Towne Realty, Inc., D/B/A Tri Realty, Inc. v. Safeco Insurance Company of America, Defendant-Cross-Claim v. Lexington Insurance Company, Commercial Union Insurance Co., Defendants-Cross-Claim
Docket: 87-3420
Court: Court of Appeals for the Eleventh Circuit; September 14, 1988; Federal Appellate Court
The case involves a dispute between insurance companies regarding liability for a settlement related to an injury sustained by Charles L. Stephens at the Villa Armada Apartments, managed by Towne Realty, Inc. Towne Realty filed a diversity action against three insurers: Safeco Insurance Company of America, Commercial Union Insurance Co., and Lexington Insurance Company. The district court ruled that Safeco was solely liable, prompting Safeco to appeal.
Stephens was injured on December 27, 1980, while delivering newspapers, leading to a lawsuit against both Towne and the apartment's Owners. Both Towne and the Owners were insured by Safeco, which provided $1,000,000 in coverage for liability related to the apartments. Additionally, Towne had policies from Commercial Union and Lexington, each offering $500,000 in coverage for various properties managed by Towne.
The policies included "other insurance" clauses to limit liability if multiple insurers were involved. The Commercial Union policy specified that it would be primary insurance unless stated otherwise, and when applicable, it would not reduce its liability due to the presence of other insurance. The policy also included a contribution provision, mandating proportional contribution among insurers when multiple coverages applied to the same loss.
The appellate court reversed the district court's decision, indicating that Safeco should not bear exclusive liability for the loss, suggesting a need to evaluate the contributions of all involved insurers.
Contribution by limits stipulates that if other insurance does not allow for equal contribution, the Company’s liability is limited to the ratio of this policy's limit to the total limits of all valid insurance covering the loss. Safeco's 'other insurance' clause indicates that if there is any valid and collectible insurance available, Safeco will not provide coverage unless its policy limit exceeds that of the other insurance, in which case it offers excess coverage to match its own limit. Lexington's policy similarly states that if other collectible insurance exists, its coverage is excess and does not contribute to the other insurance, allowing for excess insurance without diminishing its liability.
After the Stephens initiated legal action, Safeco defended both Owners and Towne and sought contributions from Commercial Union and Lexington for a potential settlement exceeding Towne's coverage. An agreement was reached for a $1,000,000 settlement, with Safeco and Commercial Union contributing $500,000 each, contingent upon filing a declaratory judgment to determine the primary insurer and, if Safeco was found not primarily responsible, arbitration for proportional liability.
Two subsequent lawsuits ensued: Towne sought a declaratory judgment on insurer responsibilities, while Safeco sought a judgment affirming the responsibilities of Commercial Union and Lexington. The court consolidated these cases, noting no material fact disputes precluding summary judgment. It determined that the simultaneous purchase of policies covering the same property created ambiguity regarding primary responsibility, justifying the introduction of parol evidence. Ultimately, the court found that the intent of the parties indicated Safeco's policy was meant to provide primary coverage.
The district court's reasoning regarding the ambiguity of insurer liability is rejected. Florida law permits the consideration of parol evidence only when a guaranty contract is genuinely ambiguous, but concurrent execution of insurance policies does not inherently create such ambiguity. The intent of the parties is determined by the policy language, which is controlling unless ambiguous. It is noted that relying on the timing of policy execution to question primary liability is circular reasoning.
An examination of the specific insurance policies reveals that Commercial Union's policy explicitly designates it as providing 'primary insurance' unless stated otherwise, with no language undermining its primary status. In contrast, Safeco's and Lexington's policies do not claim primary coverage; Safeco's policy stipulates that coverage is contingent on the absence of other applicable insurance, while Lexington's is an umbrella policy offering only excess coverage. As such, Commercial Union is determined to be primarily responsible for the settlement amount of $500,000 in Towne's case with the Stephens.
The district court ruled that Safeco was primarily liable due to its policy offering 'specific' coverage, while Commercial Union's policy was categorized as 'blanket' or 'floating.' However, this distinction does not change the conclusion that Commercial Union is primarily liable, as Florida courts typically do not apply this distinction when a policy explicitly states it provides primary coverage or involves third-party liability. Commercial Union clearly stated its primary coverage, making it the responsible insurer.
The court also addressed the distribution of remaining liability of $500,000, considering the differing clauses in Safeco's and Lexington's policies. Safeco’s policy contained an 'escape clause' that deferred coverage until all other insurances were exhausted, while Lexington’s umbrella policy had an 'excess clause' that only covered amounts above other available insurances. This created a conflict where each policy could activate the other's provisions.
A Florida Supreme Court case clarified that umbrella policies are considered true excess coverage, taking precedence over both primary and escape clauses. Therefore, Safeco's coverage must be utilized first.
The district court's judgment assigning exclusive responsibility to Safeco was reversed, establishing that Commercial Union is the primary insurer, and Safeco is the secondary insurer. The case is remanded for a judgment reflecting this decision. The excerpt also notes that the case does not concern the Owners' liability, as they were solely insured by Safeco.
