Davis v. Liberty Mut. Ins. Co., No. 2:96-CV-158.

CourtUnited States District Courts. 2nd Circuit. District of Vermont
Writing for the CourtSessions
Citation19 F.Supp.2d 193
PartiesGareld DAVIS, Plaintiff, v. LIBERTY MUTUAL INS. CO. and Schwan's Sales, Enter., Defendants.
Decision Date14 August 1998
Docket NumberNo. 2:96-CV-158.
19 F.Supp.2d 193
Gareld DAVIS, Plaintiff,
v.
LIBERTY MUTUAL INS. CO. and Schwan's Sales, Enter., Defendants.
No. 2:96-CV-158.
United States District Court, D. Vermont.
August 14, 1998.

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COPYRIGHT MATERIAL OMITTED

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Richard Kevin Bowen, Boylan & Bowen, Springfield, VT, for plaintiff.

Daniel L Burchard, Lori Reuschel Choiniere, McCormick, Fitzpatrick, Kasper & Burchard, Burlington, VT, for Defendant Liberty Mut. Ins. Co.

Robert P. Gerety, Jr., White River Junction, VT, for Defendant Schwann's Sales Enter.

OPINION AND ORDER

SESSIONS, District Judge.


Plaintiff, Gareld Davis ("Davis"), filed this action on May 13, 1996, seeking declaratory relief requiring Defendants Schwan's Sales Enterprises ("Schwan's") and Liberty Mutual Insurance Company ("Liberty Mutual") to provide direct liability insurance coverage, to indemnify and pay a $1,711,790.00 judgment obtained by Davis, attorney's fees, and the costs and expenses of litigation. The parties filed cross motions for summary judgment on all counts. For the reasons stated below, Liberty Mutual's and Schwan's motions for summary judgment are granted and Davis's motion for summary judgment is denied.

FACTUAL BACKGROUND

Plaintiff, Gareld Davis was severely injured when the truck in which he was traveling crashed. The truck was owned by Schwan's and driven by Daniel Finnell ("Finnell").

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At the time of the accident Davis and Finnell were Schwan's employees and were making a delivery in the course of employment. Finnell failed to negotiate a turn in the road, the truck slid into a ditch and flipped several times, eventually coming to rest against a tree and a stone wall. Davis suffered extensive injuries to his head and back when he was pinned under the truck.

At the time of the accident Schwan's was insured by Liberty Mutual. Schwan's provided workers' compensation insurance and uninsured/underinsured motorist ("UM/UIM") coverage to its employees through Liberty Mutual. In addition to workers' compensation insurance and UM/UIM coverage, Liberty Mutual provided Schwan's with a separate Business Auto Insurance Policy (the "auto policy" or "policy") which had a direct liability limit of $2,000,000.00. The auto policy insures "anyone using with [the named insured's] permission a covered auto." Exhibit A, p. 2, Part IV, Liability Insurance, ¶ D. The auto policy also obligates Liberty Mutual to defend suits and pay on behalf of an insured "[a]ll sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident resulting from the ownership, maintenance or use of a covered auto." Exhibit A, p. 2, Part IV, Liability Insurance, ¶ A. However, Liberty Mutual's obligation to defend does not extend to "[b]odily injury to any fellow employee of the insured arising out of and in the course of his or her employment." Exhibit A, p. 2, Section IV, Liability Insurance, ¶ C, Exclusion 4 (hereinafter the "fellow employee exclusion").

Davis and Finnell have little memory of what they were told by Schwan's concerning insurance coverage. Davis vaguely recalls that when he applied for his job, Stanley Ostrow, Schwan's representative, told him that he would be covered "both personally and liability ways" if he was involved in an accident. Exhibit 7, Deposition of Gareld Davis, p. 20, L 19-20. Finnell has no memory of any representations concerning insurance coverage.

Davis sued Finnell seeking damages for his injuries in the accident. Finnell then asked Liberty Mutual to defend and indemnify him. Liberty Mutual refused Finnell, citing the fellow employee exclusion clause.

Davis and Finnell settled. Under the terms of the settlement Davis received from Finnell and his insurer, New Hampshire Group Insurance Company ("New Hampshire Group"), the $20,000.00 limit of New Hampshire Group's personal auto liability policy. Also, Finnell assigned to Davis all his rights against Liberty Mutual and Schwan's. Finnell stipulated that a judgment could be entered against him for $1,711,790.00 (the "Agreed-for-Judgment"). In return, Davis gave Finnell and New Hampshire Group a covenant not to sue and a covenant not to execute. Windham Superior Court granted a judgment order against Finnell for $1,711,790.00. Davis then sued Liberty Mutual and Schwan's Sales for the Agreed-for-Judgment ($1,711,790.00).

In the meantime, Liberty Mutual paid more than $80,000.00 to Davis in workers' compensation benefits. Liberty Mutual then placed a workers' compensation lien on the $20,000.00 that New Hampshire Group had paid Davis.

Davis seeks declaratory relief rendering the auto policy's fellow employee exclusion invalid and unenforceable. He claims that the fellow employee exclusion violates the spirit and the principle of the financial responsibility statute. Davis also seeks damages on breach of contract, bad faith, gross misconduct, and good faith and fair dealing claims.

DISCUSSION

I. Summary Judgment Standard

Summary judgment is appropriate in cases where there is no genuine dispute as to a material fact and it appears that the moving party is entitled to a judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). A party seeking summary judgment bears the burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party opposing

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summary judgment may not rest on its pleadings, but must set forth specific facts showing that there is a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In its review, this Court views all of the facts and all of the inferences drawn from the facts in the light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, disposition by summary judgment is appropriate. Id. 475 U.S. at 587, 106 S.Ct. 1348; see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

II. Declaratory Relief

Davis is a fellow employee as defined by Liberty Mutual's auto policy. Under Vermont law, an injury arises in the course of employment when it occurs within a period of time when the employee is on duty and in a place where the employee may reasonably be expected to be while fulfilling the duties of his or her employment contract. See In re Estate of Marsigli v. Granite City Auto Sales, Inc., 124 Vt. 95, 97, 197 A.2d 799, 802 (1964)(finding an injury arises in the course of employment when it occurs within the period of time when employee is on duty and at a place where they may reasonably be expected to be while fulfilling the duties of their employment contract); see also Moody v. Humphrey & Harding Inc., 127 Vt. 52, 56, 238 A.2d 646, 649 (1968) (finding an injury occurs in the scope of employment when it occurs at a time and place where the employee may reasonably be expected to be while fulfilling the duties of his employment contract). Here, it is undisputed that the accident arose out of and occurred in the course of employment, and as a result, Liberty Mutual's fellow employee exclusion applies to the facts of this case.

This case presents an important question. Does the fellow employee exclusion clause violate section 800(a) of title 23 of Vermont Statutes Annotated, Vermont's financial responsibility statute? See Vt. Stat. Ann. tit. 23, § 800(a) (1987 & Supp.1997). For the reasons stated below, this Court holds that the fellow employee exclusion clause in question does not violate the statute.

A. Statutory Construction

This Court has diversity jurisdiction over this case pursuant to 28 U.S.C. § 1332(a)(1) and is thus required to apply Vermont law as to all substantive issues. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). It is established law that when the state supreme court has not interpreted a particular statute, it is the duty of this Court in a diversity action to anticipate how the state court would interpret the statute. See Deveny v. Rheem Mfg. Co., 319 F.2d 124, 129 (2d Cir.1963)(finding that a federal district court in a diversity case hearing an action based on injuries sustained in Vermont must look to Vermont law and rules of statutory interpretation).

This Court must apply the same rules of statutory construction that the Supreme Court of Vermont would apply. See Travelers Ins. Co. v. 633 Third Assoc., 14 F.3d 114, 119 (2d Cir.1994)(federal district court must apply the same analysis that the Supreme Court of Vermont would apply). It is well established that statutory interpretation should begin with statutory language itself. If the meaning of a statute is plain this Court must enforce the statute according to its obvious terms. See Donoghue v. Smith, 119 Vt. 259, 263, 126 A.2d 93, 96 (1956). However, if the meaning of the statute is not clear this Court must ascertain and give effect to the intention of the legislature. See State v. Hull, 143 Vt. 353, 354, 465 A.2d 1371, 1372 (1983) (stating that the rules of statutory interpretation are aids developed for the purpose of determining legislative intent). Under Vermont law, "[t]he rules relating to plain and ordinary meanings are ... only starting points on the path to the objective of legislative intent." State v. Baldwin, 140 Vt. 501, 510, 438 A.2d 1135, 1140 (1981)(stating that rules of statutory interpretation are not laws, but tools to be used to determine the legislative intent). In

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addition, the Supreme Court of Vermont presumes that when the legislature passed the statute it was mindful of the relevant judicial...

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    ...of administrative deference, and that BISHCA did not prohibit the policy provision at issue here. See Davis v. Liberty Mut. Ins. Co., 19 F.Supp.2d 193, 200 (D. Vt. 1998) (discussing generally the deference owed to BISHCA on such matters). But it remains the role of this court to ensure that......
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5 cases
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    • United States District Courts. 2nd Circuit. District of Vermont
    • March 6, 2002
    ...not only errs in denying coverage but does so unreasonably." Id. 164 Vt. at 402, 670 A.2d at 809. Davis v. Liberty Mut. Ins. Co., 19 F.Supp.2d 193, 202 (D.Vt.1998); see also Bushey, 670 A.2d at 809 ("Thus, if a realistic question of liability exists, an insurer may withhold payment while it......
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    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 28, 2004
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    • February 25, 2000
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    • United States
    • Vermont Superior Court of Vermont
    • November 30, 2011
    ...of administrative deference, and that BISHCA did not prohibit the policy provision at issue here. See Davis v. Liberty Mut. Ins. Co., 19 F.Supp.2d 193, 200 (D. Vt. 1998) (discussing generally the deference owed to BISHCA on such matters). But it remains the role of this court to ensure that......
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