Mary Free Bed Hospital & Rehabilitation Center v. Insurance Co. of North America

131 Mich. App. 105 (1983) 345 N.W.2d 658

MARY FREE BED HOSPITAL AND REHABILITATION CENTER
v.
INSURANCE COMPANY OF NORTH AMERICA

Docket No. 64736.

Michigan Court of Appeals.

Decided December 19, 1983.

Varnum, Riddering, Wierengo & Christenson (by Terrance R. Bacon and Teresa S. Decker), and Baxter & Hammond (by R. Curtis Mabbitt), of counsel, for plaintiff.

Cholette, Perkins & Buchanan (by Bruce M. Bieneman and Jeffrey H. Beusse), for defendant.

Before: R.M. MAHER, P.J., and GRIBBS and K.N. SANBORN,^[*] JJ.

GRIBBS, J.

In this case we are presented with an issue similar to that addressed in Farm Bureau Mutual Ins Co v Horace Mann Ins Co, 131 Mich. App. 98; 345 NW2d 658 (1983). In Farm Bureau we decided that the "other insurance" clauses of conflicting insurance policies should be disregarded and liability prorated based on the combined policy limits. See Lamb-Weston, Inc v Oregon Automobile Ins Co, 219 Or 110; 341 P2d 110 (1959). Here, the insurance policies of the self-insured plaintiff, Mary Free Bed Hospital and Rehabilitation Center, and the defendant, Insurance Company of North America (INA), contain conflicting "excess" clauses. Consistent with our opinion in Farm Bureau, we hold that the clauses should be disregarded and pro-rata liability attached.

In assigning pro-rata liability, a problem not present in Farm Bureau arises. The Mary Free Bed Plan has a policy limit of $250,000. The INA policy has a $1,000,000 limit and a $10,000 deductible. The deductible amount was paid for here by the Mary Free Bed Plan. Thus, the hospital argues that in considering its pro-rata liability, the policy's value is $240,000, which is the policy limit less the sum covered under INA's deductible. INA argues that proration should be based on the plaintiff's policy limit of $250,000 without adjustment. The trial court used the plaintiff's calculation to arive at a liability proportion of 19.35% for Mary Free Bed and 80.65% for INA. We disagree with this method and accept INA's "policy limits" argument. See 8A Appleman, Insurance Law & Practice, § 4909, p 408; 16 Couch, Insurance (2d ed), § 62:2, pp 436-437. The applicable deductible does not affect proration. The insurers are to pay the loss in proportion to their policy limits.

The trial court properly determined that pro-rata liability applies, but erroneously calculated the amount of proration. We affirm in part and reverse in part and remand for entry of an order consistent with this opinion.

We do not retain jurisdiction.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.