Excess Insurance Case In Texas

The United States Court of Appeals for the Fifth Circuit recently decided a case wherein the insured argued that he had an excess insurance policy. The court decided that his policy was not an excess insurance policy.
The case is styled “Danny Kirk, v. Universal Underwriters of Texas Insurance Co.” In this case, Universal Underwriters of Texas Insurance Co. (“UUT”), issued to Olympic International Trucks, Inc. d/b/a Olympic Ideal Lease (“Olympic”) an insurance policy. Kirk, who was injured by a tractor-trailer unit leased to Gulf Coast Building Supply (“Gulf Coast”), asserted that the policy issued to UUT was an excess policy.
The court analysed the policy. Reading Part 500 of the UUT Policy, it provided liability insurance to Olympic for injuries arising out of “garage operations” or “auto hazard.” Auto hazard included coverage of “anyone else required by law to be an insured while using an auto under a lease or rental agreement, within the scope of Olympic’s permission.” The UUT Policy provided that it only covered Olympic’s lessees if “at the time of the accident, the insurance required by the lease or rental agreement is not collectable.”
The lease agreement required Gulf Coast to maintain $750,000 of liability insurance on the tractor-trailer unit and in fact Gulf Coast had coverage for $1,000,000 with Home State County Mutual Insurance Company. Home State paid the policy limits of $1,000,000. Kirk had injuries that exceeded this amount that were not fully compensated, thus the reason for Kirk bringing suit against UUT for more.
The court found that the UUT Policy only provided coverage where “the insurance required by the lease or rental agreement is not collectable,” and the court found that the term “collectable” did not require UUT to show that Kirk would be fully compensated for his injuries, only that the other insurance was able to be collected.
In this case the court applied Texas law because the policy was issued in Texas and the insurance company was domiciled in Texas. The court stated “Texas’s interests in governing insurance contracts entered into in Texas for the protection of Texas residents would be most seriously impaired if Texas law did not apply.”
As a side note, there was an arguement about the spelling of the word “collectable” in this case. The correct spelling is collectible, whereas in the policy it was spelled “collectable.” The court went to Random House Webster’s Unabridged Dictionary and pointed out that “collectable” is an acceptable alternative spelling of collectible and means “capable of being collected.”
The lesson from this case for the policyholder is to make sure they know what they are buying. There needs to be a discussion with the agent to clarify what is being purchased.