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TIG Insurance Co. v. North American Van Lines8/26/2005
ent interest. And Royal tendered its $5,000,000 limit, which indicates Royal also believed these "claim expenses" could be apportioned to its policy. We conclude the trial court did not err in holding that NAVL may apportion its share of the "claim expenses" to the Royal policy.
2. Ratio of "Claim Expenses" Apportioned to USF&G
Next we examine whether the trial court used the correct ratio in apportioning "claim expenses" to USF&G. Under the USF&G policy, When the "insured's" legal obligation to pay damages under LIABILITY COVERAGE . . . exceeds the self-funded retention . . . we will indemnify you for a portion of the "claim expenses" in the ratio that the portion of the total loss in excess of such self-funded retention bears to the total loss payable (inclusive of the self-funded retention) under this policy . . . .
The trial court interpreted this provision as requiring USF&G to indemnify NAVL for 44.1% of the "claim expenses," allowing NAVL to apportion 55.9% of those expenses to the Royal policy. The trial court arrived at this ratio by dividing the total actual damages which exceeded the self-funded retention, or $3,947,274 (actual damages of $8,947,274 minus the SFR of $5,000,000) by the total actual damages including the self-funded retention, or $8,947,274. The parties agree the trial court correctly calculated the numerator in the ratio as $3,947,274. However, the parties disagree about the court's calculation of the denominator. We conclude the trial court erred in using the total actual damages as the denominator. The USF&G policy states the denominator in the ratio is the "total loss payable (inclusive of the self-funded retention) under this policy." The "total loss payable (inclusive of the self-funded retention)" under the USF&G policy is $5,000,000, or the policy limits, because the total loss exceeds the policy limits. When the total loss exceeds the policy limits, as in this case, the denominator cannot be higher than $5,000,000, or it would exceed the "total loss payable . . . under this policy."
NAVL does not argue that the language is ambiguous. Instead, it argues that calculating the ratio in this way can lead to absurd results because, in some cases, the ratio could exceed 100% and no insurer would agree to indemnify its insured for more than the amount of "claim expenses." But to adopt NAVL's interpretation of this provision would require us to ignore the language "payable under this policy," and rewrite it to delete that language, which we cannot do under the rules of contract construction. See Beaston, 907 S.W.2d at 433; Vincent, 109 S.W.3d at 866; Tan It All, Inc., 111 S.W.3d at 679. Applying the correct denominator, USF&G's share of claim expenses is 78.9% and NAVL's share is 21.1%.
As a result, we conclude the trial court erred in calculating the ratio to be used in allocating claim expenses to USF&G. The allocation should be:
TotalUSF&GRoyalTIG
Actual Damages$8,947,274$5,000,000$3,686,100$261,174
Prejudgment Interest$2,488,077$1,963,093$524,9840
Postjudgment Interest$3,738,938$2,950,022$788,9160
3. Should defense costs have been allocated as part of "claim expenses"?
Next we consider whether the trial court should have included defense costs in its allocation of "claim expenses" to the Royal policy. NAVL argues that because the definition of "claim expenses" under the USF&G policy includes defense costs, NAVL's share of the defense costs should have been apportioned to the Royal policy. The dispute arises from the Royal policy's two conflicting definitions of "ultimate net loss." In its policy, Roy
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