Opinion ID: 2120473
Heading Depth: 2
Heading Rank: 2

Heading: Premium Charged

Text: ¶ 51 We turn next to London Market's arguments about the premium it charged for the umbrella excess policy. London Market contrasts the relatively small premium it charged with the larger premium Johnson Controls paid for the umbrella coverage provided by Travelers. [11] London Market asserts that the relatively low premium paid for its excess policy is evidence that the parties did not contract for London Market to provide a defense. It contends that this argument is borne out by Oelhafen v. Tower Ins. Co., 171 Wis.2d 532, 539, 492 N.W.2d 321 (Ct.App.1992), which explained that the intent of umbrella policies to serve a different function from primary policies with excess clauses is reflected in the rate structure of the two types of policies. ¶ 52 London Market's argument is unpersuasive for two reasons. First, contract interpretation should be based on the language of the policy rather than a court's conjecture about extrinsic information. Second, even if we considered the relative size of the two premiums in our analysis, we would not be persuaded that the lower premium evinces an absence of the duty to defend. There are additional reasons apart from defense costs that an umbrella excess policy might be less expensive than a primary policy or an umbrella policy. ¶ 53 In Davis v. Allied Processors, Inc., the court of appeals explained that insurance companies calculate premiums based upon statistics. 214 Wis.2d 294, 300, 571 N.W.2d 692 (Ct.App.1997). Excess policies may be less expensive because most judgments and settlements will be within the limits of the primary policy, leaving no exposure for the excess policy. Id. Excess coverage is normally not reached except in the case of a catastrophic loss: [I]t was far more likely that payment would be required for compensatory damages under the underlying policy than would be required for a compensatory loss of over [the limits of the underlying policy] through the umbrella policy. Because the risk was diminished for the umbrella policy, it could and did charge a smaller premium. Id. ¶ 54 We conclude that the extrinsic evidence offered by both parties is not helpful in our determination of whether the 1973-1976 London Market policy contains a duty to defend. Rather, for the reasons mentioned above, we conclude that London Market's policy incorporates the duty to defend provided in the underlying umbrella policies issued by Travelers.