Court Opinion

ID: 9728868
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:17:57.79889+00
Date Added: 2024-06-11T18:25:52.111625
License: Public Domain

GALLAGHER, Associate Judge,
dissenting:
The majority opinion in this case rests on the premise that the clauses in the respective insurance policies necessarily conflict and that the court must therefore affirmatively intervene to resolve this conflict. I disagree.
This case originated in a malpractice action arising out of injuries allegedly sustained from an injection administered by, Nancy Jones, a nurse, at Doctors Hospital. Defendants in the action were Ms. Jones, the hospital, and Ms. Jones’ employer, Me-*1292dox, Inc., a corporation which provides temporary medical personnel to local doctors and hospitals. The case was settled for $100,000 pursuant to a settlement agreement which provided that the insurance companies representing all defendants would litigate separately their respective liabilities. In the event that this litigation was not concluded by March 1, 1978, the agreement provided further that Ms. Jones’ insurer, Globe Indemnity Co., would pay the full amount of the settlement with no prejudice to its rights.
The insurers’ liabilities were not adjudicated by the agreed date. Globe therefore paid the full amount of the settlement. Globe and Ms. Jones then brought an action against the hospital and its insurer, Hartford Insurance Co., and Medox and its insurer, Insurance Company of North America (INA). The trial court granted summary judgment to the hospital, Hartford Insurance Co., Medox and INA, and dismissed the claim of Ms. Jones and Globe, thus ruling that Globe should bear the entire cost of the settlement. Ms. Jones and Globe have appealed the dismissal of their claim and the denial of their Motions for Summary Judgment against Medox and INA.
At the time of the injection, Ms. Jones was the sole insured under the Globe policy. This policy had a $1,000,000 limit of liability and contained a pro rata “other insurance” clause which provided:
If the insured has other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability . . . bears to the total applicable limit of liability of all valid and collectible insurance against such loss.
Ms. Jones was also covered under a provision of Medox’s INA policy by which INA contracted with Medox to pay liabilities incurred under state circumstances by Me-dox’s employees and contractors. The applicable limit of liability in the INA policy was also $1,000,000 and the policy contained an “excess other insurance” clause which provided:
The insurance afforded [by this policy] shall.be excess insurance over any other valid and collectible insurance.
(Hereinafter INA’s blanket excess clause.)1
Globe’s pro rata clause and INA’s blanket excess clause are not in conflict, as I read them. Globe’s provision contemplates contribution from all other valid and collectible insurance. INA is not collectible insurance for this purpose because INA’s blanket excess clause expressly states that it will not pay if the claim is covered by any other valid and collectible insurance (up to the policy limit). Globe is collectible insurance under 'INA’s clause because it states that it will pay the claim in any event (subject to any applicable pro rata contribution).2 Thus, applied together, the two policies result in Globe being liable for any claim up to its policy limit, with INA picking up any excess.
Critics of this approach to interpretation of insurance contracts have argued that it requires a circularity of reasoning, and that the decision will depend on which contract is read first. See, e. g., Oregon Automobile *1293Insurance Co. v. United States Fidelity and Guaranty Co., 195 F.2d 958, 960 (9th Cir. 1952); Werley v. United Services Automobile Association, 498 P.2d 112, 117 (Alaska 1972); Note, 38 Minn.L.Rev. 838, 852 (1954). In response to the problem, the majority adopts the Lamb-Weston rule, which takes the position that all “other insurance” clauses, regardless of their nature, are mutually repugnant, requiring proration.3 Lamb-Weston, Inc. v. Oregon Automobile Insurance Co., 219 Or. 110, 128, 341 P.2d 110, 119 (1959). This rule presents an appealingly simple and no-nonsense way to deal with the vagaries of insurance policies. In applying it, however, the court must sweep away the contractual language, and perhaps the negotiated intent of the parties: Effectually, the court is legislating mandatory pro rata clauses for insurance policies having “other insurance” provisions. I think the court should take such action only when presented with clearly irreconcilable provisions4 and perhaps, when insurers come to court seeking to avoid all liability.
The problem of circularity arises only when each insurer, claiming that the other must pay first, declines to pay at all. Smith v. Pacific Automobile Insurance Co., 240 Or. 167, 400 P.2d 512 (1965). See Firemen’s Insurance Co. v. St. Paul Fire and Marine Insurance Co., 243 Or. 10, 15, 411 P.2d 271, 274 (1966). This is not the case here.5 The fact that the clauses are designed to limit liability, which the majority finds objectionable, is relevant only where the covered person may be deprived of coverage.6 Thus, keeping in mind the rights of *1294all the parties, “we can resolve the difficulty of circular ‘other insurance’ provisions without totally disregarding all such provisions. There is nothing repugnant in such an approach, and certainly this court cannot justify appellate disregard for a valid contract by labeling the provisions of those contracts ‘repugnant.’ ” Sloviaczek v. Estate of Puckett, 98 Idaho 371, 377, 565 P.2d 564, 570 (1977) (McFadden, C. J., dissenting).
The majority opinion is couched in equity considerations and a concern lest one insurance company be allowed to “escape liability” because of “superior” drafting. The underlying rationale apparently is that two companies covering the same risk should pay equally. The companies have no contractual relationship with each other, however, and hardly need to be protected from each other. Furthermore, neither conferred a benefit on the other nor relied on the other’s existence. Globe is not getting “stuck” for anything more than it contracted for with Ms. Jones. INA, on the other hand, had no direct contractual relationship with Ms. Jones. Its coverage extended to her, as a kind of employee benefit, because of the contract between INA and Medox. I doubt the court should be quick to sweep away the clear language of that contract without at least knowing to what extent Medox negotiated for and intended to create only secondary coverage for its employees/contractors, and to what extent that intention may have affected the policy rates.7 “Questions of contribution between coinsurers have caused much trouble to the courts, a large part of which has arisen through efforts to equalize equities outside of the contract. This trouble is lessened if the parties are left with their contracts as they themselves have made them.” Grollimund v. Germania Fire Insurance Co., 82 N.J.L. 618, 621, 83 A. 1108, 1109 (E&A 1912), quoted in Citizens Mutual Automobile Insurance Co. v. Liberty Mutual Insurance Co., 273 F.2d 189 (6th Cir. 1969) and in American Surety Co. of New York v. American Indemnity Co., 8 N.J.Super. 343, 72 A.2d 798 (Ch.Div.1950).
Although the minority rule has some appeal in cases of truly conflicting provisions, I am not persuaded that it is logically defensible on these facts. I would affirm.

. INA’s policy contained another “excess other insurance” clause which stated that the benefits of the policy were intended to be in excess of other insurance available to “the insured.” The policy defined “the insured” as Medox or certain of its principals. Both the trial court and the parties on appeal devoted a great deal of attention to the question of whether Ms. Jones was “the insured” for the purpose of applying the excess provisions of INA’s “other insurance” clause. The blanket excess clause overrides these provisions, however, and makes resolution of this problem unnecessary. Apparently INA did not rely on its blanket excess clause at trial, although it is in the record.

. The determination of what is or is not valid and collectible insurance should not be made in the abstract, but must be based on a consideration of all the facts and circumstances, including the existence and terms of additional policies.

. Lamb-Weston presents a somewhat similar fact situation, involving a tort defendant whose agent was involved in an accident while driving a rented truck. The contending insurance companies were those of the tort defendant and of the lessor of the truck. The lessor’s insurance contained an “omnibus” clause extending coverage to authorized lessee drivers. The postures of the insurance companies were opposite to those in this case, the tort defendant’s policy containing the excess clause and the lessor’s policy containing the pro rata clause. The court’s decision appears to be grounded in frustration with numerous and difficult-to-apply rules and a generalized annoyance with insurance companies’ attempts to escape liability. One commentator has asserted:
An analysis of the out-of-state cases relied upon by [the Lamb-Weston court] leads one to the conclusion that although some of the language employed therein supports the decision in Lamb-Weston, neither the actual rea-sonings applied nor the holdings nor both together do. Each case either applies the rationale of the majority position or reaches a result entirely consistent with that rationale. Comment, “Other Insurance” Clauses: The Lamb-Weston Doctrine, 47 Ore.L.Rev. 430, 437 (1968).

. Indeed, the Oregon court itself, subsequent to Lamb-Weston, has stated its theoretical agreement with such an analysis:
There are decisions to the effect that the policy containing the pro-rata clause should always bear the whole loss when the other Policy contains an excess clause. However, when the two contracts are compared in such cases, the other-insurance clauses frequently are not held to be repugnant. But when repugnancy cannot be resolved by reference to the contracts, the case is a proper case for the equitable rule set forth in Lamb-Weston. Liberty Mutual Ins. Co. v. Truck Ins. Exch., 245 Or. 30, 39, 420 P.2d 66, 70-71 (1966). [Citations and footnote omitted. Emphasis supplied.]
The court nevertheless held to its Lamb-Weston view that the pro rata and excess clauses before it were, in fact, irreconcilably repugnant.

. Cf. Sloviaczek v. Estate of Puckett, 98 Idaho 371, 376, 565 P.2d 564, 569 (1977) (McFadden, C. J., dissenting) (case involving escape clauses, see note 6, infra.)
It is not denied by the majority or the parties that the “other insurance” provisions were agreed upon by the parties; there is no allegation of fraud or deceit, or any contention of unequal bargaining power resulting in uncon-scionability.
This circularity is not repugnant. It is true that if all provisions are taken together, all compensation would be denied. If so interpreted, the result might be repugnant. However, neither of the insurance companies party to the suit contend .that such an interpretation should be given to the various provisions.

. In several cases relied on by the majority, the court applied the Lamb-Weston rule to enable the plaintiff to recover additional amounts under the policies. See e. g., Sloviaczek v. Estate of Puckett, supra; Travelers Ins. Co. v. Lopez, 567 P.2d 471 (Nev.1977); Werley v. United Ser. Auto. Ass’n, supra. In fact, in Sloviaczek and Werley, the courts were faced with essentially *1294identical escape-type clauses which provided excess coverage only in the amount by which the limit of liability of each exceeded the limit of liability of the other. Such clauses are frequently disfavored by the courts. Russ, The Double Insurance Problem — A Proposal, 13 Hastings L.J. 183, 191 (1961).

. It has been suggested that the adoption of the Lamb-Weston rule has in fact increased the cost of processing claims, as insurers may not now comfortably rely on their other insurance clauses, but must routinely prepare for liability by investigating all claims. Comment, “Other Insurance" Clauses, The Lamb-Weston Doctrine, supra at 445.