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Automobile Underwriters v. Hardware Mut. Cas.

FEBRUARY 27, 1970.

AUTOMOBILE UNDERWRITERS, INCORPORATED, ATTORNEY-IN-FACT FOR SUBSCRIBERS AT STATE AUTOMOBILE INSURANCE ASSOCIATION, PLAINTIFF-APPELLANT,

v.

HARDWARE MUTUAL CASUALTY COMPANY, A MUTUAL INSURANCE COMPANY, LAURA KOEHL, JANET KOEHL AND LAWSON M. HOPKINS, D/B/A HOPKINS MOTOR SALES AND SERVICE, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Peoria County; the Hon. ROBERT E. HUNT, Judge, presiding. Affirmed.

RYAN, J.

This case involves a dispute between two insurance companies as to which company is obligated to furnish defendant a defense in litigation which arose out of an automobile collision.

One, Grant, was test driving an automobile with a view to buying the same. The automobile was owned by Hopkins Motor Sales and Service. Grant was involved in an accident with another automobile, the occupants of which were injured and who subsequently sued both Grant and Hopkins. Hopkins' insurer (defendant herein) refused to defend Grant. Grant's insurer on a policy of automobile liability insurance covering another automobile sued Hopkins' insurer for a declaratory judgment. The trial court held that the owner, Hopkins' insurer was under no obligation to defend the driver Grant. We are of the opinion that the trial court was correct.

The dispute arose by virtue of apparently conflicting provisions of the two insurance policies. Grant's policy issued by the plaintiff, Automobile Underwriters, Inc., agreed to pay all sums the insured became liable to pay as damages for bodily injury or property damage arising out of the use of "the owned automobile or any non-owned automobile." An owned automobile is defined as including a temporary substitute automobile. "A non-owned automobile" is defined as "an automobile . . . not owned or furnished for the regular use of either the named insured . . . other than a temporary substitute automobile." The policy then provides under the heading of "Other Insurance" as follows:

". . . 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." (Emphasis added.)

Hopkins, the owner, had an automobile garage liability policy which had been issued by the defendant, Hardware Mutual Casualty Company, and which provides coverage for liability arising out of certain automobile accidents. Attached thereto was a document entitled "Limited Coverage for Certain Insured's Endorsement." This endorsement commences with the following recital:

"In consideration of the reduced rate of premium made applicable to the insurance under Part 1, it is agreed that this policy section is amended as follows:

"1. Paragraph 3 of `Persons Insured' is amended to read as follows:

"(3) (b) Any other person, but only if no other valid and collectible automobile, liability insurance, either primary or excess . . . is available to such person; . . . ." (Emphasis added.)

The conflict arises by virtue of the italicized portions of the provisions of the two policies set forth above. The clause in plaintiff's policy (driver Grant's insurer) is commonly referred to as an "excess insurance" clause, while that in Hardware's policy (owner Hopkins' insurer) is referred to as an "escape" or "no liability" clause. The plaintiff has discussed the so-called majority view and minority view as these clauses have been interpreted by the courts. It is not necessary to detail these decisions in this opinion. They had been discussed at length by our Supreme Court in New Amsterdam Cas. Co. v. Certain Underwriters at Lloyds, London, 34 Ill.2d 424, 216 N.E.2d 665. The New Amsterdam decision has aligned Illinois on the side of the majority view favoring "excess" clauses over "escape" or "no liability" clauses in insurance policies. In that case the court stated that the majority rule is: When the owner of an automobile has a policy with an omnibus clause, and the additional insured also has a nonownership policy which provides that it shall only constitute excess coverage over and above other valid collectible insurance, the owners' insurer has the primary liability. Under this rule the courts give no application to the other insurance clause in the primary policy, which provides that if the additional insured has other valid and collectible insurance he shall not be covered by the primary policy. (Page 430.)

The "escape" clause involved in the New Amsterdam case provided that if any person entitled to indemnification thereunder "is also covered by other valid and collectible insurance, such other person . . . shall not be indemnified under this policy."

The essential difference in this "escape clause" and the "escape clause" in Hardware's policy in the case now before us is the inclusion in Hardware's clause after the words "other valid and collectible automobile liability insurance" the further qualifying words "either primary or excess." These words were not in the "escape" or "no liability" clause which was interpreted in the New Amsterdam case. This difference, we conclude, renders the holding in the New Amsterdam case inapplicable in the case now under consideration. The decision in this case is in no manner designed to reduce or avoid the application of the decision in the New Amsterdam case. Our decision is solely applicable to the cause before this court and is rendered necessary by these specific facts of the case and language of the endorsement to Hardware's policy set forth above.

In Indiana Lumbermens Mut. Ins. Co. v. Mitchell, 285 F. Supp. 969 (1968) the District Court for the Eastern District of Illinois had before it an "escape" clause which included identical language to that used in Hardware's policy including the words "either primary or excess." The court held that because of the inclusion of the restrictive language in the clause before it which was not involved in the New Amsterdam case, the policies in the two cases were distinguishable and New Amsterdam was not controlling. This decision was affirmed by the Circuit Court of Appeals for the 7th Circuit in 409 F.2d 392, where the court stated that it was this specific inclusion of "excess" insurance within the meaning of "other valid and collectible insurance" which relieved Lumbermens of the obligation to defend in that case.

In 7 Am Jur2d, Automobile Insurance, § 202, the authors define five different situations in which conflicts between insurers are involved. The ...


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