Opinion ID: 1814753
Heading Depth: 1
Heading Rank: 2

Heading: Premiums

Text: Both Auto-Owners and USAA argue that the large disparity in premiums demonstrates that the risk assumed by a true excess carrier is more remote from the insured event than that assumed by the primary carrier, thus reflecting the level of risk that each insurer intended to assume. The Court of Appeals addressed the premium issue in passing, also discussing the separate endorsement problem. First, the Court of Appeals noted that even if a greater premium was paid for the Frankenmuth policy than for either umbrella policy, that price would presumably take into account both aspects of the Frankenmuth policythe primary and the excess coverage. Bosco, supra at 433, 539 N.W.2d 517. This is essentially the basis of Auto-Owners' and USAA's positionthe premium for the Frankenmuth policy is significantly higher for the entire risk assumed by each of the three insurers, further illustrating the difference between a primary policy with a non-owned vehicle excess clause and an umbrella policy. However, the Court of Appeals, after stating the costs of coverage should take into account the entire policy, stated that neither Auto-Owners nor USAA demonstrated that the premium attributable to the excess insurance portion of the Frankenmuth policy is disproportionately higher than that paid for the umbrella policies. Id. at 433, 537 N.W.2d 879. The Court of Appeals analysis did not fully address the substance of Auto-Owners' and USAA's arguments regarding the purpose of examining the disparity in premiums. An examination of the premiums reflects the intent that an umbrella policy serves a different function. Emcasco, supra at 133, 93 Ill.Dec. 666, 487 N.E.2d 110. The Emcasco court also noted that `[t]he premium is comparatively small, for the size of the risk, so that the company cannot be expected to prorate with other excess coverages; and public policy should not demand that this be done.' Emcasco, supra at 133, 93 Ill.Dec. 666, 487 N.E.2d 110, quoting 8A Appleman, supra, § 4906, p. 348. The USAA primary policy costs $3.91 per $1,000 of coverage. The annual premium was $1,746.82, of which $390.82 or twenty-two percent, was for liability coverage. The Frankenmuth policy had an annual premium of $2,334. The Frankenmuth policy declarations do not indicate the premium charged for each separate coverage, but if the USAA automobile policy is representative, then twenty-two percent is about $500 or $2 per $1,000 of coverage. [6] The umbrella policies issued by USAA ($123.17 annual premium) and Auto-Owners ($90 annual premium) cost twelve cents and nine cents per $1,000 of coverage, respectively. This disparity, argue Auto-Owners and USAA, is even more significant than it appears because the coverage provided by the umbrella policies is not limited to automobile-related risks. The Emcasco court simply compared the total premiums for each policy to reveal the disparity and held it indicative of the reduced risk assumed under the umbrella policy. Id. at 133, 93 Ill.Dec. 666, 487 N.E.2d 110. Whatever the method employed, the disparity in premiums is obvious and demonstrates that the umbrella policies were intended to cover a more remote level of risk. While not dispositive, the disparity in premiums does evidence the risk each insurer intended to assume.