Primary insurer cannot
escape coverage liability through insertion of another insurance' clause.
Century Surety Co. v. United Pacific
DJDAR 6724 (California
Courts of Appeal, Second District) June 23, 2003
Summary: County Line Framing Inc., a subcontractor, was sued.
County Line was covered by successive
commercial general liability policies
issued by four different
insurers. Three insurers had the same "other
insurance" provision in
their policies. One insurer, Century Surety Co.,
replaced this provision with an "excess
only" clause. Century denied having
any duty to defend or indemnify
County Line, because, based on the clause,
its coverage was in excess
to the coverage of the other insurers. Century
filed an action for declaratory relief.
The trial court found Century, as a
primary insurer, had a duty to defend
and indemnify County Line, along with
the other insurers.
The court granted summary judgment in favor of the
other three insurers..
Affirmed. Excess insurance is "secondary insurance which
provides coverage after
other identified insurance is no longer on the
risk." Here, Century
is a primary insurer, attempting to reduce
coverage obligation through an "other
insurance" clause. These clauses take
the form of pro rata
provisions, excess only clauses, or escape clauses.
Since excess only clauses,
in primary liability policies, and escape
clauses are disfavored,
liability and cost of defense is then prorated
according to each policy's limits. Since
Century's "other insurance" clause
and the other insurers'
pro rata clauses are contradictory, all clauses
should be ignored and pro rata contribution
insurance" clauses in two umbrella liability policies were held to be mutually
repugnant and must each contribute pro rata under the Lamb-Weston doctrine,
despite the fact that one was "excess" while the other was only "pro rata."
CSE Ins. Group v. Northbrook Property & Casualty Co., 23 Cal. App.
4th 1839, 29 Cal. Rptr.2d 120 (1994).
In Pacific Indemnity
Company v. Bellefonte Insurance Company, 80 Cal. App.4th 1226, 95 Cal.
Rptr.2d 911 (4th Dist. 2000), the California Court of Appeals ruled that
a trial court had erred in assigning the entire costs of defense to Bellefonte
based upon “excess” other insurance wordings in the Pacific Indemnity policies,
holding instead that an “equitable allocation” should be made. Rather,
the court ruled that the defense costs should be allocated between the
insurers on some unstated “equitable” basis.