Opinion ID: 1091903
Heading Depth: 1
Heading Rank: 3

Heading: Whether State Farm, as the host driver's insurer, should have been required to exhaust its UM coverage before Dixie made any UM payment or, in the alternative, whether State Farm and Dixie should have been allowed to pro-rate the $25,000 offset?

Text: Dixie urges that its policy of insurance is the injured party's own insurer and that State Farm, as the host driver's UM insurer, would be the primary insurer. Mississippi Farm Bureau Mut. Ins. Co. v. Garrett, 487 So.2d 1320, 1321 (Miss. 1986). Dixie's position is that the host driver's insurer (State Farm) should pay before the excess insurer (Dixie) would be ordered to pay. In this case, Dixie asserts that State Farm should be required to pay the full $10,000 UM coverage before Cannon can resort to his own UM coverage. Primary/excess insurance principles deal with who pays first. Appellant's Brief at 7. This argument addresses the problem that has arisen in interpreting language in an insurance policy (other than life insurance), referred to as other insurance clauses, which were designed to prevent claims by overinsuring. The problem arises when multiple insurance coverages exists. The practice of the insurers is described in the following manner: There are three basic types of other insurance clauses which regulate how liability is to be divided when multiple coverage exists. The first, a pro-rata clause, limits the liability of an insurer to a proportion of the total loss. The second, an escape clause, seeks to avoid all liability. The third, an excess clause ... provides that the insurance will only be excess. See 8 J. Appleman, Insurance Law and Practice § 4911 (Cum.Supp. 1973); 7 Am.Jur.2d Automobile Insurance §§ 200-02 (2d ed. 1963). Carriers Ins. Co. v. American Policyholders' Ins. Co., 404 A.2d 216 (Me. 1979); see also 76 A.L.R.2d 502 (1961); 46 A.L.R.2d 1163, 1167 (1956); 69 A.L.R.2d 1122 (1960). The insurance industry has tried, by drafting specific policy provisions, to place the initial loss on other applicable insurers. [C]ourts have had to consider language in insurance policies denying coverage for a loss because of the existence of one or more additional policies. This situation, which is both common and exceedingly difficult to resolve, was humorously described by the Third Circuit Court of Appeals. Restaurateurs are familiar with the good-natured struggles which often ensue when guests attempt to pick up the tab for their dinner companions. It may be fanciful to assume that it was to avoid similar unseemly displays when the time came to pay a casualty loss that insurance companies incorporated other insurance clauses in their policies. Certainly, there is one dramatic difference between those generous diners, would-be hosts, and the insurers  the diner pleads for the opportunity to pay the bill; the insurer's use of the other insurance clause is designed to confer that honor on the other company. Alleman, Resolving the Other Insurance Dilemma: Ordering Disputes Among Primary and Excess Policies, 1981 Kan.L.Rev. 75. This Court has resolved coverage questions by applying the Mississippi Motor Vehicle Safety Responsibility Act (Miss. Code Ann. § 83-11-101, et seq. (1972) as amended), and the language of the particular insurance policy involved, together with policy considerations. See Thiac v. State Farm Automobile Ins. Co., 569 So.2d 1217 (Miss. 1990); Cossitt v. Nationwide Mut. Ins. Co., 551 So.2d 879 (Miss. 1989); Brown v. Maryland Cas. Co., 521 So.2d 854 (Miss. 1987); State Farm Mut. Automobile Ins. Co. v. Kuehling, 475 So.2d 1159 (Miss. 1985); Government Employees Ins. Co. v. Brown, 446 So.2d 1002 (Miss. 1984). This Court has consistently held that an insurer may not diminish the mandated statutory requirements. Mississippi Farm Bureau Mut. Ins. Co. v. Garrett, 487 So.2d 1320, 1323 (Miss. 1986); State Farm Mut. Automobile Ins. Co. v. Kuehling, 475 So.2d 1159, 1161 (Miss. 1985); Talbot v. State Farm Mut. Automobile Ins. Co., 291 So.2d 699, 703 (Miss. 1974). Likewise, our cases provide for the freedom of the insurer and the insured to contract so long as the mandatory statutory requirements are not circumvented. Casualty Reciprocal Exchange v. Federal Ins. Co., 608 So.2d 1258, 1259 (Miss. 1972); Wickline v. United States Fidelity & Guar. Co., 530 So.2d 708, 717 (Miss. 1988). This Court addressed other available insurance policy language in Mississippi Farm Bureau Mut. Ins. Co. v. Garrett, 487 So.2d 1320, 1323 (Miss. 1986), in light of our UM statute and prior case law. There, this Court upheld the contractual language between the insurer and the insured. Likewise, in the instant case, the trial court upheld similar contractual language and this Court now affirms. Pursuant to the holding of State Farm Mutual Auto. Ins. Co. v. Kuehling, 475 So.2d 1159, 1163 (Miss. 1985), a policy may, by its language, provide[] for offsets of the [UM] coverage by amounts paid by the tortfeasor's carrier... . Applying that rule to this case, one could say that, to the extent of $20,193.66, State Farm provided liability insurance of $25,000 and cannot be considered wholly uninsured. Subtracting or offsetting, $20,193.66 from $25,000, the court correctly arrived at an uninsured liability due from State Farm of $4,806.34. Dixie, however, had a similar offset provision in its policy. Dixie contends that, at any rate, the trial judge should have required State Farm to exhaust its UM coverage before requiring Dixie to make any payment. Nothing in Mississippi law requires such an arrangement where a policy provision provides otherwise. Because Dixie's policy only allows it to offset amounts actually paid by it, Dixie is not entitled to the benefit of the offset first. Chicago Ins. Co. v. Lumberman's Mut. Cas. Co., 503 So.2d 916 (Fla.App. 1987); Georgia Farm Bureau Mut. Ins. Co. v. State Farm Mut. Automobile Ins. Co., 255 Ga. 166, 336 S.E.2d 237 (1985). The trial court correctly held that the primary insurer was entitled to offset first. As to the argument that pro-ration of their coverages should have been allowed, Dixie argues that to permit the primary insurer to offset the liability coverage allows State Farm to escape liability under its UM coverage. Dixie, therefore, argues alternatively that State Farm and it should be allowed to pro-rate the amount of UM coverage. In view of the Garrett analysis, this Court holds that the trial judge acted properly in denying pro-ration of the offset provision of the primary insurer's policy of insurance. Because Dixie's policy only allows it to offset amounts actually paid under any liability coverage, Dixie is not entitled to offset the liability policy limits. The trial judge's decision is affirmed. AFFIRMED. ROY NOBLE LEE, C.J., HAWKINS, P.J., and PITTMAN, BANKS and ROBERTS, JJ., concur. McRAE, J., dissents by separate written opinion, joined by DAN M. LEE, P.J., and SULLIVAN, J.