Bibeault v. Hanover Ins. Co., 78-469-A

• Decision Date: 11 July 1980
• Docket Number: No. 78-469-A,78-469-A
• Citation: 417 A.2d 313
• Parties: Carolyn BIBEAULT v. HANOVER INSURANCE COMPANY. ppeal.
• Court: Rhode Island Supreme Court

Page 313

417 A.2d 313

Carolyn BIBEAULT v. HANOVER INSURANCE COMPANY.

No. 78-469-Appeal.

Supreme Court of Rhode Island.

July 11, 1980.

Decof, Weinstein & Mandell, Leonard Decof, Providence, for plaintiff.

John F. Dolan, Providence, for defendant.

OPINION

KELLEHER, Justice.

This advisory opinion is rendered to the United States District Court for the District of Rhode Island in accordance with Supreme Court Rule 6. The civil action giving rise to the certified questions currently before us was instituted in the District Court by the plaintiff, Carolyn Bibeault (Carolyn), against the defendant, Hanover Insurance Company (Hanover or the company). Carolyn sought uninsured-motorist coverage and compensatory and punitive damages against Hanover for its alleged bad-faith refusal to settle her insurance claims. A District Court jury awarded Carolyn $15,000 under the uninsured-motorist claims and $20,000 in compensatory and $35,000 in punitive damages for Hanover's bad faith. After hearing Hanover's motions for a directed verdict, a judgment notwithstanding the verdict, and a new trial, the District Court stayed all proceedings pending receipt of our advice.

On June 14, 1975, Carolyn sustained serious injuries as a result of a collision that occurred in Attleboro, Massachusetts, when her automobile was struck head-on by a vehicle that had crossed the center of the road into her lane. The driver of this second vehicle was Oliver Cardoza (Cardoza), a Massachusetts resident and another defendant in the case. Cardoza, who pleaded guilty to the charge of operating negligently so as to endanger, was an uninsured motorist within the meaning of G.L.1956 (1979 Reenactment) § 27-7-2.1 because his insurance provided a maximum coverage of $5,000 per person. Although Cardoza's insurance company offered Carolyn $5,000 in settlement of her claims against him, she could not accept this proposal until her insurer, Hanover, consented in writing to the transaction as required by the terms of the uninsured-motorist section of her policy.

Aware of Carolyn's deteriorating financial situation, which was intensified further by overdue medical bills and her inability to work, Hanover made its consent conditional upon Carolyn's acceptance of $3,500 in settlement of her claims against it. ¹ A few months following the execution of this release, Carolyn learned that she might also be entitled to recovery for injuries sustained in the collision pursuant to the uninsured-motorist sections of the policies issued by Hanover to her two sisters, Donna and Dianne. These policies were identical to that purchased by Carolyn and were in effect on the date of the collision. One issue raised at trial and certified to us by the District Court concerns Carolyn's eligibility to recover under these two policies since, at the time of the collision, she was driving her own automobile, a vehicle that did not satisfy the definition of an "insured automobile" as set forth in each policy. ²

The uninsured-motorist section of each policy, entitled "Family Protection Against Uninsured Motorists," provides:

"The company will pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, hereinafter called 'bodily injury', sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile * * *."

The policy defines an "insured" as

"the named insured as stated in the policy (herein also referred to as the 'principal named insured') and any person designated as named insured in the schedule and, while residents of the same household, the spouse of any such named insured and relatives of either * * *." (Emphasis added.)

Donna and Dianne are, therefore, "the principal named insured" within their respective policies. Although Carolyn was not designated as a named insured in the schedule of the policy of either sister, she would, by definition, qualify as an "insured" under both policies if she resided with her sisters at the time of the collision. The jury found that on June 14, 1975, the three Bibeault sisters resided on Front Street in Lincoln, Rhode Island. Thus, Carolyn is clearly an "insured" for purposes of both policies.

The key point of contention arises over the applicability of an exclusion found in the uninsured-motorist section of all three policies which exempts from coverage any

"bodily injury to an insured while occupying an automobile (other than an insured automobile) owned by a named insured or any relative resident in the same household * * *."

Hanover contends that since Carolyn, at the time of the collision, was driving her own vehicle, which was not described as an "insured automobile" in the policy of either sister, the exclusion bars any recovery under her sisters' policies. Hanover claims that the validity of an identical exclusion was recognized in Employers' Fire Insurance Co. v. Baker, R.I., 383 A.2d 1005 (1978), where an insured was seeking to recover uninsured-motorist benefits for injuries she received when her motorcycle collided with an uninsured vehicle and the insured automobile described in the policy was the insured's Ford Mustang. Hanover gains no comfort from the exclusionary language it cites or from the plurality holding in Baker because, as Carolyn points out, there is additional language found in the exclusion which in plain and simple terms creates an "exception," if you will, to the "exclusion." The exceptional language provides:

"but this exclusion does not apply to the principal named insured or his relatives while occupying or if struck by an automobile owned by an insured named in the schedule or his relatives."

A reading of the exclusion in conjunction with the exception reveals that there is a class of individuals who may benefit from the uninsured coverage notwithstanding the taking-away language of the exclusion.

We need look no further than the actual wording of the policy to reach the obvious conclusion that Carolyn is not subject to the exclusion. Substituting the characters of this case into the exception, it reads,

"but this exclusion does not apply to the principal named insured (Donna or Dianne) or (her) relative (Carolyn) while occupying an automobile owned by an insured named in the schedule (Donna or Dianne) or (her) relatives (Carolyn)."

At the time of Carolyn's collision, she was related to both Donna and Dianne and was occupying an automobile owned by a relative of each of the named insured. Thus, in this controversy the exclusion is just so much verbiage, and Carolyn may look to her policy and those of her sisters for the uninsured-motorist coverage each provides as long as the total recovery does not exceed her total loss. Pickering v. American Employers Insurance Co., 109 R.I. 143, 282 A.2d 584 (1971).

The second and final issue certified by the District Court presents the question of whether an insurer's bad-faith withholding of insurance payments gives rise to an independent claim for breach of duty owed to the insured. Hanover contends that this issue is controlled by the recent case of A.A.A. Pool Service & Supply, Inc. v. Aetna Casualty & Surety Co., R.I., 395 A.2d 724 (1978), wherein this court refused to recognize an independent claim for a bad-faith withholding of payments under the standard fire insurance policy. This decision was based not upon our disapproval of the claim in question, but rather upon our reluctance to intrude into the area of fire insurance, a field clearly preempted by the Legislature through G.L.1956 (1979 Reenactment) § 27-5-3. This section sets forth in detail the form and terms of the standard fire insurance policy which must be included within any policy or contract of fire insurance on property situated within the state. In the A.A.A. Pool Service & Supply case, we concluded that the Legislature must have been cognizant of the fact that § 27-5-3 limited an insured's total potential recovery to the actual value of property damaged. In declining to expand the liability of the insurance company, we answered

"only the question posed by the District Court, and we venture no opinion about whether an independent cause of action will arise by reason of a bad-faith withholding of a payment under any type of insurance policy other than the standard fire insurance policy for the State of Rhode Island." A.A.A. Pool Service & Supply, Inc. v. Aetna Casualty & Surety Co., R.I., 395 A.2d 724, 726 (1978).

Recently, in DiIorio v. Abington Mutual Fire Insurance Co., R.I., 402 A.2d 745 (1979), we also refused to recognize an independent claim in tort for the bad faith of an insurer. This decision was based, however, on the trial justice's finding of insufficient evidence to support a jury question on the issue of bad faith. In DiIorio, there was a genuine question regarding the insured's coverage under a homeowner's policy that included the standard fire insurance policy. Although there is some language in DiIorio which seems to indicate that the principles of A.A.A. Pool Service & Supply would be applied to policies other than the standard fire insurance policy, our holding in A.A.A. Pool Service & Supply was never intended to extend to any contract of insurance other than the standard fire insurance policy described in the statute.

Hanover argues that the reasoning of A.A.A. Pool Service & Supply is equally applicable in this case because the uninsured-motorist provisions of its policies are statutorily mandated by § 27-7-2.1. We cannot agree. Section 27-7-2.1 merely requires that all automobile insurers offer uninsured-motorist coverage equal to or above the minimum limit established by G.L.1956 (1968 Reenactment) § 31-31-7 (1979 Supp.). This is entirely different, however, from § 27-5-3 wherein the Legislature has expressly...