APPEAL from the Appellate Court for the First District; heard
in that court on appeal from the Circuit Court of Cook County;
the Hon. LOUIS Z. WEXLER, Judge, presiding.
MR. CHIEF JUSTICE UNDERWOOD DELIVERED THE OPINION OF THE COURT: Plaintiffs, while passengers in a car owned by a friend, John J. Porchivina, and driven by Mrs. Porchivina, were injured in 1961 in an automobile accident caused by an uninsured motorist. The Porchivinas were the owners of an insurance policy with Hartford Accident & Indemnity Company, and plaintiffs, as passengers in the Porchivina car, were also covered as insureds under the policy. The plaintiffs, another passenger and the Porchivinas all made claims under the uninsured motorist provision of the Hartford policy, which limited coverage to $10,000 per person and $20,000 per accident. The $20,000 limit was exhausted, with plaintiffs recovering $7,500 as their apportioned share. The plaintiffs then instituted the present action under the uninsured motorist provision of their own insurance policy with defendant, New Amsterdam Casualty Company, seeking compensation to the extent their damages exceeded the $7,500 recovered from Hartford. In a bench trial, the circuit court of Cook County found that New Amsterdam was not liable under the terms of its policy with plaintiffs. On appeal to the Appellate Court for the First District, the judgment for defendant was affirmed. (110 Ill. App.2d 103.) We granted leave to appeal.
New Amsterdam successfully urged below that under the express conditions of its policy with plaintiffs, the availability of other insurance, i.e., the hosts' (the Porchivinas) policy with Hartford, relieved defendant from liability when its insured was injured in a car he did not own, except to the extent its policy limits exceeded the limits provided on the other insurance. Since both policies had the same limits of $10,000/$20,000, no "excess" coverage was provided. Plaintiffs object to this construction, arguing that since the Hartford insurance was not collectible by them to the full policy limits, it was not "available" so as to relieve New Amsterdam under the policy's "other insurance" provisions. They also contend that the "other insurance" provisions of the New Amsterdam policy should not be given effect, since, as the parties stipulated, identical provisions were contained in the Hartford policy; thus there is alleged to be a conflict as to which policy's "other insurance" provisions control, and plaintiffs suggest that equity requires us to disregard the provisions in both policies. The provisions which control the uninsured motorist coverage of the two policies are as follows:
"5. Other Insurance. With respect to bodily injury to an insured while occupying an automobile not owned by a named insured under this endorsement, the insurance hereunder shall apply only as excess insurance over any other similar insurance available to such occupant, and this insurance shall then apply only in the amount by which the applicable limit of liability of this endorsement exceeds the sum of the applicable limits of liability of all such other insurance.
"With respect to bodily injury to an insured while occupying or through being struck by an uninsured automobile, if such insured is a named insured under other similar insurance available to him, then the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the company shall not be liable under this endorsement for a greater proportion of the applicable limit of liability of this endorsement than such limit bears to the sum of the applicable limits of liability of this insurance and such other insurance.
"Subject to the foregoing paragraphs, if the insured has other similar insurance available to him against a loss covered by this endorsement, the company shall not be liable under this endorsement for a greater proportion of such loss than the applicable limit of liability hereunder bears to the total applicable limits of all valid and collectible insurance against such loss."
New Amsterdam argues that no conflict exists in the application of the various clauses of the two policies. The company urges that the "other insurance" provision of the Hartford policy which describes plaintiffs is the second paragraph above (commonly known as a "pro-rata clause"), since plaintiffs were "insureds" struck by an uninsured automobile; the first paragraph (known as an "excess clause", or more specifically an "excess-escape clause") in the Hartford policy does not describe plaintiffs, since they were not "occupying an automobile not owned by a named insured" they were in fact occupying an automobile which was owned by a named insured under the Hartford policy i.e., Mr. Porchivina. The New Amsterdam policy, on the other hand, did describe plaintiffs in the first paragraph; the Porchivinas' car, which plaintiffs were occupying, was "an automobile not owned by a named insured" of the New Amsterdam policy. It is defendant's position that the applicable provisions of the policies do not conflict Hartford provides for prorating with any other available insurance, but since in this factual setting New Amsterdam extends "excess" coverage only, and no coverage at all when its limits do not exceed the limits of other insurance, its policy does not constitute "other available insurance" so as to activate Hartford's pro rata clause. Defendant suggests that this view was apparently held by Hartford as well, since that company never sought contribution from New Amsterdam toward payment of the claim of plaintiffs. Thus it is maintained that the availability of the Hartford coverage properly relieves New Amsterdam, by activating its policy's excess-escape clause. As to plaintiffs' contention that the Hartford coverage was not collectible by them to the full extent of the $10,000/$20,000 limit, and hence should not be deemed "other available insurance" within the meaning of the excess-escape clause, New Amsterdam answers that the language in its clause unambiguously provides otherwise.
It is not surprising that the resolution of "other insurance" problems has been a difficult task in many jurisdictions, including Illinois. Courts have dealt with the problem in several contexts, and a variety of theories have been promulgated.
Presumably from the time insurance first became available, there has been at least the possibility that multiple coverage situations would occur. In the field of property insurance, this prospect understandably encouraged carelessness and fraud where more than full compensation could be recovered upon the loss of the insured property. Property insurers recognized the hazards of allowing such multiple recovery, and responded by incorporating "other insurance" provisions into their policies. (Comment, "Concurrent Coverage in Automobile Liability Insurance" (1965), 65 Colum. L. Rev. 319, 320; 8 Appleman, Insurance Law and Practice (1942), sec. 3905, at 270.) Such provisions have had the effect of reducing multiple recoveries, and have also served thereby to limit the liability of insurers. These factors led to a proliferation of similar limitations on liability under automobile insurance policies, which now engender the vast majority of case law in the area. (See generally Annot. (1961), 76 A.L.R.2d 502; Annot. (1956), 46 A.L.R.2d 1163.) There are three basic types of "other insurance" provisions commonly used in automobile liability policies: the "pro-rata clause", the "excess clause", and the "escape clause". The typical pro-rata clause provides that when an insured has other insurance available, the company will be liable only for the proportion of the loss represented by the ratio between its policy limit and the total limits of all available insurance. The excess clause allows coverage only "over and above" other insurance. The escape clause holds the policy null and void with respect to any hazard as to which other insurance exists. As illustrated by the policies in this case, combinations of the basic clauses frequently arise within a single provision, and separate provisions are often contained within a single policy to control coverage arising under varying circumstances.
It should be noted at this juncture that the clause upon which defendant relies is a standard "excess-escape" hybrid, normally found in uninsured motorist policies as a limitation on the coverage provided when the insured is injured in a car not owned by a named insured under the policy. The clause provides that under such circumstances, if other insurance is available, the policy will apply only as excess coverage. The escape feature is found in the proviso that such excess coverage is limited to the amount by which the policy's liability limit exceeds the limit of liability of the other insurance. This escape feature substantially reduces the coverage which would be provided by an excess policy not so limited. Instead of furnishing additional compensation up to its limit in the amount by which an insured's damages exceed his recovery from other insurance, the policy only compensates to the extent that its own limit exceeds the limit of the other policy. Furthermore, although the clause provides for excess coverage, its practical effect is usually controlled by the escape provision since most uninsured motorist coverage is in the same minimum amount, there is rarely an instance where an "excess" policy limit exceeds the limit of the other policy; hence it is an infrequent situation for an "excess" policy to provide any coverage when its "excess-escape clause" has been given effect. Donaldson, "Uninsured Motorist Coverage" (1969), 36 Ins. Cnsl. J. 397, 423-24; Drummond, "Uninsured Motorist Coverage A Suggested Approach to Consistency" (1969), 23 Ark. L. Rev. 167, 183-84; Notman, "A Decennial Study of Uninsured Motorist Endorsements" (1968), 540 Ins. L.J. 22, 33-35; Widiss, "Perspectives on Uninsured Motorist Coverage" (1967), 62 NW. U.L. Rev. 497, 522-23.
The obvious difficulties involved in reconciling the applicable clauses of two or more insurance policies prompted recourse by the courts to several simplistic theories. The policy issued earliest has been reasoned on that basis alone to be the primary coverage, notwithstanding the presence of "other insurance" clauses which provided otherwise. (See, e.g., New Amsterdam Cas. Co. v. Hartford Accident & Indemnity Co. (6th cir. 1940), 108 F.2d 653.) Other courts have placed primary liability with the policy issued to the primary tortfeasor. (See, e.g., American Auto Insurance Co. v. Pennsylvania Mutual Indemnity Co. (3d cir. 1947), 161 F.2d 62; Commercial Casualty Co. v. Hartford Accident & Liability Co., 190 Minn. 528, 252 N.W. 434; Maryland Casualty Co. v. Bankers Indemnity Ins. Co., 51 Ohio App. 323, 200 N.E. 849.) Courts have also placed primary liability on whichever insurer more specifically covered the risk involved. (See, e.g., Hartford Steam Boiler Inspection & Ins. Co. v. Cochran Oil Mill & Ginnery Co., 26 Ga. App. 288, 105 S.E. 856; Trinity Universal Ins. Co. v. General Accident Fire and Life Assurance Corp., 138 Ohio St. 488, 35 N.E.2d 836; Annot (1944), 150 A.L.R. 636.) These theories have all been discarded, having proved unworkable and unreasonable. The underlying objection to such resolutions has been that they completely ignore the "other insurance" clauses and thereby place no emphasis whatever on the most significant factor of all the intent of the parties. See Comment, "`Other Insurance' Clauses: The Lamb-Weston Doctrine" (1968), 47 Ore. L. Rev. 430, 432-33; Watson, "The `Other Insurance' Dilemma" (1966), 54 Ill. B.J. 486, 489-90.
Rather than resort to theories which place primary liability on one insurer without attempting to give effect to the "other insurance" clauses, the courts have generally acknowledged that the provisions exist and should control if they can be given effect compatibly. The conclusion is almost universal under this approach that identical clauses are incompatible, and thus where the applicable clause of each conflicting policy is identical, the courts have refused to give effect to either. The liability is then prorated between the policies. The courts have recognized that this approach is fair when there is no rational basis for applying the clause of one policy and refusing to apply the identical clause of another policy. (See Annot. (1960), 69 A.L.R.2d 1122; Watson, "The `Other Insurance' Dilemma", 54 Ill. B.J. 486, 488-89.) But the appeal of this simple and easily applied rule has tempted some courts into applying the proration procedure in every instance involving conflicting "other insurance" clauses, on the basis that all such clauses are irreconcilably in conflict with one another, even where the applicable clauses are not identical. The landmark case ordering proration in a conflict between dissimilar clauses was Oregon Automobile Insurance Company v. United States Fidelity & Guaranty Co. (9th cir. 1952), 195 F.2d 958. The United States Court of Appeals was faced with a conflict between an excess clause and an escape clause, and the applicable Oregon law provided no authority on the issue. Although the court conceded that the vast majority of authority elsewhere would give effect to the excess clause and thereby hold the escape clause policy primarily liable, the court decided that the majority's reasoning was "completely circular, depending, as it were, on which policy one happens to read first the problem is little different from that involved in deciding which came first, the hen or the egg." (195 F.2d at 959.) The Oregon Supreme Court later adopted the same view as its own, stating flatly that, "In our opinion, whether one policy uses one clause or another, when any come in conflict with the `other insurance' clause of another insurer, regardless of the nature of the clause, they are in fact repugnant and each should be rejected in toto." (Lamb-Weston, Inc. v. Oregon Auto Ins. Co., 219 Ore. 110, 129, 341 P.2d 110, 119; modified on rehearing, 219 Ore. 130, 346 P.2d 643.) The reasoning of the court in Lamb-Weston reveals a misplaced reliance on authority from other jurisdictions; the "Oregon rule" which it adopts from Oregon Auto has actually found very little support. See generally, "`Other Insurance' Clauses: The Lamb-Weston Doctrine", 47 Ore. L. Rev. 430, at 437-39; but see State Farm Mutual Auto Ins. Co. v. Travelers Ins. Co. (La. App. 1966), 184 So.2d 750.
The majority approach, unlike the Oregon rule, is to reconcile the applicable clauses of conflicting policies, and thereby give effect to the intention of all the parties, whenever possible. Of the six possible combinations of the three basic clauses, three combinations find identical clauses in conflict. As noted earlier, in such situations it is generally held to be impossible to give effect to the intent of all parties, and thus identical clauses are deemed incompatible. Most cases do not involve identical clauses, however; when the conflict between clauses is escape v. excess, pro rata v. escape, or pro rata v. excess, as here, the majority of jurisdictions reconcile the conflict by giving effect to one clause and finding the other to be inapplicable. For instance, it is generally found that a policy conditioned by an excess clause, or an excess-escape clause, is not such "other available insurance" as will activate the pro-rata clause of another policy; thus the excess clause is given its intended effect while the pro-rata clause is inapplicable, coinciding with the intent that it should apply only if there is other insurance available. See Annot. (1961), 76 A.L.R.2d 502; 8 Appleman, Insurance Law and Practice (1962), sec. 4914; Couch, Cyclopedia of Insurance Law 2d (1966), 62:49; Donaldson, "Uninsured Motorist Coverage," 36 Ins. Cnsl. J. 397, at 424-26; Drummond, "Uninsured Motorist Coverage," 23 Ark. L. Rev. 167, at 183; Note, "The Effect of Other Insurance Clauses in Cases of Concurrent Coverage of Uninsured Motorist Insurance" (1968), 37 U. Cin. L. Rev. 582, 588-91.
Turning to the history in Illinois, we find authority for both the majority view and the Oregon rule. A string of cases which developed as authority for the Oregon rule was initiated by the Appellate Court for the First District in Continental Casualty Co. v. New Amsterdam Casualty Co., 28 Ill. App.2d 489. The court ordered apportionment of liability in that case, citing the Oregon Auto case; however, the case involved a conflict between two applicable excess clauses, and the apportionment was in accordance with the universally accepted rule in such cases. Nevertheless, the appearance in Continental Casualty of authority for the Oregon rule was reinforced under similar circumstances in Laurie v. Holland America Insurance Co. (1st Dist.), 31 Ill. App.2d 437 and finally applied by the Appellate Court for the Second District in a manner which was more clearly contrary to the majority view. (Economy Fire & Casualty Co. v. Western States Mutual Insurance Co., 49 Ill. App.2d 59.) The court did not seek out the applicable clauses of the "other insurance" provisions contained in the policies involved, but simply noted that the provisions of the conflicting policies were identical in toto; the court reasoned from that fact alone that the prior Illinois authority required proration of liability. The squarest authority in Illinois for the Oregon rule arose in New Amsterdam Casualty Co. v. Certain Underwriters at Lloyds, London (1st Dist.) 56 Ill. App.2d 224, where the court prorated liability between two policies although the "other insurance" provision conflict was between an excess clause and an escape clause. Shortly after that decision, the Appellate Court for the Second District resolved a conflict between identical provisions in toto where the applicable clauses were a pro-rata clause in one policy and an excess clause in the other. (Jensen v. New Amsterdam Insurance Co., 65 Ill. App.2d 407.) The court recalled Continental Casualty and Laurie, noting that on their facts they were not authority for the Oregon rule. The court overruled Economy Fire & Casualty insofar as it adopted the Oregon rule, distinguished the New Amsterdam-Lloyds of London appellate court decision and proceeded to dispose of the case before it according to the majority view, finding the pro-rata policy primarily liable.
At this juncture, we granted leave to appeal from the decision in the New Amsterdam-Lloyds of London case, in which the Oregon rule had been applied. We reviewed the developments in Illinois and elsewhere, and concluded that the majority view should prevail. In reversing the appellate court, we held that, "Lloyds does not escape through use of the clause denying liability if any person other than the named insured is also covered by other valid and collectible insurance, because plaintiff's policy was not `other' insurance but rather `excess' coverage * * *, plaintiff's excess insurance never came into force. It did not furnish `other valid and collectible insurance' and Lloyds must bear the entire amount of the damages and costs." (New Amsterdam Casualty Co. v. Certain Underwriters at Lloyds, London, 34 Ill.2d 424, 430.) Our adoption of the majority view has since controlled the disposition of several appellate court cases upon facts quite similar to those before us here. Tindall v. Farmer's Automobile Management Corp. (3d Dist.), 83 Ill. ...