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ALERT: Primary Coverage Where Both Policies Say they are Excess in PA, DE and NJ

September 2, 2014

Issue Presented: Under New Jersey, Pennsylvania, and Delaware law, how is the excess assessed when an insured driver is covered by multiple primary coverage policies with identical excess clauses?

Answer: In all three states, two identical competing excess clauses will be deemed mutually repugnant and cause both policies to share in the loss equally.

Analysis:

PA: In Pennsylvania, “[w]here two policies each purport to be excess over the other, such clauses are mutually repugnant; both must be disregarded and the insurers must share in the loss.” Nationwide Ins. Co. v. Horace Mann Ins. Co., 759 A.2d 9, 12 (Pa.Super. 2000) (cautioning that the equal shares method [as opposed to pro-rata method] should be applied only where two clauses are truly irreconcilable, such that giving literal effect to both would result in neither policy covering the loss). In such a situation, each insurer must contribute equally towards any settlement, judgment or expenses. Fireman's Fund Ins. Co. v. Empire Fire & Marine Ins. Co., 155 F. Supp. 2d 429, 434 (E.D. Pa. 2001) (holding that competing policies with identical excess clauses split costs including cost of defense). Overall, when a Pennsylvania driver is covered by two primary coverage policies with identical competing excess clauses, the insurers will share equally in the loss.

NJ: The Superior Court of New Jersey deems two policies as co-primary if they both have excess clauses and would cancel each other out. Similar to Pennsylvania, New Jersey forces two policies with competing excess clauses to “share the risk”. Hanco v. Sisoukraj, 834 A.2d 443, 447 (N.J. Super. App. Div. 2003). The Superior Court of New Jersey makes clear that, “unless all the policies contain congruent pro-rata provisions, the sharing is equal. Id. Overall New Jersey has competing excess clauses share equally in the loss unless they have identical pro-rata clauses.

DE: The Superior Court of Delaware has only addressed the issue of competing excess clauses once in Liberty Mut. Ins. Co. v. Fireman's Fund Ins. Co., 479 A.2d 289, 292 (Del. Super. 1983). In Liberty Mutual Insurance, The Superior Court of Delaware held that, “[w]hen two very closely worded [excess] clauses have come into conflict, the judicial response has been to disregard them as mutually repugnant.” Id. The Court has also held that when competing excess clause are “silent on apportionment between two competing excess clauses and do not have similar pro-rata clauses then each policy will share in the costs equally.” See Id. Overall, Delaware will have competing polices with congruent excess clauses share equally in the costs unless there are also pro-rata provisions in both polices.

No Statutes: There are no statutes covering competing excess clauses for third parties in Pennsylvania, New Jersey or Delaware. No Motor Vehicle Codes had any statutes concerning coordination of Third Party Benefits. The Motor Vehicle Codes only mention Coordination of Benefits for First Parties, and only mention Priority of Recovery / Coverage in Excess of Requirements for Uninsured/ Under-insured Motorists. 


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