Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC364122 Teresa Sanchez-Gordon, Judge.
Black, Compean, Hall & Eli, Frederick G. Hall and Kimberly R. Arnal for Plaintiff and Appellant.
Tressler, Soderstrom, Maloney & Priess, Mary E. McPherson, David Simantob and Yvonne M. Schulte for Defendant and Respondent.
CHAVEZ, J.
California Insurance Guarantee Association (CIGA) appeals from a judgment entered after the trial court granted summary judgment in favor of RLI Insurance Company (RLI) on CIGA’s claims against RLI for equitable reimbursement, equitable subrogation and equitable indemnity. The parties stipulated to facts and presented conflicting summary judgment motions on the question of which party was obligated to pay a loss arising out of an automobile accident where the driver’s primary insurer was insolvent. We affirm the judgment in RLI’s favor.
FACTUAL BACKGROUND
The following recitation of facts is taken from the parties’ stipulation of undisputed facts.
1. The automobile accident
On February 16, 1999, a bobtail truck rented by ATD, Inc. (ATD) from Bush Leasing, Inc. (Bush) and driven by ATD employee Kenneth Spiva (Spiva) struck an automobile driven by Consuelo Beasinger (Beasinger).
Beasinger filed a civil complaint against ATD, Bush and Spiva for bodily injury and property damage resulting from the accident (the underlying action). (Beasinger v. Spiva, et al., Sac. County Super. Ct. Case No. 00AS00813.)
2. Insurance policies
At the time of the accident, ATD and Spiva were insured by the Reliance Insurance Company (Reliance) under a primary business automobile policy. The Reliance policy had a per accident limit of $1 million. In addition to the Reliance policy, ATD and Spiva were also insured by RLI under a commercial umbrella liability policy.
At the time of the accident, Bush was insured by Transportation Insurance Company (Transportation) under a primary business automobile policy. The Transportation policy, like the Reliance Policy, had a per accident limit of $1 million. Bush was also insured by National Union Fire Insurance Company of Pittsburgh, PA (National Union) under a commercial liability umbrella policy.
ATD and Spiva tendered the underlying action to Reliance, Transportation, National Union and RLI.
On October 3, 2001, the Commonwealth Court of Pennsylvania ordered Reliance into liquidation, thereby triggering certain limited statutory obligations on the part of CIGA. (See Ins. Code, § 1063.2, subd. (a).) As a result of Reliance’s liquidation, CIGA initially agreed to defend ATD and Spiva in the underlying action. In late 2003, Transportation took over the defense of ATD and Spiva in the underlying action. As a result, CIGA withdrew its defense. (See Ins. Code, § 1063.1, subd. (c)(9).)
All further statutory references are to the Insurance Code unless otherwise noted.
3. Settlement of the underlying action
On or about June 8, 2004, Beasinger offered to settle her claims against ATD and Spiva for $3 million. Later that year, Transportation tendered its $1 million policy limit to Beasinger. Beasinger rejected the offer.
In the fall of 2004, defense counsel for ATD and Spiva advised CIGA that the reasonable settlement value of Beasinger’s claim against ATD and Spiva was between $1.5 and $1.6 million. On October 29, 2004, CIGA wrote to RLI, advising it of the settlement negotiations in the underlying action and the estimate of the reasonable settlement value of the action. That same day, RLI advised CIGA that it had no obligation to contribute to any judgment awarded against ATD and Spiva, or any settlement reached in the underlying action, unless and until the judgment or proposed settlement exceeded the combined limits of insurance of both the underlying (and then insolvent) Reliance policy and the Transportation policy -- i.e., $2 million.
On November 1, 2004, CIGA requested that RLI reconsider its position. Two days later, RLI reiterated its prior position and refused to participate in any settlement discussions.
Shortly thereafter, the underlying action settled for $1.5 million. Transportation paid its policy limit of $1 million. CIGA paid $350,000. National Union paid $150,000. RLI did not contribute to the underlying settlement.
PROCEDURAL HISTORY
On or about December 28, 2006, CIGA filed this action against RLI for equitable reimbursement, equitable subrogation and equitable indemnity. CIGA sought recovery of the $350,000 it contributed to the Beasinger settlement. CIGA and RLI agreed to file cross-motions for summary judgment based on stipulated facts and documents. The joint stipulation of facts and documents was signed on August 10, 2007.
On the same day, CIGA and RLI each filed motions for summary judgment or, in the alternative, summary adjudication. CIGA argued that under section 1063.1, subdivision (c)(9), it was under no obligation to contribute to the Beasinger settlement, but RLI was. More specifically, CIGA argued that section 11580.9, subdivision (b) and the holding of Ross v. Canadian Indem. Ins. Co. (1983) 142 Cal.App.3d 396 (Ross), dictated that RLI’s policy was “other insurance” available to contribute to the Beasinger settlement.
RLI argued that, on the contrary, its policy was excess over “scheduled” and “unscheduled” other insurance in the amount of $2 million and that its policy contains enforceable “anti-drop down language.” It was RLI’s position that because Beasinger’s claim settled for less than $2 million RLI was under no obligation to contribute to the settlement.
The matter was heard on October 12, 2007. At the hearing, the court denied CIGA’s motion and granted RLI’s motion. The court relied on Denny’s, Inc. v. Chicago Ins. Co. (1991) 234 Cal.App.3d 1786 (Denny’s), explaining: “Denny’s states the specific language an excess insurer can use to establish that it is not insuring against an insolvent primary insurer. RLI used that language.” The court distinguished the holding of Ross, relied upon by CIGA.
On October 19, 2007, the trial court signed an order granting RLI’s motion for summary judgment and denying CIGA’s motion for summary judgment. On October 25, 2007, notice of entry of judgment was entered in favor of RLI. CIGA timely filed an appeal from the judgment.
DISCUSSION
I. Standard of review
Summary judgment is properly granted where “there is no triable issue as to any material fact and... the moving party is entitled to judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).) Where, as here, a case is “presented on summary judgment motions with stipulated facts, we conduct a de novo review to decide a pure question of law.” (Wilshire Ins. Co., Inc. v. Sentry Select Ins. Co. (2004) 124 Cal.App.4th 27, 33 (Wilshire), citing Oliver & Williams Elevator Corp. v. State Bd. of Equalization (1975) 48 Cal.App.3d 890, 894.)
II. Applicable insurance law
We begin with a discussion of applicable concepts of insurance law.
A. Primary versus excess coverage
Primary and excess insurance coverage are distinct. “‘Primary coverage is insurance coverage whereby, under the terms of the policy, liability attaches immediately upon the happening of the occurrence that gives rise to liability. [Citation.] Primary insurers generally have the primary duty of defense. [¶] “Excess” or secondary coverage is coverage whereby, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted.’ [Citation.]” (Century Surety Co. v. United Pacific Ins. Co. (2003) 109 Cal.App.4th 1246, 1255 (Century Surety).)
Thus, excess insurance is secondary insurance which “provides coverage after other identified insurance is no longer on the risk.... In short, excess insurance is insurance that is expressly understood by both the insurer and insured to be secondary to specific underlying coverage which will not begin until after that underlying coverage is exhausted.... [Citation.]” (Century Surety, supra, 109 Cal.App.4th at p. 1255.)
Here, Reliance provided primary coverage and RLI provided excess coverage to ATD and Spiva. Transportation provided primary coverage and National Union provided excess coverage to Bush.
B. History and purpose of CIGA
CIGA was created in 1969 as a compulsory association of state regulated insurance companies. (R. J. Reynolds Co. v. Cal. Ins. Guar. Ass’n (1991) 235 Cal.App.3d 595, 599 (R. J. Reynolds).) Its purpose is to provide against loss arising from the failure of an insolvent insurer to discharge its obligations under its insurance policies. (Middleton v. Imperial Ins. Co. (1983) 34 Cal.3d 134, 137.) CIGA assesses its members when another member becomes insolvent, thereby establishing a fund from which insureds whose insurers become insolvent can obtain financial and legal assistance. (Isaacson v. Cal. Ins. Guar. Ass’n (1988) 44 Cal.3d 775, 784 (Isaacson).) Member insurers then recoup assessments paid to CIGA by means of a surcharge on premiums to their policyholders. (R. J. Reynolds, supra, at p. 600.) In this way, the insolvency of one insurer does not only affect a small segment of insurance consumers, but is spread throughout the insurance consuming public, which essentially subsidizes CIGA’s continued operation. (Ibid.)
While CIGA’s general purpose is to pay the obligations of an insolvent insurer, it is not itself an insurer. (R. J. Reynolds, supra, 235 Cal.App.3d at p. 600.) “CIGA is not in the ‘business’ of insurance... CIGA issues no policies, collects no premiums, makes no profits, and assumes no contractual obligations to the insureds.” (Isaacson, supra, 44 Cal.3d at p. 787.) Rather, it is authorized by statute to pay only covered claims of an insolvent insurer, those determined by the Legislature to be in keeping with the goal of providing protection for the insured public. (R. J. Reynolds, supra, p. 600.)
CIGA is authorized to pay only “covered claims” of an insolvent insurer. (§ 1063.2, subd. (b); Stonelight Tile, Inc. v. California Ins. Guarantee Assn. (2007) 150 Cal.App.4th 19, 32.) CIGA has the statutory authority to deny a noncovered claim. (Stonelight, at p. 32.) Thus, CIGA’s first duty is to determine whether a claim placed before it is a “covered claim.” Section 1063.1, subdivision (c)(1) defines “covered claims” in relevant part as “the obligations of an insolvent insurer... imposed by law and within the coverage of an insurance policy of the insolvent insurer... which were unpaid by the insolvent insurer... [and] for which the assets of the insolvent insurer are insufficient to discharge in full.” Among the exceptions to covered claims is an exception for “any claim to the extent it is covered by any other insurance... available to the claimant or insured.” (§ 1063.1, subd. (c)(9)(A).)
III. The RLI Policy
In determining whether the RLI insurance policy provided coverage for the loss in question, we must first determine whether RLI, the excess insurance provider, was required to “drop down” and provide coverage which would have been provided by Reliance absent its insolvency. “How this issue is resolved depends upon the wording of the polic[y].” (Denny’s, supra, 234 Cal.App.3d at p. 1791.)
“Our interpretation of the insurance polic[y] is guided by certain established principles of law. Those principles were summarized by the Supreme Court in [Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807 (Reserve)], which is the leading California case concerning an excess insurer’s duty to take the place of an insolvent underlying insurer. In Reserve, the court held: ‘Words used in an insurance policy are to be interpreted according to the plain meaning which a lay [person] would ordinarily attach to them. Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists. [Citations.] [para.] On the other hand, “any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer and... if semantically permissible, the contract will be given such construction as will fairly achieve its object of providing indemnity for the loss to which the insurance relates.” [Citations.]...’ [Citation.]” (Denny’s, supra, 234 Cal.App.3d at pp. 1791-1792.)
The RLI policy issued to ATD and Spiva contained the following relevant language:
“I. INSURING AGREEMENT
“We will pay on behalf of the insured all sums which the insured becomes legally obligated to pay as ultimate net loss, because of:
“A. Bodily injury and property damage; or
“[¶]... [¶]
“Caused by an occurrence which takes place during the policy period and anywhere in the world.”
“II. LIMITS OF LIABILITY
“A. [W]e shall only be liable for the ultimate net loss in excess of:
“1. the applicable limits of scheduled underlying insurance stated in Item 5 of the Declarations, for occurrences covered by scheduled underlying insurance, plus the limits of any unscheduled underlying insurance which also provides coverage for such occurrences;...”
“Scheduled underlying insurance” is defined as:
“P. Scheduled underlying insurance means the insurance policies listed in the Schedule of Underlying Insurance including any renewal or replacement of such contracts not more restrictive.”
The Reliance policy, with applicable limits of $1 million, was listed in the “Schedule of Underlying Insurance.”
“Unscheduled underlying insurance” is defined as:
“T. Unscheduled underlying insurance means any insurance policies available to any insured (whether primary, excess, excess-contingent, or otherwise) except the policies listed in the Schedule of Underlying Insurance. Unscheduled underlying insurance does not include insurance purchased specifically to be excess to this policy.”
“Ultimate net loss” is defined as:
“R. Ultimate net loss means the actual sums the insured is legally obligated to pay as damages for which any insured is legally liable, either through final adjudication on the merits or through compromise settlement with our written consent or direction because of any occurrence covered by this policy.”
The RLI policy further specified that it does not “drop down” in the event of insolvency:
“H. Financial Impairment.
“Bankruptcy, rehabilitation, receivership, liquidation or other financial impairment of the insured or any underlying insurer shall neither relieve nor increase any of our obligations under this policy.
“In the event there is diminished recovery or no recovery available to the insured as a result of such financial impairment of any insurer providing scheduled underlying insurance or unscheduled underlying insurance, the coverage under the policy shall apply only in excess of the limits of liability stated in the scheduled underlying insurance or unscheduled underlying insurance. Under no circumstances shall we be required to drop down and replace the limits of liability of a financially impaired insurer. Nor shall we assume any other obligations of a financially impaired insurer.”
The plain language of the RLI policy provides that it is excess to both “scheduled” underlying insurance and “unscheduled” underlying insurance. These terms are unambiguous. (See Carmel Development Co. v. RLI Ins. Co. (2005) 126 Cal.App.4th 502, 510-511 (review den. Mar. 30, 2005) (Carmel) [“It is apparent from the language of these basic insuring provisions that... RLI obligated itself to step in only when the limits of both the [underlying primary policy] and all other available coverage -- primary and excess -- were exceeded”].) RLI’s position is that Reliance’s policy provided $1 million of “scheduled” insurance, and Transportation’s policy provided $1 million of “unscheduled” insurance, thus RLI’s policy did not become available until the limits of both policies combined -- $2 million -- was exceeded. Further, RLI takes the position that, based on the specific language of the policy, RLI was not required to change its obligations based on the insolvency of any underlying insurer.
Policies such as the one issued by RLI in this case have been upheld by California courts. For example, in Denny’s, supra, 234 Cal.App.3d at page 1786 (review den. Jan. 8, 1992), the insured had liability coverage pursuant to insurance policies in three layers. The first layer consisted of primary insurance issued by the Home Indemnity Company for $500,000. The second layer consisted of excess coverage with a limit of $10 million through Midland Insurance Company. And the third consisted of excess insurance pursuant to policies issued by Chicago Insurance Company and Comstock Insurance Company with a limit of $10 million each in excess of $10 million. The insured was subject to a personal injury lawsuit which resulted in a settlement of $687,500. (Id. at pp. 1788-1789.) Prior to the settlement, Midland had become insolvent, and CIGA stepped in and assumed responsibility for Midland’s insuring obligations. The issue on appeal was whether CIGA was required to pay the $187,500 which would have been paid by Midland had it not become insolvent, or whether Chicago and Comstock were required to “drop down” and pay the amount in excess of the $500,000 contributed by Home Indemnity. Our Court of Appeal determined that Chicago and Comstock were not required to “drop down” and pay the amount insured by Midland: “The Chicago and Comstock policies unequivocally provide that their liability will attach only after the underlying insurer has paid or has been held liable to pay the full amount of the underlying coverage, i.e., the policy limit, and that Chicago and Comstock will then be liable to pay ‘only the excess’ of the underlying policy limit.” (Id. at p. 1793.) Thus, the court concluded, “the language at issue here precludes an interpretation requiring Chicago and Comstock to ‘drop down’ to the level of the underlying insurer.” (Ibid.; see also Carmel, supra, 126 Cal.App.4th at p. 511 [“RLI obligated itself to step in only when the limits of both the [primary] policy and all other available coverage -- primary and excess -- were exceeded”].)
Similarly, the relevant language in the RLI policy specifying that “[u]nder no circumstances shall we be required to drop down and replace the limits of liability of a financially impaired insurer,” precludes an interpretation requiring RLI to drop down and pay an amount that would have been covered by an underlying insurer but for its insolvency.
Ross, relied upon by CIGA, does not dictate a different conclusion. In Ross, our Court of Appeal determined that the trial court improperly sustained a demurrer on the question of whether an excess insurer’s policy became primary upon the insolvency of the primary insurer. However, neither of the policies at issue was attached to the complaint, thus the court was required to assume that the allegations of the complaint were true. (Ross, supra, 142 Cal.App.3d at p. 399, fn. 2.) The court concluded: “[W]hen a secondary insurer is available in the event of an insolvent primary insurer, the secondary insurer should be responsible in the absence of specific language to the contrary.” (Id. at p. 404, italics added.) Thus, in contrast to the matter before us, Ross did not involve specific policy language precluding an excess insurer from “dropping down” to cover an insolvent primary insurer’s obligations.
We conclude that the language at issue precludes a finding that the insolvency of Reliance imposed upon RLI any greater obligations than it had specifically agreed to provide.
IV. Section 11580.9, subdivision (b) does not require RLI to cover the loss under the circumstances of this case
CIGA’s main argument is based on its position that the Transportation policy would not have provided coverage had Reliance remained solvent. Had Reliance remained solvent, CIGA argues, Reliance and RLI would have had to bear the loss pursuant to section 11580.9, subdivision (b). Due to Reliance’s insolvency, however, Transportation was required to “step into the place of the insolvent Reliance and fulfill Reliance’s coverage obligations.” Thus, CIGA argues, because Transportation essentially replaced Reliance as primary insurer, RLI should step in and pay excess over the $1 million limit of the Reliance policy. We are not persuaded by CIGA’s argument.
Preliminarily, CIGA’s argument rests on the analysis of a factual scenario which is purely hypothetical and therefore irrelevant. Reliance is insolvent, and Transportation has stepped in and paid the limits of its policy. Transportation is not a party to this case and has made no argument that RLI should have covered any part of the loss that it paid.
In addition, section 11580.9, subdivision (b) does not support CIGA’s argument that, if Reliance had remained solvent, RLI would have had to pay the excess over $1 million before Transportation.
Section 11580.9 was enacted in 1970. The Legislature’s purpose in enacting section 11580.9 was “‘to avoid so far as possible conflicts and litigation... between and among injured parties, insureds, and insurers concerning which, among various policies of liability insurance and various coverage therein, are responsible as primary, excess, or sole coverage.’ [Citation.]” (Wilshire, supra, 124 Cal.App.4th at p. 33.) The Legislature declared “‘it to be the public policy of this state that Section 11580.9 of the Insurance Code expresses the total public policy of this state respecting the order in which two or more of such liability insurance policies covering the same loss shall apply.’ [Citation.]” (Ibid.)Section 11580.9, subdivision (b) provides guidance as to the priority of policies where two or more policies cover an insured who leases or rents vehicles.
During the relevant time period, section 11580.9, subdivision (b) provided, in relevant part:
Section 11580.9, subdivision (b), has since been amended. (Stats. 2003, ch. 729, § 1; Stats. 2006, ch. 345, § 1.)
“Where two or more policies apply to the same loss, and one policy affords coverage to a named insured engaged in the business of renting or leasing motor vehicles without operators, it shall be conclusively presumed that the insurance afforded by that policy to a person other than the named insured or his or her agent or employee, shall be excess over and not concurrent with, any other valid and collectible insurance applicable to the same loss covering the person as a named insured or as an additional insured under a policy with limits at least equal to the financial responsibility requirements specified in Section 16056 of the Vehicle Code. The presumption provided by this subdivision shall apply only if, at the time of the loss, the involved motor vehicle either
“(1) Qualifies as a ‘commercial vehicle’ as that term is used in Section 260 of the Vehicle Code.
“(2) Has been leased for a term of six months or longer.”
Vehicle Code section 260, subdivision (a), in effect in 1999, provides that a “‘commercial vehicle’ is a vehicle of a type required to be registered under this code used or maintained for the transportation of persons for hire, compensation, or profit or designed, used, or maintained primarily for the transportation of property.” The parties agree that Bush was in the business of renting or leasing commercial vehicles without operators. The parties also agree that the vehicle involved in the accident was a bobtail truck rented by ATD from Bush. Finally, the parties agree that bobtail trucks, like the one involved in the accident, are designed, used or maintained primarily for the transportation of property -- i.e., it is a “commercial vehicle.” Thus, CIGA argues, the prerequisites for section 11580.9, subdivision (b) have been satisfied and the statute controls the prioritization of the policies at issue.
CIGA argues that, under section 11580.9, subdivision (b), the Transportation policy issued to the lessor, Bush, was “conclusively presumed to be excess over and not concurrent with Reliance and [RLI].” CIGA argues that the priority of policies under the statute is dependent on the identity of the named insured without regard to the level (primary or excess) or limits of each policy. In other words, CIGA’s position is that, under section 11580.9, subdivision (b), all policies issued to the lessor are excess over and not concurrent with all policies issued to others.
We disagree with CIGA’s position that the statute governs the prioritization of the RLI policy over the Transportation policy in this matter. Section 11580.9, subdivision (b), is only applicable where two policies “apply to the same loss.” Here, the policies issued by Reliance and Transportation applied to the same loss. Both were primary policies, which attached immediately upon the happening of the occurrence that gave rise to liability, and covered the first $1 million of loss. Thus, section 11580.9, subdivision (b) applies to determine the prioritization of the two primary policies issued by Reliance and Transportation.
The RLI policy, in contrast, does not apply to “the same loss” because it provides coverage only to the ultimate net loss “in excess of the applicable limits of scheduled underlying insurance..., for occurrences covered by scheduled underlying insurance, plus the limits of any unscheduled underlying insurance which also provides coverage for such occurrences.” Thus, while the Reliance and Transportation policies covered “the same loss,” or the first $1 million of liability, the RLI policy covered a different loss: the loss in excess of underlying scheduled and unscheduled insurance. (See Hartford Accident & Indem. Co. v. Sequoia Ins. Co. (1989) 211 Cal.App.3d 1285, 1295-1296 [when two or more policies apply “at the same level of coverage,” they cover the same loss].)
The Legislature’s intent in enacting section 11580.9 supports our conclusion that the statute applies to determine the priority between the primary policies at issue in this case, rather than the priority of the RLI policy over the Transportation policy. As explained in Zurich-American Ins. Co. v. Liberty Mut. Ins. Co. (1978) 85 Cal.App.3d 481, 486, “Prior to 1970, the allocation of loss between coinsurers, two or more insurers affording coverage to the same loss, was made by judicial resort to the provisions of the respective policies.... Judicial construction of these provisions was marked by inconsistency, prompting commentators and the courts alike to request legislative clarification. [Citation.] [¶] In 1970, the Legislature responded to these requests with the enactment of section 11580.9... [which] contains a series of alternative conclusive presumptions to be employed by the courts in determining the priority of coverage between coinsurers.” Thus, the Legislature was prompted to enact section 11580.9 as a result of disputes between coinsurers -- two or more insurers providing coverage to the same loss.
Section 11580.9, subdivision (b), is applicable to determine which of the two parallel primary policies -- provided by Reliance and Transportation -- applied as primary coverage to the loss. Under the statute, the Transportation policy, as the policy issued to the “named insured engaged in the business of renting or leasing motor vehicles without operators,” was conclusively presumed to be “excess over and not concurrent with” any other valid and collectible insurance applicable to the same loss -- i.e., the Reliance policy. Thus, had Reliance remained solvent, section 11580.9, subdivision (b), would have obligated Reliance to provide the initial coverage for the accident, with Transportation acting as an excess provider.
RLI’s policy language indicating that RLI’s coverage would not kick in until the “ultimate net loss” exceeded the applicable limits of both scheduled and unscheduled insurance specified that such “unscheduled insurance” included “any insurance policies available to any insured” whether such policies were “primary, excess, excess-contingent, or otherwise.” Despite the fact that Transportation’s policy was, by statute, excess to the Reliance policy, it was still “available” to the insured to cover the loss. Under these circumstances, RLI’s contractual language makes the RLI coverage unavailable to the insured until the ultimate net loss exceeds the value of both the scheduled insurance -- Reliance’s $1million policy; and the unscheduled insurance -- Transportation’s $1 million policy.
This is the case regardless of Reliance’s insolvency. As set forth above in section III, the language of RLI’s policy precludes a finding that the insolvency of any insurer changes RLI’s obligations. Thus, we reject CIGA’s argument that, had Reliance remained solvent, section 11580.9, subdivision (b), would have applied to make RLI responsible for the loss in excess of Reliance’s policy limits before Transportation.
Based on the above analysis, we also reject CIGA’s position that RLI is in a better position because of Reliance’s insolvency. Regardless of Reliance’s insolvency, RLI was not required to provide coverage until the insured’s ultimate net loss exceeded $2 million -- the applicable limits of Reliance’s $1 million policy plus Transportation’s (unscheduled) $1 million policy. RLI is in no better, and no worse, position because of Reliance’s insolvency. As its policy dictates, RLI has neither been “relieve[d]” of its obligation nor has there been an “increase [in] any of [its] obligations” under the policy.
For the same reasons, we reject CIGA’s argument that because RLI received a premium for the policy at issue, it should be held liable before CIGA. As recognized by the California courts, “the risks involved in primary coverage are different from those involved in issuing an excess policy and these differences [are] reflected in the premium costs.” (Travelers Casualty & Sur. Co. v. Am. Equity Ins. Co. (2001) 93 Cal.App.4th 1142, 1156.) The premium charged by RLI for the risks it assumed presumably reflected RLI’s express agreement that its liability would not attach until the limits of all scheduled and unscheduled underlying insurance had been exceeded, regardless of the insolvency of any underlying insurer. CIGA has presented no law dictating that such an agreement is not enforceable.
V. RLI’s policy did not provide “other insurance” as defined by section 1063.1, subdivision (c)(9)(A)
We next address CIGA’s argument that the RLI policy qualifies as “other insurance” under section 1063.1, subdivision (c)(9)(A). Pursuant to section 1063.1, CIGA is authorized to pay “covered claims” as that term is defined in the statute. Section 1063.1, subdivision (c)(9)(A), specifies that the term “covered claims” does not include “any claim to the extent it is covered by any other insurance of a class covered by this article available to the claimant or insured.”
We have concluded that RLI’s policy language rendered it excess to all “scheduled” and “unscheduled” insurance. (See sec. III., above.) At the time of the loss, the policy limits of the scheduled and unscheduled insurance totaled $2 million. Thus, should the loss have exceeded the $2 million limits of the Reliance and Transportation policies, RLI’s policy would have been “available” to the insured. However, because there was no loss in excess of $2 million, RLI’s policy was not “other insurance... available to the... insured.” (§ 1063.1, subd. (c)(9)(A), italics added.)
Again, we note that Ross does not compel a different conclusion. In applying section 1063.1 to the situation before it, the Ross court commented that “CIGA was created for the protection of the public. Thus, when a secondary insurer is available in the event of an insolvent primary insurer, the secondary insurer should be responsible in the absence of specific language to the contrary.” (Ross, supra, 142 Cal.App.3d at p. 404, italics added.) Here, the RLI policy contains such “specific language to the contrary.” That language provides that “[b]ankruptcy, rehabilitation, receivership, liquidation or other financial impairment of the insured or any underlying insurer shall neither relieve nor increase any of our obligations under this policy,” and specifies that “[u]nder no circumstances shall [RLI] be required to drop down and replace the limits of liability of a financially impaired insurer.” This language renders the holding in Ross inapplicable. In sum, the RLI policy did not provide “other insurance” that was “available” to the insured to cover the loss in question.
VI. CIGA’s public policy argument
CIGA makes the argument that RLI’s interpretation of its policy allows RLI to artificially make itself “unavailable” and escape its coverage obligations when an underlying insurer is declared insolvent. Thus, CIGA argues, RLI’s interpretation makes its language regarding the insolvency of an underlying insurer “tantamount to... an ‘escape’ clause.” Such clauses, CIGA argues, are disfavored under California law as contrary to public policy.
We disagree with CIGA’s interpretation of RLI’s policy as making its coverage “unavailable” when an underlying insurer is declared insolvent. RLI does not take the position that its coverage would not have been available had the ultimate net loss exceeded the combined limits of the Reliance and Transportation policies. Instead, RLI maintains, as set forth in its policy, that the insolvency of one of those underlying insurers simply does not change RLI’s obligation.
Further, CIGA fails to persuade us that the language found in the RLI policy can be described as an “escape” clause. None of the cases cited by CIGA in support of its public policy argument involve “financial impairment” or “limits of liability” clauses such as those at issue here. All involve competing “other insurance” clauses between primary insurers. (See Fireman’s Fund Ins. Co. v. Md. Casualty Co. (1998) 65 Cal.App.4th 1279, 1305 [defining “escape clauses” as “‘excess-only’ provisions in otherwise primary liability insurance policies”]; Dart Industries, Inc. v. Commercial Union Ins. Co. (2002) 28 Cal.4th 1059, 1080 [escape clauses are “‘other insurance’ clauses that attempt to shift the burden away from one primary insurer wholly or largely to other insurers”]; Commerce & Indus. Ins. Co. v. Chubb Custom Ins. Co. (1999) 75 Cal.App.4th 739, 745-746 [analyzing competing “other insurance” provisions of two primary insurers, and specifying “‘[a]n “other insurance” dispute can only arise between carriers on the same level, it cannot arise between excess and primary insurers’”]; Employers Reinsurance v. Mission Equities Corp. (1977) 74 Cal.App.3d 826, 831 [dispute between two primary malpractice insurers covering different time periods]; Peerless Casualty Co. v. Continental Casualty Co. (1956) 144 Cal.App.2d 617, 619 [analyzing “the effect to be given to the ‘other insurance’ clauses” of two primary insurers: the primary insurer of the lessor and the primary insurer of the lessee].)
As discussed above, those provisions of the RLI insurance policy preventing it from “dropping down” if an underlying insurer becomes insolvent have been upheld by California courts. (Denny’s, supra, 234 Cal.App.3d at p. 1786; Carmel, supra, 126 Cal.App.4th 502.) Here, those provisions applied to prevent RLI from being liable for the accident until the loss exceeded the limits of both the Reliance policy and the Transportation policy, regardless of the insolvency of any underlying insurer.
DISPOSITION
The judgment is affirmed.
We concur: BOREN, P. J.ASHMANN-GERST, J.