Court Opinion

ID: 9462699
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:47:39.848823+00
Date Added: 2024-06-11T17:37:43.576586
License: Public Domain

CLARK, Circuit Judge
(dissenting in part):
I agree with the majority that the risks and parties were covered by the policies and that the “other insurance” clauses were operative. However, I dissent from the majority’s holding that in this purely interinsurer dispute the identical provision in the two policies construed here does not “provide for” contribution by equal shares because I believe that holding to be at odds with the realities of insurance policywriting, the historical development of insurance law, and the intent of the parties to the insurance contracts in this case.
It must be remembered that policy provisions like those involved here, while nominally part of a contract between insurer and insured, are drafted with the conduct of other insurers in mind. The majority’s construction ignores the industry-wide trend toward standardization of policy language. The majority declares a clause which states “I will if you will” is not enough to effect an “agreement” between insurers — an agreement that is ineluctably fictional. Thus, to get any “agreement” under the majority’s rule, at least one insurer must say, in effect, “I will, no matter what.” Such a requirement in and of itself arrests the standardization process. Further, to require that one insurer commit itself unconditionally to contribute equal shares before another company’s offer to share equally could be said to “provide for” such contribution is to place both companies in a quandary. They offer equal sharing while their opposite number in a future loss event may offer only pro rata contribution. This uncertainty about loss sharing could prevent lowered underwriting reserves and thus increase costs for all insureds. Perhaps, by some combination of negotiation and coercion, the unconditional language could be imposed as the industry standard, but not without raising antitrust issues of considerable magnitude.
Second, the history of the construction of “mirroring” policy provisions affords guidelines for decision overlooked by the majori*1112ty. Traditionally, the construction of “other insurance” clauses required judicial identification of primary and excess insurers where mirroring language was involved. In the past, the effect of such language was usually, “If there is other insurance, I’m not the primary insurer.” Early cases typically gave full effect to this language. This could and did result in situations in which a multiple policyholder was denied coverage altogether. Gradually, the injustice to the insured of this position was perceived, and the next step was to invent fictions to identify the primary insurer. Several criteria were used: date of policy issuance, comparative policy limits, comparative total premiums paid, totality of circumstances. See Note, 38 Minn.L.Rev. 838 (1953). This method, too, was abandoned by many jurisdictions whose courts found sophistical the inquiry into primariness. See e. g., Zurich General Accident & Liability Insurance Co. v. Clamor, 124 F.2d 717 (7th Cir. 1941). The next step consisted of holding that the “other insurance” clauses were mutually repugnant, that both (or all) insurers afforded primary coverage, and that they should pay by shares prorated according to some judicially determined formula. Frequently, the old criteria for determining primariness were used as the basis for proration. See, e. g., Oregon Automobile Insurance Co. v. United States Fidelity & Guaranty Co., 195 F.2d 958 (9th Cir. 1952). See also Annot., 76 A.L.R.2d 502. In 1959, the Supreme Court of Oregon went an additional step, holding that if the old criteria were fictional for the purpose of determining primariness, they were equally fictional for the purpose of determining the insurers’ respective shares and that contribution should be by equal shares up to the policy limits of the insurer providing the lower coverage. On rehearing, confronted by joint motion of the parties to allow proration by comparative policy limits, the court modified its opinion accordingly. See Lamb-Weston, Inc. v. Oregon Automobile Insurance Co., 219 Or. 110, 341 P.2d 110 (1959).
As important as this decisional progression was the concomitant adjustment of policy language to the developing case law. As full or partial escape gave way to proration, proration clauses began to appear in insurance policies in an attempt to control the formula selected. And after Lamb-Weston, “equal shares” became one of the formulae included in the list of permissible options. Where, as here, both insurers have taken the evolutionary step of including identical language agreeing to accept “equal shares,” it seems to me inaccurate to say that the policies do not “provide for” contribution by equal shares simply because mirror image clauses are phrased in permissive rather than mandatory language. Each was written without knowledge of what other policy it would face and necessarily could not be worded with mandatory precision.
Finally, as a matter of insurance contract jurisprudence, the result of the historical trend in “other insurance” writing has been to enshrine as conventional wisdom the notions that escape, excess, and proration clauses in insurance policies bespeak a general intent to minimize the portion of the loss borne by the policywriter and that such intent was limited by the exercise of the same general intent by coinsurers. See, e. g., Southern Home Insurance Co. v. Willoughby, 124 Ga.App. 162, 182 S.E.2d 910, 913-14 (1971). I believe that a similar general intent to share the loss equally is shown here by the inclusion of the equal shares language. This construction is supported by Argonaut Insurance Co. v. Cotton States Mutual Insurance Co., 373 F.Supp. 817 (M.D.Fla.1974), and Veillon v. Southern Farm Bureau, 254 So.2d 130 (La.App.1971). Each of the policies in the Argonaut case involved “other insurance” clauses with language identical to that in the present suit. Although the focus of the suit was the primary/excess question, I can find no support in the Argonaut opinion for the assertion of the court below that the point was conceded. There is only the statement:
The policies then provide that if the other insurance provides for contribution by equal shares (which is the case here) then the Company would not be liable for a greater proportion of the loss then would
*1113be payable if each insurer contributed as equal share.
373 F.Supp. at 820-21 (emphasis added).
The Veillon case held that where two of three coinsurers’ policies contained provisions like those sub judice, but the third contained only a clause calling for proration on a policy limits basis, equal shares must give way to proration. The clear implication from the court’s reasoning is that the-absence of equal shares language from the third policy — not the absence of unilaterally binding language, a characteristic shared by all three policies — rendered a three-way contribution by equal shares improper.
Because I would reverse the trial court and direct rendition of judgment that Georgia Casualty take nothing, leaving undisturbed the insurers’ equal-share payment of the settlement with the injured party, I respectfully dissent.