Opinion ID: 1636685
Heading Depth: 1
Heading Rank: 3

Heading: Primary or Excess Insurance

Text: In the instant case, both the Colony policy and the Lumbermens policy contain other insurance clauses specifying when their respective coverage is primary coverage as opposed to excess coverage. On appeal, Colony does not dispute Georgia-Pacific and Lumbermens' assertion that coverage under the Lumbermens policy is excess coverage. Instead, Colony argues that because both policies contain excess-insurance clauses, liability for defending the underlying case should be prorated between the two insurers in proportion to each company's share of the total limits of applicable coverage, citing State Farm Mutual Automobile Insurance Co. v. General Mutual Insurance Co., 282 Ala. 212, 210 So.2d 688 (1968) (where two insurance policies covering the same risk contain excess-insurance clauses, the clauses are mutually repugnant and the loss should be apportioned between the two insurers on a prorata basis). The other insurance clause of the Colony policy provides: 4. Other Insurance. If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows: a. Primary Insurance  [Colony] insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in c. below. b. Excess Insurance This insurance is excess over any of the other insurance, whether primary, excess, contingent or on any other basis: (1) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or similar coverage for `your work'; (2) That is Fire Insurance for premises rented to you or temporarily rented to you or occupied by you with permission of the owner; or (3) If the loss arises out of the maintenance or use of aircraft, `autos' or watercraft to the extent not subject to Exclusion g. of Coverage A (Section 1). When this insurance is excess, we will have no duty under Coverages A or B to defend the insured against any `suit' if any other insurance insurer has a duty to defend the insured against the `suit.' ... (Emphasis added.) Colony's policy specifically states that its coverage is primary, subject to the exceptions enumerated in subsections 4.b.(1), (2), and (3). It is clear that subsections (2) and (3) are inapplicable here. Furthermore, we conclude that the language in section 4.b.(1) refers solely to first-party property coverage, which is likewise not at issue in this case. See Great Northern Ins. Co. v. Mount Vernon Fire Ins. Co., 92 N.Y.2d 682, 689, 685 N.Y.S.2d 411, 708 N.E.2d 167 (N.Y.Ct.App.1999) (interpreting the same other-insurance language at issue here to apply only where first-party property loss coverage would serve as primary indemnification for a loss). Specifically, the Court in Great Northern concluded that exceptions enumerated in a commercial general liability policy protected only property interests and that the phrase, similar coverage for `your work,' when read in the context of the enumerated coverages, meant first-party property coverage for commercial work. 92 N.Y.2d at 688, 685 N.Y.S.2d at 415, 708 N.E.2d at 171. The court further elaborated on the difference between first-party coverage and third-party coverage: Insurance contracts generally are assigned to one of two classes: either `first-party coverage' or `third-party coverage'.... `First-party coverage' pertains to loss or damage sustained by an insured to its property; the insured receives the proceeds when the damage occurs.... In contrast, if the insurer's duty to defend and pay runs to a third-party claimant who is paid according to a judgment or settlement against the insured, then the insurance is classified as `third-party insurance' .... Thus, wholly different interests are protected by first-party coverage and third-party coverage. ... The interests protected ... involve property, not persons. Indeed, the goal of first-party property coverage, including fire, builder's risk and installation risk, is to reimburse the insured for the insured's actual property loss, dollar for dollar, but no more. Thus, read within the context of the enumerated coverages, we interpret `similar coverage for your work' to mean first-party property coverage for commercial work. 92 N.Y.2d at 687-88, 685 N.Y.S.2d at 414-15, 708 N.E.2d at 170-71. The Lumbermens policy contains additional language in its other insurance clause, and that language is not present in the Colony policy: 4. Other Insurance b. Excess Insurance  This insurance is excess over: (1) Any of the other insurance, whether primary excess, contingent or on any other basis: (a) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or Similar coverage for `your work'; (b) That is Fire insurance for premises rented to you or temporarily occupied by you with permission of the owner; or (c) If the loss arises out of the maintenance or use of aircraft, `autos' or watercraft to the extent not subject to Exclusion g. of Coverage A (Section I). (2) Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.  (Emphasis added.) When the two policies are compared, it is clear that the language in the two policies is neither conflicting nor ambiguous. As previously noted, the enumerated coverages in section 4.b.(1) of the Colony policy refers only to first-party property coverage. The excess-insurance clause in the Lumbermens policy, i.e., section 4.b.(2), contains additional language, stating that the Lumbermens policy is excess over [a]ny other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement. Section 4.b.(2) of the Lumbermens policy creates a category for third-party liability coverage, for which there is no comparable provision in the Colony policy. Because the excess-insurance clause in each policy contains a different classification of risk, the clauses cannot be mutually repugnant. State Farm Mut. Auto. Ins. Co., supra. Accordingly, the Colony policy provides the primary coverage. In Nationwide Mutual Insurance Co. v. Hall, 643 So.2d 551, 558 (Ala.1994), this Court stated: The determination of which insurance coverage is primary and which, if any, is excess or secondary depends on the exact language of the policy. Insurance contracts, like other contracts, are construed to give effect to the intention of the parties, and when that intention is clear and unambiguous, the insurance policy must be enforced as written. (Emphasis added; citations omitted.)