Opinion ID: 223511
Heading Depth: 4
Heading Rank: 2

Heading: Whether the Policies Provide Coverage in Excess of All Other Insurance

Text: Liberty Mutual next argues that the district court erred in finding that Liberty Mutual's coverage under the Policies was not excess over Pella's other, pre-2001 insurance. The plain language of the Policies, Liberty Mutual contends, explicitly and unambiguously states that Liberty Mutual does not have to reimburse Pella's defense costs if those defense costs are fully covered by other insurers. Thus, Liberty Mutual maintains that the Policies were clearly intended to serve as excess policies because they are labeled as such. According to Liberty Mutual, by considering only whether the Policies were true excess policies (and concluding that they were not), the district court simply removed key language from the policy. Here, the Policies provide that Liberty Mutual will reimburse Pella's defense costs that are in excess of the Self-insured Amount. The Policies defined the Self-insured Amount as follows: Self-insured Amount means:    (b) If the insured has other insurance greater than or equal to the Self-insured Amount: All amounts payable or retained under such other insurance: but not less than the amount shown in the Declarations under Item 4, Self-Insured Amount[.] (Emphases added.) In turn, the Policies define other insurance as  any other valid and collectible insurance, whether primary, excess, contingent or on any other basis, except any such insurance purchased by the insured specifically to apply in excess of this insurance. (Emphasis added.) At first glance, the Policies' language suggests that Liberty Mutual owes a duty to reimburse only in excess of all amounts that Pella can recover under any other applicable insurance policies. Upon closer examination, however, the Policies' use of the present tense is significant: the Self-insured Amount could reasonably be read to provide excess coverage only over the insurance that Pella had in effect at the same time as the Policies. At the time the Policies were in effect  September 1, 2000, to September 1, 2006  Pella did not ha[ve] any other insurance. Under this reading, the district court did not err by concluding that Pella did not have to exhaust its coverage from its pre-2001 insurers before being reimbursed by Liberty Mutual. This interpretation finds additional support from Iowa courts' interpretation of other insurance. Iowa courts do not always interpret a policy's reference to other insurance to mean that its coverage will be construed as excess over other such insurance. See Nat'l Sur. Corp. v. Ranger Ins. Co., 260 F.3d 881, 884-85 (8th Cir.2001) (discussing Iowa courts' interpretations of other-insurance clauses). Otherwise, for example, an insured could be covered by two policies, which both contain other insurance provisions; if those provisions were construed literally, the insured might have no coverage, an obviously unacceptable answer. Id. at 884. (citing Union Ins. Co. v. Iowa Hardware Mut. Ins. Co., 175 N.W.2d 413, 417 (Iowa 1970)). Instead, Iowa courts distinguish between primary policies which contain other insurance provisions and true excess policies. A primary policy with an other insurance provision is a policy purchased to be the first tier of insurance coverage, one which is intended to kick in the moment liability is established, but which may be excess in certain, specified situations. LeMars Mut. Ins. Co. v. Farm & City Ins. Co., 494 N.W.2d 216, 218 (Iowa 1992) (quotation and citation omitted). In those circumstances, the primary insurer may be entitled to contribution from other insurers; the insured's right to coverage, however, will not be affected. 15 Lee R. Russ & Thomas F. Segala, Couch on Insurance § 219:1, at 219-8 (3d ed. 1999). In contrast, a true excess, or umbrella policy, is a policy purchased to be the final tier of insurance coverage, one which is intended to be excess over all other available insurance and which the parties intended to cover only catastrophic losses which exceed the insured's required primary insurance limit. LeMars, 494 N.W.2d at 218 (quotation and citation omitted). [A]n insurer that issued a `true excess' or `umbrella' policy is not liable for any portion of the loss until the primary insurer's policy limit has been exhausted, even if the primary policy contains an other-insurance clause. Nat'l Sur. Corp., 260 F.3d at 884 (citing Vigilant Ins. Co. v. Allied Prop. & Cas. Ins. Co., 609 N.W.2d 538, 541 (Iowa 2000); LeMars, 494 N.W.2d at 219). To determine whether a given policy is a primary policy with an other insurance provision or a true excess policy, Iowa courts consider the polic[y] as a whole in light of the pattern of coverage intended to result from multiple policies. LeMars, 494 N.W.2d at 218. In doing so, the court is permitted to consider the surrounding circumstances, the situation of the parties, and the objects the parties were striving to attain. Id. In identifying a policy as a true excess policy, the court may consider not only the title and terms of the policy but also the amount of the premium relative to the total amount of coverage. Id. at 219. For example, a low premium relative to the amount of risk insured is indicative of a true excess policy. See id. (noting the yearly premium of only $120 for excess coverage of $1,000,000 reflected [t]he `umbrella' nature of the policy). Furthermore, [t]rue excess and umbrella policies require the existence of a primary policy as a condition of coverage. Nat'l Sur. Corp., 260 F.3d at 885. This is so because the express purpose of a true excess policy is to protect the insured in the event of a catastrophic loss in which liability exceeds the available primary coverage. Id. (quoting 15 Couch on Insurance § 220:32, at 220-37). Considering these factors, we conclude that the Policies are primary policies with an other insurance provision that would allow Liberty Mutual to seek contribution from other insurers  but not affect Pella's right to recover from Liberty Mutual in the first instance. Although the Policies are labeled as excess, several other factors beyond the label strongly indicate that the Policies were intended to apply as primary coverage. First, and most importantly, the Policies do not require the existence of another, primary policy as a condition of coverage. In fact, the record indicates that Pella had no other applicable coverage during the policy periods from September 1, 2000, to September 1, 2006. Second, the Policies do not indicate that they were intended to cover only catastrophic losses. This is, in part, reflected by the third factor: as the district court observed, the Policies provided the same amount of coverage that Pella received under its pre-2001 primary policies. The amount of the premiums was similar, as well. Accordingly, the district court did not err in concluding that Pella did not have to exhaust all of its available insurance coverage before Liberty Mutual would owe a duty to reimburse defense costs.