Opinion ID: 853272
Heading Depth: 2
Heading Rank: 6

Heading: Exhaustion of Underlying Limits for Old Forge Claim

Text: The parties disagree as to when Allstate's excess coverage attaches for liabilities incurred at the Old Forge site. Both parties argue this issue in the framework of the trial court's and Court of Appeals' holdings that Allstate's 1978 and 1979 policies provided personal injury coverage and that there is no aggregate limit on Hartford's property damage coverage. However, we concluded in Part II that no excess personal injury coverage applied, and in Part IV that the aggregate limit issue is not ripe for summary judgment. Our analysis stands on the shoulders of those holdings. Allstate contends that Dana must exhaust the underlying Hartford limits for both property damage and personal injury before making a claim for excess coverage. Allstate bases this conclusion on three premises, only the third of which we find persuasive. First, Allstate contends that both coverages must be exhausted because the 1978 and 1979 Allstate policies [7] use the plural limits, instead of the singular limit when referring to the exhaustion of underlying insurance. [8] We disagree with this contention because, even if Allstate were correct as to the intended effect of the word limits, its use in this manner is, at least, ambiguous. It is common for major enterprises such as Dana to have layers of coverage stacked to provide insurance against risks at escalated levels. Here there is only one underlying CGL policy, Hartford's, but the excess form employed by Allstate presumably is used for higher level policies which insure above other excess carriers as well as the primary insurer. Indeed, a number of policies are listed in Allstate's schedule of underlying policies, each with limits of its own for the various coverages other than general liability (advertising, workers compensation, etc.). The limits of the underlying insurances can readily be taken to mean that Allstate is not responsible for coverage until the limits of all the listed underlying policies covering a particular claim have been exhausted, but not to imply that more than one limit in the same policy must be exhausted by the same occurrence. Moreover, one provision of the policy (Endorsement 8) provides that a reduction in the limit or limits of the underlying policy or policies causes the excess policy to drop down. This seems to assume that a given coverage has only one limit, and multiple underlying policies produce multiple applicable limits. Allstate also bases its conclusion on this Court's statement in Ryder Truck Lines, Inc. v. Carolina Cas. Ins. Co., 270 Ind. 315, 319, 385 N.E.2d 449, 452 (1979), that the liability of the insurer under an excess insurance clause arises only after the limits of the primary policy are exhausted. This is, of course, generally a correct statement. However, we think Ryder means only that Dana must exhaust the underlying coverage applicable to the losses supporting its excess coverage claim, and does not resolve the issues presented here. Finally, Allstate contends that both coverages must be exhausted because the parties have stipulated that Dana's liabilities at other sites are properly described as both personal injury and property damage losses. [9] The trial court took the parties' stipulation to mean the underlying coverages for personal injury and property damage were both available to Dana when Dana sought indemnification for the cleanup costs incurred at those sites. The trial court then concluded that Dana's costs for other environmental liabilities could be allocated to either coverage for the purpose of determining whether an underlying limit was exhausted. Although this reasoning could have led the trial court to allocate the underlying payment to property damage, the trial court allocated Dana's losses at other sites to the bodily injury coverage of the Hartford policies, exhausting that coverage's underlying aggregate limit. In the trial court's view, this resolution mooted the question of whether Hartford's limit for property damage is aggregate or per occurrence because the trial court held exhaustion of either coverage sufficient to reach the excess policy. The Court of Appeals disagreed, ruling that Allstate's obligation does not attach until the Hartford policy limits for both personal injury and property damage have been reached. 737 N.E.2d at 1205. The issue turns on what underlying coverage is available to Dana under the Hartford policy, and whether Dana has incurred covered losses in excess of the applicable limit or limits of that coverage. Although it is not uncommon to have both personal injury and property damage coverage for the same occurrence, we think it unusual that two coverages apply to the same liability, as the parties stipulated is the case here. We are not faced with a single event, such as an explosion, that may harm both people and property and trigger both personal injury and property damage coverage for different injuries. Rather, the parties have stipulated, correctly or otherwise, that the same environmental cleanup liability falls under both underlying coverages. Given that unusual situation, we agree with the Court of Appeals that both underlying limits must be exhausted. This turns on the stipulated applicability of both coverages to all liabilities and would not typically be the case where different liabilities are incurred as a result of the same occurrence. The remaining question is at what point the underlying policies are exhausted. This issue turns on the resolution of the aggregate limits issue described in Part IV. If there is an aggregate limit on Hartford's property damage coverage, it is separate from the personal injury aggregate limit and, therefore, Dana must incur $2 million in environmental liabilities for occurrences during the policy period before liability for both $1 million in property damage and $1 million in personal injury are incurred and Allstate's coverage attaches. [10] If there is a per occurrence limit on Hartford's property damage coverage, then Dana must have incurred $1 million in liability at the Old Forge site alone, in addition to another $1 million in liability at all sites for occurrences during the policy period, before Allstate's coverage attaches. In sum, we hold that, because Dana and Allstate have stipulated that Dana's environmental liabilities are insured under both the property damage and the bodily injury coverage of Hartford's policy, Dana must exhaust both underlying coverages before seeking excess coverage from Allstate. Because the point at which Allstate's coverage attaches ultimately turns on whether Hartford's underlying limit is an aggregate or per occurrence limit, see Part IV, the trial court's summary judgment as to Allstate's coverage obligation for the Old Forge site is reversed.