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Liquidation of Midland Insurance Company v. Superintendent of Insurance of the State of New York6/1/2000
lands policy was issued first, then canceled, and the Midland policy then attached.
Likewise, a plain reading of the "Other Insurance" and "Prior Insurance" clauses defeats LAQ's claim that the clauses were to be used only to resolve disputes over contribution between insurers, but could not be used to reduce the amount owed by Midland to LAQ in the first instance. The clauses clearly provide that Midland's $20 million coverage obligation to LAQ would be reduced by any sums owed to LAQ by other excess policies on the same risk, and specifically preclude contribution.
Consequently, the only question with regard to the Highlands policy is whether the District Court's proration of the policy 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, a
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