Opinion ID: 853272
Heading Depth: 2
Heading Rank: 4

Heading: Exhaustion of Aggregate Limits of Primary Policies

Text: Dana's primary liability insurer in the relevant years was The Hartford Insurance Group. Dana contends that the Hartford policies had property damage liability limits of $1 million per occurrence and also an aggregate $1 million limit. If so, once the total of $1 million in coverage for the policy year was exhausted, Allstate, as the excess insurer, was responsible for the balance. Allstate argues that the Hartford policies had no aggregate limits, and contained only per occurrence limits of $1 million for property damage liability. Under Allstate's view, Allstate's liability as an excess carrier was triggered only if Dana incurred more than $1 million on a single occurrence. All agree that the contamination at each Dana location constitutes a separate occurrence. The trial court found no aggregate limits in the Hartford policy, and the Court of Appeals agreed. 737 N.E.2d at 1196. The source of contention is the section Limits of Liability in the Hartford policies. That section states: The total liability of the company for all damages because of all property damage sustained by one or more persons or organizations as the result of any one occurrence shall not exceed the limit of property damage liability stated in the schedule as applicable to each occurrence. Subject to the above provision respecting each occurrence, the total liability of the company for all damages because of all property damage to which this coverage applies and described in any of the numbered subparagraphs below shall not exceed the limit of property damage liability stated in the schedule as aggregate: (1) all property damage arising out of premises or operations rated on a remuneration basis.... Allstate contends that, for the aggregate limit to apply, the property damage liability must have been rated on a remuneration basis. Allstate further contends that the policies were rated on the basis of sales, not remuneration, and therefore there are no aggregate limits. Dana argues that the policies are ambiguous as to how the various risks were rated, and extrinsic evidence renders summary judgment inappropriate. Although Hartford was among the insurers who settled their disputes with Dana, it requested and received leave to intervene in this appeal because, it contends, the presence of aggregate limits in policies of this type is an important and recurring issue. The declaration pages in the Hartford policies state that the policies are composite rated. The policies do not state what that term means. The Court of Appeals concluded that the composite rate is a figure that combines the advance premiums for bodily injury coverages and property damage coverages and does not describe how those advance premiums were calculated. Id. n. 17. In deciding that the property damage liability was not remuneration rated, the Court of Appeals stated: If the policies had used a remuneration basis to calculate premiums, as Dana asserts, then the premiums listed on the coverage pages of the policies would have been calculated according to the rates set forth in the Remuneration premium basis category. Instead, the advance premiums were calculated according to rates that were set forth in the Sales basis category and used Dana's estimated sales to arrive at the premium amount. Id. at 1196. We agree that the premium charged for the policy was apparently based on Dana's estimated sales. The form shows columns for calculating premiums for bodily injury and property damage. The entire premium is shown in the bodily injury column. The column for the advance premium on property damage liability coverage states only, INCL IN COMPOSITE RATE. The printed form allows for two types of coveragebodily injury and property damageand describes four Rating Classifications, one of which is PremisesOperations, which has as its Premium Bases area, frontage, remuneration, and receipts. Sales appears only as a basis for premiums on completed operations and products, both of which are excluded coverages under the policy. [6] We cannot discern from this record how Dana's property damage liability was rated, or even whether it was rated at all, though we suppose it was. The Court of Appeals and the trial court equate rated on remuneration with calculation of the premium. This is certainly one common understanding of what it means to rate a risk. In the context of this policy, however, we think an equally plausible reading is that the reference to remuneration rating in the quoted subsection (1) of the printed form refers to coverages that are identified as rated by remuneration on the printed portion of the declaration. Property Damage is one of those, and under this reading would be subject to an aggregate limit. The second view is consistent with extrinsic evidence Dana designated in opposition to summary judgment regarding the understanding of Hartford employees and Dana's insurance broker as to how the Hartford policies rated Dana's property damage liability coverage. Evidence of industry practice is admissible to construe terms of art or ambiguous agreements. See 2 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 22:49 (3d ed.1995); cf. Abbey Villas Dev. Corp. v. Site Contractors, Inc., 716 N.E.2d 91, 100 (Ind.Ct.App.1999). In oversimplified terms, Dana offered evidence from Hartford and Dana employees and Dana's broker that the reference to premises and operations rated on a remuneration basis was understood in the industry to mean the premises and operations exposure of a manufacturing operation like Dana. All of these witnesses agreed that the policy was understood to include aggregate limits. The trial court found no ambiguity in the contract and disregarded this evidence. Because of the facial ambiguities we have described, we think Dana's evidence created a genuine issue of material fact as to the construction of this document and summary judgment was improperly granted on this issue. As a final note on the aggregate limits issue, Hartford complains that Allstate, as a stranger to the policy, has no business disputing the understanding of the parties and their broker as to the meaning of the document. We disagree. Allstate, as an excess carrier, is entitled to rely on the underlying policies in evaluating its risks. But, similarly, Allstate is charged with an understanding of common industry practice. Cf. Martin Rispens & Son v. Hall Farms, Inc., 601 N.E.2d 429, 438 (Ind.Ct.App.1992), aff'd in part, rev'd in part on other grounds, 621 N.E.2d 1078 (Ind.1993) ([K]nowledge of trade usage must be imputed to those individuals who undertake business transactions in the industry, be they industry giants or newcomers.). How this all shakes out is a matter for the trier of fact in the first instance. We reverse the trial court's award of partial summary judgment to Allstate on this issue.