In Gohagan v. Cincinnati Ins. Co., No. 14-3454, 2016 WL 66944 (8th Cir. Jan. 6, 2016), the U.S. Court of Appeals for the 8th Circuit affirmed a Missouri federal court’s ruling that the anti-stacking provisions in a commercial general liability and business owner’s policy prevented recovery for the same injury under both policies.
The coverage dispute arose out of an accident that occurred when the insured, Thomas Campbell was removing a tree from a residential development property, resulting in bodily injury to John Gohagan. Cincinnati Insurance Company (Cincinnati) issued a general liability policy and a business owner’s policy to Campbell, which were each subject to a $1 million per-occurrence limit and a $2 million general aggregate limit. Both policies contained anti-stacking provisions that stated “the aggregate maximum limit of insurance” under all policies “shall not exceed the highest available limit of insurance” under any one policy.
The parties settled the underlying personal injury claims, which included Cincinnati’s payment of the $1 million per-occurrence limit under the commercial general liability policy. Gohagan subsequently sued Cincinnati in the U.S. District Court for the Western District of Missouri, seeking recovery of another $1 million under the business owner’s policy. In granting Cincinnati’s motion for summary judgment, the District Court held that the anti-stacking provisions prohibited recovery under both policies for the same injury, and therefore limited the maximum coverage for any one occurrence to the $1 million per-occurrence limit.
On appeal, Gohagan argued that the anti-stacking stacking provisions were ambiguous as to whether the total recovery is $1 million under one policy or $2 million under both. The appellate court disagreed, finding the provisions unambiguously prevented recovery for one incident under multiple Cincinnati policies. In that regard, the court rejected Gohagan’s argument that the meaning of “aggregate maximum limit of insurance” was ambiguous. By emphasizing only part of the anti-stacking provisions, Gohagan ignored the requirement that the aggregate maximum limit of insurance under both policies combined may not exceed the per-occurrence limit under either policy. The court determined that when read as a whole, the anti-stacking provisions capped the payout under both policies combined for a single “occurrence” (in this case, the tree-falling accident resulting in Gohagan’s injury) to the limits of one policy (i.e., $1 million).
The 8th Circuit also rejected Gohagan’s argument that the policy’s “other insurance” clause setting forth a method for distributing responsibility among multiple policies also applied to other insurance policies issued by Cincinnati. Specifically, the court found Gohagan’s reading of the “other insurance clause” mistakenly relied on reading the individual provision in isolation from the rest of the policy, an approach that would leave the anti-stacking provisions meaningless. In that regard, the court agreed with the District Court’s determination that the “other insurance” clause applies when a policy issued by another insurer covers the same injury as a policy issued by Cincinnati, not when Cincinnati issues both policies.
Tressler Comments
Where an insured has multiple liability policies from a single insurer that cover the same loss, it may attempt to stack policy limits to increase its recovery under the policies. As a result, insurers often include anti-stacking provisions to limit recovery to the highest limit of any one policy. The 8th Circuit’s decision in Gohagan is important because it enforces anti-stacking policy language intended to restrict the insurer’s exposure to a single policy limit where it issued multiple policies to the insured.