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Commercial Automobile |
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Other Insurance Provision |
Wal-Mart hired Pro-Carriers,
Inc. (Pro) to transport a loaded trailer from Alabama to Florida in late March or
early April 2001. In turn, Pro leased a tractor owned by Henry Williams to haul
Wal-Mart's trailer, and Williams was hired to drive the tractor. While hauling
the trailer through Georgia on the way to Florida, Williams was involved in a
serious multi-vehicle accident. The injured parties filed tort claims against
Pro, Wal-Mart and Williams, seeking substantial damages.
Pro had a primary insurance
policy issued by Underwriters Insurance Company (Underwriters) with a $1
million limit per occurrence. It also had an excess policy with Lexington with
a $1 million limit per occurrence. Wal-Mart had an American Home Assurance
Company (American) policy with a $10 million limit subject to a $5 million
deductible, which stated in part: "This endorsement applies solely between
you (Wal-Mart) and us (American). It does not affect the rights of others under
this policy." American's limit was subject to Wal-Mart reimbursing it for
any deductible amounts. Williams was insured under a Northland Insurance
Company (Northland) policy with a $1 million limit per occurrence. The
"Other Insurance" clauses in the American and Northland policies were
similar.
The three defendants and
their insurers settled the injured parties' claims for $4,534,000 but reserved
their respective rights to contribution, indemnity and/or subrogation against
each other. Underwriters and Northland each paid $1,000,000 and Wal-Mart paid
$2,534,000 since its share did not exceed the deductible. It then sued
Lexington, Northland and American, seeking subrogation and contribution from
Lexington, and a declaratory judgment concerning all parties' rights and
obligations under the policies. All three filed answers, and Northland
cross-claimed against American. Based on the language of the "Other Insurance"
provisions in their respective policies, Northland and American both provided
excess, as opposed to primary, coverage and each was obligated to contribute to
the settlement on a pro-rata basis in the proportion of their limits to all
limits. Since Northland's limit was $1 million and Americans was $10 million,
their total limit as excess insurers was $11 million. Northland stated that it
was obligated to contribute only one eleventh of the settlement ($321,273 of
the $3,354,000 Northland and American paid) and that American owed ten
elevenths, or $3,212,727. Since Northland contributed more than its pro-rata
share, it claimed that American owed it the difference between the $1,000,000
that it paid and $321,273, or $678,727.
The trial court granted
summary judgment in favor of Lexington as to Wal-Mart's claim that Lexington's
coverage was primary rather than excess, and denied Wal-Mart's motion on that
same issue. The court also denied Northland's motion for summary judgment but
granted American's motion for summary judgment as to Northland's cross-claim
that it was entitled to reimbursement from American. Northland's motion for
reconsideration was denied and it appealed, contending that the trial court
erred in granting American's motion for summary judgment as to its cross-claim
for reimbursement. It argued that the language of the "Other
Insurance" provisions in the Northland and American policies provided
excess coverage and were required to contribute proportionally based on limits.
American argued in its response that it had not provided "any other
collectible insurance" as to trigger the pro-rata sharing of
responsibility.
The appellate court
disagreed with American, finding that its deductible endorsement applied only
between it and Wal-Mart and required Wal-Mart to reimburse American up to the
deductible amount for amounts it paid as damages. Despite Wal-Mart paying its
share of the settlement directly, the American policy clearly required it to
pay on a first-dollar basis and then be reimbursed for the deductible amount.
It cited the general rule in insurance law that deductibles are relevant only
between the insurer and the insured and do not affect proration. Applying this
principle, it determined that the trial court erred in granting summary judgment
in favor of American and reversed, stating that Northland was obligated to pay
only its pro-rata share of settlement proceeds in proportion to the total
limits under the "Other Insurance" provision.
Court of Appeals of Georgia.
Northland Insurance Company, et al. v. American Home Assurance Company et al.
No. A09A2203. Dec. 16, 2009. 301 GaApp. 726, 689 S.E.2d 87