Burlington v. GAS & ELEC. INS. SERVICES

• Decision Date: 25 February 2000
• Docket Number: No. 98-049.,98-049.
• Citation: 751 A.2d 284
• Court: Vermont Supreme Court
• Parties: CITY OF BURLINGTON v. ASSOCIATION OF GAS AND ELECTRIC INSURANCE SERVICES, LTD.

751 A.2d 284

CITY OF BURLINGTON v. ASSOCIATION OF GAS AND ELECTRIC INSURANCE SERVICES, LTD.

No. 98-049.

Supreme Court of Vermont.

February 25, 2000.

John L. Franco, Jr., Burlington, and John T. Leddy of McNeil, Leddy & Sheahan, P.C., Burlington, for Plaintiff-Appellee.

Joseph E. Frank of Paul, Frank & Collins, Inc., Burlington, for Defendant-Appellant.

Present AMESTOY, C.J., MORSE, JOHNSON and SKOGLUND, JJ., and CASHMAN, District Judge, Specially Assigned.

SKOGLUND, J.

For the third time, we are asked to decide the extent of insurance coverage, if any, available to appellee City of Burlington concerning its settlement of a suit claiming that the City wrongfully refused to accept wood chip deliveries as provided in a contract between the City and the owners of a wood products business, the Moffatts. In the first case, we determined that the City's primary liability policy with National Union Fire Insurance Co. (NUFI) did not require the insurer to defend and indemnify the City in response to the Moffatt suit. See City of Burlington v. National Union Fire Ins. Co., 163 Vt. 124, 126, 655 A.2d 719, 720 (1994) (hereafter NUFI). In the second case, we concluded that the insuring agreement contained in the City's excess liability policy with appellant Associated Electric & Gas Insurance Services, Ltd. (AEGIS) covered the claims raised in the underlying suit, but remanded the matter for the superior court to determine the applicability of policy exclusions not previously considered. See City of Burlington v. Associated Elec. & Gas Ins. Servs., 164 Vt. 218, 222-23, 669 A.2d 1181, 1184 (1995) (hereafter AEGIS). Both AEGIS and the City now appeal the superior court's summary judgment ruling on remand that the excess insurer must indemnify the City for defending and settling the underlying claims for bodily injury. We affirm.

The material facts are undisputed. The City sought indemnification from NUFI and AEGIS in separate declaratory judgment actions after defending against and eventually settling a lawsuit, entitled Moffatt v. City of Burlington, in which the plaintiffs claimed that the City's failure to fulfill its contractual obligations to purchase a specified volume of wood chips for its electric generating plant caused them economic losses and bodily injuries, including emotional distress. In each case, the superior court awarded summary judgment to the insurer.

In NUFI, we affirmed the superior court's judgment that the Moffatt allegations, sounding in breach of contract and related torts, were not covered by NUFI's liability policy, which provided coverage for an "occurrence"—defined as "an accident" resulting "in bodily injury or property damage neither expected nor intended from the standpoint of the insured." 163 Vt. at 126-27, 655 A.2d at 720. In so ruling, we noted that an "accident" is an unexpected happening, and that the City had acted intentionally in refusing the wood chip deliveries. See id. at 128, 655 A.2d at 721. Further, we distinguished cases cited by the City in which the unintended harm constituted the "occurrence," noting that the City "intended or expected economic injury to the wood chip suppliers when it reduced its purchases from them." Id. at 128-29, 655 A.2d at 721-22. We stated that basing coverage on the City's lack of "precise knowledge of the amount or nature of the damage it might inflict on others as a consequence of its business actions" would take us "far afield from any common-sense definition of accident." Id. at 129, 655 A.2d at 722.

In AEGIS, however, we reversed the superior court's summary judgment ruling in favor of the excess insurer. We relied on the particular language of the policy's insuring agreement, which defined "occurrence" as an "accident" or "event" resulting "in bodily injury, personal injury or property damage." AEGIS, 164 Vt. at 221, 669 A.2d at 1183. Noting that the commonly understood meaning of the term "event" is not limited to accidental or unintended actions, we concluded that the term covered the claims raised in Moffatt, thereby requiring AEGIS to indemnify the City. See id. at 222, 669 A.2d at 1184. We further stated that our conclusion was reinforced by the fact that the AEGIS definition of "occurrence" did not include the standard modifying phrase "neither expected nor intended" contained in the NUFI policy's definition of "occurrence." See id. at 222-23, 669 A.2d at 1184. Nevertheless, because AEGIS also relied on policy exclusions that "should first be construed and applied by the trial court," id. at 223, 669 A.2d at 1184, our opinion did not resolve the issue. We remanded the matter to the trial court to consider the policy exclusions when determining whether AEGIS was required to indemnify the City.

The exclusion examined on remand provides that coverage does not apply "to liability of any INSURED for BODILY INJURY, PERSONAL INJURY or PROPERTY DAMAGE caused intentionally by or at the direction of such insured." After rejecting AEGIS's arguments that our conclusions in NUFI compelled summary judgment in its favor, the superior court ruled that the exclusion denied coverage for intentional injuries, but not necessarily for intentional harms, and therefore the City's actions that led to the underlying suit were not excluded from coverage. The court determined that AEGIS was responsible for covering the City's liability and costs associated with the underlying claims for bodily injury, but not for property damage, because the latter claims were actually seeking compensation for uncovered economic losses. Accordingly, the court granted partial summary judgment in favor of AEGIS and partial summary judgment in favor of the City.

Both parties appeal. AEGIS argues that the superior court erred in concluding that (1) neither the doctrine of stare decisis nor the doctrine of issue preclusion dictated granting summary judgment in favor of AEGIS; (2) the AEGIS exclusion did not apply; (3) AEGIS's refusal to defend against the Moffatt suit estopped it from challenging the justiciability of the underlying claims for emotional distress; and (4) the City was entitled to prejudgment interest on defense costs not associated exclusively with the Moffatts' economic loss claims. In addition to opposing these arguments, the City contends in its cross-appeal that the superior court erred in denying coverage for property damage, and in failing to award the City full reimbursement for its costs in defending against the Moffatt suit.

We apply the same standard as that applied by the trial court in reviewing arguments challenging the grant or denial of summary judgment: "Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law, after giving the benefit of all reasonable doubts and inferences to the nonmoving party." NUFI, 163 Vt. at 127, 655 A.2d at 721. As was the case in the two previous appeals concerning this matter, the parties do not dispute the material facts; thus, the issues concern solely questions of law.

I.

AEGIS first argues that under the doctrines of issue preclusion and stare decisis NUFI is controlling precedent on the ultimate issue of whether the City intended the harm resulting from its breach of contract. In AEGIS's view, NUFI concluded that because the City intended some harm, all resulting harm must be deemed intentional, regardless of its nature or scope. Thus, AEGIS takes the position that NUFI compelled the superior court on remand to conclude that the AEGIS exclusion denied coverage for all of the resulting harm caused by the City's decision to limit the Moffatts' wood chip deliveries.

We find no merit to this argument. NUFI construed a different provision contained in a different policy. In NUFI, this Court was concerned with whether the City's breach of contract was an "accident," which we had defined in previous case law as an unexpected happening occurring without intention or design. See 163 Vt. at 128, 655 A.2d at 721. We stated that without question the City acted intentionally in refusing the wood chip deliveries. See id. We also stated, in response to the cases cited by the City holding that an intentional act may be an "occurrence" if the resulting harm was unintended, that the City intended or expected the Moffatts to incur economic injury from its decision to limit deliveries, even if it was not aware of the precise nature or amount of the damages. Id. at 128-29, 655 A.2d at 721-22. We concluded that compelling NUFI to defend the Moffatt suit would have the effect of imposing a duty to defend in virtually any commercial contract dispute, and, consequently, would distort the purpose of the liability policy. Id. at 129-30, 655 A.2d at 722.

These statements were made solely in support of our conclusion that the City's conduct triggering the underlying suit was not accidental in nature, and thus was not a covered "occurrence" under the particular language of the NUFI policy. See id. at 129, 655 A.2d at 722-23 ("commonsense definition of accident" would be stretched beyond recognition if we were to base duty to defend on whether insured had precise knowledge of amount or nature of damages that might result from its business decision). They do not govern the question of whether, under the AEGIS exclusionary clause, any "BODILY INJURY, PERSONAL INJURY or PROPERTY DAMAGE" alleged in the Moffatt complaint was "caused intentionally" by the City. Indeed, "the same issue as in NUFI" was raised in AEGIS but resolved in favor of the City because the definition of "occurrence" in the AEGIS policy was more expansive, covering both events and accidents. See AEGIS,164 Vt. at 220,669 A.2d at 1183 ("real difference" between NUFI and AEGIS policies lies in content of definition of "occurrence").

II.

AEGIS argues, however, that even if NUFI does not compel summary judgment in its favor under the doctrines of issue preclusion or stare...