In Gemini Insurance Co. v. Zurich American Insurance Co., No. 22-13495, __ F.4th__, 2024 WL 4553123, (Oct. 23, 2024), two insurance companies disputed what share of a $2 million settlement each was required to pay under Florida law. The answer turned on the interpretation and interaction of two “other insurance” clauses.
Gemini and Zurich both insured a trucking company, with Zurich providing coverage for $1 million and Gemini providing coverage for $3 million. Both insurers agreed that they owed a share of a $2 million settlement arising out of a tractor trailer accident, where the insured leased the tractor and trailer. Gemini argued that its policy was excess to Zurich’s and it owed $1 million while Zurich argued that it owed $500,000 because the policies attached at the same level and therefore each insurer owed a pro rata contribution.
The district court, granting Zurich’s motion for summary judgment, held that each insurer owed its pro rata share, reasoning that in Florida where two insurance policies contain excess insurance clauses, the clauses are deemed mutually repugnant, and both insurers become primary and share the loss on a pro rata basis in accordance with their policy limits. Travelers Ins. Co. v. Lexington Ins. Co., 478 So. 2d 363, 365 (Fla. 5th DCA 1985).
The Eleventh Circuit reversed. Writing for the court, Judge Jordan explained that Florida law recognizes three main kinds of “other insurance” clauses—(1) pro rata clauses, which limit an insurer’s contribution to a proportion of the total loss based on the policy’s limit; (2) excess clauses, which provide coverage only after other insurance limits are exhausted; and (3) escape or no liability clauses, which provide that there is no coverage if there is another policy that covers the loss. Where more than one policy provides coverage for a loss, it is appropriate to review the insurance contracts to see if they address the ranking or contribution of other insurers.
Gemini’s “other insurance” clause stated: “This insurance is excess over and shall not contribute with any of the other insurance.” Zurich’s clause stated, in relevant part: “[T]he insurance provided by this Coverage Form is excess over any other collectible insurance.” It further provided: “When this Coverage Form and any other Coverage Form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis.”
Gemini disagreed with Zurich’s contention (accepted by the district court) that both policies contained excess “other insurance” clauses such that each insurer was required to make a pro rata contribution. Rather, it argued that Gemini’s policy was excess to Zurich’s because its “other insurance” clause provided that it was both excess and non-contributory, while Zurich’s clause was pro rata.
The Court of Appeals sided with Gemini, basing its reasoning on two Florida district court cases. First, in Progressive Express Insurance Co. v. Ferris, 312 So. 3d 112 (Fla. 5th DCA 2020), the court held that where there is a “pure excess” clause and a pro rata clause, courts give effect to the “pure excess” provision. Notably, the insurance clauses in Ferris resembled the clauses at issue before the Eleventh Circuit. One clause provided that it was “excess over any other . . . coverage” (like Gemini’s), and the other described itself as an excess clause but went on to provide that the insurer would only pay its proportion of the damages (like Zurich’s).
Second, in Aetna Casualty & Surety Co. v. Beane, 385 So. 2d 1087 (Fla. 4th DCA 1980), the court rejected the argument that two insurance policies were mutually repugnant such that the policies applied pro rata where one policy (Aetna’s) provided that it was “excess insurance over any other valid and collectible insurance” and the other (American States’) provided that it “shall be in excess of, and shall not contribute with, such other insurance.” The court was focused on giving plain meaning to the policies’ text rather than categorizing the policies as pro rata or excess. It placed special significance on the phrase in American States’ policy “shall not contribute with such other insurance” and concluded that American States’ policy was excess to Aetna’s.
Applying Ferris and Beane, the Eleventh Circuit found that Zurich’s policy stated that it would pay a proportion of the loss, like the policy in Ferris (which gave effect to a pure excess clause over a pro rata clause). Gemini’s policy included the “we shall not contribute” language like the policy in Beane that the court concluded was excess to the other policy. Thus, Ferris and Beane, when considered together, counseled that Gemini’s policy was excess to Zurich’s.
The court was unpersuaded by Zurich’s attempts to distinguish Beane because it involved uninsured motorist coverage and an umbrella policy. It also rejected Zurich’s invitation to overturn Beane based on the court’s general reluctance to second-guess state courts’ application of their own law. Finally, the court disagreed with Zurich’s argument that there is no such thing as a “super excess” policy under Florida law—the Ferris court’s description of a policy as “pure excess” suggested otherwise. More importantly, the court explained, the three categories of “other insurance” clauses recognized by Florida courts were not rigid boxes that all “other insurance” clauses neatly fall within. As with any contract interpretation, the focus needs to be on giving effect to the language of the relevant policies.
Because Gemini’s policy was excess to Zurich’s, Zurich was required to pay $1 million (the policy limit), and Gemini was required to pay the excess (the remaining $1 million).
Next, the court considered Zurich’s arguments about prejudgment interest. The district court concluded that Gemini was the prevailing party and awarded it prejudgment interest, from the date Gemini paid $2 million to settle the claim until March 4, 2022, the date that Zurich paid its pro rata share of the settlement ($500,000). The court rejected Zurich’s argument that interest should have stopped accruing on November 10, 2020—the day that Zurich offered to pay Gemini its pro rata share in exchange for a full release of the additional $500,0000. Zurich’s offer was conditional. Gemini was thus forced to litigate for the remaining $500,000, and prejudgment interest continued to run until March 4, 2022—the day that Zurich made an unconditional $500,000 payment to Gemini. As for the second $500,000 owed to Gemini, the court explained that prejudgment interest would run from the date of Gemini’s settlement payment until the date of the amended final judgment.