Opinion ID: 573687
Heading Depth: 1
Heading Rank: 2

Heading: Concurrent Coverage

Text: 24 In deciding whether St. Paul's policy provided primary coverage for the Castillo lawsuit, the district court looked principally at whether MICA's policy with GMHA and Dr. Pozner covered the Castillo lawsuit. The court's unstated assumption was that St. Paul's policy did not provide concurrent primary coverage. The court also reasoned that reading St. Paul's policy as providing concurrent primary coverage would defeat St. Paul's reasonable expectations in entering into the insurance agreement with GMHA and Dr. Pozner. The district court's analysis overlooked the key factor: the St. Paul policy itself. 25 Skandia does not deny that the MICA policy provided primary coverage for the Castillo lawsuit. Instead, it argues that the St. Paul policy also provided primary coverage for the lawsuit. This state of affairs is not unusual and is provided for by other insurance clauses. Skandia points out that the St. Paul policy contains no exclusion which prevents it from providing concurrent coverage for the Castillo lawsuit. Such an exclusion is contained, for example, in the MICA claims-made policy which the district court so closely scrutinized: Coverage under this Agreement excludes liability arising out of any Occurrence ... [c]overed by any other insurer. By contrast, the St. Paul policy reads: 26 If you have other professional liability insurance 27 A professional liability loss that's covered under this agreement may also be covered under other insurance you have. If it is, we'll pay that portion of your loss which the limits of your coverage under this agreement are of the total of all limits that apply. But we won't pay more that the limits of the coverage under this agreement. 28 By its express language, the St. Paul policy assumes situations in which St. Paul will provide coverage concurrent with other insurers. It goes so far as to present a formula for calculating St. Paul's proportionate share of the concurrent coverage. 29 St. Paul's omission of an express exclusion for concurrent coverage resulted from a marketing decision. The policy in this case evolved from an earlier version. That version had contained an express exclusion for losses which were covered in whole or in part by any other insurance. According to the draftsman of the policy at issue here, the express exclusions were removed [b]ecause it's always really nice to come in and say we have an exclusion-free policy. This is a nice marketing arrangement without any change. That St. Paul's choice to leave out an express exclusion to deny concurrent coverage created a nice marketing arrangement may well be. Whether that omission accomplished this without any change to previous language denying concurrent coverage is what this dispute is about. 30 St. Paul insists that the claim first made language effectively creates an exclusion for concurrent coverage. St. Paul argues that because GMHA had reported the Castillos' murmurings of unrest to MICA in 1980, the claim which GMHA made upon St. Paul in December 1982 after the Castillos had filed suit was not first made with St. Paul. Hence, St. Paul asserts that the Castillo suit was not covered by the policy. However, this interpretation represents only one of at least three possible readings of claim first made. 31 The first possible reading of claim first made tracks the language of the policy closely. Under the policy, a claim is made on the date [the insured] first report[s] an incident ... to [St. Paul]. Thus, a claim is made once the insured makes a report to St. Paul. However, the policy will provide coverage only if [t]he claim [is] first ... made while [the] agreement is in effect. This condition implies that if an insured had reported an incident to St. Paul before the current policy had taken effect, coverage would be denied whether or not the insured reports the incident during the current policy period. This limitation would come into play if the insured had previously been covered by St. Paul under an earlier policy. The condition would prevent an insured from taking advantage of the terms of the current policy by re-reporting an incident which the insured had initially reported to St. Paul pursuant to the earlier policy. That neither Dr. Pozner nor GMHA had previously been covered by St. Paul does not defeat this interpretation. As Sletten and other cases indicate, the same language was used in St. Paul's policies with other insureds. Oft-used forms might well contain conditions which are relevant only for some parties. Under this reading, St. Paul was required to provide coverage for the Castillo lawsuit because the first time GMHA reported the Castillo claim to St. Paul was during the policy period. 32 The second possible reading of claim first made is the one proposed by St. Paul. Under this interpretation, the phrase should be read so as not to limit claim made to claims against St. Paul; it should also refer to claims made against other carriers. There are a number of difficulties with this argument. First, this interpretation contradicts the policy's own definition of claim made--the reporting of an incident to St. Paul. Second, the policy is silent on which insurer's definition of claim made should be used. If St. Paul's definition is used, and an insured's previous actions constitute a claim made under St. Paul's policy but do not trigger coverage under the other carrier's policy, then there will be no coverage, not merely a failure of concurrent coverage. This result is rather overbroad if the word first was inserted into the When You're Covered clause simply to deny concurrent coverage. Finally, a flat denial of concurrent coverage is contradicted by the implications of the other insurance clause. This is not a clause found in finely printed boilerplate at the back of a thick agreement. It appears, typed in ordinary size, on the second page of a 2-page document. 33 Under a third possible reading, the word first relates to the purpose of the When You're Covered clause. That clause introduces the two preconditions for coverage. Insertion of the word first could emphasize the fact that there are two preconditions, not merely one. In other words, even if the underlying insurable incident had occurred after the retroactive date, before the insured can be covered by the policy the insured must first report the incident to St. Paul. Under this construction, the term first serves to impress upon the insured the importance of reporting incidents to St. Paul. Failure to do so will result in dire consequences: coverage will be denied. That a claims-made policy would be written to emphasize this is not unlikely because the occurrence/reporting distinction reflects the key difference between the old occurrence policies, and the newer claims-made policies. Under this reading, the policy required St. Paul to cover the Castillo lawsuit because GMHA did indeed report the lawsuit to St. Paul during the policy period. 34 Under Arizona law, a finding of ambiguity in the meaning of an insurance clause does not end the analysis. The expectations of the parties must be discerned. Because this is a dispute between the reinsurer and the alleged primary insurer, the actual intentions of the parties to the St. Paul policy are irrelevant. Dr. Pozner and GMHA are not before this court. State Farm Mut. Auto. Inc. Co. v. Bogart, 717 P.2d 449, 454-455 (Ariz.1986). Instead, this court must determine the reasonable expectations of the parties to the policy. State Farm Mut. Ins. Co. v. Wilson, 782 P.2d 727 (Ariz.1989). Such an analysis must consider the purpose of the clause in question, public policy considerations, and the purpose of the transaction as a whole. Id. 35 The purpose of the When You're Covered clause is to set out the preconditions for coverage under the policy. Because this dispute is about the meaning of one those conditions, the first Wilson factor does not help in the analysis. 36 Second, St. Paul points to no public policy against concurrent coverage. Indeed, the other insurance clause of its agreement with Dr. Pozner and GMHA presupposes the possibility of concurrent coverage. Thus, the second Wilson factor does not help. 37 In the final analysis, this dispute comes down to the reasonable expectations of the parties, viewing the transaction as a whole. St. Paul's principal arguments concern the meaning that the insurance industry ascribes to claim first made, and the fact that, during the negotiations for the GMHA policy, St. Paul had requested that GMHA send it the listing of prior-reported incidents. 38 The problem with these arguments is that they ignore the expectations of the insured. The policy with GMHA and Dr. Pozner was brief and is written in a style which invites the reader to expect that ordinary meanings apply to the words. The policy tells the reader that you're covered when a claim is first made during the policy period. Because claim made might be ambiguous, the policy further informs the reader that a claim is made when you first report an incident to us. Arguing that insurance industry buzzword definitions should apply to claim first made is unreasonable in light of how this agreement was written. 39 Moreover, the presence of the other insurance clause contradicts the argument that the policy denies concurrent coverage. Nowhere does the policy explicitly exclude coverage for prior-reported incidents. St. Paul does not claim that it informed GMHA that the requested list of prior-reported incidents represented claims which St. Paul would not cover. Instead, it argues that GMHA believed this to be true. This assertion is belied by the testimony of the GMHA officials. Moreover, that the contrary is true is demonstrated by the fact that once the Castillos filed suit, GMHA first reported the suit to St. Paul, and not MICA. It was only after St. Paul denied coverage that GMHA dealt with MICA. 40 Actual behavior is probative as to whether the expectations were reasonable. It is not surprising that GMHA first reported the lawsuit to St. Paul in light of the fact that the St. Paul policy goes so far as to set out a formula for computing St. Paul's share of concurrent coverage. Were we to conclude that claim first made has the effect of denying concurrent coverage, we would be holding that it is reasonable for an insured to expect that his insurer will deceive him as part of its marketing strategy. This we decline to do. 41 St. Paul's policies with Dr. Pozner and GMHA provided concurrent primary coverage for the Castillo lawsuit. 42 REVERSED and REMANDED.