                                                                           FILED
                           NOT FOR PUBLICATION                              JAN 22 2010

                                                                       MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



VIGILANT INSURANCE COMPANY;                      No. 08-17212
GOVERNMENT EMPLOYEES
INSURANCE COMPANY,                               D.C. No. 2:06-cv-01607-LDG-
                                                 LRL
             Plaintiffs - Appellees,

  v.                                             MEMORANDUM *

LINCOLN GENERAL INSURANCE
COMPANY,

             Defendant - Appellant,

 and

DTG OPERATIONS, INC.,

             Defendant.



                    Appeal from the United States District Court
                             for the District of Nevada
                     Lloyd D. George, District Judge, Presiding

                      Argued and Submitted January 13, 2010
                            San Francisco, California

Before: NOONAN, HAWKINS and M. SMITH, Circuit Judges.


        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      This is an action for contribution among insurers arising under Nevada law.

We have jurisdiction pursuant to 28 U.S.C. §§ 1332 and 1291. As the facts and

procedural history are familiar to the parties, we recite them here only as necessary

to explain our decision.

      Defendant-Appellant Lincoln General Insurance Co. (Lincoln) appeals the

district court’s grant of summary judgment in favor of Plaintiffs-Appellees

Vigilant Insurance Co. (Vigilant) and Government Employees Health Insurance

Co. (GEICO). By its order, the district court held that Lincoln was required to

reimburse Vigilant and GEICO for the $250,000 each contributed to settle an

underlying personal injury lawsuit arising from an automobile accident involving

their insured, Dr. Barry Root, while he was driving a rental car. We affirm.

      Dr. Root purchased the supplemental insurance offered by DTG Operations,

Inc. (Dollar) at a car rental counter in Las Vegas, Nevada. The supplemental

insurance had two parts: Dollar’s primary self-insurance (the Primary Protection),

and Lincoln’s Supplemental Liability Insurance (the Lincoln SLI policy). The

Primary Protection provided for insurance against third party personal injury

claims up to Nevada’s $15,000 statutory minimum. The Lincoln SLI policy

provided for the same up to $1 million, less the Primary Protection.




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      Lincoln argues that as between a rental car driver’s personal automobile

insurance—here, GEICO—and a rental car agency’s self insurance up to the state

statutory minimum—here, the Primary Protection—the driver’s personal

automobile insurer bears the primary responsibility for covering losses. Lincoln

claims that Alamo Rent-A-Car, Inc. v. State Farm Mutual Automobile Insurance

Co., 953 P.2d 1074 (Nev. 1998) supports its position.

      Lincoln’s argument fails. The court in Alamo ruled that “[a] rental agency

offers primary insurance only when the renter agrees to purchase an extra

protection plan.” Id. at 1077. Because Dr. Root purchased an extra protection plan

from the rental agency, that extra protection plan provides primary coverage for

losses sustained by Dr. Root while he drove the rental car. Thus, as the district

court held, as between the Dollar Primary Protection and GEICO, Dollar must pay

first. Dollar accepted that outcome, paid the policy limit, and is not party to this

appeal.

      The gravamen of this appeal is whether GEICO or Lincoln pays next, since

the Primary Protection is only $15,000 and the damages assessed against Dr. Root

were $760,000. Lincoln argues that GEICO should pay next because its policy is a

“primary type” policy whereas the Lincoln SLI policy is an “excess type” policy,

and that all “primary type” policies must be exhausted before any “excess type”


                                           3
policies become liable for a given loss—thus invoking the so-called “horizontal

exhaustion rule.” See, e.g., Cmty. Redev. Agency v. Aetna Cas. & Surety Co., 57

Cal. Rptr. 2d 755, 761 (Cal. App. 1996). However, even assuming this California

rule would be embraced by Nevada courts, the horizontal exhaustion rule does not

apply when the language of the relevant policies provides specific guidance on

payment priority. “If an excess policy states that it is excess over a specifically

described policy and will cover a claim when that specific primary policy is

exhausted, such language is sufficiently clear to overcome the usual presumption

that all primary coverage must be exhausted.” Id. at 761 n.6. This is consistent

with Nevada law, which directs us to examine the language of the policies to

determine priority when there is no statutory scheme governing priority. See

Alamo, 953 P.2d at 1075. We therefore turn to the policies.

      The Lincoln SLI policy provides:

             We will pay on behalf of the “insured” [Dr. Root] the
             “ultimate net loss” in excess of the limit of liability or
             limit of insurance of all “underlying insurance” available
             to the “insured” because of “bodily injury” or “property
             damage” to which this insurance applies . . . .

“Underlying insurance” means “insurance listed in ITEM 4.” Item 4 states,

“[l]imits required under any State Financial Responsibility Limits or Mandatory

Insurance Law or other available insurance, which ever is higher.”


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       According to Lincoln, “other available insurance” includes the renter’s own

auto insurance. Such a construction cannot be correct. The Lincoln SLI policy is

not a contract between Lincoln and Dr. Root; it is a contract between Lincoln and

Dollar. Elsewhere in the Lincoln SLI policy, it states: “‘underlying insurance’

shall be maintained in full effect by you during the term of the policy.” “[Y]ou”

refers to Dollar. Thus, the plain meaning of the Lincoln SLI “excess type” policy

is that it is expressly excess to the primary insurance secured by Dollar, not that

maintained by the renter. On the other hand, the GEICO “primary type” policy

states that it is excess as to non-owned (rented) autos. Accordingly, regardless of

the policies’ general self-classifications as “primary” or “excess,” the language of

the policies establishes that the order of priority for the particular loss in this case

must be first Dollar, second Lincoln, and third GEICO.

       We note that any other ruling would lead to an unconscionable result.

Lincoln contracted with Dollar to sell insurance to rental car drivers. If Lincoln

has no liability until after a renter’s personal insurance is exhausted, Lincoln’s SLI

policy offers only an illusory benefit, and is potentially putting its contracting

partner, Dollar, at risk of liability for misrepresentation. In light of such

considerations, and the general rules of insurance contract interpretation, we

decline to accept Lincoln’s interpretation of its policy. See Fed. Ins. Co. v. Am.


                                            5
Hardware Mut. Ins. Co., 184 P.3d 390, 392 (Nev. 2008) (stating Nevada public

policy in favor of construing insurance policies narrowly against the insurer and in

favor of coverage); Nat’l Union Fire Ins. Co. of Pa. v. Reno’s Executive Air, Inc.,

682 P.2d 1380, 1383 (Nev. 1984) (“When ambiguity in the language of a policy

exists, the court should consider not merely the language, but also the intent of the

parties, the subject matter of the policy, and the circumstances surrounding its

issuance.”).

      We therefore find that once the Primary Protection was exhausted, Lincoln

became liable for the loss up to the limits of its policy. Since the limits of

Lincoln’s policy are not exhausted in this case, there is no need to determine the

relative liabilities of GEICO and Vigilant. Lincoln must reimburse GEICO and

Vigilant each $250,000.

AFFIRMED.




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