Court Opinion

ID: 9478494
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:50:24.506382+00
Date Added: 2024-06-11T17:46:27.422696
License: Public Domain

ANDERSON, Circuit Judge,
dissenting:
Respectfully, I dissent. First State’s position, adopted by the majority, ignores the conflict between Provision III and Condition “0” and thus fails to apply established Georgia law that such an ambiguity must be resolved in favor of coverage.
The two relevant policy provisions are Condition “0” and Provision III. Condition “0” provides in part:
0. Maintenance of Underlying Insurance: It is warranted by the Insured that the underlying policy(ies) listed in Schedule A, or renewals or replacements thereof not more restrictive in coverage, shall be maintained in force during the currency of this policy....
Provision III provides in part:
In the event that the aggregate limits of liability of the underlying policies, listed in the schedule of underlying insurance, are exhausted solely as the result of OCCURRENCES taking place after the inception date of this policy, this policy shall, subject to the Company’s limit of liability and to other terms of this policy, with respect to OCCURRENCES which take place during the period of this policy, continue in force as underlying insurance for the remainder of the policy year of the underlying policy or until the aggregate limit of liability as stated in Item 3.II is exhausted, but not *844for broader coverage than was provided by the exhausted underlying insurance.
In the event that the aggregate limits of liability of the underlying insurance are exhausted or reduced as the result of OCCURRENCES taking place prior to the inception date of this policy, the Company shall only be liable to the same extent as if the aggregate limits had not been so exhausted or reduced.
First State argues that provision III means that during any particular policy year of the excess policy, if the aggregate limit of liability of the underlying policy is exhausted or reduced as a result of occurrences taking place before the beginning of that policy year, then the company will be liable only to the same extent as if the aggregate limit had not been so exhausted or reduced. I agree with First State, and the majority, that this is the most reasonable reading of the language of Provision III. Less obvious, however, is the necessary consequence of that language. What this language means is that whenever the policy dates of the underlying policy do not precisely coincide with the policy dates of the umbrella policy, the insured will be at risk of having reduced or even no underlying coverage during the overlap.1 With this hidden risk revealed, it is clear that any non-foolhardy insured could satisfy his obligation to maintain underlying insurance only by maintaining an underlying policy with policy dates that precisely coincide with the policy dates of the umbrella policy.
Obviously, Provision III gives rise to a result which is not only harsh, but a result which conflicts with a common sense understanding of the intention of the parties, i.e., that the parties intended that the underlying policy and the umbrella policy would dovetail and provide continuous coverage. Of course, a court is required to enforce the unambiguous terms of a policy even if the result is harsh and lacking in common sense. For the reason explained below, I need not address the question of whether or not the hidden risk in Provision III would itself render the policy language ambiguous.
Courts do not focus on a single provision of a contract, e.g., Provision III. Rather, courts are required to construe an insurance policy in light of all of its terms and provisions. Neither First State nor the majority has addressed the conflicting meaning of Condition “O.” Condition “O” describes the insured’s obligation to maintain underlying insurance. Under its terms, the insured can satisfy that obligation by maintaining “during the currency of [the First State] policy” the underlying policy listed in the schedule or a renewal thereof. By permitting renewals of the listed underlying policy during the First State policy period, Condition “O” expressly authorizes *845an underlying policy whose policy dates do not coincide precisely with the policy dates of the First State umbrella policy. That is, a particular underlying policy which is maintained by renewal, during the umbrella policy period, will necessarily have policy dates that do not coincide with the policy dates of the excess policy period.
An insured therefore could reasonably conclude from reading Condition “0” that he would satisfy his obligation to maintain underlying insurance by means of a policy whose dates did not coincide precisely with the policy dates of the excess policy. Moreover, such an interpretation comports fully with common sense. There is nothing in common experience or business practice that would indicate to a reasonable insured that risk would be involved if the policy dates of an underlying policy do not coincide precisely with the policy dates of the excess policy, especially if both policies are maintained over the course of several years. To the contrary, common sense would indicate to a reasonable insured that he is adequately covered so long as he maintains during the entire relevant time period an underlying policy with the specified limits of liability.
Thus, Provision III requires that the only feasible way to maintain underlying insurance is by means of an underlying policy whose policy dates precisely coincide with the policy dates of the umbrella policy. By contrast, Condition “0” expressly permits an insured to satisfy his obligation to maintain underlying insurance by maintaining an underlying policy whose policy dates do not coincide with the policy dates of the excess policy. Under established Georgia law, these two conflicting provisions create an ambiguity, and the ambiguity must be resolved in favor of coverage. See Cotton States Mutual Ins. Co. v. Crosby, 149 Ga.App. 450, 254 S.E.2d 485, 487, rev’d in part on other grounds, 244 Ga. 456, 260 S.E.2d 860 (1979). See generally Garmany v. Mission Ins. Co., 785 F.2d 941, 945 (11th Cir.1986) (ambiguities should be resolved in favor of finding coverage).
The insurance company argues that its interpretation of Provision III is bolstered by the underlined section of Condition “O”:
0. Maintenance of Underlying Insurance: It is warranted by the Insured that the underlying policy(ies) listed in Schedule A, or renewals or replacements thereof not more restrictive in coverage, shall be maintained in force during the currency of this policy except for any reduction in the aggregate limit(s) contained therein solely by payment of claims in respect of OCCURRENCES happening during the period of this policy.
It is far from clear that the underlined clause supports the company’s position. First State reads this “except clause” to mean that payments from the underlying policy on account of occurrences happening during the period of the excess policy will not result in any reduction in excess coverage. By negative implication, the company argues, any other payments reducing the underlying limits (e.g., payments on account of occurrences before the umbrella policy period) would not count towards the $500,000 which triggers umbrella liability.
The insurance company’s reading is flawed. First, as the district court pointed out, it is not clear whether “this policy” refers to the underlying policy or the umbrella policy. Second, Condition “O,” to the extent First State’s interpretation of the “except clause” is accepted, is itself ambiguous. The language permitting renewal of the underlying policy during the period of the umbrella policy expressly permits an insured to satisfy his obligation to maintain underlying insurance by maintaining a policy whose policy dates do not precisely coincide with the policy dates of the umbrella policy. But for the reasons already explained this would be impossible under the company’s interpretation of the “except clause.” The conflict between the two clauses would create an ambiguity, and under the established law, the clause providing coverage would be enforced.
In conclusion, I agree with the district court. I respectfully disagree with the majority’s conclusion that the policy provi*846sions are unambiguous. Since Provision III and Condition “0” are in conflict, I would resolve the ambiguity in favor of coverage.

. Under Provision III, any payments of underlying insurance on account of occurrences before each policy year of the umbrella policy are excluded and are not taken into account in reaching the $500,000 point at which umbrella coverage is triggered. When the policy dates of the underlying and umbrella insurance do not precisely coincide, the previous underlying policy period and the new excess policy period will overlap for some amount of time each year. This may result in reduced coverage during the overlap, in the following fashion, even if both policies are maintained and renewed year after year.
At the point when the overlapping period begins, the underlying policy may be partially or fully exhausted. For example, in this case the relevant policy year of the underlying insurance ran from April 11, 1982 to April 11, 1983, and the relevant umbrella policy years were April 1, 1982 to April 1, 1983, and April 1, 1983 to April 1, 1984. The overlap period at issue was the eleven-day period between April 1, 1983 (the beginning of the relevant policy year of the umbrella policy) and April 11, 1983 (the end of the relevant policy year of the underlying policy). Of the $500,000 aggregate annual coverage of the underlying policy, all $500,000 had already been used up by occurrences taking place by April 1, 1983. Under First State’s interpretation of the policy, Hercules Bumpers thus had zero underlying coverage during this eleven-day period, because $500,000 was attributable to occurrences before the beginning of the particular policy year of the excess policy (i.e., April 1, 1983). Thus, the overlap is a period when, even if both policies are properly maintained and renewed, there is a gap in the insurance coverage.
Because this overlap period will recur each year, the risk of a gap in coverage during the overlap period will recur each year. The only way to eliminate this risk is to eliminate the overlap, i.e., to have underlying coverage with policy dates that precisely coincide with the policy dates of the umbrella policy.