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LIBERTY MUT. INS. CO. v. PACIFIC INDEM. CO.

January 25, 1984

LIBERTY MUTUAL INSURANCE COMPANY
v.
PACIFIC INDEMNITY COMPANY and AMERICAN HOME ASSURANCE COMPANY



The opinion of the court was delivered by: WEBER

 This opinion represents our latest effort to resolve the various issues in this declaratory judgment action. The dispute is over the obligations of the various parties under insurance policies issued by them and covering the W. T. Grant Company. The insured is a defendant in a large personal injury suit in the state court, which recently culminated in a large verdict for the plaintiff there.

 We are now confronted with cross-motions for summary judgment by the plaintiff Liberty Mutual and defendant American Home. The parties have briefed the issues, and because we find no genuine issue of material fact, this matter is appropriate for disposition under Fed.R.Civ.P. 56. We will also address defendant Pacific's motion for reconsideration of our previous opinion and order on the apportionment of defense costs between Pacific and Liberty Mutual.

 I. FACTS

 A brief review of the facts and the parties is in order. A more detailed discussion of the facts may be found in our previous opinion at 557 F. Supp. 986 (W.D. Pa. 1983).

 Plaintiff Liberty Mutual issued Blanket Public Liability Policy No. R61-621-004235-061 to W. T. Grant. This policy provides primary insurance with a limitation of $100,000. Liberty Mutual also issued Umbrella Excess Liability Policy No. LE 2-621-004236-120 to W. T. Grant. This excess coverage has a limitation of $10,000,000.

 Defendant Pacific issued Comprehensive General Liability Policy No. LAC-202492 to American Cement Corporation with W. T. Grant as an additional insured. This primary liability policy has a limitation of $100,000 which has already been exhausted on other claims.

 Defendant American Home issued Excess Third-Party Liability Policy No. CE 35-07-98 to American Cement with W. T. Grant as an additional insured. This excess liability policy has a limitation of $5,000,000.

 In our previous opinion we concluded that Pacific's policy and Liberty Mutual's primary liability policy would stand on equal footing. We also concluded that while Pacific's liability limitation had been exhausted, it was still liable under the policy for defense costs, to be borne on an equal basis with Liberty Mutual. We did not at that time address any aspect of the American Home policy because it was not before us on Pacific's motion for summary judgment.

 II. ANALYSIS

 We must now resolve the relation of the excess policies of Liberty Mutual and American Home, both as to liability and defense costs. Each party contends that the other's policy is primary.

 We look first to the American Home policy which sets forth liability limitations in Endorsement 2:

 
It is understood and agreed that the limits of liability afforded hereunder shall be the difference between $5,000,000 Combined Single Limit Bodily Injury and Property Damage Liability (including Automobile), Protection, Indemnity and the Limits of Primary Liability shown below . . . .

 This clause is followed by a listing of primary insurance maintained by the insured, including the Pacific policy involved in this suit. Additional primary insurance is identified in Endorsements 5, 9 and 10. The Liberty Mutual "excess" policy is not named in these listings.

 Liberty Mutual contends that the plain implication of the above-quoted endorsement is that American Home intended that its policy be excess insurance only as to those listed primary policies. It is argued that because Liberty Mutual's excess policy is not listed as primary insurance in the endorsements, and because Liberty Mutual's policy purports to be excess as to all other insurance, American Home's policy must be exhausted before Liberty Mutual's policy is reached.

 There are however other applicable provisions in the American Home policy. Condition 1 of the policy incorporates by reference the provisions of the underlying primary policies:

 
1. It is agreed that this policy, except as herein stated, is subject to all conditions, agreements and limitations of and shall follow the Primary Insurance in all respects, including changes by endorsement . . . .

 The applicable policy for our purpose is the primary policy for General Liability, identified in Endorsement 2 as the Pacific policy which is in issue here. This policy contains an ...


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