Carr v. Lumbermens Mut. Cas. Co. 63 N.Y.2d 319 (1984)
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When an insurance company issues separate policies to spouses residing in the same household, and each policy contains an “other insurance” clause, the insurer must contribute up to the full extent of the coverage in each policy, allowing for the stacking of policy limits, unless a clause unequivocally makes a policy invalid or uncollectible.
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Summary
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This case concerns whether an insurance company could limit its liability when it issued separate policies to a husband and wife, each covering their own vehicles, and their son was involved in an accident while driving another car. The New York Court of Appeals held that Lumbermens Mutual Casualty Co. was liable for the cumulative limits of both policies, totaling $150,000 in excess coverage, despite a “two or more auto policies” clause attempting to limit liability to a single policy’s limit. The court reasoned that the “other insurance” clause required each policy to contribute ratably and that the insurer’s interpretation of the “two or more auto policies” clause violated insurance regulations by effectively invalidating one policy.
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Facts
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Plaintiffs were injured in a car accident involving Wesley Carr, who was driving a vehicle owned by Michael Romeo. Romeo’s insurance policy provided primary coverage with a $25,000 limit. Wesley Carr’s parents, James and Rose Carr, each had separate insurance policies with Lumbermens Mutual Casualty Co., providing $75,000 in excess coverage each. James’ policy covered his pickup truck, while Rose’s policy covered her vehicles. Wesley resided with his parents and was a “covered person” under both policies. Lumbermens charged and received full premiums for both policies.
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Procedural History
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The plaintiffs sued, seeking a declaration that both Lumbermens policies were available to cover the losses up to their combined limits of $150,000. Lumbermens counterclaimed, arguing that its liability was limited to $75,000 under the “two or more auto policies” clause. The Supreme Court declared that both policies provided excess coverage. The Appellate Division reversed, limiting Lumbermens’ liability to $75,000. The New York Court of Appeals then reversed the Appellate Division, reinstating the Supreme Court’s judgment.
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Issue(s)
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Whether Lumbermens’ “two or more auto policies” clause could validly limit its liability to the maximum limit of one policy, when the “other insurance” clause in each policy provided for pro rata excess coverage, and applicable insurance regulations required ratable contribution by excess insurance policies.
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Holding
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No, because the “two or more auto policies” clause, as construed by Lumbermens, effectively nullified the “other insurance” clause’s requirement for ratable contribution, violating insurance regulations requiring excess policies to contribute ratably and was not “equally or more favorable to the insured” as required by 11 NYCRR 60.1(g).
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Court’s Reasoning
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The court reasoned that the “other insurance” clause in each policy provided for pro rata excess coverage, as required by insurance regulations (11 NYCRR 60.1[g]). Lumbermens argued that the