Summary
In Reetz it was concluded that the clauses of the two policies were directly repugnant and the loss was then to be prorated.
Summary of this case from Schoenecker v. HainesOpinion
October 8, 1959 —
November 3, 1959.
APPEAL from an order of the circuit court for Waukesha county: WILLIAM E. GRAMLING, Circuit Judge. Affirmed.
For the appellant there were briefs by Kivett Kasdorf, attorneys, and Harold A. Dall of counsel, all of Milwaukee, and oral argument by Mr. Dall.
For the respondents Reetz there was a brief and oral argument by Harold V. Schoenecker of Milwaukee.
For the respondent Continental Casualty Company there were briefs by Lowry Hunter, and oral argument by Willis J. Zick, all of Waukesha.
On August 21, 1957, Charles and William Reetz commenced an action for damages for personal injury to Charles and damage to the property of William. Plaintiffs alleged that the personal injury and property damage were caused by the negligent operation of an automobile tractor and trailer driven by Harry Wendt. The defendants named were Wendt; E. A. Werch, d/b/a Werch Trucking Company, Wendt's employer; Continental Casualty Company, Werch's insurer; Berlin Rental Service, a partnership in which Werch was allegedly a partner, and Virginia Surety Company, insurer of Berlin Rental Service. Plaintiffs alleged that the damages for personal injuries to Charles amounted to $25,000, and his prayer for judgment was in that amount. Continental Casualty Company served and filed a cross complaint against Virginia Surety Company for the amount of any judgment which might be rendered against Continental Casualty Company, alleging that Virginia Surety Company was primarily liable.
Virginia Surety Company moved for summary judgment dismissing the complaint and cross complaint against it, and appealed from an order, entered February 9, 1959, denying its motion. The facts appear from the pleadings and the affidavits filed in connection with the motion.
The tractor which Wendt was operating was owned by Berlin Rental Service and leased to Werch Trucking Company. The trailer was owned by Werch Trucking Company. Continental had issued to Edwin Werch, d/b/a Werch Trucking Company, a policy of automobile liability insurance with a $25,000 limit for bodily injury to one person. The automobiles for which insurance was provided included hired automobiles, the premium in that respect being based on the cost of hire. The policy contains a provision as follows:
"14. Other Insurance. If the insured has other insurance against a loss covered by 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 under this policy with respect to loss arising out of the maintenance or use of any hired automobile insured on a cost-of-hire basis or the use of any nonowned automobile shall be excess insurance over any other valid and collectible insurance."
The policy also provides:
"The unqualified word `insured' includes the named insured and also includes any person while using an owned automobile or a hired automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or with his permission, . . ."
Virginia Surety Company had issued to E. A. Werch, d/b/a Berlin Rental Service, a policy of automobile liability insurance covering liability for injury arising out of the ownership, maintenance, or use of the tractor involved herein. It provided:
"If the insured has other insurance against a loss covered by 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, . . ."
The policy also provides:
"With respect to the insurance for bodily injury liability and for property-damage liability the unqualified word `insured' includes the named insured and, if the named insured is an individual, his spouse if a resident of the same household, and also includes any person while using the automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or such spouse or with the permission of either."
An indorsement entitled "Long Haul Truckmen" contains the provision:
" Other Insurance. With respect to any automobile of the commercial type while leased or loaned to any person or organization, other than the named insured, engaged in the business of transporting property by automobile for others . . . this insurance shall be excess insurance over any other valid and collectible insurance."
The circuit court concluded that since the damages might, upon the trial, be fixed at an amount in excess of the $25,000 asserted in the complaint, the motion by Virginia Surety Company for summary judgment in its favor was premature even if the insurance it afforded was excess as it claimed.
The issue results from the presence of the "excess" clauses in the two policies. The pertinent excess clause in the Continental policy is the proviso in the cc other insurance" paragraph quoted in the statement of facts. In the Virginia policy, it is the "other insurance" paragraph of the "Long Haul Truckmen" indorsement. If neither policy contained its excess clause, it is undisputed that both policies would cover the liability which the plaintiff seeks to establish.
It is not perfectly clear whether Berlin Rental Service and Werch Trucking Company were each mere trade names of E. A. Werch, but the parties have treated them as separate persons and we shall do so.
The tractor was a commercial-type vehicle leased to a person other than Berlin Rental Service, the named insured under the Virginia policy, engaged in the business of transporting property by automobile for others. Thus, the factual situation contemplated by the excess clause in the Virginia policy would be fulfilled if the tort-feasor's alleged liability to the plaintiff were covered by the Continental policy.
It is equally true, however, that tinder the Continental policy, this tractor was a hired automobile insured on a cost-of-hire basis. Thus, the factual situation contemplated by the excess clause in the Continental policy would be fulfilled if the tort-feasor's alleged liability to plaintiff were covered by the Virginia policy.
It follows that coverage by Continental could be a defense for Virginia only if the excess clause in the Continental policy be disregarded. Conversely, coverage by Virginia could be a defense for Continental only if the excess clause in the Virginia policy be disregarded. Any attempt to give effect to both clauses puts one on a perpetual mental merry-go-round.
Is there any rational basis for determining that effect should be given to one of the excess clauses and not to the other? We think not, and reach the only remaining alternative of giving effect to neither. In Ermis v. Federal Windows Mfg. Co. (1959), 7 Wis.2d 549, 97 N.W.2d 485, we considered a situation where an alleged liability might prove to be covered both by a comprehensive general liability policy issued to one named insured and by an automobile liability policy with loading and unloading coverage issued to another. We said, at page 555:
"Finally, both Bituminous and American contend that under the terms of their respective policies if there is other insurance applicable theirs is excess insurance. The provisions of both policies are substantially the same, and if there is ultimate liability so far as American is concerned, the damages must be prorated according to the amounts of the respective policies."
Although the policies were of a different type and issued to named insureds who were differently related to the activities which allegedly gave rise to liability, we made no attempt to say that one policy was primary and one secondary, or to fix upon some other criterion for granting effect to the excess clause in one policy and denying effect to the excess clause in the other. As pointed out in Oregon Automobile Ins. Co. v. United States Fidelity Guaranty Co. (9th Cir. 1952), 195 F.2d 958, courts have used various criteria, i.e., which policy was issued first, which policy was more specific, and which named insured was primarily liable. We agree with the court of appeals that each of these criteria is a "relatively arbitrary circumstance." In the Oregon Automobile Ins. Co. Case, the offending driver was the named insured under the U.S. F. G. policy describing his own automobile, but was driving a car owned by another and insured with Oregon. When the cause of action arose, the driver was entitled to "drive other car" coverage under the U.S. F. G. policy, and to "omnibus" coverage under the Oregon policy. The court said that (p. 959) —
"The U.S. F. G. policy provided, in substance, that it would prorate with other valid and collectible insurance, except that, with respect to the use by the insured of an automobile other than that named, it would be excess insurance only. The Oregon policy provided that it would prorate with other valid and collectible insurance, except that as to anyone other than a named insured, if such person had other valid and collectible insurance, then he would not be indemnified under the Oregon policy."
The court of appeals held that one could not rationally choose between these other insurance provisions; that they were mutually repugnant and must be disregarded; and that the liability must be prorated between the companies.
Virginia argues upon this appeal that the Continental policy is more general because it covers hired and nonowned automobiles not described in the policy, while the Virginia policy is more specific because it covers only described automobiles. It is argued that this is a rational basis for giving effect to the excess clause in the Virginia policy and disregarding the excess clause in the Continental policy. This argument is not persuasive. It is true that the two policies differ in the respects mentioned and others, but it seems to us more important that in drafting each policy, the parties contemplated a type of situation which was likely to arise where the operation of the vehicle would probably be covered by other insurance. In the Virginia policy, the parties contemplated a leasing of vehicles by the named insured to others, and in the Continental policy the parties contemplated the leasing of vehicles to the named insured. The specific situation contemplated in each policy has now come about. Virginia Surety Company was not entitled to summary judgment for the reasons indicated. Because of our conclusion that the excess clauses of the policies are to be disregarded, we have not considered whether the trial judge was correct in holding that Virginia's motion for summary judgment was premature in any event.
By the Court. — Order affirmed.