Fireman's Fund Insurance Co. v. CNA Insurance Co., 2004 VT 93 (VT 9/17/2004)

• Decision Date: 17 September 2004
• Docket Number: No. 2003-035, March Term, 2004,2003-035, March Term, 2004
• Parties: Fireman's Fund Insurance Company Supreme Court v. CNA Insurance Company and Sumitomo Marine Management (USA), Inc.
• Court: Vermont Supreme Court

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2004 VT 93

Fireman's Fund Insurance Company Supreme Court v. CNA Insurance Company and Sumitomo Marine Management (USA), Inc.

No. 2003-035, March Term, 2004

Supreme Court of Vermont

September 17, 2004

On Appeal from Rutland Superior Court, Richard W. Norton, J.

Robert Reis, John C. Holler and Matthew D. Anderson of Webber, Reis, Holler & Urso, LLP, Rutland for Plaintiff-Appellant/Cross-Appellee.

Kaveh S. Shahi of Cleary Shahi Associates, P.C., Rutland, for Defendant-Appellee/ Cross-Appellant CNA Insurance Co.

William D. Riley of Paul Frank & Collins, Burlington, and Richard H. Nicolaides, Jr. and Nina Markoutsis of Bates & Carey, Chicago, Illinois, for Defendant-Appellee Sumitomo Marine Management, Inc.

PRESENT: Amestoy, C.J.,¹ Dooley, Johnson and Skoglund, JJ., and Allen, C.J. (Ret.), Specially Assigned.

DOOLEY, J.

¶ 1. Plaintiff Fireman's Fund Insurance (Fireman's) appeals, and defendant CNA Insurance Company (CNA) cross-appeals, from a Rutland Superior Court order denying in part and granting in part the parties' motions for summary judgment. In the superior court, Fireman's brought a declaratory judgment action to determine the priority of coverage for three insurance policies, issued respectively by Fireman's, CNA, and Sumitomo Marine Management (USA), Inc. (Sumitomo). Each of the policies provides some degree of coverage for injuries resulting from the automobile accident that is the subject of several underlying lawsuits. The accident involved two passenger vehicles and a tank tractor truck owned by Pouliot and Corriveau, Inc. (P&C) that was pulling a milk tank "pup" trailer leased from Agri-Mark, Inc. (AMI). CNA² was the primary insurer for both P&C and its driver, Burton Heath, with Sumitomo providing a commercial excess umbrella policy for these insureds. Fireman's was AMI's primary carrier. Pursuant to the declaratory judgment action, the trial court found that Fireman's and CNA shared primary coverage responsibility for any claims against P&C, Heath, and AMI and that in the event that these two policies were exhausted, Sumitomo had coverage responsibility for any excess liability against the three parties. We affirm in part, and reverse and remand in part.

¶ 2. This case arises out of an automobile accident that occurred on June 1, 1997 on Route 7 near the village of Brandon. On that date, Ronald Gilligan was driving south on Route 7 with his wife, daughter and his daughter's friend in the car. Gilligan attempted to pass a minivan driven and occupied by members of the Clodgo family. When Gilligan pulled into the northbound lane to pass, he ran head-on into the oncoming P&C truck, driven by P&C's employee Heath. At the time of the accident, the truck was hauling a trailer owned by AMI and leased by P&C pursuant to an oral lease between the two parties. All four occupants of the Gilligan vehicle were killed, and members of the Clodgo family were injured.

¶ 3. After the accident, several lawsuits were filed against P&C, Heath, and AMI. The suits claimed that Heath was negligent in the operation of the truck and that both P&C and AMI were responsible for his negligence under respondeat superior. One suit against AMI, filed by the estate of a passenger in the Gilligan vehicle alleged that the "pup" trailer was unreasonably dangerous and not suitable for the purpose for which it was being used. Gilligan's insurer paid out its policy limit of $300,000 which the various claimants shared. Fireman's has been defending AMI in these suits, but has not defended or contributed to the defense of Heath or P&C. Similarly, CNA has been defending Heath and P&C, but has not provided a defense for AMI. The Clodgo family settled its action against Heath and P&C after these lawsuits were filed.³ The settlement agreement provides that if CNA is able to recover any sums from Fireman's for contribution or reimbursement, CNA will pay the Clodgos one-third of the recovery up to $25,000.

¶ 4. In the aggregate, significant policy coverage is available for satisfaction of any judgments or settlements that may result from the claims. Both the CNA and Fireman's policies provide $1 million of auto liability coverage, and Sumitomo's commercial excess umbrella policy has a limit of $2 million. Our responsibility, as was the superior court's, is to establish the coverage priorities among the policies before us.

¶ 5. All parties to the declaratory judgment action moved for summary judgment. Fireman's urged the court to find that it is obligated to provide defense and indemnification for the insureds only upon the exhaustion of both the CNA and Sumitomo policies. In contrast, CNA argued that it shares primary coverage with Fireman's for liability for P&C and Heath, and that Fireman's alone provides coverage for AMI's liability. Sumitomo, in turn, asserted that CNA and Fireman's are primary for P&C's and Heath's liability and that Fireman's is also primary for AMI's liability. According to Sumitomo, it is obligated to provide coverage only for P&C and Heath, and only then after both CNA's and Fireman's policies are exhausted.

¶ 6. After considering the parties' motions for summary judgment, the court issued an order and made the following rulings: (1) Sumitomo's motion was granted "insofar as the CNA and Fireman's policies must be exhausted before Sumitomo must contribute to the coverage of P&C, Heath and AMI," but was denied "insofar as it sought to avoid responsibility for claims arising from Heath and AMI"; (2) CNA's motion was granted "insofar as Fireman's must share primary responsibility for the P&C and Heath claims," but was denied "insofar as it sought to escape liability for claims arising from Heath and AMI liability;" and (3) Fireman's motion was granted "insofar as CNA must share primary responsibility with Fireman's for claims arising from P&C's, Heath's and AMI's liability," but denied "insofar as it sought to avoid primary responsibility for any claims."

¶ 7. Following the issuance of the order, Fireman's filed an appeal with this Court, and CNA cross-appealed. Thereafter, Sumitomo withdrew from the appeal. This withdrawal has little effect on this opinion because we still must address Fireman's arguments on the priority of coverage responsibilities with respect to all three carriers. On appeal, Fireman's contends that it is excess over both the CNA and Sumitomo policies. CNA cross-appeals, arguing that Fireman's shares primary coverage responsibility for P&C and Heath and that it provides no coverage for AMI even though AMI is a listed as an additional insured.

¶ 8. We review the decisions on the parties' summary judgment motions using the same standard as the trial court. Madden v. Omega Optical, 165 Vt. 306, 309, 683 A.2d 386, 389 (1996). Summary judgment is appropriate "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 any party is entitled to a judgment as a matter of law." V.R.C.P. 56 (c)(3). We will take as true the facts alleged by the nonmoving party, and "give the nonmoving party the benefit of all reasonable doubts and inferences." Chamberlain v. Metro. Prop. & Cas. Ins. Co., 171 Vt. 513, 514, 756 A.2d 1246, 1248 (2000) (mem.). Here, our inquiry largely turns on the policies' language. Construction of the language of insurance contracts is a question of law, not of fact. Waters v. Concord Group Ins. Cos., 169 Vt. 534, 535, 725 A.2d 923, 925 (1999) (mem.). Accordingly, we make our own inquiry into the legal effect of the contracts' terms and the relationships between them. Gannon v. Quechee Lakes Corp., 162 Vt. 465, 469, 648 A.2d 1378, 1380 (1994).

¶ 9. We interpret insurance contracts according to their terms and the intent of the parties as expressed by the policies' language. City of Burlington v. Nat'l Union Fire Ins. Co., 163 Vt. 124, 127, 655 A.2d 719, 721 (1994). "Disputed terms are to be read according to their plain, ordinary, and popular meaning." Chamberlain, 171 Vt. at 514, 756 A.2d at 1248. Any ambiguity will be resolved in the insured's favor, but we will not deprive the insurer of unambiguous terms placed in the contract for its benefit. Peerless Ins. Co. v. Wells, 154 Vt. 491, 494, 580 A.2d 485, 487 (1990).

¶ 10. The questions in this appeal are complicated and interrelated. Logically, there are nine starting questions — that is, for each of the three carriers, does the policy extend coverage to each of the three defendants in the underlying litigation?⁴ For each of the carriers and defendants, for which the answer to the coverage question is positive, we must then determine the priority of coverage — that is, is it primary secondary or tertiary with respect to another carrier's coverage? At some point in this litigation, virtually every possible question and answer was advanced by one or more of the carriers.

¶ 11. The decision in the trial court and the framing of the appeal issues has narrowed the number of questions we must answer. Most importantly, the trial court found, or in some instances assumed, that the answers to the nine opening questions were all affirmative, and that each of the three carriers had, through the applicable policy, extended coverage to all of the three defendants in the underlying litigation. For Fireman's, the trial court apparently based its conclusion upon the deposition testimony of its employee who was empowered to state its position and admitted that its policy covered the liability of P&C and Heath, as well as AMI. Fireman's has not contested this conclusion on appeal, and, as a result, we do not consider its validity.

¶ 12. CNA did not contest the trial court's conclusion that CNA's policy covered P&C and Heath. CNA did, however, contest coverage of AMI in the trial court and we must answer this appeal question. The situation with respect to Sumitomo is essentially the same because its...