Title: Western Cas. & Surety Co. v. UNIVERSAL UNDERWRITERS INS
Citation: 232 Kan. 606, 657 P.2d 576
Docket Number: 54,491
State: Kansas
Issuer: Kansas Supreme Court
Date: January 14, 1983

232 Kan. 606 (1983)
657 P.2d 576
WESTERN CASUALTY AND SURETY COMPANY, Appellant,
v.
UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Appellee.
No. 54,491

Supreme Court of Kansas.
Opinion filed January 14, 1983.
C. Stanley Nelson, of Hampton, Royce, Engleman &amp; Nelson, of Salina, argued the cause and was on the brief for appellant.
Paul Hasty, Jr., of Wallace, Saunders, Austin, Brown &amp; Enochs, Chartered, of Overland Park, argued the cause and was on the brief for appellee.
The opinion of the court was delivered by
McFARLAND, J.:
This is a dispute between two insurance companies concerning: (1) the legal effect of mutual "other insurance" excess coverage provisions and (2) whether automobile insurance mandated by the Kansas Automobile Injury Reparations Act, K.S.A. 1978 Supp. 40-3101 et seq. is primary coverage.
The case was submitted to the trial court on the following stipulated facts:
"STIPULATION OF FACTS
....
Subsequently, the two insurance policies were admitted into evidence by agreement.
The trial court's findings and conclusions are:
Western appeals from the judgment.
The rules relative to appellate review of cases tried on stipulated facts are set forth in Crestview Bowl, Inc. v. Womer Constr. Co., 225 Kan. 335, 592 P.2d 74 (1979), as follows:
The issue before us is stated as follows. Does a policy of motor vehicle liability insurance issued to a Kansas motor vehicle owner under the Kansas Automobile Injury Reparations Act (K.A.I.R.A.), K.S.A. 1978 Supp. 40-3101 et seq., provide primary liability coverage to the statutorily required limits for damages arising out of the use of the insured motor vehicle with the consent of the named insured notwithstanding "other insurance" clause providing that it is "... excess insurance over any other valid and collectable insurance"?
The overall issue, so stated, encompasses a number of component points which are best considered individually.
Western first argues "other insurance" clauses are void as being in contravention of K.A.I.R.A. and public policy. Western concedes there is no provision in K.A.I.R.A. expressly prohibiting such clauses. Nevertheless, Western contends the Legislature by enactment of K.A.I.R.A. intended to declare such clauses void as attempts to exclude liability. In support of this argument, Western cites DeWitt v. Young, 229 Kan. 474, 625 P.2d 478 (1981), which held any insurance policy provision which attempts *609 to dilute, condition or limit the minimum coverage requirements of K.A.I.R.A. is void. The logic of Western's argument is difficult to follow. "Other insurance" excess coverage clauses do not seek to dilute, condition or limit statutorily mandated coverage. Rather they seek only to establish priority as to which policy should be exhausted first in satisfying the liability. We conclude such clauses are not violative of K.A.I.R.A. A similar result was reached by the Missouri Court of Appeals in State Farm Mut. Etc. v. Universal, Etc., 594 S.W.2d 950 (Mo. App. 1980), wherein the validity of "other insurance" clauses was challenged. Interestingly, Universal was the insurance company asserting invalidity of "other insurance" clauses in the Missouri case.
Western argues even if "other insurance" clauses are held not to be violative of K.A.I.R.A., they are contrary to public policy. This point is wholly without merit. We see no public policy question in how insurance companies divide among themselves the loss occasioned by their communal insured. A like conclusion was reached by the Supreme Judicial Court of Maine in Carriers Ins. Co. v. Am. Policyholders' Ins. Co., 404 A.2d 216, 218 (Me. 1979).
Having determined "other insurance" excess coverage clauses are neither prohibited by K.A.I.R.A. nor contrary to public policy, the next point is whether the Universal policy, having been secured by the owner of the van to comply with K.A.I.R.A., has primary liability as a matter of law. The purpose of K.A.I.R.A. is to assure motor vehicles using the public highways of Kansas have at least minimum liability insurance coverage. There is no provision in the K.A.I.R.A. directing that insurance coverage mandated by the act is to be considered as primary. In the absence of such a statutory requirement, we fail to see how the question of whether a particular coverage is primary or excess is a matter of public policy or inherent in K.A.I.R.A.
In Cosmopolitan Mut. Ins. Co. v. Continental Cas. Co., 28 N.J. 554, 147 A.2d 529, 69 A.L.R.2d 1115 (1959), the New Jersey Supreme Court held the fact a policy was issued for compliance with the state's mandatory insurance law for leased vehicles (N.J. Stat. Ann. § 45:21-1 et seq., [West], does not automatically result in primary liability attaching to that policy. In so doing, the court reasoned:
See also Arditi v. Massachusetts Bonding &amp; Insurance Co., 315 S.W.2d 736 (Mo. 1958).
We conclude the fact the purchase of the Universal policy was in satisfaction of K.A.I.R.A. requirements does not necessarily render said coverage primary or the Western policy coverage excess.
Having determined "other insurance" excess coverage clauses do not violate K.A.I.R.A. or public policy, and insurance obtained by an owner in compliance with K.A.I.R.A. does not necessarily make the owner's insurer primarily liable, the next point is whether the two "other insurance" clauses are mutually repugnant so as to mandate pro rata distribution of the Dyer settlement.
"Other insurance" provisions may be divided into three general categories. First, pro rata clauses which provide the insurer will pay its pro rata share of the loss, usually in proportion which the limits of its policy bear to the aggregate limits of all valid and collectable insurance. Second, excess clauses which provide the insurer's liability shall be only the amount by which the loss exceeds the coverage of all other valid and collectable insurance, up to the limits of the excess policy. Third, escape clauses which *611 provide the policy affords no coverage at all when there is other valid and collectable insurance. State Farm Mut., Etc. v. Universal, Etc., 594 S.W.2d  at 953.
The "other insurance" clauses before us are nearly identical excess coverage provisions. In discussing the general rules relative to this situation, Am.Jur.2d states:
Authorities in the field of insurance have similarly commented:
Conflicting "other insurance" excess coverage provisions are generally held to be mutually repugnant. Illustrative thereof are: Blanchard v. Rodrigue, 340 So. 2d 1001, 1008 (La. App. 1976); Carriers Ins. Co. v. Am. Policyholders' Ins. Co., 404 A.2d  at 220; Cosmopolitan Mut. Ins. Co. v. Continental Cas. Co., 28 N.J. at 562; and Harbor Ins. Co. v. United Services Auto. Ass'n, 114 Ariz. 58, 63, 559 P.2d 178 (Ct. App. 1976). See also Buckeye Union Ins. Co. v. State Auto. Mutl. Ins. Co., 49 Ohio St.2d 213, 3 Ohio Op.3d 330, 361 N.E.2d 1052 (1977), and generally Annot., 69 A.L.R.2d 1122.
We conclude the conflicting "other insurance" excess coverage provisions herein are mutually repugnant and must be disregarded.
The net effect of disregarding the "other insurance" clauses is that both policies herein are to be considered as affording dual primary coverage and the loss, of course, must be prorated between them. The final point then is how such loss is to be prorated between Western and Universal.
*612 The trial court followed the majority view in the United States and prorated the loss on the basis of policy limits.
The virtues and faults of the various methods of proration were discussed by the Maine Supreme Judicial Court in Carriers Ins. Co. v. Am. Policyholders' Ins. Co., 404 A.2d 216, as follows:
We find the rationale of the Maine Supreme Judicial Court in Carriers persuasive. We conclude the most appropriate method of proration here is to prorate the loss equally up to the limits of the lower policy. Inasmuch as the loss herein was less than the limits of the lower policy, the loss herein should be prorated equally between Western and Universal.
The judgment of the district court is affirmed in part, reversed in part and remanded with directions to enter judgment prorating the loss in accordance with this opinion.
PRAGER, J., not participating.