76 Wn.2d 249, PACIFIC INDEMNITY COMPANY et al., Appellants, v. FEDERATED AMERICAN INSURANCE COMPANY et al., Respondents
[No. 39489. En Banc.      Supreme Court      June 12, 1969.]
PACIFIC INDEMNITY COMPANY et al., Appellants, v.
                FEDERATED AMERICAN INSURANCE COMPANY et al.,
                               Respondents.«*»

[1] Insurance - Multiple Coverage - Primary Policy - Determination. Where two or more policies of insurance cover a nonowner-driver of an automobile, neither policy will be determined to provide "primary insurance" simply because such policy specifically and expressly covers the automobile, but rather such a determination, if any, will depend upon the provisions of the policies relating to other insurance.

[2] Insurance - Multiple Coverage - Excess Clauses in Both Policies. Where two insurers' policies cover the same risk and both policies describe the coverage as being excess insurance over any other valid and collectible insurance, the two excess clauses are mutually repugnant and must be disregarded, and each insurer is liable for a share of the cost of defense and legal liability prorated according to their respective policy limits.

Appeal from a judgment of the Superior Court for King County, No. 662396, Walter T. McGovern, J., entered December 15, 1966. Affirmed.

Action on an insurance policy. Defendants appeal from a summary judgment in favor of the plaintiffs.

Guttormsen, Scholfield, Wittits & Ager, by Jack P. Scholfield, for appellants.

Wayne Murray (of Murray, Dunham & Waitt), for respondents.

WEAVER, J. -

This case presents a question of first impression in this state.

When two companies issue insurance policies covering the same occurrence that gives rise to a possible liability and both policies describe the coverage as being excess insurance over any other valid and collectible insurance, which insurance company shall bear the loss, if any?

«*» Reported in 456 P.2d 331.

[2] See Ann. 69 A.L.R.2d 1122; 7 Am. Jur. 2d, Automobile Insurance § 202.

250 PACIFIC INDEMN v. FEDERATED AM. INS. [76 Wn.2d 249

Wendy J. Bundt, while driving an automobile with permission of the owner, William A. Farrimond, had an accident. A passenger in the other car sued both of them.

Plaintiff-appellant, Pacific Indemnity Company (hereafter referred to as Pacific) had insured Miss Bundt against liability arising from her use and operation of an automobile; but, if she was operating a car not owned by her, the policy provided that the company's coverage was only to be excess, after the exhaustion of any other coverage of valid and collectible insurance.

Mr. Farrimond, the owner of the car driven by Miss Bundt, was insured by Federated American Insurance Company (hereinafter designated Federated). The policy provided that the insurance extended to one driving Mr. Farrimond's car only to the extent that the coverage was in excess of any other valid and collectible insurance available.

Thus, we have two insurance policies applicable to the same occurrence, each insuring only in excess of other insurance.

In oral argument before this court, plaintiff-appellant's counsel pointed out that there are three possible solutions.

First: Enforce each contract as written. This merits only passing consideration. If literal effect were given to both "excess insurance" clauses of the applicable policies, neither policy would cover the loss and the result produced would be an unintended absurdity. 7 Am. Jur. 2d Automobile Insurance § 202, p. 545.

Second: Federated's insurance for Mr. Farrimond, being on his automobile, was "primary insurance" and must be exhausted before other "excess insurance" became liable. In support of this contention, appellant cites and discusses our decisions in Safeco Ins. Co. v. Pacific Indem. Co., 66 Wn.2d 38, 401 P.2d 205 (1965), and Western Pac. Ins. Co. v. Farmers Ins. Exch., 69 Wn.2d 11, 416 P.2d 468 (1966). To these we add General Ins. Co. of America v. State Farm Ins. Co., 75 Wn.2d 200, 449 P.2d 391 (1969), decided after the instant case was argued in this court.

June 1969] PACIFIC INDEMN v. FEDERATED AM. INS. 251

[1] It is true that in all three cases we designated certain policies of insurance to be "primary insurance," not because they were on the specific automobile, but because each case was based upon a difference between policies. In Safeco, Western, and General, the dispute was between a "pro rata" clause and an "excess clause." Our designation of a pro rata clause insurance policy as being "primary insurance" when compared with an "excess insurance" clause, was not made for the purpose of designating all policies upon the automobile as "primary insurance"; but was designated "primary" because it became effective prior to the policy of "excess insurance." If we should accept the contention that the owner's policy (Mr. Farrimond's) is primary, we would be compelled to completely disregard the excess clause of that policy. There is no reason to give absolute effect to a provision in one policy while ignoring a similar provision in the other. Both clauses should occupy the same legal status.