Great Divide Insurance Company v. Lexington Insurance Company

Filing 40

Judge Richard G. Stearns: ENDORSED ORDER entered. MEMORANDUM AND ORDERFor the foregoing reasons, Great Divides Motion for Summary Judgment (Dkt # 16) is ALLOWED. Lexingtons Motion for Summary Judgment (Dkt # 21) is DENIED. Lexingtons Counterclaim (Dkt # 5) will be dismissed as moot. The Clerk will enter judgment accordingly and close the case.(Caruso, Stephanie)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 15-14146-RGS
GREAT DIVIDE INSURANCE COMPANY
v.
LEXINGTON INSURANCE COMPANY
MEMORANDUM AND ORDER ON
CROSS-MOTIONS FOR SUMMARY JUDGMENT
FOLLOWING ANSWER TO CERTIFIED QUESTION
BY MASSACHUSETTS SUPREME JUDICIAL COURT
November 6, 2017
STEARNS, D.J.
This insurance coverage dispute presented a rare question of first
impression under Massachusetts state law.

At issue was the interplay

between two insurance policies, one issued by defendant Lexington
Insurance Company, which provided $10 million in excess insurance
coverage to the insureds; the other by plaintiff Great Divide Insurance
Company, which provided $1 million in primary coverage or excess coverage
depending on the nature of the accident giving rise to the claim. 1 The
question presented was not about liability but whose: whether to treat Great

The parties agree that both policies provided excess coverage to the
defendants in the underlying wrongful death action giving rise to this
dispute. They disagree as to which policy goes first.
1

Divide’s “hybrid” policy as an Excess Policy or as a Primary Policy and, if as
an Excess Policy, what priority of coverage should be applied to the two
policies with respect to any monetary award in the underlying state court
wrongful death action. Of course, if the Great Divide policy were to be
treated as a Primary Policy, Lexington’s liability would not be triggered
unless the damages exceeded the $1 million of coverage provided by Great
Divide.
On cross-motions for summary judgment, the court heeded the
admonition of the Court of Appeals in Showtime Entm’t, LLC v. Town of
Mendon, 769 F.3d 61, 79 (1st Cir. 2014), that where the path of prophecy is
too dimly lit to make a wise prediction on a question of state law, a district
court has the option of certifying a question to the state’s highest court (as
sanctioned by Massachusetts Supreme Judicial Court (SJC) Rule 1:03). See
Great Divide Ins. Co. v. Lexington Ins. Co., 15-cv-14146-RGS, 2016 WL
3945098 (D. Mass. July 19, 2016).2 On November 1, 2017, the SJC answered
2 As Rule 1:o3 requires, in its rescript the court set out: “(1)

the question
of law to be answered; and (2) a statement of all facts relevant to the
questions certified and showing fully the nature of the controversy in
which the questions arose.” The court framed the question as follows:
Where there is a motor vehicle accident and the primary
commercial automobile liability insurance policy issued to the
owner of the vehicle involved in the accident is exhausted, what
is the priority of coverage between (1) a second primary
commercial automobile liability insurance policy insuring the
2

the court’s question as follows: “Where neither insurer is the primary insurer
in the circumstances of this case, Great Divide and Lexington insure the same
level of risk, notwithstanding the noted differences in the language of each
insurance policy.” Great Divide Ins. Co. v. Lexington Ins. Co., SJC-12164,
Slip Op. at 15 (Nov. 1, 2017). Consequently, the SJC ruled that “both parties
cover the loss at issue, and neither [policy] has priority over the other.” Id.
at 14.
Given the ruling of the Commonwealth’s highest court, the task
remaining before this court requires no heavy lifting. Because both policies
apply “to the extent of their respective policy limits,” id. at 3, the only
question is how a potential damages award or settlement should be
apportioned between the two policies. The answer can be found in Mission
Ins. Co. v. U.S. Fire Ins. Co., 401 Mass. 492 (1988) – a case that the parties

driver of the vehicle, which contains an other insurance/nonowned vehicle clause providing (a) that, with respect to motor
vehicles the insured owns, this insurance is primary, (b) that,
with respect to motor vehicles the insured does not own, this
policy is excess and (c) that “when this coverage form and any
other coverage form or policy covers on the same basis, either
excess or primary, we will pay only our share” and (2) a true
excess liability insurance policy insuring the owner of the vehicle
that contains an other insurance clause providing that “if other
valid and collectible insurance applies to damages that are also
covered by this policy, this policy will apply excess of the ‘other
insurance’”?
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previously agreed was most closely on point to the dispute at hand. In
Mission, where the two policies at issue were “silent on the matter of
percentage of contribution with other insurers,” the SJC counseled that,
given “the absence of language controlling the issue, the better approach is
to require the insurers to contribute equally until the policy with the lower
limit is exhausted.” Id. at 500.
Here, by contrast, there is no such silence. Great Divide’s policy
specifically provides that “[w]hen this coverage form and any other coverage
form or policy covers on the same basis, either excess or primary, we will only
pay our share” – with “our share” being further defined as “the proportion
that the limit of Insurance of our coverage form bears to the total of the limits
of all the coverage forms and policies covering on the same basis.” Great
Divide’s Statement of Material Facts (SMF), Ex. C at 25 (Dkt #18-3). This is
a textbook statement of pro rata coverage, as Lexington concedes. See Def.’s
Mem. in Opp’n to SJ, Dkt #22, at 19 (“Great Divide’s ‘other insurance’ clause
expresses that it will share liability on a pro rata basis. . . .”). Therefore,
because there is “language controlling the issue,” Mission, 401 Mass. at 500,
and because “[a]n insurance contract is to be interpreted ‘according to the
fair and reasonable meaning of the words in which the agreement of the
parties is expressed,’” Allmerica Fin. Corp. v. Certain Underwriters at
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Lloyd’s, London, 449 Mass. 621, 628 (2007) (quoting Cody v. Connecticut
Gen. Life Ins. Co., 387 Mass. 142, 146 (1982)), the court rules that Great
Divide’s share of liability is to be determined on a pro rata basis.
Here the sum of both excess policies, Great Divide’s $1 million plus
Lexington’s $10 million is $11 million.

Great Divide will therefore be

responsible, up to the limit of its $1 million policy, for 1/11th (or 9.09 per
cent) of any settlement or damages award in the wrongful death action.
Lexington, in turn, will pay 10/11ths (or 90.90 per cent).
ORDER
For the foregoing reasons, Great Divide’s Motion for Summary
Judgment (Dkt # 16) is ALLOWED. Lexington’s Motion for Summary
Judgment (Dkt # 21) is DENIED. Lexington’s Counterclaim (Dkt # 5) will
be dismissed as moot. The Clerk will enter judgment accordingly and close
the case.
SO ORDERED.
/s/ Richard G. Stearns
UNITED STATES DISTRICT JUDGE

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