(Article from Insurance Law Alert, October 2023)
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Holding
Affirming a Georgia district court, the Eleventh Circuit ruled that “other insurance” clauses in two policies were irreconcilable and therefore that insurers’ defense and indemnity should be allocated on a pro rata basis. Nat’l Cas. Co. v. Georgia Sch. Bd. Assoc., 2023 U.S. App. LEXIS 24426 (11th Cir. Sept. 14, 2023).
Background
Several educators who were insured by both National Casualty and the Georgia School Board Association – Risk Management Fund (the “Fund”) were named as defendants in a lawsuit. The insurers disputed their respective coverage obligations based on “other insurance” clauses in the policies. The provision in National Casualty’s policy stated:
This policy is specifically excess if the insured has other insurance of any kind whatsoever, whether primary or excess . . . . Other insurance includes, but is not limited to, insurance policies, state pools, and programs of self-insurance . . . In addition, [Liability Coverage] is specifically excess over coverage provided by EDUCATIONAL UNIT’S or school board’s errors and omissions or general liability policies . . . and it is specifically excess over coverage provided by any policy of insurance which purports to be excess to a policy issued to the insured.
The Fund’s “other insurance” clause stated: “If valid and collectible insurance is available to the Member for a loss covered by [the Fund] under any coverage parts within this Coverage Document, the obligations of [the Fund] are excess over the available and collectible insurance.”
National Casualty sought a declaration that the Fund owed a primary duty to defend and indemnify the educator defendants. The Fund counterclaimed, seeking contribution from National Casualty for amounts paid to defend and indemnify the educators.
Ruling on the parties’ cross motions for summary judgment and partial summary judgment, the district court concluded that the “other insurance” clauses conflicted and that defense and indemnity should be allocated on a pro rata basis. Thereafter, the district court certified to the Georgia Supreme Court the question of whether Georgia’s irreconcilable clauses rule applied to the Fund, an entity created by statute and “entrusted with public funds,” or was limited to commercial insurance companies. The Georgia Supreme Court ruled that “no law or public policy” prohibited application of the rule to the Fund.
Decision
National Casualty argued that the Fund’s “other insurance” clause was not implicated in the first place because National Casualty’s policies were neither “available nor collectible.” More specifically, National Casualty claimed that because its own “other insurance” clause rendered its coverage excess over all other coverages, it was not available or collectible as to the underlying claims. The Eleventh Circuit rejected this reasoning, stating that “National Casualty’s policies are ‘collectible’ and ‘available’ because they’d pay if liability exceeded what the other insurance covered.” National Casualty also contended that because its “other insurance” clause is more specific than that in the Fund’s policy in that it expressly states that coverage is excess to any other coverage, its coverage should be “super excess.” The court rejected this argument as well, noting that Georgia law does not endorse an rule of interpretation in this context based on levels of specificity in policy language.
Comments
When a conflict exists between “other insurance” clauses in policies that concurrently insure the same risk, the rights and obligations depend primarily on the specific policy language at issue. As the Eleventh Circuit emphasized, where two “other insurance” clauses are both excess in nature, most courts do not endorse a rule under which a more specific clause governs a more general clause, and instead find them mutually repugnant. Additionally, while some jurisdictions require insurers to contribute in equal shares where two excess clauses are deemed irreconcilable, Georgia law endorses the majority rule in this context—pro rata allocation of defense and indemnity costs.