Court Opinion

ID: 8884002
Source: CourtListenerOpinion
Date Created: 2022-11-26 21:21:32.922487+00
Date Added: 2024-06-11T17:06:49.103212
License: Public Domain

GIBSON, Circuit Judge
(dissenting).
I respectfully dissent. Although I fully agree on the jurisdictional issue, I feel that the result reached by the majority on the merits is not only unfair but contrary to the demonstrated intention of the parties in securing and issuing the insurance policies in question. I also realize the reasoning employed by the majority has a certain logical basis because of the language used in setting forth certain terms and definitions in the American policy. But the net effect of the majority decision is to relieve State Farm of 10/llths of its contractual obligations as a primary insurer by a fortuitous and unintended extension of a master policy issued by American that was obviously not intendr ed by the insured or by American to afford primary coverage to the 1965 Ford.
In discussing judicial problems attendant to fairly reconciling various separate clauses of “proration,” “excess coverage” and “other insurance” by which each insurance company attempts *1012to restrict its coverage and take advantage of possible coverage by other policies, Judge Tate’s approach in his concurring opinion in State Farm Mutual Automobile Insurance Company v. Travelers Insurance Company, 184 So.2d 750, 754 (La.App.1966) merits consideration : .
“Nevertheless, although the respective clauses cannot be reconciled by word-logic, the respective policy coverages can be sensibly allocated in the light of the total policy insuring intent, as determined by the primary policy risks upon which each policy’s premiums were based and as determined by the primary function of each policy.”
A similar approach in the instant case would more nearly conform both with the intention of the parties and the practicalities of securing adequate liability insurance without duplication of premium costs and without loss of coverage to the insured or to the public.
The question of overlapping coverage has produced much litigation at the expense of the insureds and the public without increasing the coverage to the insureds or to the public. I feel that a better reasoned view would be to give major consideration to the intention of the parties on coverage rather than to a construction of inartfully drawn conditions and definitions inserted in an adhesive policy that have the effect of operating contrary to the intentions of the parties. The Minnesota Supreme Court has also viewed this problem on an overall basis laying forth certain guidelines of construction, which appear to me to be sound, reasonable and empirically justified in a case of this kind. In Federal Insurance Company v. Prestemon, 278 Minn. 218, 153 N.W.2d 429 (1967), the Minnesota Supreme Court expressly adopted Judge Tate’s approach and set out four factors to be considered in the allocation of liability between the insurers:
“(1) Which company by its policy intended to cover ‘business operations’? (2) Which company specifically described the accident-involved vehicle in its policy? (3) Which premium is reflective of the greater contemplated exposure? (4) Which company insured the particular risk as an ‘incident’ of its object, and which policy appears to cover the particular car and the risks inherent in using the car for contemplated ‘business operations’ uses?” Id. at 436-437.
The principle of Prestemon, as embodied in these four tests, is equally applicable to the instant case.
The State Farm policy was written specifically for and exclusively described the 1965 Ford while the American policy did not. State Farm received a full premium for the specific coverage, while American did not even have knowledge of the lease of the car and charged no premium. It is true that the American policy provided primary coverage to the insured for liability arising out of the use of “any automobile”; however, Evansville’s premium was based upon “the hazards described in the declarations” of the policy, which included a listing of automobiles, plus its risk as an excess insurer on automobiles used by the insured but not specifically listed in the declarations. This was not a flat rate premium; the premium for the primary coverage was clearly determined by the automobiles listed on the Declarations sheet. Evansville’s prior practice under this American policy supports this conclusion. In at least two instances in which Evansville or Pembina wanted primary coverage of a leased automobile, the automobiles were listed by American under its Declarations sheet of described and insured vehicles and an appropriate endorsement describing the car added to the policy, a certificate of insurance was transmitted to the lessor and an additional premium was charged.
The intent of the parties is clearly manifested in the above facts. State *1013Farm was the primary insurer of the leased automobile; Evansville didn’t intend that its regular American policy provide primary coverage for which it would have to pay an additional premium or it would merely have added the 1965 Ford to the American Declarations sheet. Where there is valid primary coverage on a non-owned automobile, as in this case, the American policy should provide only excess coverage and American’s excess clause should be construed so that a “non-owned automobile” includes a “hired automobile” insured by someone else on a primary basis. This construction of American’s policy — that it provides only excess coverage on hired automobiles (including those insured on a cost of hire basis) — is a reasonable one, for in the ordinary course of business either the lessor or lessee will obtain primary coverage. By this construction, the premiums paid are commensurate with the risk, the insured is not penalized by the payment of double premiums, and American is not penalized with an unknown potential obligation not scheduled in its policy as a primary risk; yet the public is fully protected. By finding American to be a primary insurer of the car in question, the majority penalizes American by requiring it to provide coverage for which it received no consideration (except a possible charge against the insured after actual liability had attached),1 penalizes the insured by making it pay for coverage it didn’t want or need because it had already purchased primary coverage from State Farm, and exonerates State Farm from most of its contractual liability as a primary insurer.
I would reverse the District Court judgment on the merits.

. The American policy appears to provide for a retroactive premium charge for this automobile since provision is made for computation of an earned premium upon termination of the policy. However, as a practical matter, there is no way American can collect such premiums if it is unaware that its insured has leased a car and the insured itself does not intend that its American policy provide primary coverage. As a practical matter, only where a loss occurs and liability has attached will an additional premium be subject to collection. This is not commensurate with the risk contracted for by American.