The opinion of the court was delivered by: WILLIAM H. YOHN, JR.
Plaintiff Continental Insurance Company ("Continental") and defendant Aetna Casualty and Surety Company ("Aetna") have filed this supplemental joint motion for summary judgment on the remaining outstanding issue in the case. This court's order dated February 22, 1993, in response to the insurers' prior motions for summary judgment, required both Continental and Aetna to indemnify Jefferson Duncan and to defend him in the underlying suits filed in the Philadelphia Court of Common Pleas. In the briefs for those motions, neither Continental nor Aetna briefed the issue of the apportionment of indemnity and defense costs if both companies were held responsible for providing coverage. This supplemental motion addresses the issue whether Continental and Aetna must contribute to the liability and defense costs of Jefferson Duncan in equal shares or on a pro rata basis, in proportion to their respective policy limits.
There are two separate issues for the court to decide: the manner of apportionment of defense costs and the manner of apportionment of indemnity or liability costs. These two types of costs can be handled in the same way, but they need not be, and not all courts have treated them in the same way.
In discussions of apportionment, courts and parties have used the term "pro rata "in several different ways. Black's Law Dictionary defines "pro rata" as:
Proportionately; according to a certain rate, percentage, or proportion. According to measure, interest, or liability. According to a certain rule of proportion. For example, if a corporation has ten shareholders each of whom owns 10% of the stock, a pro-rata dividend distribution of $ 1,000 would mean that each shareholder would receive $ 100.
With regard to apportionment of insurance costs, pro rata usually means a division in proportion to policy limits,
and when this court uses the term "pro rata" without further designation, it means that.
However, "pro rata" has also been used to mean apportionment by equal shares and apportionment in proportion to the ratio between the premiums paid to a particular insurer and the total premiums paid to all insurers covering the occurrence. Windt, Insurance Claims and Disputes, 1988, § 7.04. This last method of apportionment has been tried by several courts, but it has not been used extensively. See e.g. Insurance Co. of Tex. v. Employers Liab. Assur. Corp. 163 F. Supp. 143 (S.D.Cal. 1958); Indiana Ins. Co. v. Federated Mut. Ins. Co., 415 N.E.2d 80 (Ind. Ct. App. 1981). Insurance policies that covered the same occurrence may have had different premiums because they covered a different range of risks or insureds; in that case, the cost of the premiums would not necessarily have reflected the amount paid to insure the risks or the persons covered in the particular occurrence.
The parties do not dispute that Pennsylvania law governs the underlying cases, but unfortunately, the Pennsylvania courts provide little guidance on the issue that is the subject of this motion. The parties cite cases from the courts of common pleas of several counties, from federal courts applying Pennsylvania law and from other jurisdictions. The few cases cited from the appellate courts in Pennsylvania are not directly on point.
There is one indication that the Pennsylvania legislature favors pro rata apportionment in relation to policy limits in the case of double insurance or "other insurance" for an occurrence.
Title 40 Pa.Stat.Ann. § 636(2) sets out requirements for fire insurance policies, and gives a standard form policy with required inclusions. One clause, entitled "Pro rata liability," states, "This Company shall not be liable for a greater proportion of any loss than the amount hereby insured shall bear to the whole insurance covering the property against the peril involved, whether collectible or not." 40 Pa.Stat.Ann. § 636(2). The legislature did not promulgate a similar requirement with regard to other types of insurance. In doing so with regard to fire insurance, however, it could have chosen any of the three methods of prorating discussed above. The fact that the legislature chose to require proration in proportion to the amount of insurance covering the risk demonstrates that the legislature has a preference for this method of apportionment and considers it to be a fair one.
The language of the policies as to apportionment of indemnity costs and as to duty to defend is often determinative in the cases. Where both relevant policies contained language favoring a particular principle of apportionment, the court applied it. Liberty Mutual Ins. Co. v. Home Ins. Co., 583 F. Supp. 849 (W.D.Pa.1984). Occidental Fire and Casualty Co. v. Brocious, 772 F.2d 47 (3d Cir. 1985).
In the instant case, the Aetna policy provides:
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. Our share is the proportion that the limit of insurance of our Coverage Form bears to the total limits of all the Coverage Forms and Policies covering on the same basis.
Aetna Policy, Section V(5)(C), Aetna Exhibit C-19. The Continental policy states: