“Excess” Clause Trumps “Pro-Rata” Clause in Colorado Other Insurance Dispute

Travelers Home and Marine Insurance Company (Travelers) brought a declaratory judgment action against Central Mutual Insurance Company (Central) claiming that it contributed more than its required share to the underlying action against a common insured, Winston Howe (Howe). The underlying action involved a motor vehicle accident in which Travelers insured, Howe, was driving a car owned by Central’s insured, Walter Pawlowski (Pawlowski). Howe was a permitted user of Pawlowski’s car and thus, qualified as an insured under the Central Policy.

Travelers sought determinations that the Central Policy was primary, and the Travelers Policy was excess; that Travelers did not have any duty of indemnification until and unless the limits of the Central Policy were exhausted; that Central is obligated to reimburse Travelers; and that Travelers does not owe contribution to Central.

Central initially took control of the defense, accepting that its policy was primary and Travelers coverage was excess. However, it subsequently changed its position and claimed that the Travelers coverage was co-primary. Travelers disputed Central’s position and reserved its right to ultimately determine the carriers’ respective rights and obligations.

The United States District Court for the District of Colorado, finding that Colorado law applied (and Alaska law did not—that the auto collision occurred in Alaska was merely a “fortuitous factor” and not as significant as that the Travelers Policy was negotiated and issued in Colorado), noted that an “excess” other insurance clause is valid and enforceable, so long as there is not a conflicting “other insurance” clause making both policies excess. The Travelers’ Policy included an “other insurance” clause with an “excess” provision, which applied because Travelers’ insured (Howe) did not own the automobile he was driving when the accident occurred. In contrast, the Central Policy contained an “other insurance” clause with pro rata language.  The district court held that the coverage provided by Travelers was excess to the coverage provided by Central. Hence, as the excess insurer, Travelers did not have any duty of indemnification until and unless the limits of the Central Policy were exhausted.  Therefore, Central was obligated to reimburse Travelers.