Harbor Ins. Co. v. Connecticut Ins. Guar. Ass'n, Civ. No. H-87-551(AHN).
| Decision Date | 14 April 1989 |
| Docket Number | Civ. No. H-87-551(AHN). |
| Citation | 711 F. Supp. 70 |
| Court | U.S. District Court — District of Connecticut |
| Parties | HARBOR INSURANCE COMPANY v. CONNECTICUT INSURANCE GUARANTY ASSOCIATION. |
John Farley, Halloran, Sage, Phelon & Hagarty, Hartford, Conn., for plaintiff.
Steven A. Levy, Friedman, Mellitz & Newman, Fairfield, Conn., for defendant.
RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT
The plaintiff, Harbor Insurance Company ("Harbor"), brings this diversity action against the Connecticut Insurance Guaranty Association ("the Association"), seeking partial indemnification of its payment in settlement of a claim against its insured arising out of a motor vehicle accident. In particular, it seeks to recover the portion of the settlement payment allegedly made in behalf of the insured's primary insurer, which had become insolvent prior to entry of the settlement. Harbor, the excess insurer, negotiated and paid the full settlement before the Association determined whether it was required under the Connecticut Insurance Guaranty Association Act ("CIGAA") to assume any liability of the insolvent insurer with respect to the underlying claims. In denying liability for any part of the settlement payment, the Association argues that Harbor's claim is not a "covered claim" within the meaning of the CIGAA and thus is not payable by it. In the alternative, it contends that Harbor's claim is barred by the failure on the part of the claimants to exhaust other insurance available to them. The parties have presented cross motions for summary judgment based on these two issues.
The facts giving rise to this action are not in dispute.1 The parties filed a joint stipulation of facts, a summary of which is set forth below.
On August 9, 1986, Motor Cars Leasing of Torrington, Inc. ("Motor Cars") rented an automobile to Kenneth J. Rinaldi. While driving the car in Torrington, Rinaldi negligently crossed the centerline of Torringford Street and collided head-on with a car in which Robert and Loris Geer were travelling. As a result of the collision, Robert Geer was killed and Loris Geer sustained serious bodily injury.
Integrity Insurance Company ("Integrity") provided primary automobile liability insurance coverage to Motor Cars at the time of the accident. Its policy with Motor Cars limited coverage to $20,000 per person and $40,000 per accident. Motor Cars also had an automobile liability excess indemnity insurance policy with Harbor Insurance Company ("Harbor"). This policy covered Motor Cars for the excess over the declared limits of the Integrity policy up to a maximum of $1,000,000. In addition, the Geers had automobile liability insurance with Allstate Insurance Company which included uninsured/underinsured motorist coverage with a limit of $300,000 per person and $500,000 per accident.
Harbor assumed responsibility for the adjustment of the claims asserted by the Estate of Robert Geer and Loris Geer as a result of the automobile accident. Recognizing that the potential dollar exposure on these claims could well exceed the $1,000,000 liability limit set forth in its policy, Harbor entered into settlement negotiations with the Estate of Robert Geer and with Loris Geer (collectively, "the Geer claimants"). In early March, 1987, Harbor was notified that Integrity had become insolvent and would be placed into formal liquidation later that month.
On April 14, 1987, Harbor wrote to the Connecticut Insurance Guaranty Association to determine whether it would assume Integrity's liabilities and obligations, as provided for by the CIGAA, and pay Integrity's underlying limits as part of the settlement of the Geer claims. The Association did not respond to the letter since it had not yet received the Geer file from Integrity's receiver. Harbor ultimately succeeded in settling both Geer claims by agreeing to make a total payment of $631,156. Under the terms of the settlement, the Estate of Robert Geer received $100,000 and Loris Geer received $531,156.
The Association received the Geer file from the Integrity receiver after Harbor had already settled the Geer claims. Nevertheless, it wrote to the Estate of Robert Geer, to Loris Geer and to Kenneth Rinaldi, recommending that, prior to submitting a claim pursuant to the CIGAA, they determine whether other insurance coverage was available to them. No claim was ever submitted to the Association by the Estate of Robert Geer or by Loris Geer.
Harbor has brought this action to recover the sum it paid in settlement of the Geer claims for which Integrity was originally responsible.2 It seeks to establish that its claim against the Association is "covered" within the meaning of the CIGAA, Conn. Gen.Stat. Section 38-275 et seq., and thus payable by the Association. The Association responds that an excess insurer, like Harbor, may not assert a "covered claim" under the CIGAA. Alternatively, it argues that Harbor may not recover because of the failure to exhaust rights parallel to the "covered claim" under other coverage available to the claimants. Since the court finds the latter argument to be dispositive of the case, it assumes that Harbor's claim is a "covered claim" for purposes of the pending motions. For the reasons set forth below, summary judgment shall enter in favor of the Association.
The Association is a "nonprofit unincorporated legal entity" created by statute. Conn.Gen.Stat. Section 38-276. Its plan of operation, organizational structure, obligations and powers are set forth in the CIGAA. Id. Section 38-273 et seq. The CIGAA provides that the Association assume "all rights, duties and obligations" of an "insolvent insurer" with respect to claims "covered" by the statute.3 Id. Section 38-278(1)(b). It also requires the Association to "investigate claims brought against it and adjust, compromise, settle and pay covered claims to the extent of its obligations, and deny all other claims." Id. Section 38-278(1)(d). Further, "it may review settlements ... to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements ... may be properly contested." Id.
The Association is authorized to pay and discharge "covered claims" only. See id. Section 38-278(1). The CIGAA defines a "covered claim" as "an unpaid claim ... which arises out of ... the coverage ... of an insurance policy ... issued by ... an insurer which becomes insolvent." Id. Section 38-275(4).4 In addition, the Association assumes the liabilities of an insolvent insurer on a "covered claim" only after the claimant has exhausted his rights under other available insurance policies. Id. Section 38-282(1).
With respect to the prerequisite of exhaustion, the CIGAA provides that:
any person having a claim against an insurer under any provision in an insurance policy, other than a policy of an insolvent insurer, which is also a covered claim under this chapter, shall exhaust first his rights under such policy. Any amount payable on a covered claim under this chapter shall be reduced by the amount of any recovery under such insurance policy.
Id. It follows from the language of this provision that one cannot recover on a "covered claim" if the claimant has failed to exhaust rights under any available coverage afforded by a solvent carrier.5 In the instant case, it is undisputed that the Geer claimants failed to assert any claims under the Geers' uninsured motorist policy carried by Allstate.
The contract of insurance between the Geers and Allstate contained uninsured motorist protection with limits of $300,000 per person and $500,000 per accident. The policy extended coverage to "motor vehicles for which the insurer ... becomes insolvent." Stipulation of Facts, Exhibit D at 23. Connecticut law also requires that uninsured motorist coverage afforded to Connecticut residents have such a reach. See Conn. Agencies Regs. Section 38-175a-6(a) (1986). Because of the insolvency of Integrity, the automobile rented by Mr. Rinaldi became an "uninsured motor vehicle," triggering the rights of the Geer claimants to recover under the uninsured motorist coverage of the Allstate policy. The Association advised the claimants in writing that such "coverage may be available and must be exhausted before looking to us for any recovery." Stipulation of Facts, Exhibit H. No claim was ever asserted under the Allstate policy.
Harbor contends that the exhaustion requirement of Section 38-282(1) is inapplicable to the instant claim because of its liability payment to Loris Geer. It argues that any rights Loris Geer held under the uninsured motorist coverage of the Allstate policy were extinguished as a result of that payment. It bases this argument on a provision within the Allstate policy which states that the limits of its coverage are reduced by Stipulation of Facts, Exhibit D at 24. Harbor interprets this provision to mean that "the only coverage `available' under the Allstate policy was the amount of coverage in excess of its liability payment" to Loris Geer. Memorandum of Law in Support of Harbor Insurance Company's Motion for Summary Judgment at 9. Since Harbor's payment exceeded the $300,000 limit of the Allstate coverage, it argues, the Allstate policy became unavailable for purposes of the CIGAA and therefore has no bearing on the instant claim asserted against the Association.
Connecticut law is unsettled on the question of what effect, if any, is given to the liability payment of an excess insurer upon the limits of another carrier's uninsured motorist coverage in light of the insolvency of the insured's primary insurer. The CIGAA requires that all other available insurance be exhausted before the Association assumes the liabilities of an insolvent insurer....
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