Appeal from the Municipal Court of Chicago; the Hon. HELEN F.
McGILLICUDDY, Judge, presiding. Reversed and remanded with
MR. JUSTICE DRUCKER DELIVERED THE OPINION OF THE COURT.
Rehearing denied April 12, 1965.
Plaintiff appeals from a judgment on the pleadings entered in favor of defendant.
Chester A. Fiske was driving an automobile owned by Hav-A-Kar which was insured by defendant against liability in the operation of its cars when driven by a named assured or with permission of a named assured. Fiske was not a named assured but was alleged to be an agent of Hav-A-Kar. This agency was denied by defendant in its answer. However, in the briefs and on oral argument there was no dispute that Fiske was driving with the permission of Hav-A-Kar and was covered by defendant's policy. Defendant's policy contained the following provisions:
6. OTHER INSURANCE. If the Assured named in the Schedule carry a policy of another insurer against a loss covered by this policy, such Assured shall not be entitled to recover from the Underwriters a larger proportion of the entire loss than the amount otherwise payable under this policy bears to the total amount of valid and collectible insurance applicable to said loss. If any person, firm or corporation other than the Assured named in the Schedule is, under the terms of this policy, entitled to be indemnified hereunder and is also covered by other valid and collectible insurance, such other person, firm or corporation shall not be indemnified under this policy. (Emphasis added.)
Fiske had purchased an insurance policy from plaintiff protecting him from liability arising out of the operation or use of his own automobile and any other car which Fiske might operate. (Insuring Agreement V.) That policy further 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 stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, the insurance . . . under Insuring Agreement V shall be excess insurance over any other valid and collectible insurance available to insured, either as an insured under a policy applicable with respect to said automobiles or otherwise. (Emphasis added.)
On February 23, 1954, Fiske was involved in an automobile accident while driving an automobile belonging to Hav-A-Kar and the injured persons in the other car filed suit against Fiske. He forwarded the summons to plaintiff, which assumed his defense but tendered the defense to defendant which refused to accept it. Thereafter plaintiff settled the case and brought this action for reimbursement of the amount paid by plaintiff in settlement of Fiske's case and for the expenses of the defense.
Plaintiff claims that since its policy is only for "excess insurance," under the circumstances of this case the primary liability is that of defendant. Defendant argues that its policy exempts it from liability because Fiske had "other valid and collectible insurance."
Plaintiff urges that we adopt the interpretation of similar policy provisions given by the court in Zurich General Acc. & Liability Ins. Co. v. Clamor, 124 F.2d 717 (7th Cir 1941). There the court held that an "excess clause" (like plaintiff's in the instant cause) is not "other insurance" and that a policy (like defendant's in the instant case) even though it contains an "escape clause" is more specific and therefore creates primary liability.
In other federal cases it has been held that "excess insurance" clauses do not constitute "other valid and collectible insurance" and do not go into effect until the specific policy is exhausted, even though the latter contains a clause precluding liability in the event of "other valid and collectible insurance." General Ins. Co. v. Western Fire & Cas. Co., 241 F.2d 289 (5th Cir 1957); Continental Cas. Co. v. American Fidelity & Cas. Co., 275 F.2d 381 (7th Cir 1960); McFarland v. Chicago Express, Inc., 200 F.2d 5 (7th Cir 1952).
While these cases at first reading seem persuasive, we believe the case of Oregon Auto Ins. Co. v. United States Fidelity & Guar. Co., 195 F.2d 958, which has been cited with approval by other Federal and State courts, expresses the better view. The insurance provisions in the Oregon case were identical with those in the present controversy. The court's opinion states at page 959:
It is plain that if the provisions of both policies were given full effect, neither insurer would be liable. The parties admit that such a result would produce an unintended absurdity, and each argues that the court must settle upon some way of determining which policy is primary and which secondary. . . .
We have examined cases in other jurisdictions cited by counsel where closely similar or substantially identical disputes between insurance companies have arisen. These decisions point in all directions. One group indicates that the policy using the word "excess" is secondary and that containing the language of the Oregon policy is primary. . . . Their reasoning appears to us completely circular, depending, as it were, on which policy one happens to read first. Other cases seem to recognize the truth of the matter, namely, that the problem is little different from that involved in deciding which came first, the hen or the egg. See remark of Judge Major in Zurich General Accident & Liability Insurance Co. v. Clamor, 7 Cir, 124 F.2d 717, 719. In this dilemma courts have seized upon some relatively arbitrary circumstance to decide which insurer must assume primary responsibility. Thus one group of cases fixes primary liability on the policy which is prior in date. Another group undertakes to decide which policy is the more specific, holding the one thought more specific to be primary. Another solution is ...