In Philadelphia Indemnity v. Lexington Insurance, both companies insured a school building which was damaged by fire. The issue was which insurance company had to pay, and how much. The trial court ruled that Philadelphia had to pay 54% of the loss, while Lexington had to pay 46%. Both insurance companies appealed and the Tenth Circuit affirmed.
Both policies had other insurance clauses which made the policies excess if other insurance was available. Under Oklahoma law, this meant that the court ignores the other insurance clauses, and each insurer pays a portion of the loss — on a pro rata basis according to the ratio each policy limit bears to the cumulative limit of both policies. The question was what were the policy limits of the policies? The Philadelphia policy had a $7 million limit. The Lexington policy had a $100 million limit, with an endorsement that limited coverage to the amount of the loss. The trial court concluded, and the Tenth Circuit agreed that the amount of the loss (approximately $6M) was the proper limit, and apportioned the loss between the two insurers as noted above. In determining the apportionment, the courts relied heavily on Equity Mut. Ins. Co. v. Spring Valley Wholesale Nursery, Inc., 1987 OK 121,747 P.2d 947.
The dissent claims that the court should have used the $100,000 million limit to determine the proper apportionment. The majority equated the policy limits to the limit of liability. No insurance company is bound to pay more than the loss.
There are also arguments regarding standing– Philadelphia had standing to bring the claim because it would be financially affected by how its policy interacts with the Lexington policy to cover the loss. It did not matter that each policy provided payment to different insureds where both policies provided coverage for the same building. An agreement in the lease requiring one party to purchase insurance did not control over the insurance policies’ language. The fact that the Philadelphia policy covered only the building which burned, while the Lexington policy covered other school district buildings, too, did not affect the apportionment.