SHELTER MUTUAL INSURANCE COMPANY VS. KENTUCKY FARM BUREAU , ET AL.Annotate this Case
RENDERED: SEPTEMBER 19, 2008; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
SHELTER MUTUAL INSURANCE CO.
APPEAL FROM MONTGOMERY CIRCUIT COURT
HONORABLE WILLIAM B. MAINS, JUDGE
ACTION NO. 06-CI-90203
KENTUCKY FARM BUREAU
MUTUAL INSURANCE CO.
SHELTER MUTUAL INSURANCE CO.
APPEAL FROM CLARK CIRCUIT COURT
HONORABLE JULIA ADAMS, JUDGE
ACTION NO. 06-CI-00430
STATE FARM MUTUAL AUTOMOBILE
REVERSING AND REMANDING
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BEFORE: ACREE AND STUMBO, JUDGES; GRAVES,1 SENIOR JUDGE.
GRAVES, SENIOR JUDGE: These two appeals involve the priority and
apportionment of loss between two automobile insurance policies that provided
coverage for the same accident. We reverse.
CASE NO. 2007-CA-001078-MR
On December 17, 2004, Kevin Watkins was driving, with permission,
a pick-up truck owned by Leonard and Sandra Watkins. Kevin Watkins
negligently collided with a vehicle driven by Kevin Fairchild. Fairchild incurred
$2,289.76 in medical expenses and a total of $954.26 in property damage as a
result of the accident.
On the date of the accident, Appellant, Shelter Mutual Insurance Co.,
had issued an automobile insurance policy to Leonard and Sandra Watkins. Kevin
Watkins was considered an insured under this policy because he was a permissive
driver. Concerning the coverage for personal and property damage resulting from
the liability of an insured, the Shelter policy provided:
If there is other insurance which covers the insured’s
liability with respect to a claim also covered by this
policy, Coverages A and B of this policy will apply only
as excess to other such insurance.
The limits for payment under the Shelter policy were $25,000.00 per person and
$50,000.00 per accident for bodily injury damage and $25,000.00 per accident for
property damage. The Shelter policy also contains a “step down” provision that
Senior Judge John W. Graves sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.
limits the coverage of permissive drivers to “… the minimum limits of liability
insurance coverage specified by the financial responsibility law applicable to the
On the date of the accident, appellee, Kentucky Farm Bureau Mutual
Insurance Co., had an automobile insurance policy issued to Kevin and Sharon
Watkins. The Farm Bureau policy’s coverage of Kevin extended to his use of any
automobile. Regarding the coverage for personal and property damage resulting
from liability incurred while driving a non-owned vehicle, the policy stated:
Any insurance we provide for a vehicle you do not own
shall be excess over any other collectible or selfinsurance, whether primary, excess, or contingent.
The limits for liability under the policy were $25,000.00 per person, $50,000.00
per accident for bodily injury damage, and $25,000.00 per accident for property
After the accident, Fairchild submitted claims to Shelter for his
personal injuries and property damage. Farm Bureau maintained that Shelter
provided primary coverage and did not participate in the resolution of Fairchild’s
claims. On August 23, 2006, Shelter filed a declaratory judgment action in
Montgomery Circuit Court as to the priority of coverage between the two policies
for the losses suffered by Fairchild. Both parties filed motions for summary
judgment. The court granted Farm Bureau’s motion and held that Shelter’s policy
provided primary coverage. Shelter then appealed.
Generally, three basic situations arise from competing insurance
clauses. Government Emp. Ins. Co. v. Globe Indem. Co., 415 S.W.2d 581-82 (Ky.
1967). “First, one policy contains an ‘excess insurance’ clause and the other a
standard ‘escape’ clause. Second, both policies contain an ‘excess insurance’
clause. Third, one policy contains an ‘excess insurance’ clause and the other
contains a ‘pro rata’ clause.” Id. The majority of decisions require proration in
situations dealing with competing excess insurance clauses. Id.
We find that the trial court erred by failing to give effect to the excess
insurance clause in Shelter’s policy. The reasoning of Government Emp. Ins. Co.,
supports this result. Farm Bureau argues that the specificity of the excess clause
contained in its policy is more akin to the escape clause discussed in Government
Emp. Ins. Co. We disagree. While both the escape clause in Government Emp.
Ins. Co. and the excess clause in Farm Bureau’s policy contain similar phrasing,
the intent of each clause is different when read in its entirety. The escape clause in
Government Emp. Ins. Co. sought to disclaim all liability when there was “either
primary or excess” valid and collectible insurance available to a person other than
the named insured. Farm Bureau’s does not seek to disclaim all liability in a
certain situation, rather it simply states that it will only provide excess coverage
when there is “any other collectible or self-insurance, whether primary, excess, or
contingent.” Shelter’s excess clause refers broadly to “other insurance.” The
degree of specificity in these clauses is irrelevant because they both evince an
intention to provide only excess coverage when any other insurance is available.
Therefore, we find that the clauses are mutually repugnant and should be prorated.
We reverse the judgment of the Montgomery Circuit Court.
On January 15, 2005, John Mills was driving, with permission, an
automobile owned by Patrick Duff. Mills struck a vehicle driven by Chadwick
Bell that was owned by Lou Jean Bell. On the date of the accident, Shelter had in
effect an automobile insurance policy issued to Patrick Duff. Mills was considered
an insured under the policy because he was a permissive driver. The limits of the
Shelter policy were $500,000.00 per accident. However, the Shelter policy
contained a “step down” clause that reduced coverage for permissive users to the
minimum limits of the applicable financial responsibility law. The Shelter policy
also contained the same excess insurance clause as discussed above.
Appellee, State Farm Mutual Automobile Insurance Co., also had in
effect an insurance policy issued to Mills on the date of the accident. The limits of
the State Farm policy were $100,000.00 per accident. The State Farm policy
contained the following clause:
Subject to items 1 and 2, if a substitute car, a non-owned
car or a trailer designed for use with a private passenger
car or utility vehicle … has other vehicle liability
insurance coverage on it … then this coverage is excess
over other insurance.
State Farm’s policy also contains a pro rata clause which states “ … if other
vehicle insurance applies, we are liable only for our share of the damages. Our
share is the percent that the limit of liability of this policy bears to the total of all
liability coverage applicable to the accident.” Shelter settled the claim for the
damage to Bell’s vehicle in the amount of $3,014.00 plus a $460.00 towing fee
without the participation of State Farm.
Shelter filed a declaratory judgment action in the Clark Circuit Court
as to the priority of coverage between the two policies. Both parties filed motions
for summary judgment. The court entered a judgment requiring each party to
contribute equally to the loss. Shelter then appealed.
Shelter argues that the trial court erred by ordering the party’s to
contribute equally rather than on a pro rata basis. State Farm argues that the step
down provisions contained in Shelter’s policy are unenforceable and ambiguous.
In this case, each policy contains an excess clause and State Farm’s
policy contains an additional pro rata clause. The rule is “… that when a policy
containing the pro rata “other insurance” clause conflicts with a policy having an
excess “other insurance” clause, the policy with the pro rata provision should be
applied first and the excess clause policy would become effective only when the
other policy is exhausted…” Hartford Ins. Co. v. Kentucky Farm Bureau Ins. Co.,
766 S.W.2d 75, 76 (Ky.App. 1989). Therefore, the limits of State Farm’s policy
should have been applied first and the Shelter policy would become effective only
as excess. We reverse the judgment of the Clark Circuit Court.
Accordingly, we reverse the judgment of the Montgomery Circuit
Court in 2007-CA-001078-MR and reverse the judgment of the Clark Circuit Court
in 2007-CA-001132-MR. We remand for further proceedings consistent with this
BRIEFS FOR APPELLANT:
James W. Taylor
Amanda P. Thompson
BRIEF FOR APPELLEE
KENTUCKY FARM BUREAU
MUTUAL INSURANCE CO.:
Farrah W. Ingram
Mount Sterling, Kentucky
BRIEF FOR APPELLEE STATE
FARM MUTUAL AUTOMOBILE
Jeffrey A. Taylor