Old Republic Ins. v. Cynthia Bitting

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________________________________
Nos. 01-1206EM, 02-2241EM, 02-2270EM
___________________________________
_____________ *
*
No. 01-1206EM *
_____________ *
*
In re Popkin & Stern, *
*
Debtor. *
*
------------------------------ * On Appeal from the United
* States District Court
Old Republic Insurance Company, * for the Eastern District
* of Missouri.
Appellee, *
*
v. *
*
*
Cynthia Bitting; Lynn G. Carey; *
William E. Cooper; Jeffrey S. *
Gershman; Bennett S. Keller; Steven *
H. Leyton; James R. Nangle, Jr.; *
John O. Niemann, Pat Simons; *
Steven M. Stone; Alan N. Zvibleman; *
Thomas P. Rosenfeld; Donald L. Wolff; *
and The Bar Plan Mutual Insurance *
Company, *
*
Appellants. *
*
_________________________ *
*
Nos. 02-2241EM, 02-2270EM *
_________________________ *
*
In re Popkin & Stern, *
*
Debtor. *
*
------------------------------ * On Appeal from the United
* States District Court
Old Republic Insurance Company, * for the Eastern District
* of Missouri.
Appellee, *
*
v. *
*
*
The Bar Plan Mutual Insurance *
Company, *
*
Appellant. *
___________
Submitted: January 15, 2003
Filed: August 25, 2003
___________
Before BOWMAN, RICHARD S. ARNOLD, and BYE, Circuit Judges.
___________
RICHARD S. ARNOLD, Circuit Judge.
In 1991, Popkin & Stern was a troubled law firm, losing both clients and
partners. The firm has since ceased doing business and sought bankruptcy protection.
-2-
The question presented in this case is whether, and to what extent, the law firm’s
professional liability insurance carrier, Old Republic Insurance Company, is liable for
a claim made against Popkin & Stern in October of 1991. Old Republic argues that
it is not liable for this claim because Popkin & Stern dissolved — an event which
would have terminated the policy — before the claim was made. We disagree;
Popkin & Stern did not dissolve until after the claim was made. We also reject Old
Republic’s alternate argument that the loss on this claim should be spread between
it and another insurer. We conclude that the “other insurance” clauses of the two
policies involved are not “mutually repugnant.” Old Republic is fully liable. The
District Court’s judgments to the contrary will be reversed.
I.
Popkin & Stern was a law firm organized under Missouri law. At the time
relevant to this lawsuit, the firm was governed by an Agreement of Partnership dated
July 1, 1990. The agreement explained:
The term of the Partnership shall continue from the
effective date of this Partnership Agreement until the
death, retirement, or withdrawal of all Partners or until
terminated pursuant to Article Twenty-Four hereof. . ..
Section 13.01 addressed the conditions under which a partner could withdraw from
the partnership: “[a]ny partner may withdraw or retire from the Partnership at the end
of any calendar month, after giving the Partnership at least sixty (60) days’ notice in
writing.” And Section 24.01 provided that “[a] vote of two-thirds (2/3) of the
Partners shall be required to liquidate and terminate the Partnership business.” No
other provision in the Agreement provides a method for dissolving the partnership.
-3-
The firm was experiencing serious financial difficulties throughout 1991, as it
was losing clients and profitable partners. In September of 1991, the remaining
partners decided that the firm was no longer a worth while endeavor. Thus, on
September 30, 1991, all of the remaining partners signed letters of resignation that,
despite the 60-day notice requirement of Section 13.01 of the Agreement, purported
to be effective as of that date.1 The partners took numerous contemporaneous steps
in furtherance of their plan to wind up the partnership. For one, they set up a
Liquidating Committee, which was to handle the winding-up process. The firm also
fired the vast majority of its employees as of that date, keeping only a few employees
to tidy up the firm’s affairs. The firm also cancelled all outstanding credit cards and
transferred its furniture to another law firm.
Even though the firm ceased normal law practice, the Liquidating Committee
continued the winding-up process for a considerable period of time, and at least two
partnership resolutions were drafted after September 30. First, a resolution drafted
October 2, 1991, would have amended Section 13.01 of the partnership agreement to
allow partners to resign with only five days’ notice, rather than the sixty days’ notice
required by the existing agreement. It does not appear that this resolution was ever
adopted by the partners. A second resolution, which proposed a vote to liquidate the
partnership, was dated April 7, 1992. This resolution was not signed, and there is no
evidence that it was adopted.
During this period, Popkin & Stern was insured under a “claims-made”
professional liability insurance policy issued by Old Republic in November of 1990.
The policy covered two classes of liability: (1) claims made during the policy period
or within thirty days thereafter and (2) acts, errors, or omissions that might reasonably
become claims so long as Old Republic was given written notice of the potential
1
In their letters, two partners indicated that they had already resigned, effective
September 4, 1991.
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claim during the policy period. The policy was to last for one year, until November 1,
1991, but provided for early termination in certain circumstances:
8. Change of Status
If there is a change of status in which the NAMED INSURED is:
(a) dissolved;
(b) acquired by another law firm; or
(c) merged into, or consolidated with, another law firm and the
Named Insured is not the surviving entity.
this Policy shall end on the date the change in status takes place . . ..
Thus, if the firm dissolved or was merged into a larger firm before November of
1991, the policy terminated on the date of the change in status.
On October 7, 1991, Popkin & Stern gave Old Republic notice of what has
become known as the Resolution Trust Corporation (RTC) Matter. RTC, a
government agency acting as receiver for a failed financial institution the law firm
had represented, was investigating whether a partner at Popkin & Stern who had
represented the financial institution had committed any malpractice. Subpoenas were
issued for Popkin & Stern records on the matter. Old Republic initially
acknowledged coverage of the RTC Matter, and agreed, along with two other
insurance companies, to settle the matter with the complaining party. The other two
insurers became involved in the suit because they had issued professional liability
policies to two other law firms that now included former Popkin & Stern partners in
their partnership. The Bar Plan Mutual Insurance Company, one of these companies,
insured a law firm whose partners included twelve past Popkin & Stern partners.
-5-
Old Republic has since taken the position that the RTC Matter was not covered
by its insurance policy because Popkin & Stern dissolved on September 30, 1991 —
seven days before the claim was made, according to Old Republic. Old Republic
sought declaratory relief in the United States Bankruptcy Court for the Eastern
District of Missouri, where the law firm’s bankruptcy case was pending, to determine
its liability on the RTC Matter. In Count I, Old Republic asked the Court to find that
it was not liable because Popkin & Stern dissolved on September 30, 1991, and no
notice of the claim was given before that date. In Count III, Old Republic asked the
Court to determine the respective liability of each of the insurance companies. Old
Republic maintained that, if it were liable for the RTC Matter, it should share the
costs with Bar Plan because each policy included an “other insurance” clause.2 Old
Republic maintains that these clauses are “mutually repugnant,” as applying each
clause literally would result in a total lack of coverage. Under well-settled precedent,
so the argument goes, the inclusion of such “mutually repugnant” clauses in each
policy results in the sharing of liability on the claim.
The Bankruptcy Court determined that Count I was a core proceeding and
concluded that Old Republic was liable on its policy. Old Republic then appealed the
matter to the District Court, which disagreed, concluding that Old Republic was not
liable because Popkin & Stern dissolved before Old Republic received notice of the
matter. Count III was deemed a non-core proceeding. The Bankruptcy Judge
submitted recommended findings and conclusions to the District Court. The District
Court concluded that the provisions of the insurance policies were “mutually
repugnant,” thus holding that Old Republic and Bar Plan should share coverage on
the claim. Each of these judgments is now before this Court for review. For the
reasons explained below, we reverse both judgments.
2
Count III alleges that liability should be split between Old Republic, Bar Plan,
and a third insurer. The claim against the third insurer has been settled, however, so
for present purposes we need decide only the respective liability of Old Republic and
Bar Plan.
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II.
We consider first the question of whether the RTC Matter was covered by the
insurance policy issued by Old Republic. Old Republic does not contest that the RTC
Matter is the type of claim that would be covered if the policy was in effect at the
time that it was reported. Instead, Old Republic maintains that the policy was no
longer in effect when the matter was reported, as Popkin & Stern “dissolved” — as
this term is used in the insurance contract — on September 30, 1991. Appellants, on
the other hand, maintain that the partnership did not dissolve on September 30, 1991,
and the policy was therefore in effect on the day that the matter was reported to Old
Republic (October 7, 1991). The argument over whether the RTC Matter was
covered by the Old Republic policy, then, turns entirely upon the question of whether
Popkin & Stern “dissolved” on September 30, 1991. The District Court agreed with
Old Republic, concluding that Popkin & Stern dissolved on September 30, 1991.
As an initial matter, the parties disagree about the meaning that should be given
to the word “dissolved” in the insurance policy. Old Republic argues that the term
should be defined as it is under Missouri partnership law, while Bar Plan argues that
“dissolved” should be given its more common everyday meaning. Before proceeding,
we must resolve this dispute. The interpretation of the language of an insurance
policy is a question of law. Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 76
(Mo. 1998) (en banc). In interpreting the terms of a policy, courts are to eschew
technical definitions of terms in favor of the common understanding of the word
unless it plainly appears that a technical meaning is intended. Rodriguez v. General
Accident Ins. Co. of America, 808 S.W.2d 379, 382 (Mo. 1991) (en banc). When in
doubt, courts are to adopt the reading of the policy that is more favorable to the
insured. Hobbs v. Farm Bureau Town & Country Ins. Co. of Missouri, 965 S.W.2d
194, 197-98 (Mo. App. 1998).
-7-
Given the facts of this case, the word “dissolved” in the insurance policy must
be defined by reference to the law of partnerships. Although courts generally eschew
technical interpretations, we believe that interpreting “dissolved” to mean dissolved
under Missouri partnership law is consistent with the specific factual context of this
case and the language of the insurance policy. First, this policy was written to cover
the professional liability of a general legal partnership. Given that “dissolved” is a
legal term of art that applies to partnerships, it would be unreasonable to conclude
that Popkin & Stern did not understand the use of the word “dissolved” in the
insurance policy in this manner. Moreover, the language of the policy itself indicates
that “dissolved” should be read in accordance with the law of partnerships. The other
two events that trigger this section of the policy — the merger with or acquisition by
another law firm where Popkin & Stern is not the surviving entity — are events which
mark the end of the current partnership as a legal entity. We should read “dissolved”
as being an event with a similar consequence. Reading “dissolved” as defined by
partnership law accomplishes this goal — the dissolution of a partnership marks the
end of its legal existence. We conclude that Popkin & Stern “dissolved” under the
policy only when it dissolved under Missouri partnership law.
Popkin & Stern did not dissolve — as defined by the law of partnerships — on
September 30, 1991, because the partners did not effectively invoke either of the
means of dissolution laid out in the partnership agreement. To start, it is important
to note that although the Missouri Uniform Partnership Act indicates that certain
events, such as the withdrawal of a single partner, lead to dissolution of a partnership,
these are merely default rules that can be supplanted by a partnership agreement.
Haynes v. Allen, 482 S.W.2d 85, 88 (Mo. App. 1972). The Popkin & Stern
partnership agreement did just that; the partnership agreement indicated that only two
events could end the partnership: death or withdrawal of all partners, or a vote of two-
thirds of the partners.
-8-
In light of the partnership agreement, it is clear that Popkin & Stern was not
dissolved on September 30, 1991 — the partners neither effectively withdrew from
the partnership under Section 13.01 nor voted to liquidate the partnership under
Section 24.01. No party has alleged that any of the partners gave notice sixty days
in advance of their September 30 resignation letters. Thus, the partners did not follow
the strictures of Section 13.01. According to the terms of the Agreement, then, these
letters could not effectuate immediate resignations. At best, these letters could be
considered notice of intent to resign, which, under Section 13.01, could become
effective November 30, 1991. In any event, these letters were not effective under the
terms of partnership agreement as immediate resignations. Given that Old Republic
does not allege that the partners adopted a dissolution resolution under Section 24.01
of the partnership agreement, the partners’ actions on September 30, 1991, simply did
not lead to the immediate dissolution of the partnership under the plain language of
the partnership agreement.
The District Court nevertheless concluded that the firm dissolved on that date.
The Court provided two rationales, which are both, in essence, conclusions that,
notwithstanding the fact that the terms of the partnership agreement were not met, the
facts indicate that the partnership was dissolved. First, the Court concluded that the
resignations of the partners were effective without advance notice because Section
13.01 was not aimed at en masse resignations — only resignations by fewer than all
of the partners. The Court decided that this provision was meant to protect remaining
partners. The Court concluded that, as a result, Section 13.01 did not apply to this
case, in which all partners resigned at once. We disagree. Section 13.01 does not
limit itself to situations in which fewer than all remaining partners resign; it states
that a partner cannot withdraw with less than sixty days’ notice. Moreover, Section
13.01 is the only section of the partnership agreement that provides a means for
partners to resign from the firm. There is simply nothing in the partnership agreement
to support the conclusion that the partners can effectuate immediate resignations of
all remaining partners. Moreover, reading such a provision into the agreement would
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run contrary to Section 13.01, which on its face precludes immediate resignations.
That being said, the partnership agreement did provide the partners with a method for
dissolving the partnership on September 30, 1991— a vote of two-thirds of the
partners. The partners did not avail themselves of this option.
The District Court also noted that, under Missouri law, a partnership can be
dissolved by the mutual assent of the partners. Dist. Ct. Order at 13. The District
Court concluded that the resignations of all partners on September 30 represented
such mutual assent. But the language of the partnership agreement controls, not the
Uniform Partnership Act. See Haynes, 482 S.W.2d at 88. Section 24.01 of the
Partnership Agreement provided the partners with a method of expressing their
mutual assent for the dissolution of the partnership — a vote of two-thirds of the
partners. Thus, the partners were free to dissolve the partnership on September 30,
1991; they need only have adopted a liquidation resolution by two-thirds vote. They
failed to do so. Certainly it is true that all parties to a contract may amend it as they
please, say by shortening or eliminating the 60 days’ notice required before
withdrawals; but there is no indication that the partners thought they were doing that.
Because Popkin & Stern did not dissolve on September 30, 1991, the Old
Republic policy did not terminate until November 1, 1991. The RTC Matter was thus
reported within the period specified by the policy, making Old Republic liable for the
loss.3
3
Because we conclude that the policy was still in effect at the time the RTC
Matter was reported, we need not address Appellants’ second argument, that the RTC
Matter was a claim reported within 30 days of the termination of the policy. This
argument would require us to decide whether service of subpoenas is a “claim,” an
inquiry we need not undertake in this case.
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III.
Having decided that the RTC Matter was covered by the Old Republic policy,
we must decide whether coverage should be shared by Bar Plan, an insurer that
insured twelve former partners of Popkin & Stern after they departed from the firm.
Old Republic maintains that each policy was in effect at the time the RTC Matter was
reported, each policy covered the claimed behavior, and each policy contained similar
“other insurance” clauses. Old Republic argues that, as a result, we should disregard
the “other insurance” clauses as “mutually repugnant” and prorate liability between
the insurers. We disagree.
Insurance policies often contain “other insurance” clauses, which purport to
reduce the insuring company’s liability when there is other insurance to cover the
same loss.
These clauses fall into three categories: (1) pro rata
clauses which provide that the insurer will pay its pro rata
share of the loss, usually in the proportion which the limits
of its policy bear to the aggregate limits of all valid and
collectible insurance; (2) excess clauses which provide that
the insurer’s liability shall be only the amount by which the
loss exceeds the coverage of all other valid and collectible
insurance, up to the limits of the excess policy; and (3)
escape clauses which provide that the policy affords no
coverage at all when there is other valid and collectible
insurance.
Distler v. Reuther Jeep Eagle, 14 S.W.3d 179, 183 (Mo. App. 2000). The Missouri
courts have struggled with the question of how to treat these clauses, concluding that
they are generally enforceable but refusing to enforce them when the clauses in all
valid and collectible insurance policies are “mutually repugnant”— when enforcing
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the clauses would leave the insured individual without coverage. See, e.g., State
Farm Mutual Automobile Ins. Co. v. Western Casualty and Surety Co., 477 S.W.2d
421, 426-27 (Mo. 1972) (en banc); Arditi v. Massachusetts Bonding & Ins. Co, 315
S.W.2d 736, 743 (Mo. 1958). Thus, as a general rule, when two insurance policies
cover the same risk and contain closely similar “other insurance” clauses, the clauses
are not enforced, and each insurer is liable for its pro rata share of the loss based upon
a comparison of the policy limits. Arditi, 315 S.W.2d at 743.
In this case, we are faced with similar, though not identical, “other insurance”
clauses. Old Republic’s policy included a standard excess clause:
This POLICY applies in excess of any other valid and
collectible insurance available to the Insured, unless such
other insurance is written only as specific excess insurance
over the limit of insurance of this POLICY. This POLICY
shall not be construed as being subject to the provisions of
any other insurance.
The Bar Plan policy, on the other hand, is a bit more complex. The “other insurance”
clause starts off by providing for pro rata sharing of liability:
If an Insured has insurance provided by other companies
against a Claim covered by this policy, the Company shall
not be liable under this policy for a greater proportion of
such Damages and Defense Expenses than the applicable
Limit of Liability stated in the Declarations or as
determined by LIMITS OF LIABILITY 3. bears to the total
applicable limits of liability of all valid and collectible
insurance against such claim . . ..
The clause, however, goes on to explain that:
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. . . with respect to acts or omissions which occur prior to
the inception date of this policy, the insurance hereunder
shall apply only as excess insurance over any other valid
and collectible insurance and shall then apply only in the
amount by which the applicable Limits of Liability of this
policy exceed the sum of the applicable Limits of Liability
of all such other insurance.
The basis of jurisdiction in this case is diversity of citizenship, and state law,
here the law of Missouri, supplies the rule of decision. Our duty is to apply Missouri
law, not the rule of law that we might select if we were free to do so. In determining
Missouri law, in the absence of any case precisely in point (and there is none here),
our job is to predict what the Supreme Court of Missouri would do if faced with the
case before us. In making this prediction, we are bound by previous decisions of that
Court. The Supreme Court of Missouri is authoritative in these matters, and Missouri
law is what that Court says it is. We may also look for aid to opinions of lower courts
in Missouri, for example, the Missouri Court of Appeals, which sits in three
Divisions. Opinions of the Court of Appeals, however, are not necessarily binding.
They are evidence of the law of Missouri, but they cannot prevail against a contrary
Supreme Court opinion, or if we find their reasoning inconsistent with a Supreme
Court opinion.
We are aware of only two opinions of the Missouri Supreme Court relevant in
the present situation. Old Republic relies on the earlier of these two opinions, Arditi
v. Massachusetts Bonding & Ins. Co., supra, 315 S.W.2d 736. Two “other insurance”
clauses were involved in that case, as they are here. One such clause, contained in
a policy issued by Massachusetts Bonding & Insurance Company, read as follows:
The Massachusetts policy provided that its insurance, as to
non-owned automobiles, “shall be excess insurance over
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any other valid and collectible insurance available to the
insured . . ..”
315 S.W.2d at 738. The second clause, contained in a policy issued by Travelers
Insurance Company, read as follows:
“ . . . the insurance afforded by this policy shall be excess
over any other valid and collectible insurance if the insured
has other insurance against the loss covered by this
policy.”
Id. at 742.
The Supreme Court of Missouri declined to give effect to either of these
clauses. Instead, it held that they cancelled each other out, so to speak, and
apportioned insurance coverage between the two companies in proportion to their
policy limits. The Court gave the following rationale for its decision, quoting Oregon
Auto Ins. Co. v. United States Fidelity & Guaranty Co., 195 F.2d 958, 960 (9th Cir.
1952):
“In our opinion the ‘other insurance’ provisions of the two
policies are indistinguishable in meaning and intent. One
cannot rationally choose between them. We understand the
parties to concede that where neither policy has an “other
insurance” provision, the rule is to hold the two insurers
liable to prorate in proportion to the amount of insurance
provided by their respective policies. Here, where both
policies carry like ‘other insurance’ provisions, we think
(they) must be held mutually repugnant and hence be
disregarded.’ ”
Arditi, 315 S.W.2d at 743.
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If the Massachusetts other-insurance clause had been given full effect, its
policy would have provided no coverage, owing to the existence of the Travelers
policy. If the Travelers clause had, likewise, been given full effect, its policy would
have provided no coverage, owing to the existence of the Massachusetts policy. As
a result, the insured would have had no coverage, a result that presumably was not
intended by anybody. The Supreme Court of Missouri found no way to choose
between the two clauses, and therefore decided to disregard them by adopting the pro
rata solution described above.
We take it that, if two other-insurance clauses can be reconciled, or construed
in harmony with each other in a rational manner, they should be. Contracts are meant
to be taken seriously, and the basic principle of contract law is that promises should
be kept. For this reason, the mere existence of some type of “other insurance” clause
in more than one insurance contract does not automatically mean that the clauses will
be disregarded. The second of the two Missouri Supreme Court opinions, this one
relied on by Bar Plan, illustrates this principle. In State Farm Mut. Auto. Ins. Co. v.
Western Cas. & Sur. Co., supra, 477 S.W.2d 421, two policies of insurance contained
“other insurance” clauses. State Farm’s policy read as follows:
“The insurance with respect to a temporary substitute
automobile, a trailer and a non-owned automobile shall be
excess over other collectible insurance.”
Id. at 426. Western’s policy provided in relevant part as follows:
“In consideration of the reduced rate of premium made
applicable to [this] Garage Liability Insurance, it is agreed
that . . . [i]f there is other valid and collectible insurance,
whether primary, excess or contingent, available to the
garage customer and the limits of such insurance are
sufficient to pay damages up to the amount of the
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applicable financial responsibility limit, no damages are
collectible under this policy.”
Ibid.
The State Farm Court distinguished Arditi. The clause in Western’s policy, the
Supreme Court held, was different from the other-insurance clause in the State Farm
policy. In practical effect, they are both excess clauses, but the Western clause is
more specific. It is a specific “no liability” clause, and was held to have been written
with the possibility of the existence of an excess clause and another policy in mind.
Old Republic attempts to explain the different results in the two cases as due
entirely to the fact that the Western policy recited that its clause was entered into “[i]n
consideration of the reduced rate of premium made applicable to the” policy. It is
true that the premium reduction is mentioned by the Court as part of the rationale for
its decision. We do not, however, read State Farm as limited to cases in which similar
recitations incur in insurance policies. In economic theory, it will always be true that
a reduction in coverage will be reflected in the premium, even if no express reference
is made in a policy or in the bargaining (if any) preceding the issuance of a policy.
The more important consideration in State Farm, instead, seems to us to have been
that the Western policy was phrased in terms of “no liability,” instead of simpler
language characterizing the policy in routine terms as excess with respect to other
insurance. We concede that arguments can be made about where the line between
Arditi and State Farm should be drawn, or, even, about whether such a line logically
exists. We must take these cases as we find them, however, and assume that they are
consistent. The State Farm Court certainly did not think it was behaving in a way
inconsistent with Arditi, so our duty is to reconcile the two cases. We think the key
to this reconciliation lies in the specific nature of the language in the Western policy.
It was not the same kind of routine excess clause as that contained in the State Farm
policy.
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Here, the Bar Plan clause is more specific. Old Republic’s clause is similar to
the State Farm clause involved in the State Farm case. The Bar Plan clause, by
contrast, begins with a rather routine pro rata provision, but ends with a specific
provision with respect to “acts or omissions which occur prior to the inception date
of this policy,” a category that includes the acts underlying the RTC Matter. When
the Bar Plan policy was issued, all of the events claimed to create liability to RTC on
the part of Popkin &Stern had already occurred. The Old Republic policy, which we
have held applicable to the RTC Matter, had already been issued. The Bar Plan
policy’s reference to “acts or omissions which occur prior to the inception date of this
policy” appears to us designed specifically with the present situation in mind, just as
the Western clause in the State Farm case was, in the view of the Supreme Court of
Missouri, designed specifically with clauses such as State Farm’s excess clause in
mind. In this way, the two policies can be reconciled, the two clauses in question are
not “indistinguishable in meaning and effect,” and the Bar Plan clause can reasonably
be held to prevail.
The parties cite various Court of Appeals opinions in their favor. We think Old
Republic’s best case is Planet Ins. Co. v. Ertz, 920 S.W.2d 591 (Mo. App. 1996). But
Planet reads State Farm as rejecting the Arditi analysis. We consider this an unlikely
reading of the two cases. Although fourteen years elapsed between the filing of
Arditi and the decision in State Farm, the State Farm Court did not overrule Arditi,
or even criticize it. The two clauses in the case before it, the Planet Court ruled, were
similar, and, accordingly, the fact that one clause was more specific than the other did
not matter to the Planet Court. In addition, the Planet opinion cites with approval
Fremont Indem. Co. v. New England Reinsurance Co., 168 Ariz. 476, 815 P.2d 403(1991), a case which, we concede, appears to support squarely Old Republic’s
position in the instant appeal. It might be possible for us to distinguish Planet, but
we do not stop to make the attempt. It is sufficient for our purposes that Planet
appears inconsistent with State Farm, and we do not feel at liberty to apply Arditi to
the total exclusion of the State Farm reasoning.
-17-
The case which appears to us to be consistent with both Arditi and State Farm
and which points in Bar Plan’s direction, is Smith v. Wausau Underwriters Ins. Co.,
977 S.W.2d 291 (Mo. App. 1998). In this case, both policies contained excess-type
other-insurance clauses, but the Wausau policy was held to prevail, on the ground that
it was an umbrella policy, while the other policy at issue was a primary policy. The
other policy, issued by Allied Mutual Insurance Company, did contain an excess
clause, but, in the view of the Court, this clause did not convert the Allied Mutual
policy from a primary policy into an excess policy.
In the case at bar, the Bar Plan and Old Republic policies are both primary in
the ordinary sense, at least with respect to the generality of claims. In the case of acts
or omissions committed before the inception of the Bar Plan policy, however, the
policy is more like a true excess or umbrella policy than a primary policy. This class
of claims is expressly carved out, and Bar Plan did not undertake to provide primary
coverage for it. The policy does cover acts and omissions committed in the past, but
it provides only excess coverage for these past acts. This is not a standard excess
clause, and it is not indistinguishable in meaning and effect from the standard excess
clause contained in the Old Republic policy. This difference is important because it
underscores a difference in the intent of the two policies. When a seemingly primary
insurance policy contains a standard excess clause, the Missouri courts interpret this
clause not as an expression that the policy as a whole is an excess policy, but simply
as an attempt on the part of a primary insurer to reduce its liability. The instant case
is not so simple. The Bar Plan policy provides, in general, primary insurance, but it
is excess only as to acts or omissions that occurred before its inception. This
provision stands in contrast to the Bar Plan policy’s pro rata clause for current
transgressions.
This opinion may seem tortured to the reader. We have attempted to pick a
path among the Missouri cases and the concepts discussed in them. Our holding is
merely a prediction, but we hope it is better than a guess. In our view, the Supreme
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Court of Missouri would uphold the Bar Plan clause. The two clauses are not
mutually repugnant, and Old Republic is liable for the entire claim, it being conceded
that the claim is within the limits of the Old Republic policy.4
IV.
As to Count I (whether the Old Republic policy remained in effect after
September 30, 1991), the Bankruptcy Court held against Old Republic, and the
District Court reversed. We now reverse the judgment of the District Court, and
remand the case to that Court with directions to enter an order affirming the judgment
of the Bankruptcy Court.
As to Count III (whether the two other-insurance clauses cancel each other
out), both the Bankruptcy Court and the District Court held the clauses mutually
repugnant, with the result that Old Republic and Bar Plan were required to provide
coverage pro rata. We have held to the contrary, believing that Old Republic
provides sole coverage as to the claim involved in this case. This judgment is
reversed, and the case remanded to the District Court for further proceedings
consistent with this opinion.
It is so ordered.
4
Old Republic, which prevailed on this issue in the Bankruptcy Court and the
District Court, requests pre-judgment interest on the award made to it. Because we
are concluding that Old Republic is solely liable, and are reversing the judgment in
its favor, the propriety of an award of pre-judgment interest to Old Republic is a moot
question. We therefore do not address it.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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