Opinion ID: 2585591
Heading Depth: 2
Heading Rank: 3

Heading: The Commercial Context of the Commercial Union Policy

Text: In order to interpret the Commercial Union excess liability insurance coverage afforded to Weyerhaeuser for the period from 1970 to 1973, we must examine the context in which Weyerhaeuser purchased the insurance coverage and the nature of the coverage it purchased. Weyerhaeuser is one of Washington's major corporations and a Washington court can certainly take judicial notice of Weyerhaeuser's business sophistication and ability to fend for itself while making arm's length insurance contracts with equally sophisticated insurance companies. [5] Weyerhaeuser employeda Director of Insurance whose responsibility included the placement of necessary insurance coverage. This Director of Insurance worked with Marsh & McLennan, a large national insurance brokerage firm. This brokerage firm worked both with the insured and with insurers in placing coverage for Weyerhaeuser. Given the nature of Weyerhaeuser's extensive business activities, it purchased insurance coverage in layers. See, e.g., Pub. Util. Dist. No. 1 v. Int'l Ins. Co., 124 Wash.2d 789, 793, 881 P.2d 1020 (1994). In the ordinary case, excess or umbrella coverages are designed to pick up where the primary insurance coverage leaves off, providing an excess layer of coverage above the limit of the primary policy. Thompson v. Grange Ins. Ass'n, 34 Wash.App. 151, 156-57, 660 P.2d 307, review denied, 99 Wash.2d 1011 (1983). In fact, such excess policies are designed to protect against gaps in coverage. Prudential Prop. & Cas. Ins. Co. v. Lawrence, 45 Wash.App. 111, 119, 724 P.2d 418 (1986). See also Rees v. Viking Ins. Co., 77 Wash. App. 716, 719, 892 P.2d 1128, 1130 (1995) (excess insurance obligation to defend and indemnify commences only when limits of underlying policy are exhausted); Truck Ins. Exch. v. Century Indemn. Co., 76 Wash.App. 527, 531, 887 P.2d 455 (1995) (same). Weyerhaeuser's decision to place its insurance coverage in layers above the Commercial Union coverage reveals the relevant commercial context. It would be absurd in such a setting to construe the Commercial Union policy to provide unlimited property damage coverage when Weyerhaeuser sought property damage coverage in layers above the Commercial Union policy. The underlying Fireman's Fund policy unambiguously contains an aggregate annual limit of coverage for property damage of $500,000: As respects Coverage B [property damage], subject to the above limit for one occurrence or accident, the aggregate limit of the Company's liability for all damages shall be $500,000. Clerk's Papers at 408. The level of coverage provided by ICOSP, excess to the Commercial Union policy, described the underlying limits that had to be exhausted before its coverage commenced. Marsh & McLennan described this underlying set of policy limits as follows: 2. Provided always that liability attaches to the Company only after the Primary Insurers have paid or have been held liable to pay the full amount of their respective ultimate net loss liability as follows: BODILY INJURY AND PROPERTY DAMAGE COMBINED: $2,000,000 Ultimate net loss each occurrence and in the aggregate In any one Policy year in respect of Property Damage (other than Automobile Property Damage Liability), Products Liability, and Occupational Disease ... Clerk's Papers at 11357. Thus, it is very clear the ICOSP policy in the layer above the Commercial Union policy contemplated underlying annual property damage aggregate limits of $500,000 for the Fireman's Fund policy and $1,500,000 for the Commercial Union policy. It is reasonable to believe in placing layered insurance coverage, a sophisticated corporation like Weyerhaeuser, using its insurance department and Marsh & McLennan, would place coverage in consistent layers of coverage built one upon the other. If in fact the Commercial Union policy provided unlimited property damage coverage, there would have been no need for Weyerhaeuser to purchase yet another layer of coverage for property damage, as it did in the ICOSP policy. In this case, the broker, at the request of the insured, bought layers of liability insurance coverage with aggregate annual limits of liability coverage that dovetailed with one another. Moreover, the declarations page of the Commercial Union policy makes clear the insurer provides coverage in the amount of $1,500,000 excess of $500,000. [6] Clerk's Papers at 2750. Finally, this interpretation is most consistent with the identical language contained in the limits of liability section of the policy for the underlying limits and the Commercial Union limits. Both parties concede Fireman's Fund's policy had an aggregate annual limit of property damage coverage. Br. of Appellant at 34; Br. of Resp't/Cross Appellant at 20. Insofar as the limits language in the Commercial Union policy was essentially identical, we should give the language the identical interpretation effect. Holter v. Nat'l Union Fire Ins. Co., 1 Wash.App. 46, 50, 459 P.2d 61 (1969). As the parties here essentially agree, the language of the Fireman's Fund liability policy afforded Weyerhaeuser coverage up to an annual aggregate limit of $500,000, I would affirm the trial court's ruling to that effect. In conclusion, Commercial Union afforded liability insurance coverage for property damage to Weyerhaeuser from 1970 to 1973. The agreement provided an aggregate annual limit of liability insurance coverage to Weyerhaeuser in the amount of $1,500,000 for the property damage coverage. This annual aggregate limit of insurance coverage is consistent with the language of the Commercial Union policy and its declaration page. Moreover, the limit is consistent with the context of Weyerhaeuser's placement of excess liability insurance coverage, given Commercial Union's place in the layers of coverage afforded to Weyerhaeuser. I would remand the case to the trial court for further proceedings consistent with this determination as to the existence of an annual aggregate limit of property damage liability insurance coverage under both the Commercial Union and Fireman's Fund insurance policies. JOHNSON, MADSEN, and BRIDGE, JJ., concur.