Opinion ID: 174629
Heading Depth: 4
Heading Rank: 2

Heading: The National Union Policy

Text: The provisions of the National Union Policy most pertinent to our discussion are the subrogation provision and two separate provisions authorizing KCPL to obtain excess insurance or additional contributing primary-layer insurance. The contributing primary-layer insurance provision states that if KCPL obtains such insurance, National Union is obligated to join contributing primary-layer insurers in paying claims in proportion to the amount of primary insurance provided by each contributing insurer. The excess-insurance clause, in contrast, does not discuss insurers joining together to make proportionate payments of shared obligations. Rather, the excess insurance provision states that if KCPL obtains excess insurance, National Union agrees the existence of such insurance will not reduce any of National Union's liability under the policy. Read in combination, these separately styled provisions authorizing KCPL to obtain excess and contributing insurance show that National Union recognizes a distinction between true excess policies, on the one hand, and contributory or additional primary-layer coverage, on the other. National Union may effectively have its own liability reduced by sharing primary-layer coverage with other primary insurance that KCPL may elect to purchase, but National Union may not use the existence of any excess insurance as a tool to reduce National Union's own liability. Further, because National Union expressly authorized KCPL to obtain both types of additional insurance and did not in any manner limit that right to obtaining such insurance from National Union or entities related to National Union, the policy anticipates the possibility of insurance from other companies. We read the excess-insurance clause as mirroring the standard industry practices described above in that, by disavowing an ability to reduce National Union's own liability due to the possible existence of excess insurance, the National Union policy implicitly recognizes that excess insurers are the last insurers obligated to pay claims and also the first insurers entitled to recover proceeds that are obtained from third parties and represent insured losses. In other words, any reading of the actual subrogation provision that would place excess insurers' subrogation rights on par with, or subordinate to, National Union's own subrogation rights would impermissibly make the liability limitation provision of the excess-insurance provision surplusage. Farmland Indus., Inc. v. Republic Ins. Co., 941 S.W.2d 505, 510 (Mo.1997) (en banc) ([E]very clause must be given some meaning if it is reasonably possible to do so.) (citation omitted). Through the excess-insurance provision, National Union promises not merely to pay claims without reference to the existence of excess insurance, National Union agrees that excess insurance will not reduce any liability under the policy. (Emphasis added). In effect, this expansive language addresses the concept of net liability  total outlays after subrogation recoveries  and not merely National Union's initial payments of claims. Reading the National Union policy's subrogation provision against this backdrop, i.e., in the context of the policy as a whole, we find nothing inconsistent with awarding a priority subrogation interest to an excess insurer. The National Union policy's subrogation provision is, at best, silent as to the relative rights of National Union and excess insurers. The provision grants a subrogation interest to the extent of the payment of a claim under the National Union policy. A subsequent sentence states, If any amount is recovered... the net amount recovered after deducting the costs of recovery will accrue first to the Company(ies) involved in proportion to their respective interests. Any excess of this amount will be remitted to the Insured. Unlike the Travelers policy, which refers solely to Travelers, the National Union subrogation provision does not refer solely to National Union; it refers to a group of entities referred to as Company(ies). We believe there are several possible readings of this provision as Company(ies) involved arguably could refer only to National Union and certain National Union affiliates, only to entities actually involved in recovery proceedings, or only to entities involved in the payment of claims to KCPL (National Union and excess insurers or additional, contributing primary insurers). These multiple possible readings create an ambiguity  a duplicity, indistinctness, or uncertainty in the meaning of the language in the policy. Keisker, 90 S.W.3d at 74. As such, we refuse to hold in contravention of industry standards that the National Union policy somehow precludes priority for an excess insurer. Not only does such priority find textual support in the excess-insurance authorizing provision, it can be inferred as a general matter from industry practice, and inferred specifically in this case, by viewing the policy as a whole and acknowledging the relative risks the respective insurers' contracted to accept. See Horace Mann, 514 F.3d at 329 (primary insurers charge larger premiums for coverage than do excess and umbrella carriers); id. at 339 (refusing to insulate [the primary insurer] from the effect of its decision to write a primary liability insurance policy). Here, for example, National Union priced its primary policy at $850,000 for $200 million of coverage and granted permission for KCPL to obtain excess insurance without reducing any of National Union's liability. Travelers priced the $100 million of excess coverage at $25,000 and asserted an unambiguous limitation on its own liability precluding payment prior to exhaustion of an underlying $200 million primary policy and asserting an unambiguous claim to a priority subrogation interest. This pricing and the bedrock nature of the policies suggests no confusion as to the relative rights and duties of the insurers in terms of payment and subrogation recoveries.