Federal Insurance Co. v. Americas Insurance Co.6/15/1999
In this controversy between insurance companies as to their respective obligations concerning an underlying personal injury claim, plaintiff Federal Insurance Company appeals from Supreme Court's declaration, in resolving competing cross-motions for summary judgment, that the defendant insurers, Americas Insurance Company and Westchester Fire Insurance Company, are not obligated to reimburse Federal for the $1,650,825 it contributed to the $2,475,000 settlement of the underlying claim. That claim arose out of a March 15, 1992 automobile accident that occurred in Texas when an employee of Pyramid Energy, Inc., a Texas-based oil exploration and development company no longer in existence, operating a Toyota pickup truck owned by Pyramid, lost control of the vehicle, causing it to roll over and cause serious personal injuries to James Neal Smith, a passenger. As part of the settlement, all three insurers expressly reserved their right to litigate the coverage issues at a later date.
Pyramid, acquired by Bankers Trust through foreclosure as a result of loan default, was one of its non-banking subsidiaries. In compliance with Bankers Trust's requirements, Pyramid had procured from Westchester primary coverage with a $1,000,000 limit for the 24 automobiles listed in endorsement No. 1, 22 of which, including the Toyota pickup involved in the Smith accident, were garaged in Texas. Pyramid had an umbrella policy with Americas, written as excess over the Westchester policy only, providing a $10,000,000 limit. Pyramid paid yearly premiums of $22,212 and $17,000, respectively, for the two policies. Westchester contributed $824,175 to the settlement of Smith's claim, rather than its $1,000,000 policy limit, on the ground that it was only required to contribute on a pro rata basis with Federal's Business Auto Policy (BAP), which, it argues, also provided primary coverage for Pyramid for the accident in question. Americas made no contribution to the settlement and maintains that Federal's BAP must be exhausted before it is required to contribute to the settlement.
Federal, just a few months before the Smith accident, had begun to insure Bankers Trust under a complex program, which included the BAP, two commercial general liability policies - one for the State of Texas, exclusively - and several layers of excess and umbrella coverage. Federal's BAP had a liability limit of $2,000,000 for each accident and listed 31 automobiles as covered. None of the Pyramid automobiles were listed as covered. In fact, the BAP did not list any automobiles located in Texas.
While Bankers Trust procured coverage for itself and its banking subsidiaries, it required its OREOs, such as Pyramid, to procure their own insurance to avoid the "intermix" of risks common to banking institutions with those of non- banking institutions. Pyramid complied with Bankers Trust's requirements and, as noted, purchased its own insurance. According to Russell P. Opferkuch, Bankers Trust's Vice President and Risk Manager, the BAP was intended "to provide coverage for Bankers Trust and for its banking related subsidiaries in the event that a particular subsidiary did not have its own more specific insurance."
In opposing Federal's motion for summary judgment and cross-moving for similar relief in their favor, Westchester and Americas relied exclusively on the "Subsidiary Endorsement" of the BAP, drafted two months after the policy's inception, amending the listing of the named insured to read: "[Bankers Trust] and each and every owned and/or actively managed and/or financially controlled subsidiary, organization, company, corporation, joint venture, partnership, or other entity now existing or hereinafter constitute
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