The plaintiffs, four owners and one operator of two Louisiana apartment complexes that were severely damaged in August, 2005, during Hurricane Katrina, appeal from the grant
Our review is de nova, not only because this appeal arises on summary judgment, see Bardige v. Performance Specialists, Inc.,
In brief, the dispute may be summarized as follows. Commencing in 2004, Landmark provided excess coverage
We observe at the outset that the plaintiffs’ reading of the policy is at odds with the usual operation of excess coverage, which typically insures “loss that exceeds the amount of coverage under another policy.” Boston Gas Co. v. Century Indem. Co.,
“An insurance program involving a primary policy and one or more excess policies divides risk into distinct units and insures each unit individually. The individual insurers do not (absent a specific provision) act as coinsurers of the entirety of the risk. Rather, each insurer contracts with the insured individually to cover a particular portion of the risk.”
Id. at 629-630.
Furthermore, the plaintiffs’ analysis depends upon “cherry-picking” two provisions — the definition of “ultimate net loss” and the scheduled limit of liability endorsement as it appears in their 2004 policy — and viewing them in isolation from other related policy terms.
The definition of “ultimate net loss” and the two preceding paragraphs together set forth the basic parameters of the policy’s “Excess Physical Damage Coverage Form”:
“1. Insuring Clause:
“Subject to the limitations, terms and conditions contained in this Policy or added hereto, the Company agrees to indemnify the Insured named in the schedule herein in respect of direct physical loss or damage to the property described in the schedule while located or contained as described in the schedule, occurring during the period stated in the schedule and caused by any of such perils as are set forth in Item 3 of the schedule, and which are also covered by and defined in the policy(les) specified in the schedule and issued by the Primary Insurer(s) stated therein.
“2. Limit:
“Provided always that liability attaches to the Company only after the primary and underlying excess insurer(s) have paid or have admitted to liability for the full amount of their respective ultimate net loss liability as set forth in Item 6 of the schedule and designated ‘Primary and Underlying Excess Limit(s)’[6 ] and then the limits of the Company’s liability shall be those set forth in Item 7 under the designation ‘Limit Insured’[7 ] and the Company shall be liable to pay the ultimate net loss up to the full amount of such ‘Limit Insured.’
*698 “3. Definitions:
“(a) Loss: The word ‘loss’ shall mean a loss or series of losses arising out of one event or occurrence.
“(b) Ultimate Net Loss: The words ‘ultimate net loss’ shall mean the loss sustained by the Insured as a result of the happening of the perils covered by this Policy after making deductions for all salvages, recoveries and other valid and collectible insurance other than recoveries under the policy(les) of the primary and underlying excess insurers)” (emphasis added).
Although the plaintiffs argue that the emphasized phrase in the definition of “ultimate net loss” means that Landmark is liable for the entire ultimate net loss without any deduction for amounts paid by the primary insurer, this interpretation is not reasonable. The definition does not purport to address Landmark’s liability for ultimate net loss; that issue is addressed in the preceding paragraph, entitled “Limit,” which makes clear that Landmark’s liability attaches after the primary and any other underlying insurers pay their respective portions of the ultimate net loss, and will not exceed the value reported.
The plaintiffs’ reliance on the scheduled limit of liability endorsement is equally misplaced. That endorsement provides in relevant part:
“1. In the event of loss hereunder, liability of the Company shall be limited to the least of the following in any one ‘occurrence’:
“a. The actual adjusted amount of the loss, less applicable deductibles;
“b. 100% of the individually stated value for each scheduled item of property insured at the location which had the loss as shown on the latest Statement of Values on file with this Company, less applicable deductibles. If no value is shown for a scheduled item then there is no coverage for that item; or
“c. The Limit of Liability as shown on the Declarations page of this policy or as endorsed to this policy.”
“It is agreed that in the event of reduction or exhaustion of the underlying aggregate limit or limits, such insurance as is afforded by this Policy shall apply in excess of the reduced underlying limit, or if such limit is exhausted, shall apply as underlying insurance, notwithstanding anything to the contrary in the terms and conditions of this Policy.
“It is further understood that, in the event of exhaustion of the underlying aggregate limit or limits, the deductible applicable to coverage provided by this Policy for the peril(s) for which underlying limit(s) have been exhausted shall be the same as the deductible(s) stated in the primary policy.
“In no event, however, shall this Company be liable for more than the limits of liability, as specified in Item 7 of the Excess Physical Damage Schedule.
“It is a condition of this Policy that the Policy(ies) of the primary and underlying excess insurers shall be maintained in full effect during the currency of this Policy except for any reduction or exhaustion of the aggregate limits contained therein solely by payment of losses during the Policy year.”
Were we to accept the plaintiffs’ interpretation of the scheduled
“An interpretation which gives a reasonable meaning to all of the provisions of a contract is to be preferred to one which leaves a part useless or inexplicable.” Worcester Mut. Ins. Co. v. Marnell,
Judgment affirmed.
Notes
The plaintiffs also own and operate numerous other properties that are located in Massachusetts, and the plaintiffs each have a place of business here.
The policy form is labeled “Excess Physical Damage Coverage Form.” See Mission Ins. Co. v. United States Fire Ins. Co.,
In the past, the plaintiffs had been insured on a so-called “blanket” basis. Claims by the plaintiffs against their insurance brokers for allegedly failing to continue to obtain blanket coverage have been resolved separately and are not before us.
For present purposes, we accept the plaintiffs’ premise that because Landmark had agreed to renew coverage for 2005 on the same terms as those in effect in 2004, the governing terms are those contained in their 2004 policy. As we conclude that there is no merit to the plaintiffs’ position even under the terms of the 2004 policy, we need not consider Landmark’s argument that the receipt by the plaintiffs’ broker of a binder for the 2005 policy bound the plaintiffs to a revised scheduled limit of liability endorsement expressly stating that the liability of the insurer to pay the stated value of a property would be reduced by primary and underlying excess limits.
Item 6 of the “Excess Physical Damage Schedule” lists the following: “Primary Limits and Underlying Excess Limits: $2,500,000 Per Occurrence.”
Item 7 of the “Excess Physical Damage Schedule” lists the following: “Limit Insured: $100,000 Per Occurrence, not to exceed value reported and $7,500,000 Annual Aggregate each as respects Flood and Earthquake.”
The 2005 modification to the endorsement does not affect our analysis. Although the modification provided useful clarification, it did not alter the plain meaning of the policy.
The function of a drop down clause in an excess policy is to fill in coverage where the underlying policy limit has been reduced or becomes unavailable. See Massachusetts Insurers Insolvency Fund v. Continental Cas. Co.,