42 F.3d 725 (2nd Cir. 1994), 309, American Cas. Co. of Reading, Pennsylvania v. Nordic Leasing, Inc.

Docket Nº:309, Docket 94-7192.
Citation:42 F.3d 725
Case Date:December 09, 1994
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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42 F.3d 725 (2nd Cir. 1994)



NORDIC LEASING, INC., Defendant-Appellant.

No. 309, Docket 94-7192.

United States Court of Appeals, Second Circuit

December 9, 1994

Argued Sept. 13, 1994.

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John A. Serafino, Rutland, VT (Ryan, Smith & Carbine, Ltd., of counsel), for defendant-appellant.

Philip C. Woodward, Burlington, VT (Samuel Hoar, Jr., Dinse, Erdmann & Clapp, of counsel), for plaintiff-appellee.

Before: OAKES, PIERCE and ALTIMARI, Circuit Judges.

OAKES, Senior Circuit Judge:

This appeal concerns provisions of Vermont insurance law which require insurance companies to give notice before terminating certain policies. Specifically at issue are two such. Section 4715 of Title 8, Vermont Statutes Annotated, requires a provider of commercial risk insurance to "confirm in writing ... its intention to renew [a] policy," but does not specify to whom such confirmation must be sent. Section 804(a) of Title 23 provides that automobile insurance policies issued as proof of financial responsibility be "noncancellable except after 15 days' notice to the commissioner." At issue is whether a policy has been "cancelled" within the meaning of this section if it has expired and not been renewed.

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These issues arise on an appeal by Nordic Leasing, Inc. ("Nordic") from an order of the United States District Court for the District of Vermont, Franklin S. Billings, Jr., Judge, granting summary judgment to plaintiff American Casualty Co. ("American") and denying Nordic's motion for summary judgment. Nordic was named as an "additional insured" under an insurance policy issued to Vermont Sprinkler Systems, Inc. ("Vermont Sprinkler") by American (the "policy"). Nordic claims that American's nonrenewal of the policy for nonpayment was void under 8 V.S.A. Sec. 4715 because the insurer gave notice of the policy's impending expiration only to Vermont Sprinkler (the "named insured"), and failed to notify Nordic (the "additional insured"). Nordic contends as well that the nonrenewal was void under 23 V.S.A. Sec. 804 because American failed to notify the Vermont Commissioner of Motor Vehicles (the "Commissioner"). We reject the first of Nordic's contentions but concur with the second. That is, we conclude that American's termination of the policy was not void under section 4715, but that section 804 required American to notify the Commissioner prior to termination, and that material factual issues preclude summary judgment on the question of whether it did so. Accordingly, we reverse and remand for a trial on this issue.


This declaratory judgment action arises out of a personal injury lawsuit filed against Nordic, a motor vehicle leasing company, in 1988 in the State of Maine. Nordic filed a claim for indemnification under its policy with American, despite American's representation that the policy had expired. American responded by filing this action against Nordic, seeking a declaration that it owed Nordic no duty to defend or indemnify Nordic because the automobile insurance policy American issued, naming Vermont Sprinkler as the "named insured" and Nordic as the "additional insured (lessor)," was no longer in effect on February 10, 1988, the date of the automobile accident. Nordic contends that the policy remained in effect for the two reasons enumerated above. We set out the material facts below.

In 1985, Nordic leased a 1985 Toyota pickup truck to Vermont Sprinkler. The lease required Vermont Sprinkler to maintain liability insurance coverage on the vehicle, with Nordic as an insured. Vermont Sprinkler then contracted with American for a one-year policy for the truck that went into effect in October 1986, scheduled to expire on October 3, 1987. Nordic received a copy of the declarations page, which showed the scheduled period of coverage. The policy named Vermont Sprinkler as the "named insured," and an endorsement to the policy named Nordic as the "additional insured (lessor)." The endorsement provided that "the lessor [Nordic] is not liable for payment of [Vermont Sprinkler's] premium." The loss payable clause accompanying the endorsement required American to give notice to Nordic if the policy were canceled "during the policy period." Neither the endorsement nor the clause, however, required notice in the event of nonrenewal.

On an additional endorsement, American added another additional insured to the policy--John Morin, the president of Vermont Sprinkler. Because Morin had been convicted of driving while intoxicated in 1986, he was required, under Vermont's Motor Vehicle Financial Responsibility Law, to demonstrate proof of financial responsibility in order to be eligible for a driver's license. Thus, he was required to add his name to Vermont Sprinkler's liability policy, and American was required to file with the Vermont Department of Motor Vehicles (the "DMV") a Form SR-22 (a Financial Responsibility Insurance Certificate), certifying that he was insured up to the statutory requirement. American filed an SR-22 dated October 8, 1986.

On November 25, 1987, more than seven weeks after the policy's expiration date, American sent a notice of renewal to Vermont Sprinkler along with a renewal bill. (American attributes its late notice to computer error.) The notice indicated that the policy could be renewed if payment were made by January 9, 1988. Vermont Sprinkler never paid the premiums, and the policy

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was marked non-renewed for nonpayment of premium, effective January 23, 1988.

On February 10, 1988, a Vermont Sprinkler employee, Maurice Morin, while driving the 1985 Toyota pickup leased from Nordic, struck and injured a pedestrian, Jerome Cote. Mr. Cote's conservator and spouse filed suit for damages in Aroostook County Superior Court, Maine. The suit named as defendants Maurice Morin, John Morin (the president of Vermont Sprinkler), and Vermont Sprinkler. Also named, pursuant to Maine's statute imposing vicarious liability on lessors of motor vehicles, was Nordic.

Nordic filed a claim with American, claiming that it was covered by the insurance policy with Vermont Sprinkler even though the policy had apparently expired prior to the motor vehicle accident. Subsequent correspondence between American and Nordic's contingent insurance carrier, The Reliance Companies ("Reliance"), disclosed that the insurance companies disagreed concerning American's compliance with the statutory notice requirements. American therefore filed this declaratory judgment action in August 1992, seeking a judicial determination of American's obligations to Nordic under the policy.

In a three-page opinion, the district court denied Nordic's motion for summary judgment and granted American's cross-motion. Judgment was entered for American on January 14, 1993. After Nordic's motion for reconsideration was denied, Nordic filed this appeal. 1 The underlying litigation, meanwhile, has been settled for approximately $250,000, but American and Reliance continue to disagree about who must ultimately bear the cost.


In order to prevail on a motion for summary judgment, the moving party must show that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). In deciding such a motion, the district court "must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor." Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 572 (2d Cir.1993). We review a district court's grant of summary judgment de novo. Westinghouse Elec. Corp. v. New York City Transit Auth., 14 F.3d 818, 821 (2d Cir.1994).

I. The Notice Requirement of 8 V.S.A. Sec. 4715: Notice to an "Additional Insured"?

Nordic contends that its policy with American remained in force at the time of the accident because American failed to terminate the policy in accordance with the notice requirement of 8 V.S.A. Sec. 4715, which governs renewal of commercial risk policies. This section provides:

Sec. 4715. Renewal policies

(a) If the insurer has the necessary information to issue the renewal policy of insurance to which section 4711 of this title applies, the insurer shall confirm in writing at least 45 days prior to expiration its intention to renew the policy and the premium at which the policy is to be renewed. The insured shall have the right to renew the policy at this premium.

(b) An insurer not complying with subsection (a) of this section shall grant its insured renewal coverage at the rate or premium in effect under the expiring or expired policy or at rates lawfully in effect on the expiration date. This shall be done on a pro rata basis and shall continue for 45 days after the insurer confirms renewal coverage and premium. This subsection shall not apply if the insured accepts the renewal policy.

8 V.S.A. Sec. 4715 (1993) (emphasis added).

Section 4715 must be read in conjunction with its preceding sections, sections 4711 to

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4714, which together with it comprise subchapter 3 of chapter 128 of Title 8, Vermont Statutes Annotated, concerning cancellation and nonrenewal of commercial risk insurance policies. These sections define the circumstances under which such policies may be cancelled, and, more materially for purposes of this action, set out notice requirements for cancellation, nonrenewal, and renewal. Sections 4712 and 4713 set out the notice requirements, respectively, for cancellation and nonrenewal, and, unlike section 4715, they specify to whom notice must be sent:

Sec. 4712. Notice of cancellation

(a) No notice of cancellation of a policy to which section 4711 of this title applies [i.e., commercial risk insurance other than farm risks] shall be effective unless mailed or...

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