Empire Fire & Marine Insurance v. Citizens Insurance Co. of America/Hanover Insurance
43 A.3d 56
R.I.2012Background
- BMW 325IT leased to MCB Productions by Inskip, with BMW Financial as owner, lessee, and named additional insured under Citizens' policy.
- Citizens provides primary coverage to BMW Financial as additional insured lessor; Empire provides excess coverage under its policy.
- In March 2003, a drunk driver of the 2001 BMW caused a serious injury; underlying civil action settled with Citizens and Empire paying policy limits and BMW Financial's excess carrier paying remainder.
- Empire incurred approximately $98,955.92 in defense costs defending BMW Financial; Citizens reimbursed Empire $23,060.62 and refused further reimbursement.
- Empire sued for declaratory relief seeking reimbursement of all defense costs; Citizens counterclaimed seeking repayment of the initial $23,060.62.
- Hearing justice granted Empire summary judgment; court held Citizens' policy provided primary coverage, so no pro rata apportionment was required.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Citizens provide primary coverage for BMW Financial? | Empire: lease endorsement makes Citizens primary; Empire's excess role remains secondary. | Citizens: policy language shows excess coverage since BMW Financial is not the owner-lessee; no primary duty. | Citizens provides primary coverage; no pro rata apportionment required. |
| Does the lease endorsement trump Citizens' other-insurance clause to avoid illusory coverage? | Empire: endorsement unambiguously makes BMW Financial an added insured with primary coverage; no conflict with Empire. | Citizens: other-insurance clause controls and can create excess coverage; endorsement cannot override. | Endorsement interpreted to provide primary coverage; no illusory coverage; no need for pro rata apportionment. |
| Should defense costs be allocated pro rata where policies conflict? | Empire: no conflict exists because Citizens is primary; pro rata not applicable. | Citizens: two policies conflict; pro rata apportionment should apply per Hindson/Brown. | No pro rata apportionment; Citizens bears defense costs as primary insurer. |
Key Cases Cited
- Hindson v. Allstate Insurance Co., 694 A.2d 682 (R.I.1997) (pro rata rule applies when policies conflict)
- Brown v. Travelers Insurance Co., 610 A.2d 127 (R.I.1992) (pro rata apportionment when multiple policies apply)
- Irene Realty Corp. v. Travelers Property Casualty Co. of America, 973 A.2d 1118 (R.I.2009) (resolve conflicts before pro rata rule)
- Mallane v. Holyoke Mutual Insurance Co. in Salem, 658 A.2d 18 (R.I.1995) (read policy as a whole; strict construction for ambiguity)
- Campbell v. Norfolk & Dedham Mutual Fire Insurance Co., 682 A.2d 933 (R.I.1996) (avoid illusory coverage; interpret reasonably)
- Pressman v. Aetna Casualty and Surety Co., 574 A.2d 757 (R.I.1990) (ordinary reader understanding of policy terms)
- Pires, 723 A.2d 299 (R.I.1999) (avoid illusory coverage; apply exclusions carefully)
- Ferreira v. Mello, 811 A.2d 1175 (R.I.2002) (policy interpretations; not rendering coverage illusory)
- Liberty Mutual Insurance Co. v. Harbor Insurance Co., 603 A.2d 300 (R.I.1992) (excess insurer not liable until primary exhausted)