Opinion ID: 1898749
Heading Depth: 1
Heading Rank: 2

Heading: operator's policy

Text: The endorsement is dated 02-03-59, which is also the date of the policy. The endorsement also is signed by the Secretary and President of State Farm, and is countersigned by C. H. Payne Authorized Representative. In pertinent part, the endorsement recites: It is agreed that such insurance as is afforded by the policy for Bodily Injury Liability and for Property Damage Liability applies subject to the following provisions:       3. The insurance does not apply: (a) to any automobile owned by or registered in the name of the named insured;       4. The insurance shall be excess insurance over any other valid and collectible insurance available to the named insured, either as an insured under a policy applicable with respect to the automobile or otherwise, against a loss covered hereunder.       Nothing herein contained shall be held to alter, vary, waive or extend any of the terms, conditions, agreements or limitations of the undermentioned policy other than as hereinabove stated. Effective 12:01 Standard Time, 2-03-59. Attached to and forming a part of policy number 990 115-B03-01 Issued to HARRIS, EGERTON SWAN III by the STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY of Bloomington, Illinois. On the first page of the policy, appear the name and address of Harris, III; the words ASSIGNED RISK; and in the space for DESCRIPTION OF AUTOMOBILE, appears the following: SEE END #6050.1. On the last line of the endorsement above referred to, the following numbers appear: 6050 (1.8151). Paragraph 4 of the endorsement, as we understand it, is an excess insurance clause and has the same effect as the excess insurance clause in General's policy. The pro rata clause in the body of State Farm's policy, and the excess clause in the endorsement are contradictory. The pro rata clause says the insurer shall not be liable for a greater share of the loss than the ratio of its policy limit to the total, combined limits of all policies; while the excess clause in the endorsement says the insurer shall not be liable for any of the loss until other collectible insurance has been exhausted. We cannot reasonably suppose that the parties intended to make such a frustrating agreement. The policy is properly to be interpreted from its four corners. Hill v. Ocean Accident & Guarantee Corp., 230 Ala. 590, 592, 162 So. 376. The application clearly shows that the policy was issued to comply with the motor vehicle responsbility statutes. Insured applied for an operator's policy. The policy is made an operator's policy by the endorsement. The endorsement recites that the insurance afforded for bodily injury liability applies subject to the following provisions. One of the following provisions is the excess insurance provision. The endorsement concludes with the provision that Nothing herein contained shall be held to alter    any of the terms    of the undermentioned policy other than as hereinabove stated. This last complete sentence must mean that the terms of the undermentioned policy are altered as hereinabove stated, that is, as stated in the endorsement. For these reasons, we conclude that the controlling provision is the excess insurance provision set out in the endorsement. We thus conclude that both policies contain excess insurance clauses. In that situation, a number of courts have held the clauses mutually repugnant and that the loss shall be apportioned between the two insurers. 69 A.L.R.2d 1122. One court has said: Probably in no field of law is there more confusion among the courts as to the proper rule to be followed than in the field of excess insurance.    Insurance Co. of Texas v. Employers Liability Assur. Corp., 163 F.Supp. 143, 145. Three methods of apportionment have been applied. One method is to prorate the loss according to the premiums paid to the respective insurers. Insurance Co. of Texas v. Employers Liability Assur. Corp., supra. Prorating according to amount of premium, however, was rejected in Cosmopolitan Mutual Ins. Co. v. Continental Casualty Co., 28 N.J. 554, 147 A.2d 529, 69 A.L.R.2d 1115, where the court said:    It is commonly known that the cost of liability insurance does not increase proportionately with the policy limits. The cost of increased limits is relatively small when compared to the cost of minimum coverage. The manner of contribution urged by Continental has recently been rejected. Insurance Co. of Texas v. Employers Liability Assur. Corp., 163 F.Supp. 143 (D.C.S.D.Cal. 1958). In that case the court pro-rated liability according to the premiums paid the respective companies. Although this latter test initially commends itself, upon reflection it appears that unless the insureds are in identical circumstances, there are too many variables affecting the premiums to permit them to form an adequate basis for an equitable adjustment, e. g., fleet insurance. We therefore conclude that as both companies stand on an equal footing equity requires an equal apportionment of the amount of the settlement and expenses. The judgment will accordingly be modified so as to require Continental to pay one-half of the settlement and expenses. (28 N.J. at page 564, 147 A.2d at page 534, 69 A.L.R.2d at page 1122) The second method, which was used in Cosmopolitan v. Continental, supra, as stated by the court in that case, appears to rest on the premise that both companies stand on an equal footing. If both policy limits were the same, both parties would stand on the same footing, but where, as in the instant case, one company insures up to $50,000.00 and the other up to $5,000.00, the parties do not stand on the same footing in all respects. With respect to their obligation to defend, however, we do think the parties stand on the same footing.    Both are responsible to defend on behalf of Thexton (the insured), but what obligation must each assume in respects to a recovery against Thexton?    (Par. Added) Continental Cas. Co. v. St. Paul Mercury F. & M. Ins. Co., 163 F.Supp. 325, 326, 327. Both insurers assumed the same obligation to defend, and, for that reason each should bear the same share of the cost of defending the insured. The third method of division of liability is set out in Lamb-Weston v. Oregon Auto. Ins. Co., 219 Or. 110, 341 P.2d 110, 346 P.2d 643, 76 A.L.R.2d 485, on rehearing. Both companies sought proration according to policy limits. One company had insured up to $25,000.00 and the other up to $5,000.00. The court decided that one company should bear 5/6 and the other 1/6 of the loss. The court said: Celina Mutual Casualty Co. of Ohio v. Citizens Casualty Co., 1950, 194 Md. 236, 241, 71 A.2d 20, 22, 21 A.L.R.2d 605, is urged as authority for the proposition that automobile liability insurance should be prorated in the same manner as fire insurance. The case is easily distinguishable on its facts, since both insurance policies there involved contained pro rata provisions. However, much language in the decision does point to the result urged by the companies: `There appears to be no very direct authority on the exact question. The general rule as to insurance policies is that where there are pro rata or proportionate clauses in several insurance policies insuring the same property, the insurance is concurrent and each insurer is liable for its proportionate amount. This has also been held to be the rule where there is no provision about proportionate insurance in either policy. (Citations Omitted)' As seen above, in the case of fire insurance, when a loss is prorated in the ratio which the limits of the policies bear to the total coverage, the burden imposed on each insurer is generally proportional to the benefit which he received, since the size of the premium is most always directly related to the size of the policy. While distinction can be made between insurance underwriting practices in the field of fire insurance and automobile liability, it would seem that they are not sufficiently important to disturb the rule of proration sought by the companies in this case. (346 P.2d at page 647, 76 A.L.R.2d at pages 501, 502) We adopt the Lamb-Weston rule as to proration of the $7,000.00 paid by General to the plaintiff who sued Harris, III, in the instant case. Authorities supporting this result may be found in the cases and annotations already cited. The decree appealed from is modified as follows: General should have judgment against State Farm for one-half of $1,841.43, the sum spent in defense of the action at law. General should have judgment also for 1/11 of $7,000.00, the sum paid by General to plaintiff in the action at law. General should have judgment also for interest on the above stated amounts as computed by the trial court in its decree. The trial court taxed one-half the costs in that court against complainant and one-half against respondent. The costs of appeal are taxed in the same manner. As modified the decree is affirmed. Modified and affirmed. LIVINGSTON, C. J., and LAWSON, SIMPSON, MERRILL, COLEMAN and HARWOOD, JJ., concur.