Opinion ID: 1814753
Heading Depth: 2
Heading Rank: 3

Heading: A. Policy Language

Text: This Court adheres to the rule that the policy language must be given effect, if at all possible. See St. Paul Fire & Marine Ins. Co. v. American Home Assurance Co., 444 Mich. 560, 570, 514 N.W.2d 113 (1994). Thus, the policy language is most important in our analysis. The Court of Appeals attempted to follow this Court's mandate that certainty and simplicity should not be achieved at the cost of nullifying the negotiated intent of the parties. Bosco, supra at 431, 539 N.W.2d 517, citing St. Paul, supra at 577, 514 N.W.2d 113. However, the Court of Appeals analysis of the policy language failed to give meaning to all the pertinent policy language. First, we will look to the language of the Auto-Owners policy and how its language functions with' the language of the Frankenmuth policy. Auto-Owners argues that in order for the Frankenmuth policy not to be the underlying insurance, it must fit into one of two categories: (1) a policy written specifically to be excess of the Auto-Owners policy, or (2) a policy sufficiently similar to qualify for proration with the Auto-Owners policy. With regard to the first category, no evidence was presented, and no language in the Frankenmuth policy indicates, that it was purchased to be excess of the Auto-Owners umbrella policy. Plaintiff did argue in the lower courts that the Frankenmuth policy was excess to the Auto-Owners and USAA policies. The Court of Appeals rejected this argument (see Bosco, supra at 434, n. 3, 539 N.W.2d 517), and Auto-Owners states, there is something inherently suspect with `reasoning' which yields the conclusion that an auto liability policy is excess over a multi-risk umbrella policy purchased for a small fraction of the cost of the auto policy. Auto-Owners maintains that its retained limit section contemplates that its policy is excess to any other underlying insurance, whether such underlying insurance is excess or primary. The policy also specifically states that if there is other insurance covering a loss also covered by the AutoOwners policy, this policy is excess, unless such policy was purchased specifically to apply in excess of the Auto-Owners policy. Nothing in the Frankenmuth policy indicates that it was purchased to be excess to the Auto-Owners policy. Thus, the Court of Appeals correctly rejected the notion that the Frankenmuth policy was excess to the Auto-Owners and USAA umbrella policies. Now we will examine the policy language to determine if the Frankenmuth policy qualifies for proration with the Auto-Owners policy. The Auto-Owners policy further provides that it will prorate with other similar insurance written also in excess of other underlying insurance. The Frankenmuth policy is not sufficiently similar to qualify for prorating under this clause. For example, there is nothing in the language of the Frankenmuth policy to suggest that Frankenmuth determined its rates after considering any underlying primary policies, unlike the Auto-Owners policy which specifically refers in its retained limit section to underlying insurance. Nothing suggests that it was written as excess over any underlying policy. Plaintiff, in support of his contention that the Frankenmuth policy should prorate with the Auto-Owners policy, argues that if Auto-Owners intended its policy to be excess over other excess policies, it could have drafted it that way, and to do so it must contain language that prevents prorating. However, the fact that a policy is issued as an umbrella policy at rates reflecting the reduced risk insured indicates the intent that the policy is excess over other excess policies. State Farm Fire & Casualty Co. v. LiMauro, 65 N.Y.2d 369, 376, 492 N.Y.S.2d 534, 482 N.E.2d 13 (1985). Plaintiff misunderstands the basic nature of the Frankenmuth policy. It is a primary policy and has an excess clause that becomes operative in certain limited circumstances. This clause does not change the nature and function of the policy. Absent specific language in the Frankenmuth policy rendering it sufficiently similar to the Auto-Owners policy, it does not qualify for proration with it. Now we will examine the language of the USAA policy as compared to the Frankenmuth policy. The USAA umbrella policy first provides that it is excess to any underlying insurance and then provides that, if an insurance policy is written specifically to cover as excess over the primary insurance limits, then the USAA umbrella policy will prorate the loss. This is slightly different than the Auto-Owners policy, which provides for proration with similar insurance, while the USAA policy only requires an excess policy be specifically written as excess over another primary policy. The Frankenmuth policy excess provision was not written specifically to cover as excess over any primary policy. The USAA policy other insurance provision plainly states that the USAA policy will not pay contribution with any primary insurance policies, only those written as excess over primary insurance, i.e., other policies like the Auto-Owners policy, which is written specifically over underlying insurance. USAA also notes that no evidence was presented that the Frankenmuth policy was purchased to be an umbrella policy; thus, it must be underlying insurance. The USAA umbrella policy is a true excess policy written as excess specifically over the USAA primary policy and all other underlying insurance, including the Frankenmuth policy. Finally, unlike the Frankenmuth policy, nothing in the USAA or the Auto-Owners umbrella policies suggests that either policy satisfies the requirements of M.C.L. § 500.3131; M.S.A. § 24.13131. [2] Plaintiff also asserts that the Frankenmuth policy should prorate with the USAA policy. Plaintiff argues that the USAA policy defines primary insurance as those policies listed in the declaration, i.e., the USAA primary policy. Therefore, no other policy (including the Frankenmuth policy) could be underlying. However, this analysis ignores the other insurance provision in the USAA umbrella policy, and by logical extension means that USAA, under its umbrella policy, would be required to pay before Continental because that policy is not in the declarations either. This not only contradicts Frankenmuth v. Continental , but it violates common sense. Plaintiff's analysis is inherently flawed because the Frankenmuth policy is not written as a true excess policy. Only the existence of the Continental policy triggers the Frankenmuth policy coincidental excess coverage clause. Its basic naturea primary automobile policydoes not change. The Emcasco court contrasted an umbrella policy, which remained as such in all circumstances except under very limited circumstances in which the policy provided primary coverage, with a primary policy with the excess clause, which provided primary coverage under almost all circumstances. Illinois Emcasco Ins. Co. v. Continental Casualty Co., 139 Ill.App.3d 130, 133, 93 Ill.Dec. 666, 487 N.E.2d 110 (1985). The basic purpose and nature of an insurance policy does not change, even if its coverage may change under certain limited circumstances. Although the Court of Appeals, at the time of its decision, did not have the benefit of this Court's decision in Frankenmuth, it misapplied St. Paul Ins. Co. v. American Home Assurance Co., supra. St. Paul involved three primary policies, two with pro-rata other insurance clauses and one with an excess other insurance clause. This Court adopted the majority rule that gave effect to all three clauses; the two policies with pro-rata other insurance clauses were primary and the policy with the excess other insurance clause was secondary. Id. at 563, 514 N.W.2d 113. Just as in St. Paul, the excess other insurance clauses of the USAA primary policy and the Frankenmuth policy are only effective when other primary insurance exists, such as Continental. Otherwise, both policies would be primary, even if a nonowned vehicle was involved. [3] The parties and the Court of Appeals noted that the present case differed from St. Paul because this case involves the priority of secondary insurers, not primary insurers. See Bosco, supra at 428, 539 N.W.2d 517. This is true only in the sense that umbrella carriers are involved here and were not in St. Paul. However, that is of little significance. The excess other insurance clauses in the Frankenmuth policy and in the USAA primary policy are just like that in the excess other insurance policy involved in St. Paul. Thus, these policies would be primary unless a nonowned vehicle was involved or no other primary insurance existed. No difference exists between the excess other insurance clauses contained in the USAA primary policy and the Frankenmuth policy in this matter and that in the secondary policy involved in St. Paul. The entrance of two true excess umbrella policies into the equation does not change the result with respect to the first two tiers of coverage.