Court Opinion

ID: 4711953
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:37:40.031611+00
Date Added: 2024-06-11T08:07:11.182950
License: Public Domain

Talmadge, J.
(dissenting) — I respectfully dissent. The majority misunderstands the nature of excess liability insurance coverage and incorrectly treats the issue of aggregate annual limits of liability under the Fireman’s Fund Insurance Co. (Fireman’s Fund) and Commercial Union Insurance Company (Commercial Union) insurance policies at issue in this case. I would reverse the trial court’s partial summary judgment in favor of Weyerhaeuser Company (Weyerhaeuser) and grant Commercial Union’s motion for partial summary judgment, finding its excess *703liability insurance policy sold to Weyerhaeuser contained an annual aggregate $1.5 million coverage limit for property damage. I would also affirm the trial court’s determination the Fireman’s Fund insurance policy had a $500,000 aggregate annual property damage limit of liability.
A. Principles of Insurance Contract Construction
I generally agree with the majority’s articulation of insurance policy interpretation principles. The interpretation of insurance policies is a question of law. Weyerhaeuser Co. v. Aetna Cas. & Sur. Co., 123 Wn.2d 891, 897, 874 P.2d 142 (1994). We look to the whole insurance contract in interpreting it, giving the contract a “ ‘fair, reasonable, and sensible construction’ ” as understood by the average person purchasing insurance. Am. Nat’l Fire Ins. Co. v. B&L Trucking & Constr. Co., 134 Wn.2d 413, 427, 951 P.2d 250 (1998) (quoting Key Tronic Corp. v. Aetna (CIGNA) Fire Underwriters Ins. Co., 124 Wn.2d 618, 627, 881 P.2d 201 (1994)). In effect, we look to the context of the policy’s purchase so that our interpretation of it avoids strained or absurd consequences. Transcon. Ins. Co. v. Wash. Pub. Utils. Dists.’ Util. Sys., 111 Wn.2d 452, 457, 760 P.2d 337 (1988).
In general, we enforce an insurance contract as written if the contract is clear and unambiguous. Allstate Ins. Co. v. Peasley, 131 Wn.2d 420, 424, 932 P.2d 1244 (1997). If there are ambiguities in the policy language, we may resort to extrinsic evidence to ascertain the intent of parties. Am. Nat’l Fire Ins. Co., 134 Wn.2d at 427-28. An ambiguity is generally defined as language susceptible to two different reasonable interpretations. Weyerhaeuser, 123 Wn.2d at 897. If we cannot resolve any ambiguities in the policy language by our interpretation, including the resort to extrinsic language, any ambiguities are resolved in favor of the insured. Id.
B. Weyerhaeuser’s Insurance Program
In the present case, for the time period from 1970 to *7041973,21 Weyerhaeuser purchased primary insurance coverage with Fireman’s Fund. The trial court found the Fireman’s Fund policy contained an aggregate annual property damage limit of liability of $500,000. Thereafter, Weyerhaeuser had layers of coverage with Employers Surplus Lines Insurance Company (the predecessor to Commercial Union) (referred to hereinafter as Commercial Union), Insurance Company of the State of Pennsylvania (ICOSP), New Hampshire Insurance Company, and the underwriters at Lloyd’s.22 The Commercial Union policy purported to provide liability coverage to Weyerhaeuser for the period for March 1970 to March 1973.23 The Commercial Union policy was specifically an “excess policy” and provided coverage for personal injuries, property damage, workmen’s compensation, occupational disease, employer’s liability, and employees’ benefits liability. The policy specifically indicated Commercial Union’s excess coverage commenced only upon the exhaustion of the underlying insurer’s (Fireman’s Fund) limits of liability, stating:
It is expressly agreed that liability shall attach to the Underwriters only after the Underlying Insurers have paid or have been held liable to pay the full amount of their respective ultimate net loss liability as follows: $500,000 ultimate net loss in respect of each occurrence, but $500,000 in the aggregate for each annual period during the currency of this Policy separately in respect to Products Liability and separately in respect to Personal Injury (fatal or non-fatal) by Occupational Disease sustained by any employees of the Assured and the Underwriter shall then be liable to pay only the excess thereof.
Clerk’s Papers at 2748. As the trial court properly deter*705mined, the parties clearly contemplated the underlying aggregate annual limits of liability for the Fireman’s Fund coverage would be $500,000. Commercial Union’s obligation to insure commenced upon the $500,000 being paid out or obligated to be paid out by Fireman’s Fund.
The Commercial Union policy then went on to state it would pay in excess to the Fireman’s Fund insurance coverage “up to a further $1,500,000 ultimate net loss in all in respect of each occurrence—subject to a limit of $1,500,000 in the aggregate for each annual period during the currency of this Policy, separately in respect of Products Liability and separately in respect of Personal Injury (fatal or non-fatal) by Occupational Disease sustained by any employees of the Assured.” Clerk’s Papers at 2748. The language employed in the reference to the underlying limits and the limit of Commercial Union’s own coverage is identical.
Both parties agree this limitation language in the Commercial Union policy provides a per occurrence limit of $1,500,000 of coverage. The parties disagree, however, as to whether the further language providing for an aggregate annual $1,500,000 limit was designed to provide a general aggregate annual limit for property damage, or merely aggregate annual limits each for the specific product liability and personal injury by occupational disease coverages, respectively. Commercial Union argues the aggregate limitation clause means an aggregate limit of $1,500,000 for product liability coverage, an additional aggregate limit of $1,500,000 for occupational disease coverage, both of which are specified in the clause; and a third aggregate limitation category, not specified in the clause, of $1,500,000 for property damage. Weyerhaeuser argues this third aggregate limitation category does not exist, and the majority agrees.
The majority opinion relies on a bare statement that the aggregate damage clause is not ambiguous, and quickly moves on without analysis. Majority op. at 668. It then applies this judicial fiat to the supplemental aggregate *706clause. Majority op. at 669. To paraphrase Gertrude Stein, but there is no there there. There is no underlying analytical or legal principle articulated by the majority leading to its bare announcement that the aggregate damages clause leads unambiguously to the conclusion the parties intended to contract for a $4.5 million aggregate annual limit.
While the language in the Commercial Union policy is not a picture of clarity, the meaning of the policy and the resulting allocation of millions of dollars of liability between Weyerhaeuser and Commercial Union should not be dismissed without analysis. Rather, having rightly determined the policy language is ambiguous, we should seek its meaning by referring to the commercial context in which the policy was sought, written, and purchased. “Where two commercial entities sign a commercial agreement, we will give such an agreement a commercially reasonable construction.” Wilson Court Ltd. P’ship v. Tony Maroni’s, Inc., 134 Wn.2d 692, 705, 952 P.2d 590 (1998) (footnote omitted).24
C. The Commercial Context of the Commercial Union Policy
In order to interpret the Commercial Union excess liability insurance coverage afforded to Weyerhaeuser for the period from 1970 to 1973, we must examine the context in which Weyerhaeuser purchased the insurance coverage and the nature of the coverage it purchased. Weyerhaeuser is one of Washington’s major corporations and a Washington court can certainly take judicial notice of Weyerhaeuser’s business sophistication and ability to fend for itself while making arm’s length insurance contracts with equally sophisticated insurance companies.25 Weyerhaeuser em*707ployed a Director of Insurance whose responsibility included the placement of necessary insurance coverage. This Director of Insurance worked with Marsh & McLennan, a large national insurance brokerage firm. This brokerage firm worked both with the insured and with insurers in placing coverage for Weyerhaeuser.
Given the nature of Weyerhaeuser’s extensive business activities, it purchased insurance coverage in layers. See, e.g., Pub. Util. Dist. No. 1 v. Int’l Ins. Co., 124 Wn.2d 789, 793, 881 P.2d 1020 (1994). In the ordinary case, excess or umbrella coverages are designed to pick up where the primary insurance coverage leaves off, providing an excess layer of coverage above the limit of the primary policy. Thompson v. Grange Ins. Ass’n, 34 Wn. App. 151, 156-57, 660 P.2d 307, review denied, 99 Wn.2d 1011 (1983). In fact, such excess policies are designed to protect against gaps in coverage. Prudential Prop. & Cas. Ins. Co. v. Lawrence, 45 Wn. App. 111, 119, 724 P.2d 418 (1986). See also Rees v. Viking Ins. Co., 77 Wn. App. 716, 719, 892 P.2d 1128 (1995) (excess insurance obligation to defend and indemnify commences only when limits of underlying policy are exhausted); Truck Ins. Exch. v. Century Indem. Co., 76 Wn. App. 527, 531, 887 P.2d 453 (1995) (same).
Weyerhaeuser’s decision to place its insurance coverage in layers above the Commercial Union coverage reveals the relevant commercial context. It would be absurd in such a setting to construe the Commercial Union policy to provide unlimited property damage coverage when Weyerhaeuser sought property damage coverage in layers above the Commercial Union policy.
The underlying Fireman’s Fund policy unambiguously contains an aggregate annual limit of coverage for property damage of $500,000:
*708As respects Coverage B [property damage], subject to the above limit for one occurrence or accident, the aggregate limit of the Company’s liability for all damages shall be $500,000.
Clerk’s Papers at 408. The level of coverage provided by ICOSP, excess to the Commercial Union policy, described the underlying limits that had to be exhausted before its coverage commenced. Marsh & McLennan described this underlying set of policy limits as follows:
2. Provided always that liability attaches to the Company only after the Primary Insurers have paid or have been held liable to pay the full amount of their respective ultimate net loss liability as follows:
BODILY INJURY AND PROPERTY DAMAGE COMBINED: $2,000,000
Ultimate net loss each occurrence and in the aggregate
In any one Policy year in respect of Property Damage (other than Automobile Property Damage Liability), Products Liability, and Occupational Disease . . .
Clerk’s Papers at 11357. Thus, it is very clear the ICOSP policy in the layer above the Commercial Union policy contemplated underlying annual property damage aggregate limits of $500,000 for the Fireman’s Fund policy and $1,500,000 for the Commercial Union policy.
It is reasonable to believe in placing layered insurance coverage, a sophisticated corporation like Weyerhaeuser, using its insurance department and Marsh & McLennan, would place coverage in consistent layers of coverage built one upon the other. If in fact the Commercial Union policy provided unlimited property damage coverage, there would have been no need for Weyerhaeuser to purchase yet another layer of coverage for property damage, as it did in the ICOSP policy. In this case, the broker, at the request of the insured, bought layers of liability insurance coverage with aggregate annual limits of liability coverage that dovetailed with one another.
Moreover, the declarations page of the Commercial Union policy makes clear the insurer provides coverage in the *709amount of “$1,500,000 excess of $500,000.”26 Clerk’s Papers at 2750.
Finally, this interpretation is most consistent with the identical language contained in the limits of liability section of the policy for the underlying limits and the Commercial Union limits. Both parties concede Fireman’s Fund’s policy had an aggregate annual limit of property damage coverage. Br. of Appellant at 34; Br. of Resp’t/Cross-Appellant at 20. Insofar as the limits language in the Commercial Union policy was essentially identical, we should give the language the identical interpretation effect. Holter v. Nat’l Union Fire Ins. Co., 1 Wn. App. 46, 50, 459 P.2d 61 (1969).
As the parties here essentially agree, the language of the Fireman’s Fund liability policy afforded Weyerhaeuser coverage up to an annual aggregate limit of $500,000,1 would affirm the trial court’s ruling to that effect.
In conclusion, Commercial Union afforded liability insurance coverage for property damage to Weyerhaeuser from 1970 to 1973. The agreement provided an aggregate annual limit of liability insurance coverage to Weyerhaeuser in the amount of $1,500,000 for the property damage coverage. This annual aggregate limit of insurance coverage is consistent with the language of the Commercial Union policy and its declaration page. Moreover, the limit is consistent with the context of Weyerhaeuser’s placement of excess liability insurance coverage, given Commercial Union’s place in the layers of coverage afforded to Weyerhaeuser. I would remand the case to the trial court for further proceedings consistent with this determination as to the existence of an annual aggregate limit of property damage *710liability insurance coverage under both the Commercial Union and Fireman’s Fund insurance policies.
Johnson, Madsen, and Bridge, JJ., concur with Talmadge, J.

 Weyerhaeuser purchased liability insurance coverage in layers from the early 1950s to mid-1980s. It undertook to self-insure an initial coverage layer starting in the late 1970s.

 Unfortunately, the parties have not made the policies of New Hampshire Insurance Co., nor the policies of the underwriters at Lloyd’s a part of the record in this case.

 An endorsement to the policy extended coverage for the two months before the commencement of the policy. And a later endorsement terminated coverage one month early.

 It is interesting to note the underlying Fireman’s Fund policy contains an introductory page with the words, “An insurance program especially prepared for Weyerhaeuser Company arranged by Marsh & McLennan, Inc.” Clerk’s Papers at 383. The Commercial Union policy we are considering was simply one portion of the insurance program Weyerhaeuser negotiated and purchased. We must, therefore, in construing the policy, examine it as one element of the entire insurance program, and not in isolation.

 “Weyerhaeuser is the world’s largest private owner of merchantable softwood *707timber and the world’s largest producer of softwood lumber and softwood market pulp. It is also the top forest products exporter in the U.S. and among the top U.S. exporters overall.” The company had sales of $10.8 billion in 1998. Weyerhaeuser in Action: Fact Sheets (July 2000), available at http://www.weyerhaeuser.com/ facts/weyer.htm.

 This declarations page indicates Commercial Union charged Weyerhaeuser a premium of $139,889.45 for the three years of coverage. Unfortunately, we have no information regarding the differential in premium that would have been charged by Commercial Union for coverage from 1970 to 1973 for a policy without an annual aggregate limit of property damage coverage. This information might not be entirely helpful insofar as the insurers very likely could not, and did not, anticipate the large increase in their risk occasioned by the enactment of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601-9675.