Opinion ID: 774243
Heading Depth: 3
Heading Rank: 2

Heading: RRG's Policies

Text: 35 If RRG intended its policies to attach only upon the exhaustion of the underlying Samaritan policy and charged premiums consistent with that risk, it should be held to provide coverage upon such an occurrence. See 20th Century Ins. Co. v. Liberty Mut. Ins. Co., 965 F.2d 747, 755-757 (9th Cir. 1992) (looking to `intended application of each policy' rather than `judicially created labels' such as `primary, secondary, etc.' and holding that excess insurer was excess only of specified primary carrier); U.S. Fire Ins. Co. v. Aetna Cas. & Sur. Co., 781 S.W.2d 394, 398 (Tex. Ct. App. 1989) (excess policy does not automatically overlay every applicable primary policy that contains an `other insurance' clause); Canal Ins. Co. v. United States Fidelity and Guar. Co., 720 P.2d 963, 965 (Ariz. Ct. App. 1986) (excess policy became primary when specific underlying policy was exhausted). 36 Alternatively, if RRG wrote its policies as true excess, its premiums would reflect the reduced probability that it would ever be called on to provide coverage. Maricopa County, 757 P.2d at 114. True excess policies should not be asked to contribute until all primary policies have been exhausted. Am. Family Mut. Ins. Co. v. Cont'l Cas. Co., No. 2001 WL 184770,  (Ariz. Ct. App. Feb. 27, 2001) (quoting United Serv. Auto Ass'n, 653 P.2d at 714) ( `[I]nsurers who issue residual protection only are last to pay so long as that is their expressed intent.' ). 37 Because three separate RRG policies with different terms covered Dr. Romberger during his treatment of Christina Beery, each must be examined to determine whether the RRG policies are excess of MICA's primary policy. 38
39 We hold that the first two layers of RRG coverage were intended to be specific excess insurance that attached upon the exhaustion of the underlying Samaritan Policy. These layers of coverage, like MICA's coverage, were applicable to any loss in excess of the Samaritan Policy limit. Thus, MICA must share any loss over $1 million on a pro rata basis with RRG's first two layers of coverage. In reaching this conclusion, we rely on several aspects of the RRG policy that, taken as a whole, reveal its place in the overall coverage scheme. 40 a) RRG had no knowledge of the MICA policy when it provided coverage to Dr. Romberger 41 In Gilmore, the Arizona Supreme Court noted that true excess coverage is written under circumstances where rates were ascertained after giving due consideration to known existing and underlying basic or primary policies. 812 P.2d at 980 (citation and internal quotation marks omitted). The first two layers of RRG coverage were written and priced with consideration only of enumerated underlying policies. The MICA policy was not one of the listed underlying policies. 42 The first layer of the RRG policy provides the following coverage: $1,000,000/no aggregate in excess of $1,000,000/ $12,000,000. The schedule of coverage endorsement indicates that the $1,000,000/$12,000,000 refers to the listed underlying insurance. The listed insurance, in turn, includes the Samaritan policy (with limits of $1 million per occurrence and $12 million aggregate) and several other insurance policies. This list does not include the MICA policy. By its own terms, this layer of RRG coverage applies to losses resulting from an occurrence and exceeding $1 million. It was written as excess of a specific underlying policy (the Samaritan policy) which provided primary insurance in the required amount of $1 million per occurrence and $12 million in the aggregate. 43 Similarly, the second layer of RRG coverage contains a list of enumerated underlying policies and provides $10 million in coverage excess of Underlying. There is no suggestion anywhere in the policy that RRG knew of the MICA policy when writing this layer of coverage. RRG, therefore, did not price the policy based on the existence of an additional $1 million in underlying coverage provided by MICA. 44 To repeat, neither of the first two layers of RRG coverage required the insured to maintain any additional coverage beyond that provided by the primary Samaritan policy. These provisions make clear that RRG was neither aware of nor gave consideration to the existing MICA policy. Rather, RRG's first two layers of insurance provided coverage that would attach immediately upon the exhaustion of the underlying Samaritan policy. They should be enforced as intended. 45 b) RRG and MICA did not cover the same risk 46 The Arizona Supreme Court has also noted that true excess coverage applies only when the same insured has purchased underlying coverage for the same risk. Gilmore, 812 P.2d at 980. In the present case, the RRG and MICA policies did not apply to the same risk. RRG covered Dr. Romberger for 24 of the 25 months that he provided treatment to Christina Beery. MICA insured Dr. Romberger for only two months after the birth of Christina Beery. The two policies overlapped for only thirty days. The thirty-day overlap does not support RRG's contention that it is a true  excess insurer of the Beery judgment. The relevant inquiry is whether the two insurance companies insured the same risk.  The risk assumed by the two insurers in this case was markedly different. 47 c) RRG failed to ascertain the total level of primary insurance 48 RRG provided its coverage to Samaritan several years after MICA's policy took effect. RRG had the opportunity to, and should have, taken steps to avoid the confusion, uncertainty and now the litigation produced by the overlapping policies. Executive Risk Specialty Ins. Co. v. Lexington Ins. Co., 106 F. Supp. 2d 181, 189 (D. Mass. 2000) (applying Arizona law). In Executive Risk, the court concluded that a specific excess policy was excess to an unrelated primary policy with an other insurance clause. However, the court reached this conclusion only after examining the context within which the policies were written. Id. at 183. Because the primary insurer wrote its policies with knowledge of overlapping coverage, it should bear the risk of any doubt it could have avoided. Id. at 189. In this case, RRG could have avoided the present dispute by ascertaining the total level of existing primary coverage prior to issuing its policy. This factor weighs against RRG. 1 49 d) The RRG policies contain no relevant coverage exceptions 50 The fact that the RRG policies include provisions purporting to accept liability only after making deductions for all other recoveries, salvages or other insurance does not alter our analysis. 2 These provisions cannot be given the effect of exceptions to coverage rather than excess clauses.By definition, an exception or exclusion provides that there is no coverage regardless of the existence of other insurance.  Fremont Indem. Co. v. New England Reinsurance Co., 815 P.2d 403, 406 (Ariz. 1991). In this case, RRG clearly provided insurance covering the Beery judgment. RRG intended, however, for its coverage obligation to change depending on the existence of coverage by other valid insurance. 51 These provisions are not exclusions; they are typical excess insurance clauses. The gist of the hybrid escape-excess clause is to permit escape if the loss is less than any other insurance protection and to provide excess insurance if its coverage exceeds the other valid insurance. Id. at 407. That RRG inserted its other insurance clauses in the definition of loss rather than as separate provisions is irrelevant. [W]e cannot agree with the theory . . . that such a clause is transformed into an exception simply because of its location in an insuring agreement as opposed to another portion of a policy. As a general rule, insurers cannot gain an advantage merely by rearranging `other insurance' provisions. Id. at 406 (citations omitted). Mutually repugnant other insurance clauses are void regardless of where in the insuring agreement they are located. Jefferson Ins. Co. v. Glen Falls Ins. Co., 450 N.Y.S.2d 888, 889 890 (1982) (ultimate net loss provision in one policy and other insurance clause in competing policy cancel out each other and each insurer contributes pro rata to settlement). 52 e) RRG's alternative conclusion is not supported by Arizona precedent 53 RRG does not contend that it wrote its policy as excess of the MICA policy. Rather, it argues that a policy that is excess to any primary policy is excess to each and every primary policy covering the same loss. RRG relies on two cases in support of this proposition: Ariz. Joint Underwriters Plan v. Glacier Gen. Assurance Co., 631 P.2d 133 (Ariz. Ct. App. 1981) (Glacier) and United Serv. Auto. Ass'n., 653 P.2d 712. In both Glacier and United Services , the Arizona appellate court held that two primary policies should pay their full policy limits before an excess policy is compelled to pay. Neither case supports RRG's position because neither case involved competing policies both of which were indisputably excess to a single primary policy. 54 In Glacier, the court held, as we hold today, that a specific excess policy attaches upon the exhaustion of its underlying primary policy. AJUP was liable for the excess of the total applicable limits of its underlying insurance, the MICA policy. Glacier, 631 P.2d at 135. In Glacier, however, the underlying primary policy was not exhausted until a co-equal primary policy contributed its pro rata share. Consequently, the excess insurer's liability did not attach until both the underlying policy and an unrelated primary policy had contributed. This fact distinguishes Glacier from the present litigation. 55 Here, the underlying Samaritan policy tendered its entire $1 million policy limit before any other insurer's obligation attached. As was the case in Glacier, the excess carrier's coverage (in this case, RRG) attached upon the exhaustion of its underlying primary policy (Samaritan). Unlike Glacier, however, the underlying Samaritan policy is the only first-level policy applicable to the insured's loss. MICA's duty to contribute to the Beery judgment arose at the same time that RRG's obligation attached -after the Samaritan policy was exhausted. MICA, therefore, should contribute pro rata with the RRG policy to cover any loss above Samaritan's $1 million policy limit. 56 Similarly, in United Services , the court allocated the loss among two primary insurers and an excess policy. The United Services court analyzed the language of each policy in light of the circumstances of each contracting party to determine the intent within the framework of an overall insuring scheme. United Services, 653 P.2d at 714. This analysis revealed that it was the expressed intent of the excess policy that it be the last to pay. Id. 57 Our analysis of the competing RRG and MICA policies is similar. For the reasons already noted, we conclude that it was not RRG's expressed intent that its first two layers of coverage overlay all primary policies. Reading the first two layers of RRG coverage within the context of the overall insuring scheme, we hold that RRG, in authoring and pricing these policies, gave consideration only to that coverage listed in its revised schedule of underlying coverage. That is, RRG wrote its policies to provide coverage in excess of the underlying Samaritan policy. 3 It now wishes to treat these policies as excess of all insurance that may fortuitously apply to a given loss. Gilmore, 812 P.2d at 981. We decline to provide RRG with this windfall.
58 The third layer of RRG coverage repeatedly states that it applies only to losses in excess of $10 million. The schedule of coverage endorsement, the declarations page, and the limits of liability clause all note that the coverage is in excess of the $10 million in coverage provided in the underlying policies. Unlike the first and second layers of RRG coverage, this policy does not purport to attach upon the exhaustion of a specific underlying policy. Rather, coverage under this policy attaches only after exhaustion of a specified policy amount. Exhaustion of the [$10 million] amount is a fixed policy requirement; it was not satisfied and this fact cannot be altered by language in other policies. Maricopa County, 757 P.2d at 114. 59 The third layer of the RRG policy, therefore, is excess of all insurance up to $10 million, including the MICA policy. The district court erred in holding that this layer of coverage was an equal layer of coverage with the MICA policy.