Opinion ID: 1138395
Heading Depth: 2
Heading Rank: 3

Heading: Does the Language of the INSCO Policy Require INSCO to Drop Down and Assume Ambassador's Obligations If Ambassador Became Insolvent?

Text: Even though INSCO has no duty under the doctrine of reasonable expectations to drop down and provide primary coverage in case Ambassador became insolvent, INSCO may have assumed that obligation in its insurance policy. INSCO's obligation to indemnify each ARECA member is set forth in Endorsement No. 9 to the policy. The endorsement states, in pertinent part: Limits of Liability Endorsement It is hereby understood and agreed that the limits of liability and annual premium charges are shown by entity as follows. It is further understood and agreed that the limits shown below are all excess of $900,000 excess of $100,000 S.I.R. Limits of Liability Premium . . . . Matanuska Electric Association $9,000,000 $11,555 (Emphasis added). We find there is no ambiguity in this language. INSCO's obligation to pay is triggered only after MEA has incurred $1,000,000 in loss. ARECA, however, argues that the clear language of Endorsement No. 9 providing that INSCO's coverage is in excess of the primary carrier's liability conflicts with the general terms of the insurance coverage agreement: LIMIT OF LIABILITY. The Company shall only be liable for the ultimate net loss in excess of the self insured retention stated in the declarations in respect of each occurrence and then only up to a further limit as stated in the declarations in respect of each occurrence subject to a limit as stated in the declarations in the aggregate for each annual period during the currency of this policy, commencing from the effective date. Self-insured retention is defined by the policy as the amount of the `ultimate net loss' payable by the Insured in respect of each occurrence. Ultimate net loss is defined as the total sum which the Insured becomes obligated to pay by reason of personal injury, property damage or advertising claims... . ARECA infers from these provisions that the policy requires INSCO to be liable for the amount ARECA becomes obligated to pay by reason of personal injury, property damage, or advertising claims in excess of $100,000. ARECA argues that this amount will vary depending on whether coverage is afforded by the primary insurer. We disagree. Endorsement No. 9 expressly modifies the policy's printed terms. As we held in State v. Oriental Fire & Marine Ins. Co., 776 P.2d 776, 779 (Alaska 1989), where the provisions of an effective endorsement conflict with those of the insurance policy, the endorsement controls. ARECA also relies on the other insurance clause in the policy to support its contention that INSCO is obligated to drop down. This clause provides as follows: OTHER INSURANCE. If other valid and collectible insurance, which is written by another insurer is available to the Insured covering a loss also covered by this policy, other than insurance that is in excess of this policy, the insurance afforded by this policy shall be in excess of and shall not contribute with such other insurance. ARECA argues that the Ambassador policy is other insurance that is not valid and collectible under the policy, and therefore that INSCO must cover all liability over the $100,000 SIR. ARECA relies on McGuire v. Davis Truck Services, Inc., 518 So.2d 1171 (La. App. 1988), cert. denied, 526 So.2d 791 (La. 1988) for the proposition that the use of the term collectible in an other insurance clause creates an ambiguity as to whether the excess insurer must drop down upon insolvency of the primary insurer. In McGuire, the excess insurer limited its liability to the ultimate net loss the excess of ... the amount recoverable under the underlying insurers. 518 So.2d at 1172 (emphasis in original). The court relied on the policy's use of the term collectible in the other insurance clause only to support its interpretation of the term recoverable in the limit of liability clause above. 518 So.2d at 1174. It is this language that led the court to condition the excess insurer's liability on the amount recoverable from the primary insurer. Id. McGuire, therefore, is not relevant to this case since in INSCO's policy the term collectible is found, not in the limit of liability clause, but in the other insurance clause. We choose to follow numerous other courts in holding that the presence of the term collectible in an other insurance clause does not create an ambiguity as to the excess insurer's coverage in case of the primary insurer's insolvency. [3] These courts recognize that the other insurance clause is a standard provision intended to limit the excess insurer's liability in the event that insurance other than the scheduled underlying insurance is available to the insured. Since Ambassador's insurance is not other insurance, the clause is not applicable. Considering the policy as a whole, and in particular, the language of Endorsement No. 9, we conclude that there is no ambiguity as to whether INSCO would provide primary coverage to ARECA in case of Ambassador's insolvency. INSCO is obligated to provide coverage for a loss only in excess of $1,000,000. Therefore, the judgment of the superior court is AFFIRMED. BURKE, J., not participating.