## Facts

- Merrill’s Rental Service, Inc. leased motor vehicles to Cummings Bros. under an agreement requiring Merrill’s to provide liability insurance for vehicles operated by Cummings’ employees.
- Merrill’s obtained a liability policy from Carriers Insurance Company with high limits; Cummings separately obtained a $250,000 liability policy from American Policyholders’ Insurance Company.
- A Cummings employee negligently drove a leased vehicle and caused a collision resulting in a fatality and property damage.
- Carriers settled the resulting wrongful-death claim for $200,000 and the property-damage claim for about $8,000, asserting it acted in good faith and in its insured’s best interests.
- Carriers demanded that American contribute to the settlement; American refused.
- Both policies contained “other insurance” clauses stating that, if other valid insurance applied, the policy’s coverage would be excess; neither policy expressly stated it was primary over the other.
- Carriers sued American for contribution; on an agreed statement of facts, the trial court entered judgment requiring American to pay about $104,000 (roughly half of the settlement), and American appealed.

## Issues

1. When two liability policies each contain an “other insurance” clause purporting to make coverage excess over any other insurance, how should priority and allocation be determined absent language clearly making one policy primary and the other excess?
2. If the excess clauses conflict, should the loss be allocated equally between insurers or apportioned by policy limits?
3. Does a lease provision requiring the lessor to provide insurance control which insurer is primary as between the insurers?

## Decision

- The court held the competing “other insurance” excess clauses were mutually repugnant and were disregarded for priority purposes.
- With the clauses set aside, both policies were treated as providing primary coverage for the loss.
- The court required the insurers to share the loss equally (50/50), at least up to the limits of the lower-limit policy.
- The court rejected reliance on the lease’s insurance requirement to determine insurer priority, focusing on the insurance contracts.
- The judgment requiring American to contribute approximately $104,000 was affirmed.

## Legal Principles

- When two liability policies contain irreconcilable “other insurance” provisions each attempting to make coverage excess to the other, the provisions may be treated as mutually repugnant and disregarded.
- Disregarding mutually repugnant excess clauses results in co-primary coverage, with both insurers obligated on the same level for the covered loss.
- A permissible method of allocation between co-primary insurers is equal sharing of the loss (rather than pro rata by limits), particularly as a clear and administrable rule when policy language provides no basis to prefer one insurer.
- Contractual arrangements between insureds (such as a lease requiring one party to procure insurance) do not, without corresponding policy language, determine priority between insurers.

## Conclusion

The court affirmed contribution against American, holding that conflicting excess “other insurance” clauses canceled each other out, making both insurers co-primary and requiring an equal split of the settlement despite the lease term assigning insurance responsibility to the lessor.


Carriers Ins. Co. v. Am. Policyholders' Ins. Co., 404 A.2d 216 (Me. 1979)