Opinion ID: 1802432
Heading Depth: 4
Heading Rank: 2

Heading: Whether LMCC's failure to use a loss payable clause causes the Catastrophe Policy to drop down and fill the gap caused by Legion's insolvency.

Text: ¶ 25. Caldwell alleges that LMCC's failure to use a loss payable clause, such as the one used in Century, [10] evidences that LMCC's coverage should drop down and fill the gap caused by Legion's insolvency. Other than its position that the Underlying Insurance provision adequately conveys that the Catastrophe Policy precludes drop down coverage, LMCC did not specifically respond to this argument. Caldwell claims that, pursuant to North Carolina Rule of Appellate Procedure 28(a), LMCC's failure to respond requires that this Court accept its position. ¶ 26. We first point out that Rule 28(a) is a procedural rule which has no application in this case. When we are required to apply the law of another state, we apply its substantive law, but we continue to rely on our own procedural rules. Zurich Am. Ins. Co. v. Goodwin, 920 So.2d 427, 433 (Miss.2006). ¶ 27. LMCC clearly argues that the contract, read as a whole (including its Underlying Insurance provision), is dispositive of Caldwell's claim. Additionally, Caldwell cites no authority which mandates that a loss payable clause must be included in an excess insurer's policy in order to preclude drop down coverage. Furthermore, the Underlying Insurance provision in the Catastrophe Policy adequately addresses LMCC's obligations in the event the underlying insurer becomes insolvent. The provision states that [i]n the event of bankruptcy, insolvency or financial impairment of the insurance company that issued the `underlying insurance,' [LMCC] shall be liable under Coverage A only to the extent we would otherwise have been liable. While Caldwell argues that the phrase, to the extent we would otherwise have been liable, is ambiguous, we disagree, and find Caldwell's argument to be without merit. ¶ 28. Under Coverage A, LMCC is liable for the amount in excess of the sums actually payable under the terms of the `underlying insurance.' As determined previously in Part 1A, supra, that amount is the $1,000,000 policy limit, which is clearly provided under the terms of the policy. Therefore, the Underlying Insurance provision clearly and unambiguously provides that, in the event of insolvency of the underlying insurer, LMCC is liable only for losses exceeding $1,000,000. ¶ 29. In this case, LMCC paid $200,000, which was the portion of the loss that exceeded $1,000,000. Therefore, this Court finds that LMCC paid the amount it contracted to pay and, consequently, is not liable for any gap in coverage caused by Legion's insolvency. For these reasons, we find that not only does the lack of a loss payable clause not evidence that the Catastrophe Policy must drop down, but the Underlying Insurance provision clearly precludes such drop down coverage under the terms of the policy.