Opinion ID: 170604
Heading Depth: 2
Heading Rank: 2

Heading: Kendrick's coverage under the Albany insurance policy

Text: It is a close question whether Albany must provide primary insurance coverage to Kendrick now that Shelby is insolvent. As described above, Shelby's policy stated: 8. Other Insurance  Coverage E  Personal Liability. This insurance is excess over other valid and collectible insurance except insurance written specifically to cover as excess over the limits of liability that apply in this policy. Shelby Contract, ROA, Vol. I, at 135. Albany's policy stated: 15. Special Conditions Where the Assured is, irrespective of the section, covered or protected against any loss or claim which would otherwise have been paid by this Company, under this section there shall be no contribution or participation by this Company on the basis of excess, contributing, deficiency, concurrent, or double insurance or otherwise. Insurance in excess of the limits of liability stipulated herein permitted. Albany Contract, ROA, Vol. I, at 104. Under Utah law, [8] insurance policies are construed using general contract principles. The interpretation of an unambiguous contract is a question of law to be determined by the court and may be decided on summary judgment. If the policy language is clear and unambiguous, the court must construe it according to its plain and ordinary meaning. Utah Power & Light Co. v. Fed. Ins. Co., 983 F.2d 1549, 1553 (10th Cir.1993) (citations omitted). Utah courts follow this same course when construing competing other insurance clauses. Id. at 1559 (citations omitted). [9] Further, [t]he Utah courts do not simply categorize other insurance clauses as excess, pro-rata, escape, or excess-escape clauses and apply presumptive rules that one type trumps another. Rather, ... they give effect to the plain meaning of the clauses' language. Thus, the Utah Supreme Court recognizes the general validity of excess-escape clauses, because the plain language of these clauses generally prevails over the language of other types of clauses. More importantly, [Utah has] interpreted the plain language of an excess-escape clause to prevail over the plain language of an excess clause. Although courts in other jurisdictions may have found good reason to disfavor escape and excess-escape clauses, the Utah Supreme Court has not followed their lead. Id. at 1560-61 (citations omitted). If Shelby were not insolvent, then, under our decision in Utah Power & Light Co., 983 F.2d at 1561, our only relevant inquiry would be the plain meaning of the [Shelby and Albany] clauses' language. For the Shelby clause to trigger, and for the Shelby policy to become excess insurance, rather than primary insurance, the Shelby excess clause requires that other valid and collectible insurance be available to Kendrick. Shelby Contract, ROA, Vol. I, at 135. The Albany policy, which contains an escape clause, would not qualify as other valid and collectible insurance. See Utah Power & Light Co., 983 F.2d at 1561 n. 5 ([W]hen the loss could be covered in full by a policy with an excess clause, other insurance provided by policies with either escape or excess-escape clauses was not `collectible' insurance that would trigger the competing excess insurance clause.). As a result, the Albany policy would not ... trigger the competing excess insurance clause [in the Shelby policy], and Shelby, with the untriggered excess clause[, would be] liable for the whole loss. Id. Also, the existence of the Shelby policy would trigger the Albany policy's escape clause, resulting in no contribution or participation by [Albany] as an insurer of Kendrick. Albany Contract, ROA, Vol. I, at 104. The district court's initial inclination that, in the absence of Shelby's insolvency, Shelby would be the primary insurer, Hearing, Supp. ROA, at 12, was therefore correct. See Utah Power & Light Co., 983 F.2d at 1560-61. As the district court recognized, however, the issue is no longer as straightforward after Shelby's insolvency. We are left to decide whether the respective policy provisions of the Shelby and Albany policies continue to dictate the outcome here, or whether Shelby's insolvency and the insertion of the UPCIGA into the picture alter the outcome. Under Utah law, when an insurance company is insolvent, the UPCIGA is obligated on the amount of the covered claims, up to $300,000. Utah Code Ann. § 31A-28-207(1)(a)-(b); see also id. § 31A-28-203(4) (defining a covered claim). The UPCIGA (ii) has all the rights, duties, and obligations of the insolvent insurer as if the insurer had not yet become insolvent, including the right to pursue and retain salvage and subrogation recoverable on paid covered claim obligations[.] Id. § 31A-28-207(1)(f)(ii). In addition, the statutory provision that the district court held was dispositive provides: (a) Any person who has a claim against an insurer, whether or not the insurer is a member insurer, under any provision in an insurance policy, other than a policy of an insolvent insurer that is also a covered claim, is required to first exhaust that person's right under that person's policy. Id. § 31A-28-213(1)(a). The key issue here is whether, as Albany claims, § 31A-28-207(1)(f)(ii) is dispositive, and the UPCIGA steps directly into the shoes of Shelby, or, as Kendrick claims, the statutory exhaustion provision in § 31A-28-213(1)(a) now alters Albany's ability to escape coverage. Other jurisdictions facing similar situations and applying similar statutes have reached widely varying results, but there is very little precedent directly addressing the question we face today, and we have found no case on point from Utah. The cases cited by the parties deal, in large part, with the effect of a primary insurer's insolvency upon a solvent excess insurer, and do not address the scenario where the policy of the solvent insurer contains an escape clause. In the end, we conclude that the district court erred in holding Albany liable to Kendrick. When addressing competing other insurance clauses, courts generally determine the effect of the clauses on the date of the accident. See, e.g., Sifers v. Gen. Marine Catering Co., 892 F.2d 386, 393 (5th Cir.1990); cf. Pub. Serv. Co. v. Wallis & Cos., 986 P.2d 924, 935 (Colo.1999); Allstate Ins. Co. v. Liberty Mut. Ins. Group, 868 P.2d 110, 112-15 (Utah Ct.App. 1994) (looking to the date of the accident to determine the respective obligations of two insurers); City of Greensboro v. Reserve Ins. Co., 70 N.C.App. 651, 321 S.E.2d 232, 238-39 (N.C.Ct.App.1984). In addition, several courts have held that, where a primary insurer has become insolvent and excess insurance exists under an umbrella policy, the state insurance guaranty association is responsible for all of the primary insurer's obligations, and the excess insurer is not required to drop down and provide coverage. See, e.g., Wash. Ins. Guar. Ass'n v. Keeter, 847 F.2d 761, 764-65 (11th Cir.1988); Wash. Ins. Guar. Ass'n v. Guar. Nat'l Ins. Co., 685 F.Supp. 1160, 1162 (W.D.Wash.1988); Rapid City Reg'l Hosp., Inc. v. S.D. Ins. Guar. Ass'n, 436 N.W.2d 565, 566-67 (S.D.1989); cf. New Process Baking Co. v. Fed. Ins. Co., 923 F.2d 62, 63-64 (7th Cir.1991). Some courts have gone even one step further, reaching the same result in cases where the insurance policy is an otherwise primary policy with an excess clause. See, e.g., Pilling v. Va. Prop. & Cas., 95 Fed. Appx. 126, 129-32 (6th Cir.2004); Wyo. Ins. Guar. Ass'n v. Allstate Indem. Co., 844 P.2d 464, 467-68 (Wyo.1992); Donegal Mut. Ins. Co. v. Long, 528 Pa. 295, 597 A.2d 1124, 1127-28 (Pa.1991). Here, Albany's policy contained a valid escape clause. See Utah Power & Light Co., 983 F.2d at 1560-61. The existence of the Shelby policy on the date of the accident triggered Albany's escape clause, and, at that point, Kendrick no longer had a claim against Albany that he could exhaust under Utah Code Ann. § 31A-28-213(1)(a). Albany, therefore, is not required to provide primary coverage to Kendrick, notwithstanding the exhaustion provision in § 31A-28-213(1)(a). Rather, the UPCIGA, which has all the rights, duties, and obligations of [Shelby], § 31A-28-207(1)(f)(ii), is primarily liable and, like Shelby, could not as a primary insurer prevail against Albany's valid and enforceable escape clause. [10] Admittedly, there is also some support for Kendrick's argument, although nothing that directly addresses the interplay between a primary insurer's insolvency and another insurer's escape clause. Some courts have required excess insurers to drop down and provide coverage where a primary insurer becomes insolvent and where, if the primary insurer had never existed, the excess insurer would have been required to provide primary coverage. See, e.g., Gauze v. Reed, 219 W.Va. 381, 633 S.E.2d 326, 332-34 (W.Va.2006); Scordill v. Smith, 635 So.2d 407, 408-09 (La.Ct.App.1994). In addition, several courts have emphasized that, as evidenced by statutory exhaustion provisions like Utah Code Ann. § 31A-28-213(1)(a), state insurance guaranty associations are only obligated as a last resort, regardless of what the respective insurers' obligations would have been in the absence of insolvency. See, e.g., Reed, 633 S.E.2d at 334; Jackson Brook Inst., Inc. v. Me. Ins. Guar. Ass'n, 861 A.2d 652, 656-57 (Me. 2004); Me. Ins. Guar. Ass'n v. Folsom, 769 A.2d 185, 189 (Me.2001); Scordill, 635 So.2d at 409; Ross v. Can. Indem. Ins. Co., 142 Cal.App.3d 396, 404, 191 Cal.Rptr. 99 (Cal.Ct.App.1983); cf. Oglesby v. Liberty Mut. Ins. Co., 832 P.2d 834, 843 (Okla. 1992). [11] Nevertheless, under our decision in Utah Power & Light Co., 983 F.2d at 1560-61, Albany has a valid escape clause, and Kendrick has no claim against Albany that he is required to exhaust under Utah Code Ann. § 31A-28-213(1)(a). [12] REVERSED and REMANDED for further proceedings.