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AMERICAN HOME ASSUR. CO. v. AMERICAN EMPLRS. INS.

October 21, 1974

AMERICAN HOME ASSURANCE COMPANY
v.
AMERICAN EMPLOYERS INSURANCE COMPANY, CONTINENTAL CASUALTY COMPANY, KDI SYLVAN POOLS, INC. AND KDI CORPORATION



The opinion of the court was delivered by: WEINER

 WEINER, J.

 In this action seeking a declaratory judgment, plaintiff has moved for summary judgment. The area of conflict can be divided into two issues. The first one revolves around the respective liabilities of excess insurance carriers and the second relates to the problem of adequate notice of an insured to its carrier.

 We will at this point concentrate upon the first issue. The record establishes that in April of 1969 the defendant, American Employers Insurance Company (hereinafter referred to as Employers), issued a liability policy of insurance to KDI, an Ohio corporation. The policy covered subsidiaries of KDI and had a limit of $5,000,000 in excess of a required underlying coverage of $100,000.

 In June of 1970, KDI Sylvan Pools, Inc., a Pennsylvania corporation and a subsidiary of KDI, purchased an insurance policy from plaintiff, American Home Assurance Company (hereinafter referred to as Home). This policy was also secondary coverage in the amount of $2,000,000 and was specifically to be in excess of a primary underlying policy furnished by Pennsylvania Manufacturers Association (P.M.A.) in the amount of $250,000.

 The seeds of this litigation were planted as the result of a settlement reached in a personal injury action instituted by one Joseph Donnelly who sustained severe injuries resulting in quadriplegia while using a swimming pool purchased from KDI Sylvan Pools. The amount of settlement was $890,000. The primary carrier, P.M.A., paid the first $250,000 and the balance was paid in equal amounts by Home and Employers with the stipulation that their respective rights and liabilities would be ultimately determined in the present litigation.

 Each of the policies contained an "other insurance" clause. The Home policy in relevant part, provided:

 
If other collectible insurance with any other insurer is available to the insured covering a loss also covered hereunder, this insurance shall be in excess of, and shall not contribute with such other insurance.
 
If any other valid and collectible insurance exists protecting the insured against ultimate net loss covered by this policy . . ., this policy shall be null and void with respect to such loss . . .; provided, however, if the amounts recoverable by the insured under such other insurance are not sufficient to completely protect the insured against such loss, this policy shall apply but only as excess insurance over such other valid and collectible insurance, in an amount not to exceed the limit of the company's liability stated in this policy and not as contributing insurance.

 Both plaintiff and defendant assert that the provisions recited above exonerate them from any liability. They have agreed that Pennsylvania law is to govern the determination of this issue.

 Defendant Employers has cited the case of Allstate Ins. Co. v. Employers Liability Assurance Corp., 445 F.2d 1278 (5th Cir. 1971) where two primary insurance carriers whose policies had clauses attempting to make them excess under the particular facts of that case were held subordinated to an Employers umbrella policy almost identical to the one in the present case. The Allstate ruling was based primarily on what the court discerned to be the intent of all the parties. The present case is considerably different as both policies involved here were initially secondary or umbrella type coverage and therefore stand on the same footing. Furthermore, the record does not show that at the time of issuance either the Home or Employers policy was intended to be in any way subordinated one to the other.

 Both clauses here are attempting to accomplish the same result; that is, to make each company's policy in excess over any other "valid and collectible" insurance. When two very closely worded "other insurance" clauses have come into conflict, the judicial response has been to disregard them as mutually repugnant. See, e.g., St. Paul Mercury Ins. Co. v. Underwriters at Lloyds of London, 365 F.2d 659 (10th Cir. 1966); Green v. Benson, 271 F. Supp. 90, 96 (E.D. Pa. 1967); Cosmopolitan Ins. Co. v. Continental Casualty Co., 28 N.J. 554, 147 A.2d 529 (1959); Continental Casualty Co. v. Aetna Casualty & Surety Co., 33 Pa. D. & C.2d 293 (1963).

 Plaintiff Home urges that the case at bar is different because its policy contains an "excess type" clause while defendant's clause is of the "no liability" type. The typical "no liability" clause is similar to the one used by Employers except that it precludes any coverage even if the insured's losses exceed the policy limit of the other ...


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