Court Opinion

ID: 9698719
Source: CourtListenerOpinion
Date Created: 2023-08-25 19:58:19.972132+00
Date Added: 2024-06-11T18:20:42.963667
License: Public Domain

WIEAND, Judge,
dissenting.
I respectfully dissent from the reasoning and decision of my colleagues of the majority. In my opinion, the policy of umbrella coverage did not “drop down” when the underlying insurance carrier became insolvent. Even if it were to “drop down,” however, it would not “drop down” below three hundred thousand ($300,000.00) dollars for which *177there clearly was underlying coverage by the Pennsylvania Insurance Guaranty Association.
Michael Luko, a longshoreman employed by Independent Pier Company, was injured on March 8, 1981, while working on a pier owned by Independent Terminal Company. On March 2, 1983, Luko commenced an action against Independent Terminal Company to recover for the injuries which he had sustained.
At the time of the accident, Independent Pier Company and Independent Terminal Company were named insureds in a policy of comprehensive general liability insurance which had been issued by Midland Insurance Company. The policy contained a deductible or self-insured feature in the amount of twenty-five thousand ($25,000.00) dollars and had liability limits of one million ($1,000,000.00) dollars for each occurrence. Independent Pier Company and Independent Terminal Company were also protected by umbrella policies which had been issued by several underwriters at Lloyd’s and the Institute of London Underwriters (hereinafter “Lloyds”). The limit of this coverage, which was expressly designated to be in excess of the coverage of one million dollars provided by Midland Insurance Company, was ten million ($10,000,000.00) dollars. The umbrella policies also contained provisions that for claims not covered by “underlying insurance,” the underwriters would provide coverage for claims in excess of one hundred thousand ($100,000.00) dollars.
Approximately three and one-half years after Luko’s action had been commenced, Midland Insurance Company was declared insolvent by the courts of New York. By that time, Independent Pier Company and Independent Terminal Company had merged into a corporation known as Independent Pier Company. When the corporation called upon the Pennsylvania Insurance Guaranty Association (P.I.G.A.) to undertake the obligations of its insolvent liability carrier, P.I.G.A. directed the insured to seek coverage from Lloyds, the writers of the excess coverage policies.
*178Faced with a dispute between P.I.G.A. and Lloyds regarding coverage, Independent Pier Company filed an action for declaratory judgment. Luko was added as a party plaintiff by stipulation as an essential party. The trial court, in response to motions for summary judgment, held that P.I. G.A. was responsible for coverage to the extent that Luko’s claim and/or recovery did not exceed one hundred thousand ($100,000.00) dollars and that Lloyds was responsible for providing coverage for claims in excess thereof. Both P.I.G.A. and Lloyds appealed. The majority affirms. I would reverse.
Lloyds’ coverage is determined by the terms of the policies which it issued. By these terms, Lloyds agreed to pay liabilities in excess of the underlying insurance of one million ($1,000,000.00) dollars which had been issued by Midland Insurance Company or the excess of $100,000.00 if there were no “underlying insurance.” Where there was underlying insurance of one million dollars, Lloyds’ liability was to pay for liability incurred in excess thereof. There is nowhere in the Lloyds’ policy an agreement to insure against insolvency of the underlying insurance carrier. Midland Insurance Company was identified in the Lloyds’ policy as the underlying insurance carrier, and Lloyds clearly agreed to pay only the excess of liability over that underwritten by Midland.
My review of the policies discloses that this intent is clear. There is no ambiguity. Lloyds’ liability, according to the unambiguous terms of the policy, does not attach until the underlying insurance carrier or the insured has paid the amount of the underlying limit. Its policy provides for excess coverage, not primary coverage. Its coverage does not “drop down” merely because the underlying liability insurance carrier has become insolvent. See: Werner Industries, Inc. v. First State Insurance Co., 112 N.J. 30, 548 A.2d 188 (1988); Pergament Distributors, Inc. v. Old Republic Insurance Co., 128 A.D.2d 760, 513 N.Y.S.2d 467 (1987), appeal denied, 70 N.Y.2d 607, 519 N.Y.S.2d 1031, 514 N.E.2d 389 (1987); Wurth v. Ideal Mutual Ins. Co., 34 *179Ohio App.3d 325, 518 N.E.2d 607 (1987). Contra: Massachusetts Insurers Insolvency Fund v. Continental Casualty Co., 399 Mass. 598, 506 N.E.2d 118 (1987). The insolvency of the primary carrier does not alter the policy issued by the excess carrier so as to require the excess carrier to provide primary coverage. See: Mission National Ins. Co. v. Duke Transp. Co., Inc., 792 F.2d 550 (5th Cir.1986).
Under the Pennsylvania Insurance Guaranty Association Act of Nov. 25, 1970, P.L.-, No. 232, 40 P.S. §§ 1701.101 et seq., P.I.G.A. is required to stand in the shoes of an insolvent insurance carrier. Before it can be made to assume a liability of the insolvent carrier, however, it must first appear that the insolvent carrier provided coverage. In the instant case, P.I.G.A. argues that Midland did not provide coverage for the claim made by Luko because of the following exclusionary language in its policy:
This insurance does not apply:
(j) to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury ...
P.I.G.A. contends that Luko was an employee of the insured and that his claim, therefore, is excluded from the coverage provided by the Midland policy. However, the “insured” is defined by the policy as
any person or organization qualifying as an insured in the “Persons insured” provision of the applicable insurance coverage. The insurance afforded applies separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the company’s liability, (emphasis added).
Here, Luko was employed by Independent Pier Company, a named insured, but his claim was against Independent Terminal Company, which was not his employer. For purposes of determining the obligations of the insurance carrier with respect to such a claim, Independent Terminal *180Company must be deemed “the insured.” Luko was not employed by Independent Terminal Company; and, therefore, his claim must be deemed the claim of a third person. His employment by Independent Pier Company does not preclude coverage where, as here, his claim has been directed against Independent Terminal Company. See: U.S. Fidelity and Guaranty Company v. Globe Indemnity Co., 60 Ill.2d 295, 327 N.E.2d 321 (1975). The severability of interests clause makes it abundantly clear that the use of the word “insured” in the exclusionary clause of the policy refers only to the person or entity for whom coverage is then in issue.
It is correct, as P.I.G.A. argues, that a contrary result wás reached under slightly different circumstances in Pennsylvania Manufacturers Association Insurance Co. v. Aetna Casualty & Surety Insurance Co., 426 Pa. 453, 233 A.2d 548 (1967). Recent decisions in other jurisdictions, however, have abandoned such a broad interpretation of the word “insured” and, in reliance upon the severability clause, have held that “the insured” means the person or entity against whom the claim has been made. See: United States Fidelity and Guaranty Co. v. Globe Indemnity Co., supra; Commercial Standard Insurance Co. v. American General Insurance Co., 455 S.W.2d 714 (Tex.1970). Cf. Patton v. Patton, 413 Pa. 566, 198 A.2d 578 (1964). In the instant case, the intent, as evidenced by the severability clause, is clear.
Midland Insurance Company’s policy of liability insurance provided coverage for Independent Terminal Co. in an amount not to exceed one million ($1,000,000.00) dollars. Because Midland became insolvent, P.I.G.A. must assume Midland’s obligations. By statute, however, P.I.G.A.’s liability cannot exceed three hundred thousand ($300,000.00) dollars. See: 40 P.S. § 1701.201(b)(l)(i). Within this statutory limit it seems clear to me that P.I.G.A. is an underlying insurer and is required to provide coverage to Independent Terminal Co. Thus, even if Lloyds’ excess coverage were to “drop down,” it would be required to provide coverage *181only for liability of Independent Terminal Co. in excess of three hundred thousand ($300,000.00) dollars. See: Washington Insurance Guaranty Association v. Guaranty National Insurance Co., 685 F.Supp. 1160 (W.D.Wash.1988).
For these reasons, I respectfully dissent from the majority’s decision to affirm the judgment entered in the trial court. I would hold that primary coverage, within the limits set by statute, must be provided by P.I.G.A. and that Lloyds’ coverage is only for such liability as exceeds one million ($1,000,000.00) dollars. Only in this way can we give effect to the unambiguous terms of the liability policies purchased by the insured.