Court Opinion

ID: 9612753
Source: CourtListenerOpinion
Date Created: 2023-08-22 04:11:04.83555+00
Date Added: 2024-06-11T18:03:22.905555
License: Public Domain

STOWERS, Justice, dissenting. I dissent. Contract law, as the bedrock of the legal system, requires us to give effect to valid contracts whenever possible. Although it may be convenient, it is nevertheless inappropriate to adopt simplistic solutions to complex contract problems. The Oregon rule is such a simplistic solution insofar as it ignores the rights of the parties and the language of the contracts. Its application is inappropriate considering the facts of this case. In the interest of clarification, I will set forth with particularity the facts and issues in this case. CC Housing Corporation (CCH) maintained its liability insurance policy with Continental Casualty Company (Continental). The Continental policy contained an “Other Insurance” section in which primary coverage was extended only for any covered auto owned by CCH. For any covered auto not owned by CCH, the insurance provided by the policy was excess over any other collectible insurance. With respect to coverage afforded trailers specifically, the policy provided primary coverage while the trailer was connected to a covered auto owned by CCH and excess coverage while the trailer was connected to a motor vehicle which it did not own (the situation in the present case). This section also specified that if two or more policies afforded coverage on the same basis, either excess or primary, Continental would pay a pro rata share. Ryder Truck Rental, Inc.’s (Ryder’s) tractor was not owned by CCH, and because there was other collectible insurance for the tractor unit under the Old Republic Insurance Company (Old Republic) policy, I find Continental’s policy afforded only excess coverage to the Ryder tractor. Further, since CCH’s trailer was not connected to an automobile it owned at the time of the accident in question, I find CCH’s trailer also was afforded only excess coverage. Ryder Truck Rental, Inc. and Specialized Transport, Inc. were named insureds under a policy issued by Old Republic. CCH was an additional insured under the Old Republic policy by virtue of a special endorsement and a written agreement between CCH and Specialized Transport, Inc. Further, CCH was an insured under the Old Republic policy pursuant to the “Driverless Cars” special endorsement to the policy. Under the express terms of both special endorsements, therefore, CCH became an additional insured under the Old Republic policy during its use of the Ryder truck. The Old Republic policy also contained an “Other Insurance” section stating: “The insurance afforded by this policy is primary insurance except when stated to apply in excess of or contingent upon the absence of other insurance” (emphasis added). The only additional section of the policy which related to the type of coverage afforded CCH and its trailer was the “Driver-less Cars” special endorsement discussed above. Under the 1981 version of this endorsement, the insurance afforded under the policy to a lessee of an automobile using its own trailer was excess “over any other valid and collectible insurance the lessee/renter may have whether such coverage is on a primary, excess, or contingent basis.” However, this 1981 “Driverless Cars” endorsement was not in effect at the time of the accident. Thus, the first exception to the primary coverage stated in the “Other Insurance” section of Old Republic’s policy was not applicable. The second exception was also inapplicable because the policy did not contain a statement that Old Republic’s primary coverage was contingent upon the absence of other insurance. This “Other Insurance” section of Old Republic’s policy further provided: “When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of [Old Republic’s] liability under this policy shall not be reduced by the existence of such other insurance.” Since Continental’s policy afforded only excess insurance under the facts of this case, Old Republic should have been primarily liable to the limits of its policy as mandated by the clear terms of its “Other Insurance” section. Finally, Old Republic’s “Other Insurance” clause authorized a proration of policy limits only if the Old Republic policy and another insurance policy applied to the loss “on the same basis.” Continental’s policy applied to the loss in this case only on an excess basis. The Old Republic policy applied on a primary basis as stated by the policy’s “Other Insurance” clause. Therefore, the two policies did not apply to the loss on the same basis, and a proration was inappropriate. There is no necessity to analyze the two policies further; by simply comparing the express terms of Continental’s “Other Insurance” policy clause with Old Republic’s “Other Insurance” policy clause, it is clear that the Old Republic policy afforded primary coverage in this instance. The majority, however, fails to give effect to these “Other Insurance” clauses, choosing instead to compare Continental’s “Other Insurance” clause with Old Republic’s “escape” clause. It is only by comparing these latter two provisions that the majority can allege a repugnancy between the policy terms. Notwithstanding the majority’s erroneous analysis as discussed above, I nevertheless find that the Old Republic policy afforded primary coverage for the accident at issue by virtue of Old Republic’s insertion of an “escape” clause into its policy. “An ‘escape’ clause provides that the company invoking it is relieved from any obligation to the insured if other coverage is available.” Insurance Co. of N. Am. v. Continental Casualty Co., 575 F.2d 1070, 1072 (3d Cir.1978). While the 1981 “Driverless Car” endorsement contained only an .excess clause, under the 1982 version, the version in effect on the date of the accident, the “excess” language from the 1981 endorsement was substituted with an escape clause. This new endorsement provided that the insurance afforded to a lessee and its trailer “shall not apply if there is other coverage applicable to the trailer and available to the lessee/renter.” In other words, the 1982 endorsement purported to cancel or withdraw all coverage provided to CCH and its trailer in the event that CCH had other “applicable” and “available” coverage. There was no dispute between the parties that Old Republic’s 1982 “Driver-less Cars” endorsement did incorporate an escape type clause. Although this is an issue of first impression in New Mexico, the clear majority rule is that a policy like Old Republic’s, containing language designed to avoid all liability, must fail when confronted by a policy containing a standard “excess” clause such as the one included in Continental’s policy. As stated in Horace Mann Ins. Co. v. Continental Casualty Co., 54 N.C.App. 551, 555, 284 S.E.2d 211, 213 (1981): “The majority rule is that when a standard escape clause (no liability clause) competes with an excess insurance clause, the carrier using the escape clause is held to be the primary insurer, and the carrier that uses the excess insurance clause is held to be the excess insurer only.” As discussed by the majority in their opinion, a minority of courts follow a rule of law that all “Other Insurance” clauses, whether pro rata, excess, or escape, are indistinguishable in meaning and intent and therefore mutually repugnant. See, e.g., Oregon Auto. Ins. Co. v. United States Fidelity & Guar. Co., 195 F.2d 958 (9th Cir.1952); Werley v. United Servs. Auto. Assoc., 498 P.2d 112 (Alaska 1972). Thus, in a case such as this involving a conflict between an excess clause and an escape clause, the minority rule (or Oregon rule) presumes that regardless of their natures the two clauses are identical. The result of this determination under the Oregon rule is that the “Other Insurance” clauses are disregarded and both policies are interpreted to afford primary coverage thereby requiring the insurers to share proportionately in the loss. I am aware that two New Mexico cases refer to the Oregon rule with apparent approval. See American Employers’ Ins. Co. v. Continental Casualty Co., 85 N.M. 346, 512 P.2d 674 (1973); Sloan v. Dairyland Ins. Co., 86 N.M. 65, 519 P.2d 301 (1974). However, I find them clearly distinguishable from the present case in that the conflicting insurance policies involved in both former cases contained excess clauses only; neither case involved a situation, such as the one at issue, where an excess clause confronted an escape clause. Consequently, although both cases discuss the principle that “Other Insurance” sections containing excess clauses are mutually repugnant and can be disregarded, neither case stands for the proposition that all “Other Insurance” clauses are indistinguishable and hence invalid. The district court in the present case relied upon the Oregon rule in denying Continental’s motion for judgment on the pleadings and in granting Old Republic’s motion for summary judgment. “Inasmuch as [Continental] is challenging a legal conclusion, the standard for review is whether the law was correctly applied to the facts, viewing them in a manner most favorable to the prevailing party. This means that we indulge all reasonable inferences in support of the court’s decision, and disregard all inferences or evidence to the contrary.” Texas Nat’l Theatres, Inc. v. City of Albuquerque, 97 N.M. 282, 287, 639 P.2d 569, 574 (1982). While “[resolution of factual conflicts, credibility and weight of evidence is particularly a matter within the province of the trier of fact,” a reviewing court is not “bound by a trial court’s ruling when predicated upon a mistake of law.” State v. Boeglin, 100 N.M. 127, 132, 666 P.2d 1274, 1279 (Ct.App.1983) (citations omitted). Although a split of authority exists on this issue, I find the majority rule the better reasoned view in that it gives effect to the language of the contract. “An insurance policy is a contract and is generally governed by the law of contracts, and the rights and duties of the parties are to be determined by its terms.” Thompson v. Occidental Life Ins. Co., 90 N.M. 620, 621, 567 P.2d 62, 63 (app.), cert. denied, 91 N.M. 4, 569 P.2d 414 (1977). When an insurance contract is unambiguous, no ambiguity should be placed on the language used by the parties and the language should be construed in its usual and ordinary sense. See Safeco Ins. Co. of Am. v. McKenna, 90 N.M. 516, 565 P.2d 1033 (1977). The majority states that after “carefully scrutinizing the ‘other insurance’ clauses of the two insurance policies,” it can only conclude that the provisions are “mutually repugnant and irreconcilable.” The majority disregards the contract language. I believe the terms of the “Other Insurance” clauses clearly divided the liability between Continental and Old Republic. Moreover, I find the escape clause in Old Republic’s policy clearly distinguishable from the excess clause in Continental’s policy, and I would therefore adopt the majority rule which recognizes this distinction and gives effect to the plain and unambiguous language of the policy. Finally, the majority makes much of the erroneous assumption that the insured in this case would have been left without any coverage if the Court had given effect to both “Other Insurance” policy clauses. While this certainly would have been an unjust result if it were true, the fact is that the insured would have been allowed full coverage under both insurance policies regardless of which rule of law was applied. Under the majority rule, the insured’s damages would have been satisfied first by Old Republic to the extent of its policy limits, while the insured’s remaining damages would have been satisfied by Continental to the extent of its policy limits. Under the minority rule, adopted by the majority opinion in this case, the insured’s damages will be prorated equally between Continental and Old Republic to the extent of their total policy limits. Neither rule would have prejudiced the insured in any way. In my opinion, the majority’s argument is not supported by the facts. For all of the reasons stated above, I dissent.