Opinion ID: 655850
Heading Depth: 2
Heading Rank: 3

Heading: The Other Insurance Provisions

Text: 42 Since subdivision d of section 11580.9 is not controlling and both Hartford's and Lexington's policies potentially provided coverage, we must turn to the relevant policy provisions in order to decide which insurer must pay. Each policy contains an other insurance clause setting forth policy limitations in the event that other insurance is available with respect to the same occurrence. Hartford's other insurance provision provides in relevant part as follows: 5. OTHER INSURANCE 43 a. For any covered auto you own, this Coverage Form provides primary insurance. For any covered auto you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance.... 44 .... 45 c. When this Coverage Form and any other Coverage Form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis. 46 (E.R. ex. 9 at 15.) And, in an exclusion to the Hartford policy: 47 The Liability Coverage for liability assumed under an 'insured contract' does not apply if there is any other insurance available whether primary, excess or contingent. This exclusion does not apply if such other insurance is specifically written to apply in excess of this Coverage Form. 48 (Id. ex. 9 at 20.) The Hartford exclusion is known in industry parlance as an escape clause. Chamberlin v. Smith, 140 Cal.Rptr. 493, 500 (Ct.App.1977). 49 Lexington's other insurance clause provides: 50 6. Other insurance: The insurance afforded by this policy is primary insurance except when stated to apply in excess of or contingent upon the absence of other insurance. When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of the company's liability under this policy shall not be reduced by the existence of such other insurance. 51 When both this insurance and other insurance apply to the loss on the same basis, whether primary, excess or contingent, the company shall not be liable under this policy for a greater proportion of the loss than that stated in the applicable contribution provision below: 52 (a) Contribution by Equal Shares. If all of such other valid and collectible insurance provides for contribution by equal shares, the company shall not be liable for a greater proportion of such loss than would be payable if each insured contributes an equal share until the share of each insurer equals the lowest applicable limit of liability under any one policy or the full amount of the loss is paid, and with respect to any amount of loss not so paid the remaining insurers then continue to contribute equal shares of the remaining amount of the loss until each such insurer has paid its limit in full or the full amount of the loss is paid. 53 (b) Contribution by Limits. If any of such other insurance does not provide for contribution by equal shares, the company shall not be liable for a greater proportion of such loss than the applicable limit of liability under this policy for such loss bears to the total applicable limit of liability of all valid or collectible insurance against such loss. 54 (Id. ex. 10 at 2.) 55 Since Coastal owned the truck involved in the accident, but for its escape clause, Hartford's policy would apply on a primary basis. The Lexington insurance, which afforded coverage for the premises liability, can also be characterized as primary insurance. That being said, however, the two policies' other insurance clauses give rise to a dilemma: Under Hartford's escape clause, Hartford's policy does not apply because there is coverage under the Lexington policy. But Lexington's policy indicates that because Hartford's policy does not provide for contribution by equal shares, Lexington will only contribute on a pro rata basis. Under either scenario, Coastal is left without full coverage. 56 Fortunately, California courts have provided a way out of this logical circle: 57 The applicable principle appears to be that escape clauses are not favored in the law and that, where they are in conflict with the other insurance clause in another policy covering the same risk, with the result that if both clauses are given validity the insured is left unprotected,--the escape clause will be disregarded and the other insurance clauses in both policies will be given effect on the basis of applicable proration. 58 Continental Casualty Co. v. Pacific Indem. Co., 184 Cal.Rptr. 583, 586 (Ct.App.1982); see also Employers Reinsurance v. Mission Equities Corp., 141 Cal.Rptr. 727, 731 (Ct.App.1977) ([I]t is well established that an escape clause is less favored under the law than a pro rata or excess clause.) 59 Hartford attempts to invoke Underground Constr. Co., Inc. v. Pacific Indem. Co., 122 Cal.Rptr. 330 (Ct.App.1975), in support of its contention that its escape clause is supreme. Underground is distinguishable, however, in that the court there determined that the clauses at issue--which, unlike those here, contained excess provisions--could be reconciled. Id. at 335-36. Notably, the court emphasized that it was not faced with the situation where the clauses were mutually repugnant, and that in such a case, the escape clause could not be given effect. Id. 60 Under the law of California, Hartford's escape clause must be invalidated and Lexington's Contribution by Limits provision controls. The pro rata clause requires each insurer to pay the same proportion of the loss that its liability limit bears to the entire amount of available insurance. Both the Hartford and Lexington policies had liability limits of $1 million. Therefore, Hartford should reimburse Lexington one-half of the settlement amount and attorney's fees.