Carriers Insurance Co. v. American Policyholders' Insurance
1979 Me. LEXIS 701, 404 A.2d 216 (1979)
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Rule of Law:
When two insurance policies covering the same loss each contain conflicting 'excess insurance' clauses, the clauses are deemed mutually repugnant and are disregarded. The resulting liability for the loss must be prorated equally between the insurers up to the limits of the smaller policy.
Facts:
- In 1963, Cummings Bros. (Cummings) entered into a lease agreement with Merrill’s Rental Service, Inc. (Merrill's) for motor vehicles.
- Pursuant to the lease, Merrill’s agreed to provide liability insurance coverage for the vehicles while operated by Cummings' employees.
- Merrill's obtained a policy through Carriers Insurance Company (Carriers) with approximately $3,000,000 in liability coverage.
- Cummings independently procured a separate liability insurance policy from American Policyholders’ Insurance Co. (American) with a $250,000 limit.
- In March 1972, a Cummings employee, while negligently driving a leased vehicle, was involved in an accident that killed another driver.
- Carriers settled the resulting wrongful death and property damage claims for a total of approximately $208,000.
- Both the Carriers policy and the American policy contained 'other insurance' clauses stating their coverage was 'excess' over any other collectible insurance.
- American refused Carriers' demand to contribute to the settlement payment.
Procedural Posture:
- Carriers Insurance Company (Carriers) filed a lawsuit against American Policyholders’ Insurance Co. (American) in the Superior Court, Kennebec County, seeking contribution for a settlement payment.
- The case was submitted to the Superior Court Justice on an agreed statement of facts.
- The Superior Court Justice found for Carriers and entered a judgment against American for approximately $104,000.
- American, as the appellant, appealed the judgment to the Supreme Judicial Court of Maine.
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Issue:
Are conflicting 'excess insurance' clauses in two otherwise applicable insurance policies mutually repugnant, and if so, must the resulting loss be apportioned equally between the insurers up to the limits of the smaller policy?
Opinions:
Majority - Delahanty, Justice
Yes. When two insurance policies contain conflicting excess insurance clauses, the clauses are mutually repugnant, must be disregarded, and the loss should be prorated equally between the insurers. A literal reconciliation of two excess clauses creates a logical circularity where neither policy could be considered primary, potentially leaving the insured without coverage. The court rejects arbitrary methods of determining a 'primary' insurer based on semantic differences in policy language or external agreements like the vehicle lease, as the insurers' obligations are defined solely by the insurance contracts. The only rational approach is to disregard the conflicting clauses and require both insurers to share the loss. Furthermore, the loss should be prorated equally, rather than by policy limits, because both insurers agreed to cover the loss up to the limits of the lesser policy. The majority rule of proration by policy limits unfairly subsidizes the low-coverage insurer and penalizes the high-coverage insurer even for low-loss accidents, which both had equally undertaken to cover.
Analysis:
This decision establishes a clear and definitive rule in Maine for resolving disputes involving conflicting 'excess insurance' clauses, aligning the jurisdiction with the majority approach that treats such clauses as mutually repugnant. By rejecting semantic analysis and external agreements, the court promotes certainty and discourages litigation between insurers. The most significant aspect of the ruling is its adoption of the minority rule for apportionment, requiring equal sharing of the loss rather than proration based on policy limits. This precedent sets a new standard for contribution in Maine, creating a more equitable distribution of risk for low-to-moderate losses and potentially influencing how insurers price policies with high coverage limits.
