Court Opinion

ID: 9737384
Source: CourtListenerOpinion
Date Created: 2023-08-26 19:23:38.255122+00
Date Added: 2024-06-11T07:23:58.520893
License: Public Domain

O’Connor, J.
(dissenting). To the extent relevant here, Lincoln’s obligation is set forth in Insuring Agreement III, which says: “UNDERLYING LIMIT — RETAINED LIMIT: The Company shall be liable only for Ultimate Net Loss [damages for covered losses and litigation expenses] resulting from any one occurrence in excess of either (a) the total of the applicable limits of liability of the Underlying Insurance as stated in the Schedule of Underlying Insurance and the applicable limits of any other Underlying Insurance collectible by the Insured, less the amount, if any, by which any aggregate *614limit of such insurance has been reduced by payment of loss during the period of this Policy, hereinafter called the Underlying Limit, or (b) if the insurance afforded by such Underlying Insurance is inapplicable to the occurrence, the amount stated in the Declarations as the Retained Limit, whichever is greater. The limits of liability of any Underlying Insurance Policy shall be deemed applicable irrespective of any defense which the underlying insurer may assert because of the insured’s failure to comply with any condition of the Policy subsequent to an occurrence.”
The word “applicable” in III (a), modifying the words “limits of liability of the Underlying Insurance as stated in the Schedule of Underlying Insurance,” clearly means the limits of liability stated in any underlying policy that (1) covers the occurrence in question, and (2) is listed on the schedule. The court agrees that that language, viewed “in isolation,” has the clear meaning I attribute to it. Ante at 609. Nevertheless, the court concludes that in the last sentence of HI the words “applicable limits of liability” tend to mean “collectible limits of liability,” and that, therefore, those words elsewhere in III are ambiguous and should be construed favorably to the insured as meaning “collectible limits of liability.” Ante at 609-612. In my view, however, the word “applicable” wherever it appears in Insuring Agreement HI, including the last sentence, cannot reasonably be construed to mean “collectible”.
Insurance proceeds, being money, are collectible. The word “insurance,” in a suitable context, may be construed to mean “insurance proceeds,” and therefore be collectible. But, limits of liability cannot be gathered or received as can money. Therefore, according to the usual usage of our language, limits of liability are not collectible. Courts should not conclude that policy language fairly susceptible of interpretation in the usual and ordinary sense has instead been used in an unusual and inappropriate way. Manning v. Fireman’s Fund Am. Ins. Co., 397 Mass. 38, 40 (1986). Barnstable County Mut. Fire Ins. Co. v. Lally, 374 Mass. 602, 605 (1978).
Furthermore, interpreting the words applicable “limits of liability of any Underlying Insurance Policy” as referring to *615the stated limits of liability of relevant policies listed on the schedule furthers the obvious purpose of the sentence, and is consistent with the policy as a whole. That provision simply says that any listed underlying policy that would cover the insured’s loss in the absence of the insured’s material breach of his obligations shall be deemed to cover the loss regardless of defenses the underlying insurer may have on account of such breaches. The reason for such a provision is no mystery. The burden created by the insured’s failure to secure the primary carrier’s liability is not to be shifted from the insured to Lincoln.
The court says that the last sentence of Insuring Agreement III tells the insured that “if the primary insurance is not collectible because of his fault, the excess insurance will not drop down.” Ante at 611. The court then concludes that an insured could reasonably infer that if the primary insurance is not collectible through no fault of the insured, such as the primary insurer’s insolvency, the excess insurance will drop down. But, the last sentence of Insuring Agreement in only tells the insured that if the primary insurer is not liable because of the insured’s fault, the excess insurance will not drop down. That message in no way suggests that, if the primary insurance is uncollectible by reason of insolvency, the excess insurance will drop down.
Paragraph 7 of the Conditions, of which Paragraph 9 is but a logical extension, provides that “[t]he company’s liability under this Policy with respect to any occurrence shall not attach until the amount of the applicable Underlying Limit has been paid by. or on behalf of the Insured or the amount of the Retained Limit has been paid by the Insured on account of such occurrence.” The court observes, ante at 612, that, if the word “applicable” in that provision does not mean collectible, “an insured would obtain no benefit from his excess coverage upon the insolvency of his primary insurer if he could not himself provide the funds necessary to pay claims equal to the primary insurer’s deficiency.” Concluding that such a result would be “unconscionable,” the court finds comfort in avoiding it by considering the word “applicable” as ambiguous and then construing it to mean “collectible.”
*616If the policy were ambiguous, considerations of conscionability of competing possible interpretations might be relevant. But neither Condition 7 nor the policy as a whole are ambiguous. Therefore, there is no occasion for the court to consider the conscionability of Condition 7. Furthermore, a provision requiring that the amount of the underlying insurance actually be paid by or on behalf of the insured before the excess insurer’s liability will attach is not unconscionable. It simply promotes the purpose of excess coverage. If, instead of having an excess policy with a limit of $1,000,000, as here, the insured had had underlying coverage with Ambassador with a $1,000,000 limit, the insured’s collectible insurance would have been zero because of Ambassador’s insolvency. A commitment on behalf of Lincoln effectively to substitute itself for Ambassador as to the excess and to pay the excess only if Ambassador pays up to its limit, or until the insured pays that amount, is not unconscionable.
The court rightly concludes that Lincoln is not required to assume the defense of the underlying tort actions. The message from that is that Lincoln’s coverage is not first dollar coverage. If Lincoln has no obligation to defend, it also appears that it has no right to defend. The court observes that, in light of the position in which the court’s holding puts Lincoln, Lincoln “may prefer to assume control of the defense of the underlying tort claims.” Ante at 613. But what is the source of Lincoln’s right to do so? It appears that the party required to pay the tort judgments will have no right of control over the proceedings from which those judgments may result. The court’s resolution of the indemnity and defense issues presented by this case, therefore, is inconsistent. I would affirm the judgment below.