OPINION AND ORDER
On January 7, 1979, three employees of Conrail, an interstate carrier by rail, were being transported in a van owned by Blue Bird Coach Lines and driven by its employee Greg Hoover. At that time the three employees of Conrail were acting within the scope of their employment and in the furtherance of their employer's interests. The van collided with a utility pole and the three were injured.
Blue Bird Coach Lines was providing transportation for Conrail employees pursuant to a written "General Services Contract" between them which provided that Blue Bird shall be responsible for, and shall release, protect, defend, indemnify and save harmless Conrail from any and all loss, damage, cost and expense and all claims, actions and demands arising out of, A. personal injuries to any persons arising out of the performance of this agreement, and B. the Federal Employers Liability Act based on allegations to the effect that Conrail failed to provide a safe place to work.
Under this indemnity provision Blue Bird secured insurance coverages in two policies, one a basic automobile policy covering the vehicle and its driver issued by the within plaintiff Hartford, with limits of $500,000 per occurrence, and another $500,000 limit policy issued by Federal Insurance Company which covered its liability under the indemnity agreement. Blue Bird also secured an "Umbrella Liability Policy" from the defendant Motor Vehicle Casualty Company, covering its liability in excess of $500,000. It is the disagreement between Hartford and Motor Vehicle that forms the basis of this lawsuit. The relevant terms of their policies will be discussed herein.
All three injured railroad men instituted suits against various defendants. Two of them were settled at an early stage, Hartford and Federal contributed equally to settlement of $24,750 in each case and secured releases in favor of Blue Bird and Hoover. The claim of Jowdat George remained for trial.
On August 16, 1981, Hartford began a separate action against Motor Vehicle as well as the other defendants in the George suit for a declaratory judgment of its non-liability.
George's lawsuit made claims against Conrail under the FELA against Blue Bird and Hoover, under general negligence, and under contract against his own no-fault insurance carrier Home Insurance Co. There was definite strategic method in this apparently procedural madness.
Conrail moved for summary judgment on a cross-claim of indemnity against Blue Bird under its contract and this motion was granted.
The court severed the actions for negligence and for recovery under the no-fault policy from the FELA claim because it believed that the basic cause of action was one under the FELA and that the resolution of the entire case would be accomplished by the trial of that action, which would afford the plaintiff with full recovery. With respect to the claim against plaintiff's no-fault carrier we held that the Pennsylvania no-fault insurance act would not in any way limit or impair plaintiff's right to full recovery under the FELA which governs both liability and damages.
Before trial the FELA action of Jowdat George against Conrail was settled for $600,000, of which $400,000 was paid by Federal and $200,000 by Hartford, the insurance carrier for Blue Bird and Hoover.
Hartford had denied its liability under its policy with Blue Bird, which specifically excluded coverage against liability assumed by contract. Prior to the trial Hartford had requested Motor Vehicle to contribute to a settlement with Jowdat George, which Motor Vehicle refused. In this suit Hartford seeks to recover $124,750 from Motor Vehicle. This figure is computed on the basis that Federal had paid a total of $424,750 of its $500,000 limits, leaving unexpended a balance of its limits of $75,250; thus Hartford could claim the balance of all settlements over the $500,000 limits in recovery for the $224,750 which it had contributed to all settlements. Hartford sues as the contractual subrogee of Blue Bird. Motor Vehicle resists this claim for the reasons set forth below. Both parties have moved for summary judgment and there are no disputed issues of fact.
I. The Limits of Underlying Liability.
Motor Vehicle argues that the condition of its policy with respect to exhaustion of underlying limits has not been met. The policy reads:
Liability under this policy with respect to any occurrence shall not attach unless and until the insured, or the insured's underlying insurer shall have paid the amount of the underlying limits on account of such occurrence.
As set forth before, the claim of Jowdat George was settled by Blue Bird by the payment of $600,000 by its two insurers, Hartford in the amount of $200,000 and Federal in the amount of $400,000. The claims of the other two injured employees were settled at $24,750 each, Hartford paying $24,750 and Federal paying the same.
Both the Hartford policy and the Federal policy had a $500,000 per occurrence limit. For the three claims involved in this occurrence, Federal paid out a total of $424,750 and Hartford paid out $224,750. Thus neither underlying carrier had exhausted its limits. But the total paid out on behalf of Blue Bird, the insured, was $649,500.
Motor Vehicle thus refuses to pay because neither of the limits of the underlying insurers was exhausted. We think they are wrong.
We believe that Motor Vehicle's liability is determined by the following provisions of its policy:
J. Loss Payable. Liability under this policy with respect to any occurrence shall not attach unless and until the Insured, or the Insured's underlying insurer, shall have paid the amount of the underlying limits on account of such occurrence.