Canal Ins. Co. v. Benner

• Citation: 980 F.2d 23
• Decision Date: 11 September 1992
• Docket Number: 92-1420,Nos. 92-1360,s. 92-1360
• Parties: CANAL INSURANCE COMPANY, Plaintiff, Appellee, v. Darrell A. BENNER, et al., Defendants, Appellees, Gary Lebreton, Defendant, Appellant. CANAL INSURANCE COMPANY, Plaintiff, Appellee, v. Darrell A. BENNER, Defendant, Appellant. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 23

980 F.2d 23

CANAL INSURANCE COMPANY, Plaintiff, Appellee, v. Darrell A. BENNER, et al., Defendants, Appellees, Gary Lebreton, Defendant, Appellant.

CANAL INSURANCE COMPANY, Plaintiff, Appellee, v. Darrell A. BENNER, Defendant, Appellant.

Nos. 92-1360, 92-1420.

United States Court of Appeals First Circuit.

Heard Sept. 11, 1992.

Decided Nov. 24, 1992.

Valerie Stanfill, with whom Paul F. Macri, Berman & Simmons, P.A., Lewiston, Me., Peter B. Bickerman and Lipman & Katz, P.A., Augusta, Me., were on brief, for appellants LeBreton and Benner.

John W. Ballou, with whom Mitchell & Stearns, Bangor, Me., was on brief, for appellee Canal Ins. Co.

Before TORRUELLA, Circuit Judge, ALDRICH, Senior Circuit Judge, and BOUDIN, Circuit Judge.

PER CURIAM.

On this appeal, we review the district court's interpretation of a motor vehicle liability insurance policy. The district court initially found an "occupant hazard" exclusion clause in the policy void as contrary to public policy. It then held that the amount of coverage under the policy would be limited to the minimum amount required by Maine's Financial Responsibility Law, rather than the full and greater amount of liability coverage provided by the policy. The insured appeals the latter determination. We affirm.

I

Darrell Benner was the named insured in a motor vehicle liability insurance policy issued by Canal Insurance Company ("Canal"). The policy contained an endorsement entitled "Occupant Hazard Excluded," which reads as follows:

It is agreed that such insurance as is afforded by the policy for Bodily Injury Liability does not apply to Bodily Injury including death at any time resulting therefrom, sustained by any person while in or upon, entering or alighting from the automobile.

It is further agreed that, in the event the company shall, because of provision of the Federal or State statutes become obligated to pay any sum or sums of money because of such bodily injury or death resulting therefrom, the insured agrees to reimburse the company for any and all loss, costs and expense incurred by the company.

On August 30, 1990, Gary LeBreton was a passenger in a tractor trailer owned by Benner and driven by Keith Whitney on State Highway Route 137 in the Town of Knox, Waldo County, Maine. The tractor left the road, overturned and LeBreton was injured.

LeBreton brought suit against Benner and Whitney in Waldo County Superior Court seeking damages for his injuries. In that action, LeBreton alleges that Whitney's negligent operation of the tractor trailer caused the injuries he sustained and that Benner is liable because Whitney was acting as Benner's employee at the time of the accident.

Benner called upon Canal to defend him in the litigation and to indemnify him up to the policy limit. In response, Canal brought this declaratory judgment action in the District Court for the District of Maine seeking a determination that it was not obligated under the policy to defend either Benner, or his employee, Whitney, nor to indemnify Benner or Whitney for any damages that they may have to pay to LeBreton.

The parties filed cross-motions for summary judgment. The district court granted summary judgment in favor of appellants Benner, Whitney and LeBreton finding that the Occupant Hazard Exclusion was contrary to public policy because it conflicted with Maine's Financial Responsibility Law. ¹ Regarding the amount of coverage to be paid by the insurer, the court concluded that Canal was obligated to pay to its insured the minimum amount required by Maine's financial responsibility statute--$20,000 for any one person injured--rather than the full amount of liability coverage of $750,000 provided by the policy. The district court's determination to limit coverage to the minimum amount required by Maine's financial responsibility Law was premised on two "facts":

First, the premium paid for the policy was undoubtedly based on the inclusion of the occupant exclusion. Second, and more importantly, even though the exclusion is contrary to public policy the insurer would still have the opportunity to limit its policy to the minimum amount required by the statute, and limit excess coverage by an occupant exclusion.

Unsatisfied with this result, appellants Benner and LeBreton appeal claiming that the district court should have awarded the full amount of liability coverage provided by the policy. ²

II

Rule 56(c) of the Federal Rules of Civil Procedure mandates the entry of summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). We review the district court's grant of summary judgment de novo. FDIC v. World University Inc., 978 F.2d 10, 13 (1st Cir.1992) ("Our review of a summary judgment ruling is plenary.").

III

The issue of whether, if an endorsement in an insurance policy is held void as contrary to the State's public policy, the limit of liability under the policy will apply (in this case, $750,000) or whether the limits should be those contained in State law ($20,000) has divided courts. Some courts have concluded that the liability limit is the full and generally greater amount of coverage. E.g., State Farm Mut. Auto. Ins. Co. v. Wagamon, 541 A.2d 557 (Del.1988); Meyer v. State Farm Mut. Auto. Ins. Co., 689 P.2d 585 (Colo.1984); Missouri Medical Insurance Co. v. Wong, 234 Kan. 811, 676 P.2d 113 (1984). Other courts limit the liability to the minimum statutory requirements. E.g., Collins v. Farmers Ins. Co., 312 Or. 337, 822 P.2d 1146 (1991); Walther v. Allstate Ins. Co., 83 Md.App. 405, 575 A.2d 339 (1990); State Farm Mut. v. Nationwide Mut., 516 A.2d 586 (Md.1986); Estate of Neal, 93 Nev. 348, 566 P.2d 81 (1977); Tibbs v. Johnson, 30 Wash.App. 107, 632 P.2d 904 (1981); De Witt v. Young, 229 Kan. 474, 625 P.2d 478 (1981); Estate of Neal v. Farmers Ins. Exchange 93 Nev. 348, 566 P.2d 81 (1977); State Farm Mutual Auto Ins. Co. v. Shelly, 394 Mich. 448, 231 N.W.2d 641 (1975).

Maine's Supreme Judicial Court has not decided this issue. Not surprisingly, both parties contend that the Maine courts would follow their respective interpretation of the effect of finding the endorsement void. Appellants assert that the district court's decision was contrary to the clear language of the policy because the policy provided coverage of $750,000. They argue that Canal could have drafted its occupant hazard endorsement so that if the exclusion were held invalid, coverage would be limited to the minimum amount of the relevant state's financial responsibility statute. Appellants' argument has a superficial appeal, but no real substance. Absent bad faith on the insurer's part, why should a state requirement for a mandatory minimum impose not only the minimum, but an additional amount on this particular insurer simply because, in another connection, it had undertaken additional coverage? Without reaching constitutional questions, this would be an exaggerated...