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Ltee v. Superintendent of Insurance of the State of New York6/1/2000
olicy limits was binding on Midland. Inasmuch as the reduction was an adjudication of Highlands' contractual obligations to LAQ, and did not directly affect Midland, the IAS court was not free to find that the coverage available to LAQ from Highlands was still $20 million. Once the District Court decided that the Highlands policy limits were to be prorated, this became a binding construction with res judicata/collateral estoppel effect. The forum for Midland to attack the District Court's decision was the appeal from that order to the Third Circuit. The fact that the Third Circuit vacated any determinations made concerning Midland's obligations under its policy does not permit the Superintendent in this liquidation proceeding to challenge the District Court's adjudication of LAQ's rights under the Highlands policy.
The Superintendent correctly points out that case law generally holds that proration of policy limits is not permitted when the coverage period has been shortened (see, e.g., Unigard Sec. Ins. Co. v N. Riv. Ins. Co., 762 F Supp 566, 595-596, affd in part, revd in part on other grounds 4 F3d 1049). Nevertheless, proration has been permitted in this case, for whatever reason, and we cannot sit in appellate review of the District Court's decision.
(7) "Other Insurance" Provisions in the Policies
The IAS court declared that the policy issued by Employers' Liability to LAQ must be exhausted prior to the attachment of Midland's coverage, due to the "Other Insurance" provisions of Midland's coverage. LAQ contends that since Employers' Liability has refused to pay on the policies, such insurance is not "collectible" insurance "available" to LAQ, as provided in the "Other Insurance" clause, and consequently should not be used to reduce LAQ's rights. We agree, but conclude that LAQ should be given an opportunity to establish a bona fide reason for Employers' Liability's inability or refusal to pay before the Employers' Liability policy is deemed uncollectible.
The same declaration was made with regard to Canadian General's policy. LAQ contends that Canadian General met its obligations in full when it settled for $1.7 million. The Superintendent claims that the aggregate policy limits were $1.85 million. Since this appears to be merely a ministerial matter of arithmetic, and the case has already been referred to a Referee, no reason exists to disturb this declaration; the Referee can readily calculate the face limits of the policies, and subtract from them that which Canadian General has paid. If it is determined that Canadian General settled for less than the limit of its liability, certainly Midland's obligation should be reduced accordingly.
The IAS court found that the policies issued by AHAC from 1976 to 1978 must also be exhausted before Midland is obligated to indemnify, since they constitute other insurance also available to LAQ for the same occurrences. The court reasoned that the "Other Insurance" clause did not limit coverage to current or prior years, and the contract should be enforced according to its terms. The court also concluded that not enforcing the clause would allow an insured to manipulate claims into years when it had more abundant coverage.
There is a dearth of case law on this issue in New York, with the exception of Merchants Mut. Ins. Co. v. Hartford Ins. Group (145 Misc 2d 1), which concerned a dispute between insurers at the same level of coverage. We conclude that the "Other Insurance" language of the Midland policy is broad enough to cover all primary policies, prior and subsequent, which must be exhausted before Midland's excess policy can be called to indemnify (see, Rhone- Poulenc v. Intl. Ins. Co., 877 F Su
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