The court determined that the other insurance and loss payment provisions relieved the insurer of coverage obligations. Moroney Body Works, Inc. v. Central Ins. Co., 2015 Mass. App. LEXIS 97 (Aug. 6, 2015).
A fire destroyed Moroney's custom-built bookmobile that had just been completed. Moroney had two policies: a commercial property policy issued by Central, and a garage insurance policy issued by Pilgrim Insurance Company. Central denied liability for the bookmobile. Pilgrim covered the cost of repairing the bookmobile. It paid $12,449.82 based on the appraiser's estimate of the repair costs. Moroney thought this amount was inadequate given its own estimate of the repair costs.
Moroney sued both insurers. Pilgrim settled by paying Moroney an additional amount which, when added to Pilgrim's earlier payment, resulted in Moroney receiving more than the repair cost. Moroney and Central both moved for summary judgment. The trial court granted Moroney's motion.
On appeal, Central argued its policy was excess to Pilgrim's, and that Central had no liablity unless the loss exceeded the coverage limit of Pilgrim's policy. Central relied on its "other insurance" provision:
If there is other insurance covering same loss or damage, . . . we will pay only for the amount due from that other insurance, whether you can collect on it or not.
The appellate court noted that such clauses applied where there were two or more concurrent policies that insured the same risk and the same interest, for the benefit of the same person, during the same period. Therefore, in order for the other insurance clause to operate in the insurer's favor, there had to be both an identity of the insured interest and an identity of risk.
Here, the Pilgrim policy covered autos damaged by fire. Central's policy covered "direct physical loss of or damage to Covered Property at the premises." "Covered Property" included Moroney's building, fixtures, machinery, equipment, etc. Therefore, although employing different language, both policies insured Moroney's interest as owner of the bookmobile from the risk of fire. Central's "other insurance" provision applied, and Central's liability did not begin until Pilgrim's policy limit was exhausted.
Central's loss payment provision also barred further coverage under the policy. The provision allowed Central to select whichever payment option it preferred, insuring the property for the lesser of actual cash value or the cost to repair or replace the damaged property. The trial court judge erred by awarding Moroney $126,232.20, representing the difference between the original contract price for the bookmobile ($156,900) and the amounts received in settlement with Pilgrim ($30,667.80). Moroney was not entitled to receive anything more than its repair costs.
Therefore, Central was relieved of liability under the other insurance provision and the loss payment section.