Opinion ID: 1619960
Heading Depth: 3
Heading Rank: 2

Heading: Guidant's Umbrella Policy

Text: ¶ 23. Guidant argues that the trial court erred in finding that the personal umbrella policy issued by Guidant to Hingle was primary over the business automobile liability policy issued by INA. Guidant directs our attention to the section on liability coverage in its umbrella policy: PART ALIABILITY COVERAGE LIABILITY We will pay the ultimate net loss that any covered person becomes legally obligated to pay because of personal injury or property damage to which the insurance applies occurring during the policy period. We will pay only that part of the ultimate net loss which is in excess of the applicable underlying limit or retained limit. . . . . Any insurance provided in the policy shall be excess over any other collectable insurance which applies to any part of the ultimate net loss. This does not apply to any policy specifically designed to provide coverage after benefits of this policy are used up. ¶ 24. INA urges this Court to adopt the reasoning of the trial court inasmuch as the rule promulgated in John Deere and Chappell that a vehicle owner's insurer is the primary insurer should also apply to the vehicle owner's umbrella policy. Likewise, INA points to the above passage of Guidant's policy in support of INA's contention that the umbrella policy is tied to the underlying limits of the automobile liability policy, because it states Guidant will pay that part of the ultimate net loss which is in excess of the applicable underlying limit or retained limit. ¶ 25. Though this is an issue of first impression for this Court, generally, most courts have held that an umbrella policy is not other insurance for purposes of a primary policy. 22 Holmes' Appleman on Insurance § 140.2, 391 (2003). [7] As explained in Holmes' Appleman on Insurance, there are two types of excess clauses: The first type of excess clause, primary excess coverage, occurs when primary policies become excess by operation of the other insurance clause. This type of excess clause precludes an insured from double recovery for the benefit of the insurers. The second type of excess clause, also referred to as a true excess clause, does not act as a primary, but is specifically purchased by the insured to protect against large losses or an accumulation of small losses. The difference in the two types is that the latter has lower premiums and higher limits of liability. Id. at 386. Moreover, primary excess coverage is typically automobile insurance that provides coverage for a temporary substitute or nonowned automobile that is in excess over any other valid and collectible insurance. Id. at 386-87. An umbrella policy falls into the latter category of true excess insurance. Id. at 389. Thus, by design, an umbrella policy is for the purpose of true excess coverage above and beyond any other applicable primary excess policy, even where the umbrella policy is held by the owner of the vehicle. Other-insurance clauses from primary automobile policies should not be compared with other-insurance clauses in true excess policies, for example, umbrella policies. Since they do not warrant comparison, they cannot be found to have identical, mutually repugnant clauses. Therefore, Guidant is correct in its assertion that the trial court erred in finding that Guidant's personal umbrella policy issued to Hingle must be exhausted before INA's business automobile liability policy (a policy which specifically covered the nonowned automobile involved in the accident) should be applied. Accordingly, we are required to reverse the trial court as to this issue and remand for proceedings consistent with this opinion.