Opinion
Civ. No. 82-662-B.
February 18, 1986.
Kent M. Forney, Des Moines, Iowa, for plaintiff.
Richard G. Langdon, Des Moines, Iowa, for defendant.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER FOR JUDGMENT
This is a diversity of citizenship case that presents a question of construction of the annual aggregate limits provision of a liability insurance policy. The case was submitted on stipulated facts and written briefs of the parties.
FINDINGS OF FACT
(1) Plaintiff Iowa Insurance Guaranty Association is an unincorporated entity created by Chapter 515B of the Code of Iowa with its place of business in Des Moines, Iowa.
(2) Defendant Canadian Universal Insurance Company is a foreign corporation with its principal place of business outside of Iowa and is licensed and conducts business as a non-life insurer.
(3) Signal Insurance Company was a California insurer conducting a non-life business.
(4) Nissen Corporation is an Iowa corporation engaged in the manufacture and sale of certain products.
(5) Effective January 1, 1975, through January 1, 1976, defendant Canadian issued to Nissen a policy of liability insurance covering, inter alia, Nissen's liability for products manufactured by it. Relevant portions of the policy are set forth in Appendix A attached hereto.
(6) The Canadian policy provided an aggregate limit on the defendant's liability of $300,000 per policy year. In addition, the policy provided for a $5,000 per claim deductible.
(7) During the same policy period, Signal issued its excess policy to Nissen providing $1,000,000 in liability coverage in excess of the $300,000 provided by defendant Canadian.
(8) Subsequent to January 1, 1976, Signal was declared insolvent by the state of California.
(9) Pursuant to the terms of Chapter 515B, plaintiff assumed Signal's obligations under its policy to Nissen.
(10) From time to time claims have arisen against Nissen involving products made by Nissen, which claims were within the policies of Canadian and Signal.
(11) Defendant Canadian paid certain sums, pursuant to terms of the Canadian policy, in settlement of the liability claims against Nissen.
(12) Pursuant to the terms of the Canadian policy, the defendant paid $303,750 to settle claims for occurrences during the policy year.
(13) Pursuant to the Canadian policy provisions for a $5,000 per claim deductible, the defendant received $33,750 in reimbursement from Nissen.
(14) Subsequent to the insolvency of Signal, the defendant notified Nissen that it was the defendant's position that it had paid its aggregate liability of $300,000 under defendant's policy and that therefore defendant would not further defend suits against Nissen.
(15) Thereafter, plaintiff undertook the defense of Nissen and spent $5,382.71 in legal fees defending pending cases and in excess of $30,000 in settling cases still pending against Nissen.
CONTENTIONS OF THE PARTIES
The plaintiff contends that a proper construction of defendant's policy obligated the defendant to pay a net of $300,000 in order to exhaust the aggregate and fully discharge its liability under the policy. Plaintiff seeks judgment against defendant for claims it settled and legal defense fees it incurred that it contends were within the scope of defendant's liability under the Canadian policy.
The defendant contends that under a proper construction of its policy, once it paid $300,000 gross (exclusive of deductible reimbursements) it had exhausted the aggregate and fully discharged its liability so that it had no legal obligation to pay any further sums either in settlement or defense of any claims.
CONCLUSIONS OF LAW
I agree with plaintiff. The Canadian policy clearly and unambiguously places the $300,000 aggregate limit on defendant's "liability" under the policy, not on the total amount of judgments and settlements. Defendant's liability on each claim is the amount of the judgment or settlement less the $5000 deductible. The clearest statement of that is the following in the $5000 deductible endorsement:
The Company's obligation under the Bodily Injury Liability and Property Damage Liability Coverages to pay damages on behalf of the insured applies only to the amount of damages in excess of any deductible amounts stated in the schedule above as applicable to such coverages.
Plaintiff is entitled to judgment against defendant in the amount of $35,382.71.
ORDER FOR JUDGMENT
IT IS ORDERED that judgment be entered in favor of the plaintiff, Iowa Insurance Guaranty Association, and against the defendant, Canadian Universal Insurance Company, in the amount of $35,382.71, plus pre-judgment interest thereon from November 23, 1982, as provided by Iowa code § 535.3, together with post-judgment interest on the total sum as provided by federal law, and for costs of this action.
APPENDIX A
I. COVERAGE A — BODILY INJURY LIABILITY
COVERAGE B — PROPERTY DAMAGE LIABILITY
The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of
Coverage A. bodily injury or Coverage B. property damage
to which this insurance applies, caused by an occurrence, if the bodily injury or property damage is included within the completed operations hazard or the products hazard, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.
III. LIMITS OF LIABILITY
Regardless of the number of (1) insureds under this policy, (2) persons or organizations who sustain bodily injury or property damage, or (3) claims made or suits brought on account of bodily injury or property damage, the company's liability is limited as follows:
Coverage A — The total liability of the company for all damages, including damages for care and loss of services, because of bodily injury sustained by one or more persons as the result of any one occurrence shall not exceed the limit of bodily injury liability stated in the declarations as applicable to "each occurrence".
Subject to the above provision respecting "each occurrence", the total liability of the company for all damages because of all bodily injury to which this coverage applies shall not exceed the limit of bodily injury liability stated in the declarations as "aggregate".
Coverage B — The total liability of the company for all damages because of all property damage sustained by one or more persons or organizations as the result of any one occurrence shall not exceed the limit of property damage liability stated in the declarations as applicable to "each occurrence".
Subject to the above provision respecting "each occurrence", the total liability of the company for all damages because of all property damage to which this coverage applies shall not exceed the limit of property damage liability stated in the declarations as "aggregate".
Coverages A and B — For the purpose of determining the limit of the company's liability, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence.
SCHEDULE
-------------------------------------------------------------- Amount and Basis of Deductible Coverage -------------------------------------------------------------- $ 5000.00 per claim Bodily Injury Liability $ --- per occurrence -------------------------------------------------------------- $ 5000.00 per claim Property Damage Liability $ --- per occurrence --------------------------------------------------------------
APPLICATION OF ENDORSEMENT (Enter here any limitations on the application of this endorsement. If no limitation is entered, the deductibles apply to all loss however caused): —
It is agreed that:
1. The company's obligation under the Bodily Injury Liability and Property Damage Liability Coverages to pay damages on behalf of the insured applies only to the amount of damages in excess of any deductible amounts stated in the schedule above as applicable to such coverages.
2. The deductible amounts stated in the schedule apply as follows:
(a) PER CLAIM BASIS — If the deductible is on a "per claim" basis, the deductible amount applies under the Bodily Injury Liability or Property Damage Liability Coverage, respectively, to all damages because of bodily injury sustained by one person, or to all property damage sustained by one person or organization, as the result of any one occurrence.
(b) PER OCCURRENCE BASIS — If the deductible is on a "per occurrence" basis, the deductible amount applies under the Bodily Injury Liability or Property Damage Liability Coverage, respectively, to all damages because of all bodily injury or property damage as the result of any one occurrence.
3. The terms of the policy, including those with respect to (a) the company's rights and duties with respect to the defense of suits and (b) the insured's duties in the event of an occurrence apply irrespective of the application of the deductible amount.
4. The company may pay any part or all of the deductible amount to effect settlement of any claim or suit and, upon notification of the action taken, the named insured shall promptly reimburse the company for such part of the deductible amount as has been paid by the company.