Firemen's Insurance v. St. Paul Fire & Marine Insurance
411 P.2d 271
Or.
1966
Check Treatment
HOLMAN, J.

This case involves a dispute between insurance companies. The plaintiff, Firemen’s Insurance Company (Firemen’s), issued a policy of automоbile insurance to Leta Free. In addition to Mrs. Free, the policy also insured — by what is known as an omnibus clause — any other person using her automobile with her consent. Mrs. Free loaned her car to Albert Carter. Carter, while using the vehicle, negligently caused an accident and resultant damages to third parties. Carter was also insured under a policy of automobile insurance issued to his parents by the defendant, St. Paul Fire and Marine Insurance Company (St. Paul), covering him when he was driving a vehicle other than the one owned by his parents.

Both policies had identical provisions relative to their coverage in case there was other insurance. It was as follows:

“If the Insured has other insurance against a loss covered by Part I of this рolicy, the Company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the *12 total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, the insurance with respect ‍​‌​​​​‌​​‌‌​‌​‌‌​​‌‌​​‌‌​‌‌​‌​​​​‌‌‌‌​​‌‌‌‌‌‌‌​​‍to a temporary substitute automobile or non-owned automobile shall be excess over any other vаlid and collectible insurance.”

Firemen’s asked St. Paul to participate on a pro rata basis in- defending the actions brought by the injured partiеs and St. Paul refused. Firemen’s settled the cases and brought this action in an attempt to require St. Paul to pay a pro rata share of the cost of the settlements and resultant expenses. St. Paul demurred to the complaint and the demurrer was sustained. Firemen’s appealed.

Firemen’s poliсy issued to Mrs. Free provided that if the insured (Carter) had other insurance it was liable pro rata for any loss. St. Paul’s policy, which also insured Carter, provided that if he was driving a non-owned vehicle (which he was), it was responsible only for the excess over any other insurance he might have. Firemen’s cоntends these “other insurance” provisions are repugnant and must be ignored and therefore the insurers have equal coverage and must prorаte the loss. It argues that it is entitled to contribution under the doctrine of Lamb-Weston, Inc. v. Oregon Auto. Ins. Co., 219 Or 110, 341 P2d 110, 346 P2d 643, 76 ALR2d 485 (1959).

In Lamb-Weston the owner of a vehicle leased it to another. An employee of the lessee was involved in an accident. Under the circumstances, the operator was covered by the policies of both lessor and lessee. The owner’s policy had a pro rata “other insurance” clause, the lessee’s an excess clause. The court found the prоvisions conflicting and therefore repugnant and required contribution. The existing conflict was *13 that both companies had contracted to pаy the entire loss np to policy limits unless other insurance covered ‍​‌​​​​‌​​‌‌​‌​‌‌​​‌‌​​‌‌​‌‌​‌​​​​‌‌‌‌​​‌‌‌‌‌‌‌​​‍the risk. Each independently attempted to limit its liability because of the existence of other insurance.

St. Paul attempts to distinguish the facts of Lamb-Weston from the present case on the basis that the vehicle involved was described in both policies in Lamb-Weston, while in the present case this was not true. The vehicle was described in Firemen’s policy only. St. Paul contends that automobile liability insurance is usually recognized as рrimary with respect to vehicles designated in the policy and that, therefore, in Lamb-Weston both policies were primary and pro-ration was the cоrrect conclusion. It argues this is not so where, as here, only one policy describes the vehicle. As long as there was duplicate coverage of the operator, we fail to see that it makes any difference whether the vehicle was described in both policies or only оne. The policies did not insure the vehicle against loss; they insured the operator and his employer against loss.

In Cimarron Ins. Co. v. Travelers Ins. Co., 224 Or 57, 355 P2d 742 (1960), the owner of a vehicle рermitted its use by another. The owner’s policy, which described the vehicle, had a pro rata clause. The permissive user’s policy, which did not describe the vehicle, had an excess clause. The court required contribution. This case was an instance where the vehicle Avas describеd in one policy only, but ‍​‌​​​​‌​​‌‌​‌​‌‌​​‌‌​​‌‌​‌‌​‌​​​​‌‌‌‌​​‌‌‌‌‌‌‌​​‍St. Paul attempts to distinguish it on the ground that the permissive user’s policy was a general liability policy and not solely an automobile policy. It says a general liability policy usually affords primary coverage. Therefore, it claims both policies proAÚded primary coverage, one by being a general liability policy and the *14 other by describing the vehicle involved. Assuming this is so, we do not believe this to be a valid distinction, as previously indicated.

In General Ins. Co. v. Saskatchewan Gov’t Ins. Office, 238 Or 8, 391 P2d 616 (1964), the circumstances and holding were essentially identical to Cimarron, supra.

In Smith v. Pacific Auto Ins. Co., 240 Or 167, 400 P2d 512 (1965), two persons had automobile insurance policies with identical uninsured motorist coverage. While one was riding with the other an accident occurred through the negligence of an uninsured motorist. Both wеre covered by the driver’s policy and the passenger was covered by his own. The driver’s policy had a pro rata clause; the passеnger’s an excess clause. The passenger made claim against his insurer which defended by asserting that its coverage was excess only and that thе driver’s policy had primary coverage. The court allowed recovery on the basis that the two “other insurance” clauses were reрugnant, which resulted in complete coverage by both insurers.

St. Paul admits the theory of Smith would appear to be equally applicable to the ‍​‌​​​​‌​​‌‌​‌​‌‌​​‌‌​​‌‌​‌‌​‌​​​​‌‌‌‌​​‌‌‌‌‌‌‌​​‍present case, with the exception that Smith was an action by an insured against his insurer, and that different rules of construction apply. Smith was not decided on that basis and is not thereby distinguishable.

Finally, St. Paul says the decision in Smith is wrong. If St. Paul is correct, the decisions in Lamb-Weston, Cimarron, and Saskatchewan are also in error. The theory of Lamb-Weston is applicable to all. We recognize that in holding there is a conflict between an excess clause and a pro rаta clause, the doc *15 trine of Lamb-Weston is distinctly a minority viewpoint. “We are now fully committed to the rule that an ‘excess-insurance’ ‍​‌​​​​‌​​‌‌​‌​‌‌​​‌‌​​‌‌​‌‌​‌​​​​‌‌‌‌​​‌‌‌‌‌‌‌​​‍clause will, in a case of сonflict with a pro-rata clause, be disregarded.” Smith v. Pacific Auto. Ins. Co., supra, at 434. Lamb-Weston requires that repugnant conflicting other insurance clauses be ignored and that the insurers beаr proportionate burdens of the loss. “The circularity of the interaction of the two policies, each claiming that the other must pay first, is whаt makes them repugnant.” Smith v. Pacific Auto. Ins. Co., supra, at 435. This court believes it is good public policy not to put an injured plaintiff, or a defendant who is fortunate enough tо have duplicate coverage, in a position where there is any possibility one insurer can say, “After you, my dear Alphonse!” while the other sаys, “Oh, no, after you, my dear Gaston.” They must walk arm in arm through the door of responsibility.

St. Paul, on appeal, contends for the first time that Firemen’s complаint is defective for failure to allege that the required notice of loss was made to St. Paul by Carter or his parents. We are of the opinion that the complaint alleged sufficient facts to frame the issue as to St. Paul’s duty to contribute its pro rata share. Upon that issue the failure of St. Paul’s insureds to satisfy conditions precedent to St. Paul’s liability is an affirmative defense which must be raised by answer. This was not an action by an insured upon his policy.

The decision of the trial court is reversed; St. Paul’s demurrer to Firemen’s complaint is overruled, and the case is remanded for further proceedings.