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Iowa Nat. Mut. Ins. Co. v. Fidelity & Cas. Co.

OCTOBER 1, 1965.

IOWA NATIONAL MUTUAL INSURANCE COMPANY, A CORPORATION, PLAINTIFF-APPELLEE,

v.

THE FIDELITY & CASUALTY COMPANY OF NEW YORK, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Ogle County; the Hon. LEON A. ZICK, Judge, presiding. Judgment affirmed.

MR. JUSTICE DAVIS DELIVERED THE OPINION OF THE COURT.

This case involves a dispute between two insurance companies concerning their respective liabilities arising out of an automobile accident. It was tried before the court upon stipulated facts. The plaintiff, Iowa National Mutual Insurance Company, insured Mrs. Warner Greene, the owner of a 1951 Packard automobile. The defendant, The Fidelity & Casualty Company of New York, insured her husband, Warner Greene, under a "non-owner policy," which policy was taken out and filed to provide proof of compliance with the Financial Responsibility Law. (Ill Rev Stats 1963, c 95 1/2, § 7-301, et seq.) Mr. and Mrs. Greene resided together in the same household as husband and wife.

On October 12, 1957, while both of the above policies were in force, Warner Greene drove his wife's automobile and was involved in a collision with another automobile. Two occupants of the other car were killed, and three more were injured.

The liability of Warner Greene was not questioned, and the plaintiff negotiated and paid the sum of $61,750 in settlement of all the claims arising out of the accident. The bodily injury policy limits of plaintiff's policy were $50,000 for each person and $100,000 for each occurrence; those of the defendant were $25,000 and $50,000.

The plaintiff, after paying the settlement figure, brought this suit to seek contribution of one-half thereof, or $30,837.50, from the defendant. The trial court entered judgment in favor of the plaintiff for $12,335.

Both insurance policies contained "other insurance" clauses, which were identical in the pertinent parts, and their purpose was to limit the coverage or liability under the policies in the event there was other insurance also covering the loss. The defendant contends that under its "other insurance" clause, its liability is limited solely to "excess" insurance over other valid and collectible insurance; and that since plaintiff, in its settlement, did not exceed the limits of its liability, the defendant is not liable for any part thereof. The defendant also argues that the plaintiff is the primary insurer, and as such, had a "pro rata" clause relating to "other insurance" providing that it would not be liable for any greater proportion of the loss than its policy limits bear to all valid and collectible insurance against such loss; that the excess provision of defendant's policy was binding upon the plaintiff, as the primary insurer; and that, therefore, the "pro rata" clause in the plaintiff's policy does not affect its liability as the secondary insurer.

Although this view has been effectively criticized (e.g. Lamb-Weston, Inc. v. Oregon Auto Ins. Co., 219. Ore 110, 341 P.2d 110, 115-119 (1959)), as a futile attempt to try to resolve which came first, the hen or the egg; and as founded upon circuitous reasoning to determine which is the primary policy and which the "other insurance" provision, and ipse dixit, which is to yield to the other, the view is not without substantial authority. Continental Cas. Co. v. American Fidelity & Cas. Co., 275 F.2d 381 (CA 7, 1960); McFarland v. Chicago Exp., Inc., 200 F.2d 5 (CA 7, 1952); 7 Am Jur2d (Automobile Insurance), Sec 202, p 544, 76 ALR2d 502, 505.

Various reasons are assigned for this conclusion under a wide spectrum of factual patterns with respect to the wording of the policies involved, the status of ownership or nonownership of the vehicles involved in the accident by the then driver, etc., yet in face of all these factors, it is stated in 7 Am Jur2d, supra, at 544: ". . . where one of the policies contains an `excess insurance' clause and the other a `pro rata' clause — and the `excess insurance' clause pertains to nonownership coverage, the conclusion is generally reached — no matter how various the reasoning adopted in support of it in the different cases may be — that the policy issued to the owner of the vehicle is the `primary' policy, and the company issuing it is liable up to the limits of the policy without apportionment."

The argument of the defendant in the case at bar is premised in the first instance upon the proposition that plaintiff's policy contained a "pro rata" other insurance clause, and that its policy contained an "excess" insurance clause. The problem, however, cannot be solved so simply; and the defendant's contention must be tested by the overall provisions of the respective policies of both plaintiff and defendant. The extent of the limitation of their respective liabilities is initially determined by the construction of the language used in each respective policy. Continental Cas. Co. v. American Fidelity & Cas. Co., supra, at 384; McFarland v. Chicago Exp., Inc., supra, at 7; Zurich General Acc. & Liability Ins. Co. v. Clamor, 124 F.2d 717, 720 (CA 7, 1941).

Plaintiff's "other insurance" clause provides:

"If the insured has other insurance against a loss covered by Part 1 of 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 with respect to a temporary substitute automobile or non-owned automobile shall be excess insurance over any other valid and collectible insurance."

It is conceded that "the insured", as used above in the plaintiff's policy, included Mr. Greene under the circumstances of the case. It is also apparent that the 1951 Packard he was driving, was not, under the policy, a "temporary substitute automobile or non-owned automobile." Thus, the provision of plaintiff's policy relating to excess insurance is not applicable, and the pertinent provision thereof is the "pro rata" other insurance clause, which specified under the circumstances of this case, that if Mr. Greene had other insurance covering the loss, the plaintiff would not be liable for a greater proportion of such loss than its applicable liability limits bore to all applicable liability limits of all valid and collectible insurance against such loss.

The defendant's policy provides in part:

"This insurance shall be excess insurance over any other valid and collectible insurance for Bodily Injury Liability for Property Damage Liability ...


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