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Great Divide Insurance Co. v. Lexington Insurance Co.

United States District Court, D. Massachusetts

July 19, 2016

GREAT DIVIDE INSURANCE COMPANY
v.
LEXINGTON INSURANCE COMPANY

          MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

          STEARNS, D.J.

         On April 3, 2014, a refuse truck driven by Richard Prezioso struck and killed a bicyclist, Owen McGrory, in Charlestown, Massachusetts. In September of 2014, McGrory's wife, Shannique McGrory, and his brother, John McGrory, filed a wrongful-death action in Suffolk Superior Court against Prezioso and his employers, EZ Disposal Service, Inc. (EZ), and Capitol Waste Services, Inc. (Capitol), and the registered owner of the truck, Atlantic Refuse Leasing Equipment, LLC.

         On October 30, 2015, plaintiff Great Divide Insurance Company (Great Divide) brought this declaratory judgment action against Lexington Insurance Company (Lexington) seeking a determination of the priority of their competing policies providing excess wrongful-death coverage to the defendants in the state court case. Lexington removed this case to the federal district court on December 15, 2015, on diversity grounds. Great Divide contends that its $1 million Commercial Lines Policy (Great Divide Policy), issued to EZ, and Lexington's $10 million Commercial Umbrella Liability Policy (Lexington Policy), issued to Capitol, insure the same layer of coverage. If true, Great Divide asserts, both insurers are responsible for a pro rata share of any wrongful death recovery by the McGrory estate.[1]Lexington counters that its policy is a "true excess policy, " and because the Great Divide Policy is essentially a primary policy, it must be exhausted before Lexington becomes obligated to pay into any judgment.

         BACKGROUND

         The material facts are not disputed. The parties agree that both the Great Divide Policy and the Lexington Policy provide excess coverage to all defendants in the wrongful-death action. The parties also agree that Capitol's primary insurer, Commerce Insurance Company, is liable for the first layer of insurance coverage, to its policy limit of $1 million.[2] The dispute centers on whether Great Divide, Lexington, or the insurers together, should provide the second layer of insurance.

         The Great Divide Policy

         The Great Divide Policy provides $1 million of coverage for bodily injury and property damage per accident involving a covered business vehicle. The Policy is structured to provide a primary layer of insurance for vehicles owned by the policyholder, and excess insurance for vehicles not owned by the policyholder. The Great Divide Policy's "Other Insurance" clause specifies that "[f]or any covered 'auto' you own, this coverage form provides primary insurance. For any covered 'auto' you don't own, the insurance provided by this coverage form is excess over any other collectible insurance." Great Divide's Statement of Material Facts (SMF), Ex. C at 25 (Dkt. # i8-3).[3] The refuse truck involved in the accident was a "covered auto, " but not owned by Capitol.

         The Lexington Policy

         The Lexington Policy provides $10 million of similar coverage. However, the Policy stipulates that Lexington will pay "those sums in excess of the 'Retained Amount'" for any "bodily injury" covered by the policy.[4] Id., Ex. B at 4. The Policy's "Other Insurance" provision further states that "if other valid and collectible insurance applies to damages that are also covered by this policy, this policy will apply excess of the 'other insurance.'" Id. at 25. "Other Insurance" is defined as "a valid and collectible policy of insurance providing coverage for damages covered in whole or part by this policy." Id. at 20. Finally, the Policy states that it applies "only in excess of the total applicable limits of 'scheduled underlying insurance' and any applicable 'other insurance' whether or not such limits are collectible, " and that Lexington is obligated to make no payment until any such policies have been exhausted. Id. at 15-16.

         After discovery concluded, both parties filed cross-motions for summary judgment. Great Divide's motion is premised on its "other insurance" policy language, which declares that for covered vehicles not owned by Capitol, the policy provides insurance that is "excess over any other collectible insurance." Id., Ex. C at 25. Great Divide argues that, for the particular risk in question, both it and Lexington are excess insurers; moreover, since the "other insurance" clauses of both policies declare themselves to be in excess of all other collectible insurance, the clauses are mutually repugnant and, under Great Divide's reading of Massachusetts law, both insurers are required to make pro rata contributions to the same layer of loss. See Mission Ins. Co. v. U.S. Fire Ins. Co., 401 Mass. 492, 499 (1988). Lexington moves for summary judgment as well, arguing that because its policy is a "true excess policy, " while the Great Divide Policy is excess only for the risk in question and primary under other circumstances, the Great Divide Policy must be exhausted before it has any obligation to pay. [5]

         DISCUSSION

         The "first step" in settling insurance priority conflicts is to "determine the relationship between insurer and insured." U.S. Fidelity & Guar. Co. v. Hanover Ins. Co., 417 Mass. 651, 659 (1994), citing Mission, 401 Mass. at 498. When confronted with seemingly conflicting policy language, Massachusetts courts "seek[], whenever possible, to reconcile conflicting policy clauses based on the sense and meaning of the terms in an effort to effectuate the language of the insuring agreements." U.S. Fidelity, 417 Mass. at 655.

         It is clear from the language, terms, and scope of coverage of the Lexington Policy that it was intended to provide "umbrella" insurance to its insured. Indeed, Great Divide does not dispute that the Lexington Policy is a "true" excess policy. Conversely, the Great Divide Policy bears little resemblance to a true excess or umbrella policy except for its "other insurance" clause, which states that the Great Divide Policy will provide excess coverage over and above all other collectible insurance for any accident involving an insured operating a non-owned vehicle.

         The parties agree that the Massachusetts Supreme Judicial Court (SJC) has yet to decide whether, under Massachusetts law, a primary policy which offers excess insurance in certain limited circumstances must be exhausted before a true excess or umbrella policy is triggered.[6] Both parties rely on Mission as support for their respective positions as the Massachusetts case most closely (but not precisely) on point.[7] The court, however, is of the view (and the parties agree) that Mission does not directly answer the question of priority posed by this case. The ...


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