E-Filed Document Oct 12 2016 11:09:10 2016-CA-00359 Pages: 49 IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI NO. 2016-CA-00359 CONTINENTAL CASUALTY COMPANY APPELLANT VERSUS ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY APPELLEE APPEAL FROM THE CIRCUIT COURT OF HARRISON COUNTY BRIEF OF APPELLEE/CROSS-APPELLANT ORAL ARGUMENT NOT REQUESTED SHARP, DUMMER, & BRIGGS, PLLC Attorneys at Law Robert E. Briggs/MB#99527 1635 Popps Ferry Road, Suite D Biloxi, MS 39532 Telephone:(228) 392-2003 Facsimile:(228) 392-7618 Attorneys for Appellee
CERTIFICATE OF INTERESTED PARTIES The undersigned counsel of record certifies that the following listed persons may have an interest in the outcome of this case. These representations are made in order that the Justices of the Supreme Court and/or the Judges of the Court of Appeals may evaluate possible disqualification or recusal. 1. Continental Casualty Company, Plaintiff/Appellant; 2. Honorable Christopher L. Schmidt - Circuit Court Judge, Harrison County, MS; 3. Michael Moore and John Banahan, attorneys for Plaintiff/Appellant Continental Casualty Company; 4. Allstate Property and Casualty Insurance Company, Defendant/Appellee; 5 Robert E. Briggs, Sharp, Dummer & Briggs, PLLC, attorneys for Defendant/Appellee Allstate Property and Casualty Insurance Company. i
TABLE OF CONTENTS CERTIFICATE OF INTERESTED PARTIES................................. i TABLE OF CONTENTS................................................ ii TABLE OF AUTHORITIES............................................... iv STATEMENT OF THE ISSUES........................................... 1 STATEMENT OF THE CASE-PROCEDURAL HISTORY.........................1 STATEMENT OF THE FACTS............................................ 3 SUMMARY OF THE ARGUMENT.......................................... 7 ARGUMENT........................................................... 10 I. The circuit court committed no error in granting summary judgment to Allstate Insurance Company and holding that Continental Casualty Company must share in the loss on a pro rata basis.......................... 10 A. Because the instrumentality that Continental insures was involved in the subject accident, Mississippi law requires that Continental s policy provide primary coverage................................. 10 B. Even if this court determines that the other insurance clauses in the two policies must be reviewed and analyzed, the result is that the polices are both primary and provide coverage on a pro-rata basis..................................................... 15 1. The boating liability portion of the Continental policy contains a separate other insurance clause, making it ambiguous as to whether the other insurance clause contained in the general terms section is applicable to boating liability coverage.... 15 2. Even in the absence of any issues of ambiguity, the other insurance clauses conflict and in such a scenario, Mississippi case law is clear that the clauses are both disregarded and the policies apply on a pro rata basis..................... 18 3. Because Allstate and Continental do not insure the same property for the same risk, the other insurance clauses in the two policies do not need to be reviewed or analyzed...... 24 ii
II. The Circuit Court committed no error in granting summary judgment to Allstate Insurance Company as to the claims of Continental for defense costs and expenses............................................... 26 A. Allstate did not have a duty to defend the matter before a lawsuit was filed.................................................. 26 B. Allstate never refused to defend the case when and if a lawsuit was filed, and more importantly, never refused to investigate the case.. 29 C. The claim for equitable subrogation is likewise of no benefit to Continental because it also requires a refusal of the primary carrier to defend a lawsuit....................................... 33 III. CROSS-APPEAL OF ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY..................................... 34 A. The Circuit Court erred in failing to assess sanctions against Continental Casualty Company for the frivolous claim that Allstate owed Continental defense costs and expenses and the willful refusal to dismiss those claims once advised of their futility..................................... 34 CONCLUSION......................................................... 41 CERTIFICATE OF FILING AND SERVICE.................................... 42 iii
TABLE OF AUTHORITIES MISSISSIPPI STATE COURT CASES: Allstate Insurance Company v. Chicago Insurance Company, 676 So.2d 271 (Miss. 1996)...................................... 20-23 Ashley Healthcare Plan v. Dillard, 177 So.3d 175 (Miss. 2015)........................................ 38-40 Baker Donaldson v. Muirhead, 920 So.2d 440, 451 (Miss. 2006).................................... 27 Guidant Mutual Insurance Company v. Indemnity Insurance Company of N. Am., 13 So.3d 1270 (Miss. 2009)........................... 11-14, 28, 30-31, 37 Murphee v. Federal Ins. Co., 707 So. 2d 523 (Miss. 1997)...................................... 27-28 Progressive Gulf Insurance v. We Care Day Care Center, 953 So.2d 250 (Miss. App. 2006).................................... 17 State Farm v. Allstate, 255 So.2d 667 (Miss. 1971)........................................ 28 State Farm v. Commercial Union Ins. Company, 394 So.2d 890 (Miss. 1981)....................................... 28, 34 Travelers Indemnity Company v. Chappell, 246 So.2d 498 (Miss. 1971)........................................ 11 Universal Underwriters v. State Farm, 931 So.2d 617 (Miss. App. 2005)..................................... 11 USF&G v. John Deere Insurance Company, 830 So.2d 1145 (Miss. 2002)........................................ 11 MISSISSIPPI FEDERAL COURT CASES Garriga v. Nationwide Mut. Ins. Co., 813 F. Supp. 457 (S.D. Miss. 1993)................................... 12 Hill v. General Insurance Company, iv
456 F.Supp. 2d 757 (N.D. Miss. 2006)............................... 23-24 Liberty Mutual v. Canal Insurance Company, 177 F.3d 326 (5 th Cir. 1999)..................................... 19, 22 Liberty Mutual v. USF&G, 756 F.Supp. 953 (S.D. Miss. 1990)................................. 33-34 Mesa Underwriters v. Daffy s on the River, 2014 WL 5025850 (S.D. Miss. Oct. 8, 2014)....................... 26, 36-37 State Farm Mut. v. Universal Underwriters Ins. Co., 601 F. Supp. 286 (S.D. Miss. 1984)................................... 12 United National Insurance v. Mundell Terminal Services, 740 F.3d 1022 (5 th Cir. 2014)....................................... 25 MISSISSIPPI STATUTES Miss. Code Ann. Section 11-55-5........................................ 36-37 OUT OF STATE CASES Carmel Development Co. RLI Insurance Company, 24 Cal. Rptr. 3d 588, 592 (Cal.App. 2005).............................25 Moroney Body Works, Inc. v. Central Insurance Companies, 35 N.E. 3d 397, 398 (Mass. App. 2015)................................ 25 v
STATEMENT OF THE ISSUES I. The Circuit Court committed no error in granting summary judgment to Allstate Insurance Company and holding that Continental Casualty Company must share in the loss on a pro rata basis. II. The Circuit Court committed no error in granting summary judgment to Allstate Insurance Company as to the claims of Continental for defense costs and expenses. ALLSTATE CROSS-APPEAL III. The Circuit Court erred in failing to assess sanctions against Continental Casualty Company for the frivolous claim that Allstate owed Continental defense costs and expenses. STATEMENT OF THE CASE AND PROCEDURAL HISTORY The present appeal stems from a lawsuit filed by Continental against Allstate, seeking recovery in the amount of $40,245.51, which consisted of $20,245.51 in defense costs and expenses and $20,000 for what Continental asserts was an indemnity overpayment on a pre-suit settlement. Allstate answered the Complaint and asserted a counter-claim in the amount of $23,000, which Allstate believes was the amount that they overpaid on the settlement. Allstate also sought sanctions against Continental for the frivolous claim seeking defense costs and expenses. Continental s complaint arises from an incident that occurred on June 22, 2013, wherein Mike Williams alleged to have sustained injuries as a result of the negligence of Greg Peters while Peter s boat was being loaded onto a boat trailer after a day of boating. The underlying facts of the incident are not very important for purposes of the appeal, but it is undisputed that Continental Casualty Company insured the boat and trailer involved in the incident and that Allstate insured the truck to which the trailer was attached at the time of the incident. 1
A Motion to Dismiss was filed by Allstate as to Continental s claim for defense costs and expenses and on October 28, 2015, that motion was granted by the trial court. In the same order, the trial court denied Allstate s request for sanctions. (R., pp.437-443). As to the remaining claims for indemnity, cross-motions for summary judgment were filed by the parties and via Order on February 22,2016, the trial court granted Allstate s motion for summary judgment and denying Continental s summary judgment motion. (R., pp.879-882). Timely notices of appeal were then filed by both parties. (R., pp.883-884; pp.890-891). 2
STATEMENT OF THE FACTS The first three paragraphs of Continental s statement of the facts provide detailed factual allegations about the underlying incident at issue, but no lawsuit was ever filed in that underlying suit and no discovery was conducted. It is undisputed that both the boat and trailer were involved in the underlying incident. It is also undisputed that prior to the incident at issue, Greg Peters obtained separate insurance policies on his truck and boat. His 2012 Chevy Silverado was insured by Allstate and his 2003 Regulator fishing boat was insured by Continental. Allstate s policy provided liability coverage in the amount of $250,000 and Continental s policy provided liability coverage in the amount of $300,000. (R., pp.480-496- Continental policy and R., pp.497-546- Allstate policy). Continental Casualty Company ultimately took the position that their policy was excess to Allstate s policy. As will be explained in detail below, this position is without merit but for the benefit of the Court, the other insurance clauses purportedly relied upon by Continental for their argument provide as follows: Continental Policy If there is any other available insurance that would apply in the absence of this policy, this insurance shall apply as excess over the other insurance, but the combined amount shall not exceed the limits of this policy for any loss under Coverage A, Boating and Boating Equipment or Coverage E, Boat Trailer. (R., pp.480-496; R.E., 0001). The Continental policy also contains a separate and distinct other insurance clause directly in the boating liability section of the policy (Coverage B). The boating liability section of the policy provides that the Continental policy will provide primary coverage for 3
any loss incurred while using the boat insured under the policy and only excess coverage for a non-owned, non-listed boat when there is other available coverage. (R., pp.480-496, R.E., pp. 0002-0003). Allstate policy If more than one policy applies on a primary basis to an accident involving your insured auto, we will bear our proportionate share with other collectible liability insurance. (R., pp. 497-546, R.E., pp. 0004-0005). It is undisputed that no lawsuit was ever filed by Mike Williams and instead, Williams attorney attempted to negotiate a pre-suit settlement with both Allstate and Continental. Williams attorney took no position on the primary/excess issue but did state that such was not relevant because the damages sustained by his client far exceeded the combined limits of both policies. (R., pp. 182-185). Ultimately, the case was settled at a pre-suit mediation for $460,000 wherein both insurance companies paid 50% of the settlement by agreement, reserving their rights to later argue that they overpaid. Importantly, this settlement amount was $210,000 more than Allstate s policy limits of $250,000. In the present case, Continental Casualty s claimed recovery consists of $20,000 that they believe was their overpayment on the settlement amount, and an additional $20,245.51, which consist of defense costs and expenses that they claim were incurred because of Allstate s refusal to defend the case after it was tendered to Allstate by Continental Casualty. (R., pp.175-180). Despite Continental Casualty s bare assertion that they tendered defense to Allstate, it is undisputed that no lawsuit was ever filed by Mike Williams and thus there was 4
no defense to tender. This was confirmed via e-mail from Continental s attorney on March 20, 2014. (R., pp.187-188; R.E., pp.0006-0007). Additionally, Allstate never denied that it provided primary insurance coverage to its insured Greg Peters nor that it would fully fund the defense of any lawsuit filed against him; the dispute has always been whether Continental also provided primary coverage on a pro rata basis. As with any insurance company, Allstate opened a file and began investigation of the matter when counsel for Mike Williams made a claim but this is not akin to a defense and no duty to defend was ever triggered. Allstate took statements, gathered medical records and began negotiating with counsel for Mr. Williams, but this was simply part of their routine investigation. On no less than four occasions, counsel for Continental was advised that Allstate acknowledged they were a primary insurer, that they had a duty to defend any lawsuit ultimately filed and that they would certainly honor that obligation despite any dispute with Continental about whether Continental was co-primary or excess. (R., pp.190-193; R.E., pp.0008-0011). Continental Casualty also makes a lot of assumptions about what Allstate did or did not do, but fails to provide any admissible proof for these assumptions. What Continental or their counsel did not know, however, is that the mutual insured, Greg Peters, and Allstate defense counsel Myles Sharp are personal friends and discussed this matter several times. (R., pp.435-436). Greg Peters told Mr. Sharp on multiple occasions that he had done nothing wrong and absolutely wanted to defend this case on liability. (R., pp.435-436). Mr. Peters also discussed the incident with the undersigned counsel and again 5
stated that he had done nothing wrong and didn t understand why a claim was even being made by Mike Williams. (R.,pp.435-436). This is mentioned only because of the renewed allegations in Continental s appeal brief that Allstate and their attorneys did nothing after being made aware of this claim. Such is certainly not true and is not supported by any proof in the record. Additionally, and as was noted by the trial court, Continental Casualty immediately retained an attorney and an investigator and retained both before anyone had reported the claim to Allstate, or anyone even knew that an Allstate policy existed. (R., pg.441). Continental continued their investigation of the claim and to incur attorney s fees for several months before the issue with Allstate ever arose, even though no duty had ever arisen to retain an attorney and incur those costs. When the issue with Allstate did arise, various letters and e-mails were exchanged between Allstate and Continental. In none of the correspondence did Allstate ever indicate to Continental that they would not provide a defense to Greg Peters if and when a lawsuit was ever filed. In fact, every correspondence with the exception of one, that was later clarified, clearly indicated that Allstate accepted that they were a primary insurer with a duty to defend any subsequently filed lawsuit. To say that Allstate was silent as to their plan to defend any lawsuit against the insured is disingenuous at best. 6
SUMMARY OF ARGUMENT Continental s policy clearly provides primary coverage for the underlying loss at issue in this case. The boat it insures was the vehicle involved in the accident and Mississippi law therefore requires that Continental s policy be deemed primary. The other insurance clauses in the Allstate and Continental policies are never implicated because they do not insure the same property for the same risk. The Continental policy is also ambiguous as to which other insurance clause is applicable. There are two different other insurance clauses contained in the policy and Allstate would submit that the one found in the boating liability portion of the policy is applicable as opposed to the one found in the general conditions portion of the policy. Looking at and comparing the proper other insurance clauses in the two policies leads to only one conclusion: both policies are primary. Finally, even if this court were to conclude that a detailed analysis of the other insurance clauses was appropriate, the end result would be no different for Continental. Using the general conditions other insurance clause as argued by Continental results in a conflict with the Allstate other insurance clause. Pursuant to clear Mississippi case law, any conflict in the other insurance clauses implicates the rule of repugnancy and results in both clauses being voided and the policies sharing in the loss on a pro-rata basis. Continental s policy would certainly be primary in the absence of the Allstate policy and under such a scenario, Mississippi courts have likewise been clear that the other insurance clauses are not applicable and pro rata sharing is appropriate. 7
Despite Continental s unsubstantiated allegations to the contrary, Allstate actively investigated the incident when a claim was made to them, and continued that investigation up until the time of settlement, which was their only duty under Mississippi law. That duty to investigate does not require retention of lawyers or experts and Allstate simply does not handle their pre-suit investigations that way. If Continental chooses to retain lawyers and experts prior to suit and as part of their investigation, sobeit, but that does not create any obligation for Allstate, or any other carrier, to reimburse those costs when no suit has been filed and no duty to defend triggered. Perhaps Continental Casualty and Allstate investigate claims differently, but Allstate does not typically retain an attorney or any experts as part of their investigation of a claim. They interview their insured, gather the relevant medical records and bills, have an internal medical professional review the records if necessary, and proceed to evaluate the case on both liability and damages. Continental Casualty appears to be taking the position in this case that there is some duty under Mississippi law to incur defense costs and expert fees simply because someone has made a claim against the insured, but they cite no case law whatsoever for that position. Continental continued to tender defense of this case to Allstate despite the fact that there was no defense to tender. At most, there was an investigation to tender but Allstate was already handling that investigation pursuant to their own internal procedures. If Continental Casualty was unhappy with Allstate s investigation and chose to do more than is required under the law, that was their prerogative, but it in no way created an obligation on Allstate to pay for those costs. Continental, in fact, retained an attorney before any primary/excess issue ever surfaced, which is a clear indication that unlike 8
Allstate, and without any duty to do so, this is the way that Continental handles investigations. Allstate s counsel also advised counsel for Continental on multiple occasions that Allstate was investigating the claim and would defend the case when and if a lawsuit was ever filed. Consequently, any defense costs incurred by Continental were of their own choosing and for their own reasons, and not the responsibility of Allstate; thus making Continental s claim for recovery of defense costs and expenses patently frivolous and subject to sanctions. It should be obvious to anyone who looks at the timing of events in this case, as it was to Judge Schmidt, that Continental retained an attorney and incurred defense costs and expenses on their own volition, and not because of anything that Allstate did or did not do. 9
ARGUMENT I. The circuit court committed no error in granting summary judgment to Allstate Insurance Company and holding that Continental Casualty Company must share in the loss on a pro rata basis. A. Because the instrumentality that Continental insures was involved in the subject accident, Mississippi law requires that Continental s policy provide primary coverage. Continental does not dispute that the boat insured under their policy was involved in the accident that caused Mr. Williams injuries. Specifically, the boat was being operated and in use when Mr. Williams was injured. In fact, Continental s policy provides the only coverage for the boat involved in the incident and they also provide coverage for the trailer that was involved. Allstate s policy insures the truck to which the trailer was attached, but it provides no separate coverage for the trailer or the boat; the Allstate policy is invoked only because the trailer was attached to the truck they insured. In such a scenario, it is rather ridiculous for Continental to argue that they are an excess carrier. The Continental policy was designed and in fact issued to provide primary coverage for the boat listed on the policy. The language of the Continental policy will be discussed in more detail in Section I-B-1 below, and clearly establishes that was the intent of the policy. In this case and this incident, Continental has the only policy which lists the involved boat as an insured vehicle. There is no other coverage on the boat and the primary/excess issue which Continental claims as the basis for their Complaint is therefore never implicated. Pursuant to clear and established Mississippi law, insurance coverage follows the vehicle and coverage on the vehicle involved in an accident is always primary. The long 10
standing rule in Mississippi is that the insurance policy issued to the owner of the vehicle involved in the accident is the primary policy. Guidant Mutual Insurance v. Indemnity Insurance Company of North America, 13 So.3d 1270, 1276 (Miss. 2009). There is no dispute that the Continental policy was issued to the owner of the vehicle (boat) involved in the accident and consequently, Continental cannot contract away their obligation and duty to provide primary coverage under Mississippi law, even if one used the very strained reading of their policy and other insurance clauses that Continental offers. Continental submits that Allstate s argument on this issue would make all insurers in a multi-vehicle accident primary and render every excess clause in Mississippi superfluous. They also submit that Allstate is arguing to the court that Mr. Peters boat played a greater role in the incident and that this likewise renders the Continental excess clause meaningless. Allstate, however, makes neither of the above arguments and instead makes one very simple argument on this issue. Because the vehicle that Continental insures was involved in the accident and owned by their insured, Mississippi law requires their policy to provide primary coverage. It doesn t matter if the boat or the trailer played a greater role in causing the accident as it is undisputed that both were involved. The following five cases from the Mississippi Supreme Court, the Mississippi Court of Appeals and federal district courts in Mississippi contain the same holding: the longstanding rule in Mississippi is that the insurer for the owner of the vehicle involved in the accident is the primary insurer. USF&G v. John Deere Insurance Company, 830 So.2d 1145, 1148 (Miss. 2002); Travelers Indemnity Company v. Chappell, 246 So.2d 498, 505 11
(Miss. 1971); Universal Underwriters v. State Farm, 931 So.2d 617, 620 (Miss. App. 2005); State Farm Mut. v. Universal Underwriters Ins. Co., 601 F. Supp. 286, 289-90 (S.D. Miss. 1984); Garriga v. Nationwide Mut. Ins. Co., 813 F. Supp. 457 (S.D. Miss. 1993). There are many other cases with this same holding, which Allstate can provide if Continental remains unsatisfied that the above five cases are enough to establish this basic principle of law in Mississippi. It should also be noted that Continental has never cited even one case with a contrary holding while implying that it was not the rule in Mississippi that primary insurance coverage follows the vehicle. In the trial court, and again in their Brief to this Court, Continental has cited Guidant Mutual Insurance v. Indemnity Insurance Company of America, 13 So.3d 1270 (Miss. 2009) in support of its position, claiming that both insurers in Guidant provided coverage for the vehicle involved in the accident and that the Mississippi Supreme Court determined priority of coverage by reviewing the two other insurance clauses. However, it is simply a misleading statement to say that the two insurers in Guidant both provided coverage for the vehicle involved in the accident. In Guidant, James Hingle was a volunteer fireman with the Slayden Mt. Pleasant Volunteer Fire Department and driving his personal vehicle to the scene of a fire when he was involved in an accident. Guidant Mutual provided coverage to Mr. Hingle for his personal vehicles. Indemnity Insurance provided coverage under a business automobile liability policy to the volunteer fire department but the fire department did not own the vehicle involved in the accident and Hingle was insured under Indemnity policy s only by virtue of driving a non-owned auto in the course of the fire department s business. Id. at 1276. 12
The Mississippi Supreme Court then held, consistent with the long standing rule, that Guidant, as the issuer of the liability policy to the owner of the vehicle involved in the accident, is the primary insurer. Id. at 1277. Thus, Continental s argument that the long standing rule was not dispositive in Guidant is untrue. The Mississippi Supreme Court followed the long standing rule and found Guidant primary because they insured the owner of the vehicle and named the involved vehicle on its policy and Indemnity excess because Indemnity simply insured the driver but not the vehicle involved in the accident. That is in stark contrast to the facts of our case, where Continental insures the owner of the vehicle involved in the accident and lists the vehicle (boat) involved as a covered vehicle under their policy. Continental does not provide coverage because Mr. Peters was operating a non-owned vehicle, as was the case in Guidant. They provide coverage because their insured vehicle, owned by their insured, was involved in the accident. Continental has never cited a single Mississippi case where the insurer of the owner of the vehicle involved in the accident was not found to provide primary coverage. In fact, all of the cases found by Allstate where one insurer was found to be excess in an automobile accident case involve one carrier insuring the vehicle involved and the other carrier insuring the driver but not the vehicle. For example, John Smith has coverage with Company A, which insures all of the vehicles he owns. Mr. Smith is then involved in an accident driving a friend s vehicle, which is insured by Company B. Mr. Smith would be insured under Company A s policy by virtue of driving a non-owned vehicle with permission but that coverage would be excess to the coverage issued to the owner of the vehicle. 13
Those were the facts of Guidant and are the facts of every reported decision involving an automobile accident where one carrier was deemed primary and the other excess. Those are not the facts of the present case because Continental does insure the vehicle (boat) involved in the accident and as such, must provide primary coverage. Continental s policy language actually flows perfectly and consistently with the relevant case law and as will be discussed again below, provides that they are excess for boating liability coverage only when their insured is operating a non-owned vehicle. Bottom line, Continental provided the only coverage for the boat involved in the accident and as such, is a primary insurer pursuant to Mississippi s long standing rule. This Court needs to look no further and to make no other inquiry to reach this conclusion. It is a rather simple issue that Continental Casualty has made every possible attempt to confuse without success. Continental previously ignored the existing precedent regarding the recovery of attorneys fees in making that claim and they have likewise completely ignored the long standing rule in Mississippi that they are a primary insurer under the facts of this accident. Although Allstate believes that this issue is very simple and can be resolved without any detailed analysis of the two policies and the other insurance clauses, the result is no different even if this Court were to disagree. There are several reasons for that conclusion, each of which will be discussed in a separate section below. 14
B. Even if this court determines that the other insurance clauses in the two policies must be reviewed and analyzed, the result is that the polices are both primary and provide coverage on a pro-rata basis. 1. The boating liability portion of the Continental policy contains a separate other insurance clause, making it ambiguous as to whether the other insurance clause contained in the general terms section is applicable to boating liability coverage. A close review of the two policies reveals that the Allstate policy contains several different other insurance clauses, varying in terms and effect depending on the particular coverage section. The other insurance clause applicable to the liability coverage was outlined above and essentially provides that the Allstate policy will be proportionate, or pro-rata, with any other primary insurance for a covered loss. The Continental policy is far more ambiguous as to what sections of the policy are governed by the other insurance clause contained in the general conditions portion of the policy. The other insurance clause contained in the general conditions portion of the policy essentially provides that Continental will be excess over any other available insurance, but the confusion stems from trying to determine exactly what coverage sections of the policy are governed by this clause. A close reading of the various relevant sections of the policy leads the reader to a conclusion that the other insurance clause contained in the general conditions portion of the policy, and the one so heavily relied upon by Continental in this case, has no application to Coverage B, Boating Liability, which is the coverage section that provides coverage to Greg Peters for this particular loss. There are several reasons why this is the most logical conclusion. First, the other insurance clause contained in the general conditions portion of the policy specifically 15
references only Coverage A (Boat and Boating Equipment) and Coverage E (Boat Trailer) while making no mention whatsoever of the other sections of the policy, including Coverage B (Boating Liability). While this by itself creates an ambiguity as to whether the general conditions other insurance clause has any application to Coverage B, the very terms of Coverage B create even more confusion or perhaps more clarity, depending on how you look at it. Under Coverage B, Operating Other Boats, the policy provides in pertinent part that if there is any other available insurance, we will provide coverage only as excess over such insurance. (R., pp.489-490; R.E., pp.0002-0003). In that same coverage section and when discussing the insured boat, the policy provides that it is primary and states in pertinent part that we will pay damages and any costs assessed against you up to that amount for any claim or suit covered under this policy for bodily injury or property damage for which any insured becomes legally liable through ownership, maintenance or use of the insured boat. (R., pp.489-490, R.E., pp.0002-0003). A plain reading of Coverage B clearly indicates an intent, and a logical one at that, for Continental to provide primary liability coverage for any boat listed in the declarations page and excess liability coverage for any non owned boat not listed. If the other insurance clause contained in the general conditions section of the policy was applicable to Coverage B, there would be no need for Coverage B to have its own separate other insurance clause and to distinguish between owned and non-owned boats because Continental would always be excess over any other available insurance, owned or nonowned. 16
The fact that Coverage B has its own other insurance clause combined with the fact that the other insurance clause in the general conditions portion of the policy does not mention Coverage B while at the same time specifically mentioning other coverage parts, establishes that the other insurance clause in the general conditions portion of the policy is not applicable to Coverage B and that as it should be, Continental provides primary boating liability coverage for any insured boat listed on the policy. At a minimum, this creates an ambiguity that must be construed against Continental as the drafter of the policy. Progressive Gulf Insurance v. We Care Day Care Center, 953 So.2d 250, 253 (Miss. App. 2006). In Progressive Gulf Insurance, the Mississippi Court of Appeals held that an insurance policy is construed most strongly against the insurer as the drafter of the policy. Id. The Court of Appeals further held that ambiguity is present when the policy language is susceptible of two or more reasonable interpretations... when there is no practical difficulty in making the language of an insurance contract free from doubt, any doubtful provision in the policy should be construed against the insurer. Id. at 253-254. With Continental s policy, the possible confusion created by including two separate other insurance clauses in two different parts of the policy results in a minimum, an ambiguity that must be construed against Continental as the drafter of the policy. When that is done, the court can and should determine that Continental provides primary coverage for the loss. Continental has argued that the only way to reach this conclusion is to disregard all common sense and ignore the plain reading of the contractual language. Continental has further argued that the absurdness of Allstate s strained interpretation is buttressed 17
when its two arguments are viewed together. That sounds like arguments from an insurer with no rational explanation for the language of their policy and a realization that they are in serious trouble in the present case. What Continental has failed to ever address is why there would be any need for Coverage B (Boating Liability) to have its own separate other insurance clause, and to distinguish between owned and non-owned boats if the other insurance clause in the general conditions section was meant to apply to Coverage B. Because if the general conditions section applied as Continental says that it does, they would always be excess over any other available insurance, owned or non-owned, and Coverage B would not need its own clause. Coverage B, however, is very specific. Coverage B provides that the Continental policy is primary for any incident involving the insured boat and excess for any incident involving the named insured when operating a non-owned boat. It doesn t reiterate what is contained in the general conditions section as claimed by Continental; it actually provides a far different approach very fact specific as to which boat is involved in the accident, be it owned or non-owned. Thus and far from a strained reading, a very plain reading of Coverage B clearly indicates an intent for Continental to provide primary liability coverage for any boat listed in the Declarations Page, and excess liability coverage for any non-owned boat not listed. This is logical because it is what the law requires and what the Mississippi Supreme Court has stated time and time again as the rule in our state. 2. Even in the absence of any issues of ambiguity, the other insurance clauses conflict and in such a scenario, Mississippi case law is clear that the clauses are both disregarded and the policies apply on a pro rata basis. 18
For all of the reasons discussed, this Court does not need to compare the two other insurance clauses that Continental relies on, but even if this Court looked at those clauses, the end result would still be that the policies are both primary and are to share in the loss on a pro rata basis. Continental has asserted that Mississippi s rule of repugnancy is not implicated in this case because there is no conflict between the two other insurance clauses, but that is an argument with no legs. Mississippi s rule of repugnancy provides that if there is a conflict in the other insurance or excess clauses of two policies, which standing alone would provide primary coverage to the insured, the clauses are mutually repugnant and are to be disregarded. Liberty Mutual v. Canal Insurance Company, 177 F.3d 326, 336 (5 th Cir. 1999). How Continental can read the other insurance clauses and determine that there is no conflict between them has been and remains a mystery to Allstate. The Allstate policy does not say that it will be the only primary policy; instead it clearly indicates that it will share in the loss on a pro rata basis with any other coverage. That is in direct conflict with the Continental other insurance clause contained in the general conditions portion of the policy which states that it will provide excess coverage only. Interestingly, it is no conflict with the other insurance clause contained in Coverage B of the Continental policy, the one that is applicable, which makes Continental a primary insurer for any boat listed on the policy. Continental s argument appears to be that the excess clause contained in the general conditions section of the policy should somehow trump the pro-rata clause in spite of the obvious conflict between the two provisions and the case law which does not 19
support that argument. In a 1996 case directly on point, the Mississippi Supreme Court sought to end the argument and debate about other insurance clauses, but Continental was apparently not listening. Allstate Insurance Company v. Chicago Insurance Company, 676 So.2d 271 (Miss. 1996). In the trial court, Continental argued that Allstate Insurance Company v. Chicago Insurance Company did not deal with a pro rata and an excess clause and spent many pages of their various briefs attempting to distinguish its facts from those of the present case. Apparently now realizing that they have no good argument to distinguish the Chicago Insurance Company and finally accepting that the Mississippi Supreme Court did in fact compare a pro rata clause to an excess clause, Continental has now relegated the seminal case from Mississippi on this issue to nothing other than footnote status. In Chicago Insurance Company, the Mississippi Supreme Court was faced with two competing other insurance clauses and was asked to determine how to apportion the loss among the two insurers. Chicago Insurance Company argued that their policy was excess to Allstate and that Allstate should first be required to exhaust their limits before Chicago had to pay anything. Allstate, on the other hand, asserted that the policies were both primary and the loss should be allocated on a pro-rata basis. Id. at 272. The underlying facts of the case were that a pharmacist was being sued for allegedly mis-filling a prescription. The pharmacist had personal coverage with Chicago Insurance and a policy through his business with Allstate. Both policies had other insurance clauses, one of which called for pro-rata allocation and the other of which provided that it was excess over any other collectible insurance. Id. at 273. 20
Chicago Insurance Company argued that because its other insurance clause provided that it would be excess whereas the Allstate clause provided that it would be primary, there was no conflict in the clauses and Chicago should be considered excess only. Id. at 274. The trial court agreed with Chicago Insurance Company but the Mississippi Supreme Court did not and reversed, holding that the policies should share in the loss on a pro-rata basis. The Mississippi Supreme Court attempted to clarify any prior confusion caused by previous opinions in holding that any conflict in the other insurance clauses implicate the rule of repugnancy. The specific language used by the Mississippi Supreme Court could not have been any clearer: Id. at 275. We hold that the rule of repugnancy is applicable in cases in which other insurance clauses or excessive coverage clauses conflict. We have long followed the rule that the courts must enforce contracts as they are written, unless such enforcement is contrary to law or public policy. Syllogistic folly awaits the unwary justice who seeks to harmonize the conflicting terms presented herein using traditional rules of construction. Public policy and common sense must step in when legal jargon fails. Where competing insurance policies each contain conflicting other insurance clauses or excessive coverage clauses, the clauses shall not be applied and benefits under the policies shall instead be pro rated according to the coverage limits of each policy. Nowhere in the Chicago Insurance opinion, or any other opinion located by Allstate, does the Mississippi Supreme Court expressly hold that an excess clause trumps a prorata clause, or that an escape clause trumps an excess clause; and in fact, the Court was faced with pro-rata and excess clauses in the Chicago Insurance Company case, and nonetheless held that any conflict in the clauses voids them and results in a pro-rata allocation. In fact, the use of the word OR in the opinion s language expresses a clear 21
intent that the holding will apply to any conflict in the other insurance clauses, excess or otherwise. Combine this reasoning with what the Fifth Circuit Court of Appeals explained in the Canal Insurance case and it is very clear that Continental Casualty s policy cannot be excess under the facts of the present case. The Fifth Circuit stated that the Mississippi rule of repugnancy applies if each of the two policies, standing alone, would provide primary coverage. Canal Insurance Company, 177 F.3d at 336. Very importantly, the Mississippi Supreme Court also held that it is central to our analysis that each policy, absent the other, would have provided primary coverage. Chicago Insurance Company at 275. It is thus central to this Court s analysis in the present case that the Continental policy, absent the Allstate policy, provides primary coverage. What the Mississippi Supreme Court was saying is that only a true excess insurance policy should be treated as excess and that a primary insurance policy will not be treated as an excess policy simply because the insurer puts that language in their policy in an attempt to avoid primary coverage obligations. Certainly, as the only policy which insured the boat involved in our incident, the Continental policy would provide primary coverage in absence of the Allstate policy. Continental is trying to classify themselves as an excess insurer under circumstances where such was never intended or contemplated under their own policy. Such a result might be proper if Greg Peters was operating a different boat than the one named in the Continental policy but it is certainly not proper when Mr. Peters is operating the very boat that Continental insures and an accident occurs. 22
Continental has peripherally mentioned a few Mississippi federal district court opinions without any discussion and submitted that they stand for the proposition that an excess clause trumps a pro rata clause in Mississippi. Those cases, however, involved umbrella policies, which is true excess coverage, and not an excess clause in an otherwise primary policy. Aside from the fact that the Allstate v. Chicago Insurance opinion decides the issue and results in implication of the rule of repugnancy in this case, Allstate would point out to this court that a Mississippi federal district court has opined that even a conflict between an escape clause and a pro-rata clause would likely result in the rule of repugnancy being applied as a matter of equity. Hill v. General Insurance Company, 456 F.Supp. 2d 757 (N.D. Miss. 2006). This is significant because as the court knows, an escape clause attempts to provides no coverage at all when there is other available coverage. In Hill, a homeowner s mortgage company had purchased forced place insurance for the home that they had an interest in due to the homeowner refusing to provide proof that they had purchased insurance. As it turns out, the homeowner had purchased insurance with Farm Bureau, so when the home was destroyed by fire, there were two polices in place, the one with Farm Bureau purchased by the homeowner and the forced placed insurance through General Insurance Company that had been purchased by the mortgage company. Id. at 758-759. Farm Bureau argued that General Insurance should share in the loss on a pro-rata basis even though the General policy contained an escape clause providing no coverage when there was other insurance in place. Judge Mills did not agree with Farm Bureau under the facts of that case, holding that the General force placed policy was clearly 23
purchased with the intention of providing coverage only when the homeowner had failed to purchase the coverage mandated by his mortgage company. But Judge Mills did say that it seems likely that a pro-rata and escape clause might validly be held to be mutually repugnant as a matter of equity in an appropriate case. Id. at 760. Allstate submits that when Judge Mills was talking about the appropriate case, he was referring to the situation where a policy was clearly purchased to provide primary coverage for a loss, as was Continental s policy in the present case, and yet still contained an escape clause in an inequitable attempt to avoid its primary coverage obligations. As this Court should note from the undisputed facts, Greg Peters first reported this incident to Continental and not to Allstate until many months later. This is because the obvious conclusion to Mr. Peters, and anyone else looking at the issue neutrally, was that the policy he purchased to cover his boat would provide primary coverage to him when the boat was involved in a loss. That is the appropriate result and nothing other than syllogistic folly could lead one to any other conclusion. For all of the reasons discussed above, there is no need to compare the two other insurance clauses that Continental relies on, but even if the Court looked at those clauses, the end result would still be that the policies are both primary and are to share in the loss on a pro-rata basis. 3. Because Allstate and Continental do not insure the same property for the same risk, the other insurance clauses in the two policies do not need to be reviewed or analyzed. As far as Allstate can determine from their research, Mississippi has not decided a case involving other insurance clauses where the specific issue was the property and 24
risk being insured under each of the two policies and whether or not they were the same, such as to invoke the other insurance clauses. Multiple other jurisdictions have decided the issue, however, and the rule which has developed is that the provisions of an other insurance clause apply only when the other insurance covers the same property and interest therein against the same risk in favor of the same party. United National Insurance v. Mundell Terminal Services, 740 F.3d 1022, 20128 (5 th Cir. 2014). See also, e.g. Carmel Development Co. RLI Insurance Company, 24 Cal. Rptr. 3d 588, 592 (Cal.App. 2005); Moroney Body Works, Inc. v. Central Insurance Companies, 35 N.E. 3d 397, 398 (Mass. App. 2015). The reasons for this rule seem obvious enough and the rule is designed to prevent exactly what Continental Casualty is attempting to argue in the present case. Continental provides the only insurance for a boat that is directly involved in an accident, and is yet trying to argue that they somehow do not provide primary coverage. Using the rule as laid out by the other jurisdictions to have considered the issue, the other insurance clauses in this case are not applicable because Allstate and Continental do not insure the same property for the same risk. Allstate provides no coverage for the boat and Continental provides no coverage for the truck. The risks associated with insuring a boat on the water and a truck on the road are also far different. Here, Allstate and Continental insure different property with far different risks and as such, the other insurance clauses simply have no application and both policies must be considered primary. 25
Continental dedicated a good portion of their brief to this issue that Allstate simply added to the mix as an alternative argument but this court need not decide the pending case on this issue. Allstate would simply point out that in the multiple pages of Continental s brief on this issue, at no point did they even attempt to argue that Allstate and Continental insure the same property. They completely evaded that question and instead argued that Allstate and Continental both provide liability coverage for an accident, which while true, completely misses the point. II. The Circuit Court committed no error in granting summary judgment to Allstate Insurance Company as to the claims of Continental for defense costs and expenses. A. Allstate did not have a duty to defend the matter before a lawsuit was filed. The issue in Section II becomes moot for the most part if this Court determines that Continental was a primary insurer because if they were a primary insurer and not an excess insurer, they would have no right to recover defense costs from Allstate. Assuming this Court agrees that Continental is a primary insurer, the only remaining relevance to the duty to defend issue is as to Allstate s cross-appeal, discussed in Section III below. Allstate will nonetheless discuss the issue out of an abundance of cauti on. Continental has continually asserted that Allstate had a duty to defend and that Allstate participated in the defense of the underlying matter while at the same time acknowledging that no lawsuit was ever filed. One of the cases cited by Continental in support of its argument is a recent Mississippi federal district court opinion that says 26