City of Burlington v. National Union Fire Ins. Co.

• Decision Date: 30 December 1994
• Docket Number: No. 94-381,94-381
• Citation: 655 A.2d 719,163 Vt. 124
• Parties: CITY OF BURLINGTON v. NATIONAL UNION FIRE INSURANCE COMPANY.
• Court: Vermont Supreme Court

Page 719

655 A.2d 719

163 Vt. 124

CITY OF BURLINGTON v. NATIONAL UNION FIRE INSURANCE COMPANY.

No. 94-381.

Supreme Court of Vermont.

Dec. 30, 1994.

John L. Franco of McNeil, Leddy & Sheahan, Burlington, for plaintiff-appellant.

Aaron Eaton and Joseph H. Badgewick of Ryan Smith & Carbine, Ltd., Rutland, for defendant-appellee.

Before GIBSON, DOOLEY, MORSE and JOHNSON, JJ., and PECK, J. (Ret.), Specially Assigned.

DOOLEY, Justice.

This appeal concerns whether National Union Fire Insurance Co. (NUFI) owes its insured, City of Burlington, reimbursement for Burlington's expenses in investigating, defending and settling a suit initiated against it in the Caledonia Superior Court, entitled Moffatt v. City of Burlington. Because NUFI declined to defend, Burlington provided its own defense and eventually settled the Moffatt case before trial. Burlington then brought a declaratory judgment action seeking a determination that NUFI breached its duty to defend under the policies it issued to Burlington, and, consequently, that NUFI must indemnify Burlington for its defense and settlement costs. The trial court granted NUFI's motion for summary judgment, and Burlington appeals. Because the claims alleged in the Moffatt complaint are not possibly covered by Burlington's policy with NUFI, we affirm.

The issue on appeal is whether the allegations in the Moffatt complaint, sounding in breach of contract and related torts, triggered NUFI's duty to defend Burlington under the provisions of the occurrence-based liability insurance policies that NUFI issued to Burlington. The Moffatt suit contained five counts against the City of Burlington. All of the counts arose out of the operation of an electric generation plant owned by the Burlington Electric Department. The plant was fueled by wood chips supplied by plaintiffs, and plaintiffs alleged that Burlington refused to purchase the volume of wood chips called for in their contract. Count I alleged that Burlington breached its contract with plaintiffs. Count II alleged that Burlington knew its refusal to accept the quantity of wood chips contracted for was causing the plaintiffs devastating financial hardship, and had the character of a willful and wanton or fraudulent tort of insult and oppression. Count III alleged breach of duty of good faith and fair dealing under the wood chip contract. Count IV alleged economic duress in the administration of the wood chip contract, and Count V alleged deceit, claiming that Burlington failed to disclose correct information and misrepresented material facts. The plaintiffs claimed bodily injuries including severe emotional distress, as well as economic losses, and asked for an award of direct, consequential, and punitive damages.

Burlington's liability insurance policies provided in relevant part that NUFI:

will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent....

(Emphasis added.) Coverage is triggered by an "occurrence," defined in the policies as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." On NUFI's motion for summary judgment, the trial court concluded that all five of the Moffatt counts were variations on a claim of breach of contract, and were in no way covered under Burlington's policy with NUFI.

The requirements for summary judgment are familiar. 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. See State v. Delaney, 157 Vt. 247, 252, 598 A.2d 138, 141 (1991); V.R.C.P. 56(c). The standard on review by this Court is the same as the standard to be applied by the trial court in ruling on the motion. See Cavanaugh v. Abbott Laboratories, 145 Vt. 516, 520, 496 A.2d 154, 157 (1985). In this case, there is no factual dispute about the language of the complaint or of the policies; rather, the parties dispute whether coverage under the NUFI policy extends to the Moffatt suit. The issue, therefore, is solely one of law.

We have often explained that an insurer's duty to defend is broader than its duty to indemnify. See Garneau v. Curtis & Bedell, Inc., 158 Vt. 363, 366, 610 A.2d 132, 134 (1992). Generally, the insurer's duty to defend is determined by comparing the allegations in the complaint of the underlying suit to the terms of coverage in the policy. See Cooperative Fire Ins. Ass'n v. Gray, 157 Vt. 380, 382, 599 A.2d 360, 361 (1991); Commercial Union Ins. Co. v. City of Montpelier, 134 Vt. 184, 185, 353 A.2d 344, 345 (1976). If any claims are potentially covered by the policy, the insurer has a duty to defend. See Garneau, 158 Vt. at 366, 610 A.2d at 134. Conversely, where there is no possibility that the insurer might be obligated to indemnify, there is no duty to defend. Id.

The specific issue in this case is whether any of the five counts contained in the Moffatt complaint alleges an "occurrence," as that term is defined in the NUFI policy. The resolution of this issue in turn depends on whether any of the counts show the presence of an "accident," an essential component of an "occurrence" under the NUFI policy.

An insurance policy must be construed according to its terms and the evident intent of the parties as expressed in the policy language. Sanders v. St. Paul Mercury Ins. Co., 148 Vt. 496, 500, 536 A.2d 914, 916 (1987). Disputed terms should be read according to their plain, ordinary and popular meaning. See American Protection Ins. Co. v. McMahan, 151 Vt. 520, 522, 562 A.2d 462, 464 (1989). Using these principles, we have defined "accident" as an " 'unexpected happening without intention and design.' " Commercial Union Ins. Co., 134 Vt. at 186, 353 A.2d at 346 (quoting Anton v. Fidelity & Casualty Co., 117 Vt. 300, 305, 91 A.2d 697, 700 (1952)).

There is no question that Burlington acted intentionally in refusing to accept wood chip deliveries. Despite its intentional act, it argues that the Moffatt complaint alleged an accident because Burlington neither expected nor intended the resulting harm. In making this argument, it relies upon Village of Morrisville Water & Light Dep't v. United States Fidelity & Guar. Co., 775 F.Supp. 718, 729-30 (D.Vt.1991), where the court reasoned that the unexpected nature of an accident describes the harm which is caused rather than the act involved. The case involved insurance coverage for a Vermont utility claimed by the Federal Environmental Protection Agency (EPA) to be responsible in part for the clean-up of a Missouri disposal site to which it had sent PCBs. Although the site had been EPA approved for PCB disposal, its owner failed to deal with them properly and left the site contaminated with PCBs. The federal court found that liability based on the utility's disposal of the PCBs was an "occurrence" which triggered coverage because it was an "accident" as required by the policy. Id. Thus, an...