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Insurance Law From A to Z Series – Primary vs. Excess Coverage

Summary Mississippi Insurance Law CoverIt’s time for the next installment of Holcomb Dunbar law series “Insurance Law from A to Z.”  This was put together by our litigation group  who practice in the insurance law arena.  Of course, if you have questions about these or any other topics please do not hesitate to contact us.

This week’s installment –

Primary vs. Excess Issues

There is no statute in Mississippi governing “other insurance” provisions, other than a provision which states that “any motor vehicle liability policy may provide for the prorating of the insurance thereunder with other valid and collectible insurance.”  See Miss. Code Ann. 63-15-43(9).  There is no case law that has invalidated “excess” policy provisions as contrary to public policy or based on the statute mentioned.

Nevertheless, there are some situations that will arise that will create a conflict between a carrier’s attempt at designating its policy as excess, and the “other” insurance company’s attempts to do the same thing.  Under Mississippi case law, when two (or more) policies present competing other insurance clauses (such that, if both literally read, would leave no primary coverage), the courts will disregard both provisions, and deem the policy for the accident vehicle as the primary.  Travelers Indemnity Company v. Chappell, 246 So. 2d 498 (Miss.1971); USF&G  v. John Deere Insurance Co., 830 So. 2d 1145 (Miss. 2002).

In other words, when two “other insurance” clauses conflict such that neither insurer purports to carry the primary policy of coverage, the two “other insurance” clauses cancel each other out.  This common law invention is known as “The Rule of Repugnancy.”  Once the rule is applied, “the policy of the owner of the vehicle involved in the accident is ordinarily considered to be the ‘primary policy.’”  Chappell, at 505.

Where there are two conflicting “other insurance” clauses, a carrier still should examine the language of the policies to see if in fact they conflict.  As it stands right now, however, this basic rule of contract construction comes with a caveat in Mississippi, for even where the policies do not conflict, the appellate courts have shown a tendency to apply the “primary” rule anyway.  As a result, it is becoming more and more “universal” (as one Mississippi opinion put it) to make the “primary” insurer the one with coverage of the automobile involved, conceivably in the face of policy language to the contrary.  Recently, the Mississippi Supreme Court summarily held “[t]he long-standing law in Mississippi is that the insurance policy issued to the owner of the vehicle is the primary policy . . . .”  See Guidant Mut. Ins. Co. v. Indemnity Ins. Co. of North America, 13 So. 3d 1270 (Miss. 2009).  That “primary” insurer will be required to exhaust the limits of the policy before the other, excess policy will be invoked.  Assuming a court can be reminded to look at the policy language first, in a case in which the other policy announces itself to be the primary policy or provides that coverage is to be pro rated between the insurers, the company’s excess provision would not be in conflict, and would in fact be excess.

A similar issue arises when insurance carriers dispute which company will be able to take the offset of other available insurance (such as the tortfeasor’s liability policy).  The only Mississippi case to have addressed the question of priority of a set-off is Dixie Insurance Company v. State Farm Mut. Auto. Ins. Co., 614 So.2d 918 (Miss. 1992).  In Dixie, the court appeared to create the rule that the primary carrier is entitled to the offset.   The court stated, “[t]he trial court correctly held that the primary insurer was entitled to offset first.”  Id.  See also Strickland v. Hill, 2002 WL 31654961(E.D. La.) (unpublished opinion) (noting that the offset doctrine “appears to be tailored based on the ranking of insurance companies”).  However, this “rule” may be an overstatement of Mississippi law as the court strayed from policy interpretation in this decision and the announcement of this rule was unnecessary.

 

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The information contained in this post is for general guidance on matters of interest only.  The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, there may be omissions or inaccuracies in information contained in this report.  Accordingly, the information in this report is provided with the understanding that the authors are not herein engaged in rendering legal, tax, or other professional advice and services.  As such, it should not be used as a substitute for consultation with legal or other competent advisers.  Before making any decision or taking any action, you should consult with your counsel or the attorneys at Holcomb Dunbar.

2018