Coverage Analysis
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OTHER INSURANCE

Primary insurer cannot escape coverage liability through insertion of another insurance' clause.

Century Surety Co. v. United Pacific Insurance Co.
DJDAR 6724 (California Courts of Appeal, Second District) June 23, 2003

      Case  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..

      Analysis:  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 its
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 should occur.

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Competing "other 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.

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