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Westchester Fire Ins. v. Indus. Fire & Cas.





APPEAL from the Circuit Court of Cook County; the Hon. DANIEL A. COVELLI, Judge, presiding.


Plaintiff, Westchester Fire Insurance Company (Westchester), initiated an action for declaratory judgment, seeking a determination of the extent of uninsured motorists liability due defendant, Thomas E. Richards, under two separate policies of automobile liability insurance issued to members of the Richards family unit by two different companies, Westchester and defendant, Industrial Fire and Casualty Insurance Company (Industrial). Under the "other insurance" clause of its policy, Westchester sought to limit its uninsured motorists liability to a 50-percent pro rata share of the $10,000 maximum payment provided for in its policy with the remaining $5000 chargeable to defendant Industrial. Defendant Richards moved for summary judgment, asking the court to aggregate or "stack" the two policies in order to compensate himself in the amount of $10,000 (the total of the two limits of liability). The complaint further sought to restrain Richards from proceeding with arbitration under his policy with Westchester until the court declared and determined the rights of the parties. The trial court denied Richards' motion for summary judgment and entered judgment in favor of both insurance companies, decreeing that the combined liability on both policies was $10,000, to be prorated in the amount of $5000, chargeable to each of the two insurance carriers. Defendant Richards appeals from this judgment.

We reverse.

The issue presented for review is whether the "other insurance" pro rata clause contained in both policies, which restricted damages to the higher of the limits of liability of the two separate insurance policies, precluded "stacking" or aggregation of the policies.

The facts were stipulated. On October 3, 1972, defendant, Thomas E. Richards, was a passenger in an uninsured automobile driven by Charles Kuwamoto, which vehicle overturned and resulted in injuries to Richards which exceeded $20,000. On this same date, two separate insurance policies pertaining to defendant Richards were in full force and effect. One policy, issued by Westchester, insuring a 1962 Ford Fairlane owned by George Richards, Thomas' father, listed Mr. and Mrs. Richards as the named insureds. The policy provided family protection coverage (uninsured motorists coverage) for the named insureds or any relatives, which included Thomas and his brother. It was stipulated that defendant Richards and his brother were excluded from liability coverage under this policy. The exclusion specifically provided that Thomas and his brother were excluded from coverage while operating any automobile. The family protection coverage was limited to $10,000 per person, $10,000 per accident. The premiums were paid by George Richards.

A second policy, issued by Industrial, covering the same auto (1962 Ford Fairlane) listed Thomas E. Richards as the named insured. This policy provided identical family protection coverage (uninsured motorists coverage) as that contained in the Westchester policy. The premiums were paid by Thomas Richards. The policy was purchased prior to the purchase of the Westchester policy.

Both policies also contained the following language (from the family protection coverage sections):

"OTHER INSURANCE. With respect to bodily injury to an insured while occupying an automobile not owned by the named insured, the insurance under Part IV shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance, and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance.

Except as provided in the foregoing paragraph, if the insured has other similar insurance available to him and applicable to the accident, 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 for a greater proportion of any loss to which this Coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance."

Plaintiff Westchester and defendant Industrial agreed that the legal issues are governed by the second paragraph of the "other insurance" provision.

Defendant Richards contends that under the second paragraph of the other insurance provision, commonly known as the pro rata clause, the policies' liability limits should be aggregated and then shared between the companies because (1) the language of the clause contemplates "adding" or "summing up" the liability limits and (2) in fire loss or property damage cases involving pro rata clauses, the liability of the insurer is generally considered to be measured by the proportion that the amount of its policy bears to the total aggregate insurance on the property. Defendant Richards further argues that since both companies collected premiums on the same auto, the policies should be stacked, particularly in light of the fact that Richards' father purchased insurance from Westchester after the purchase of the Industrial policy, paying a full premium, and specifically contracted with Westchester for uninsured motorists coverage for himself and defendant Richards and which policy excluded defendant Richards from liability coverage.

The insurance companies argue that the language used in the second paragraph is clear and that the liability limit clause contained in such paragraph supports their contention that the maximum coverage available is $10,000. The insurance companies point out that the fire loss/property damage cases cited by defendant Richards only construed the proportional payment clause of the pro rata clause and did not construe the liability limit clause, as none of the insurance policies involved in those contained such a clause. The insurers posit that if such a clause were at issue, it is certain that the results in those cases would have been different.

The insurers further argue that Glidden v. Farmers Automobile Insurance Association (1974), 57 Ill.2d 330, 312 N.E.2d 247, relied on by defendant Richards, is limited to its facts; in other words, stacking is permissible if one insurance company issues multiple policies to one insured, as the "other insurance" provisions contained in the policies are ambiguous under those circumstances. They continue, arguing that when insurance policies are issued by separate and different companies, the "other insurance" provisions in the policies are unambiguous and, therefore, enforceable under Putnam v. New Amsterdam Casualty Co. (1970), 48 Ill.2d 71, 269 N.E.2d 97, and Morelock v. Millers' Mutual Insurance Association (1971), 49 Ill.2d 234, 274 N.E.2d 1.

Some recent Illinois appellate court cases have considered the effect of the "other insurance" pro rata clause on insurance contracts. In Kaufmann v. Economy Fire & Casualty Co. (1977), 52 Ill. App.3d 940, 368 N.E.2d 371, the defendant insurance company issued one policy to Justin and Geraldine Kaufmann and a second policy to Daniel Kaufmann, their son. Daniel was not a member of the household when he purchased the policy, but he was at the time of the accident. Both policies contained family protection coverage and "other insurance" clauses similar to the ones in the instant case. Separate premiums were paid for each policy. Four members of the family were injured by an uninsured motorist. Defendant insurance company attempted to limit plaintiffs' coverage to Daniel's policy asserting that by virture of the other insurance clause contained in the parents' policy, such policy afforded no coverage. The court adopted the rationale of Glidden and found that when the same company issued policies to members of the ...

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