The Montana Supreme Court held that ambiguous language in the excess policy regarding aggregates provided an additional $4 million in CGL coverage. Westchester Surplus Lines Ins. Co. v. Keller Transport, Inc., 2016 Mont. LEXIS 9 (Mont. Jan. 12, 2016).
The insureds' tanker truck overturned and spilled 6,380 gallons of gasoline. The gasoline flowed beneath several homeowners' properties. The insureds held a Commercial Transportation Policy issued by Carolina Casualty Insurance Co. (CCIC). The policy had two coverages: (1) commercial automobile with coverage of $1 million per accident; and (2) commercial general liability, with $1 million in coverage for each occurrence, as well as a $2 million "General Aggregate." The CGL policy stated that its "General Aggregate" limit was the most that would be paid under the CGL coverage regardless of the number of insureds or persons making claims.
Westchester issued an excess liability to insureds. Stated limits were $4 million for each "occurrence" as well as a $4 million "General Aggregate." The term "General Aggregate" was not defined.
The homeowners sued the insureds alleging negligence for causing the accident and in the manner in which the clean-up efforts had been implemented.
CCIC paid for related clean-up expenses and litigation costs under the Auto portion of the policy. CCIC notified the insureds that its duty to defend would end once the Auto coverage had been exhausted. When such limits were exhausted, CCIC referred the matter to Weschester. Westchester undertook the defense pursuant to a reservation of rights, noting that it had no duty to defend under its policy, but that it would defend until its limits were exhausted.
When Westchester had paid $4 million in clean-up expenses and litigation costs, it referred the defense back to CCIC. CCIC defended, but filed a declaratory judgment suit against Westchester, seeking a declaration of CCIC's and Westchester's responsibilities. The Homeowners then made a claim that the CCIC policy provided an additional $1 million pursuant to the CGL coverage, and that the Weschester policy likewise provided an additional $4 million in excess limits under the CGL coverage.
In the tort action, the Homeowners secured confessions of judgment against the insureds for $13 million in damages. The insureds assigned their rights under the polices to the Homeowners.
In the declaratory judgment action, the parties moved for partial summary judgment. The court found that an additional $1 million in limits under the CGL coverage were implicated by the Homeowners' claims. Further, an additional $4 million was available under Westchester's excess policy because the phrase "general aggregate" limit was undefined and ambiguous. The phrase could be read as establishing a "general aggregate" limit for excess payments for each coverage in the underlying policy, rather than only establishing a "general aggregate" limit for the entire policy.
On appeal, Westchester argued the term "general aggregate" meant the maximum that applied to all coverages under the entire policy. The Homeowners noted that the term was undefined in the policy. Given the structure of the excess and underlying policies, the maximum must apply individually to each of the underlying coverages, or at least create an ambiguity that made it so. The court agreed with the Homeowners.
Schedule A of Westchester's policy referred to the underlying insurance. It first described the Auto liability policy with a $1 million limit for each occurrence. It then described the CGL policy with a $2 million "General Aggregate" and a $2 million "Products/Completed Operations Aggregate." Therefore, Schedule A listed two aggregates under the CGL portion of the policy. Further, under the Limits of Insurance section, the policy stated there was a $4 million "General Aggregate," and a $4 million "Products/Completed Operations Aggregate."
Given the language of the Westchester policy, the $4 million "General Aggregate" and the $4 million "Products/Completed Operations Aggregate" were applicable only to the CGL coverage because this was the only coverage for which those terms were used in the underlying insurance stated in Schedule A. The "$4,000,000 Each Occurrence" stated in the excess policy's Limits of Insurance provision would likewise appear to correspond to the Auto coverage's "$1,000,000 Each Occurrence" stated in Schedule A. Under this logical reading, the insureds would expect to have $4 million in excess insurance per occurrence under the Auto coverage, with no aggregate, and $4 million in excess insurance, with a $4 million aggregate, under the CGL coverage, or a total of $8 million in excess limits for the two coverages.
Therefore the court upheld the trial court's holding that the Westchester provided an additional $4 million in CGL coverage.