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TIG Insurance Co. v. North American Van Lines8/26/2005
al agreed to pay: he Ultimate Net Loss, in excess of the applicable Underlying or Retained Limit, which the Insured shall become legally obligated to pay because of:
(a) Personal Injury
The policy then provides: "Ultimate Net Loss" means: the total sums actually paid or payable as damages in settlement of a claim . . . or in satisfaction of a judgment for which the Insured is legally liable . . . and also includes investigation, adjustment, appraisal, appeal and defense costs paid or incurred by the Insured with respect to damages covered hereunder.
(emphasis added). However, the Royal policy contains a "Defense Settlement Amendatory Endorsement" which provides: Section IV-Definition-Item 6 "Ultimate Net Loss" is amended as follows: Ultimate Net Loss means: the total sums actually paid or payable as damages in settlement of a claim . . . or in satisfaction of a judgment for which the Insured is legally liable . . . . Ultimate Net loss does not include . . . (d) investigation, adjustment, appraisal, appeal and defense costs paid or incurred by the Insured, with respect to damages covered hereunder, which are payable by [Royal] in addition to the applicable limit of liability of this policy. (emphasis added).
NAVL argues that because the endorsement only amends the definition of "ultimate net loss" and does not delete and replace it, as with other endorsements to the policy, the original definition of ultimate net loss must also be given effect. NAVL also argues the amended definition applies only in "drop down" situations, where Royal has a duty to defend NAVL. Because Royal did not owe a duty to defend NAVL in the Emmons case, NAVL argues the original definition applies and defense costs are included in Royal's definition of "ultimate net loss" and should have been allocated to its policy limits. Conversely, TIG argues the two definitions are in conflict and irreconcilable because one definition includes defense costs within the policy's limits and the other definition does not. The trial court agreed and held "the Royal insurance policy does not encompass paying defense costs paid or incurred by NAVL in such a way as to erode the Royal policy limits" and refused to allocate defense costs to Royal. An insurance policy and its endorsements should be construed together unless they are so much in conflict they cannot be reconciled. Mesa Operating Co. v. Cal. Union Ins. Co., 986 S.W.2d 749, 754 (Tex. App.-Dallas 1999, pet. denied). In that case, endorsements to a policy generally supersede and control over conflicting printed terms within the main policy. Mesa Operating Co., 986 S.W.2d at 754; Mut. Life Ins. Co. v. Daddy$Money, Inc., 646 S.W.2d 255, 259 (Tex. App.-Dallas 1982, writ ref'd n.r.e.);United States Fire Ins. Co. v. Aetna Cas. & Sur. Co., 781 S.W.2d 394, 399 (Tex. App.-Houston [1st Dist.] 1989 (no writ).
The definition of "ultimate net loss" in the main Royal policy includes defense costs; the definition of "ultimate net loss" in the endorsement excludes defense costs. The only difference is that the amended definition contains the additional language, "which are payable by [Royal] in addition to the applicable limit of liability of this policy." NAVL argues the definition of "ultimate net loss" in the amendatory endorsement applies only in situations where Royal owes a duty to defend NAVL. But the language of the amendatory endorsement does not include such a limitation, NAVL cites no authority in support of this argument, and we decline to so hold. We conclude the trial court did not err in refusing to apportion defense costs against Royal's $5,000,000 policy limits.
4. "Ultimate Net Loss" Under the TIG Policy
TIG
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