Fratus v. Obert
| Decision Date | 27 June 2001 |
| Docket Number | C.A. 88-2619 |
| Parties | JOSEPH FRATUS, STEPHANIE L. FRATUS, and CARISSA M. FRATUS, p/p/a STEPHANIE L. FRATUS, Plaintiffs, v. JOSEPH T. OBERT, JR., Alias John Doe, AMERICAN DRY WALL COMPANY, INC., Alias John Doe Corporation, TILCON GAMMINO, INC., Alias James Roe Corporation and ABLE BITUMINOUS CONTRACTORS, INC., Alias John Doe Corporation, Defendants. RHODE ISLAND INSURERS' INSOLVENCY FUND, Plaintiff in intervention, v. TILCON GAMMINO, INC., ABLE BITUMINOUS CONTRACTORS, INC., and COMMERCIAL UNION INSURANCE COMPANY, Defendants in intervention |
| Court | Rhode Island Superior Court |
DECISION
Before this Court is a motion for declaratory judgment by the Plaintiff in intervention, Rhode Island Insurers' Insolvency Fund, asking this Court to declare 1) that defendant, Tilcon Gammino, Inc. was not an insured under any American Universal Insurance Company policy 2) that defendant, Tilcon Gammino, Inc. did not have a " covered claim" against the Rhode Island Insurers' Insolvency Fund, as that term is defined in Chapter 34 of Title 27 of the General Laws of Rhode Island; and 3) that the Fund is not obligated to pay any amount to Tilcon Gammino, Inc. or to Able Contractors, Inc. on account of Tilcon Gammino Inc.'s cross-claim. Jurisdiction is pursuant to General Laws of Rhode Island 1956 § 9-30-1.
The parties have stipulated to an agreed statement of facts. The facts, as they pertain to the present motion for declaratory judgment, are as follows. On June 4, 1985, plaintiff, Joseph J. Fratus was inspecting road repairs being performed by Able Contractors, Inc., formally known as Able Bituminous Contractors ("Able"), on Interstate 295 in Cranston, Rhode Island in the course of his employment as a Rhode Island Department of Transportation employee. He was struck and injured by a U-Haul vehicle while conducting his inspection. Thereafter, the Fratus plaintiffs commenced this suit against defendants alleging, among other things, that the defendant contractor, Tilcon Gammino, Inc. ("Tilcon"), and defendant subcontractor, Able negligently failed to maintain cones and flashing sign boards and otherwise failed to exercise due care to protect Mr Fratus.[1] This lawsuit was subsequently settled. The Rhode Island Insurers' Insolvency Fund ("the Fund") now moves this Court for declaratory judgment asking this Court to declare the rights of the parties with regard to the cross-claim of Tilcon Gammino, Inc. for contribution or indemnification from Able. A further discussion of the relevant facts and travel of the underlying lawsuit is required in order to resolve the present motion.
On or about July 20, 1989, Tilcon filed a claim for declaratory judgment in the Providence County Superior Court (Civil Action 89-3933), seeking a declaration that Able and/or Able's liability insurance carrier, American Universal Insurance Company ("American Universal"), was required to defend and indemnify Tilcon with respect to the claims asserted in the Fratus accident. Able was insured by a special multi-peril policy issued by American Universal with policy limits of $500,000 per occurrence and $500,000 aggregate. According to the agreed statement of facts, the policy provided coverage to Able for, among other things, the cross-claims asserted against Able by Tilcon The parties differ as to whether Tilcon was an additional insured under the policy Able had with American Universal. Pursuant to the subcontract between Tilcon and Able, Able was obligated under the terms of the contract to list Tilcon as an additional insured under Able's liability insurance policy and was obligated to acquire a Certificate of Insurance in Tilcon's name. While a Certificate of Insurance was issued in Tilcon's name, the policy makes no reference to Tilcon as an additional insured. (See Agreed Statement of Facts, p.3, ¶ ¶ 9-12; p. 6, ¶ 29; and Agreed Statement of Facts Exhibits "B" and "C".)
Nonetheless on or about August 10, 1989, American Universal agreed to defend and indemnify Tilcon in the Fratus action as an additional insured under the Able policy. As a result, Tilcon dismissed its declaratory judgment action against Able and American Universal. Subsequently, on or about January 8 1991, a court of competent jurisdiction in Rhode Island determined American Universal to be insolvent. The Rhode Island Insurers' Insolvency Fund ("the Fund") stepped into the shoes of the insolvent insurer (American Universal) and became responsible for certain "covered claims," as defined in Chapter 34 of the Rhode Island General Laws. The Fund's Senior Claims Examiner, Mr. Daniel F. Healy, informed Tilcon in a letter dated March 12, 1991, that due to the insolvency of American Universal, the Fund would no longer honor American Universal's arrangement to defend Tilcon in the Fratus action, because Tilcon "had coverage of its own for the above referenced accident." This other coverage to which Mr. Healy referred was a policy issued to Tilcon by Commercial Union Insurance ("CU"), which covered the claims asserted against Tilcon by the Fratus Plaintiffs. The policy limits of the CU policy were twenty million British pounds aggregate. (See Agreed Statement of Facts, p.4, ¶ ¶ 15-19; and Agreed Statement of Facts Exhibit "E.")
On or about March 11, 1992, Tilcon commenced its cross-claim against Able for contribution and indemnification. At that time, Tilcon asserted that there was no other source of recovery for Tilcon other than through the Fund. Since the commencement of the cross-claim, Tilcon conceded that, in fact, there was insurance coverage with CU for plaintiffs' losses.
Prior to the resolution of the cross- claim, Tilcon and its liability carrier, CU, agreed to settle the claims asserted by the Fratus Plaintiffs in the Fratus action pursuant to the CU policy, and entered into a Settlement Agreement and General Release. Tilcon, CU, and Able agreed that the amount paid pursuant to the Settlement Agreement was fair and reasonable. Pursuant to the Settlement Agreement, the Fratus Plaintiffs agreed to accept less than the policy limits of the CU Policy, and the Fratus Plaintiffs agreed to release Tilcon and Able from any further claims relating to the accident. Neither Tilcon nor Able admitted any liability on the plaintiff's claim under the Settlement Agreement. Likewise, neither Tilcon nor Able admitted any liability for negligence in connection with the cross-claim. On or about October 29, 1993, the Providence County Superior Court entered the Dismissal Stipulation dismissing all claims brought by the Fratus Plaintiffs against Tilcon and Able. According to the parties, CU has made and continues to make all payments provided for in the Settlement Agreement to the Fratus Plaintiffs. By virtue of making such payments pursuant to the Settlement Agreement, CU is entitled to receive any amounts recovered in Tilcon's cross-claim against Able with the exception of any applicable deductible amount. (See Agreed Statement of Facts, pp. 5-6, para.20-25)
In its Memorandum, Tilcon argues it is entitled to receive from Able either contribution under the Contribution Among Joint Tortfeasors Act, or indemnification pursuant to the subcontract toward the $1,300,000.00 settlement payment it made to Plaintiffs. Tilcon also alleges that the fund is bound by what Tilcon refers to as American Universal's "settlement agreement." Tilcon asks this Court to declare that Tilcon has a viable cross-claim and that the Fund is required to indemnify Tilcon up to its statutory limit of $300,000. Tilcon also asks that it also be awarded attorney's fees and costs incurred in its defense. Furthermore, since there is nothing in the statutory scheme which would protect Able from liability claims in excess of the protection originally purchased by Able, Tilcon argues it should also be entitled to pursue payment from Able, personally and individually, for the amount of its liability in excess of the insurance coverage provided by American Universal.
The Fund responds that it was never a named party in Tilcon's cross-claim against Able and that Tilcon has not commenced any action against the Fund or served the Fund with process. The Fund also argues that, by reason of the Act, R.I.G.L. § 27-34-5(8)(ii)(c), it has no obligation with regard to Tilcon's claim because any payment it would make would go to CU and would thus constitute a payment due an insurer, which is specifically excluded from "covered claims" in the statue. Additionally, the Fund alleges that, by reason of the Act, R.I.G.L. § 27-34-12 (a), it has no obligation on account of Tilcon's claim because any amount payable by the Fund must be reduced by the amount recovered by Tilcon from CU and because Tilcon failed to exhaust its rights against CU. The Fund seeks a declaration that Tilcon was not an insured under any American Universal policy and thus does not have a covered claim against the Fund, and that it is not obligated to pay any amount to Tilcon or to pay any amount to Able on account of Tilcon's cross-claim.
In addition to the foregoing arguments, counsel for Able argues that by reason of § 27-34-5(8)(ii)(C) of the statue, Tilcon is barred from asserting a claim for contribution or indemnification against an insured of the insolvent insurer, in this case, Able.
The parties have agreed that this Court decide the issues raised in the cross-claim and Declaratory Judgment Complaint without the parties having to file cross-motions for Summary Judgment.
The Fund was established pursuant to the Rhode Island Insurers' Insolvency Fund Act, Chapter 34 of Title 27. It is endowed by assessments on liability insurance carriers doing business in the state of Rhode Island. Section 27-34-8(3). The insurers, in...
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