Johnson v. Edlund

• Decision Date: 09 May 2023
• Docket Number: C.A. PC-2017-5261,PC-2022-05909
• Parties: GREGG JOHNSON C.A. Plaintiff, v. STEPHEN EDLUND Defendant. STEPHEN W. EDLUND Plaintiff, v. GREGG JOHNSON and USAA CASUALTY INSURANCE COMPANY Defendants.
• Court: Rhode Island Superior Court

1

GREGG JOHNSON C.A. Plaintiff, v. STEPHEN EDLUND Defendant.

STEPHEN W. EDLUND Plaintiff, v. GREGG JOHNSON and USAA CASUALTY INSURANCE COMPANY Defendants.

C.A. Nos. PC-2017-5261, PC-2022-05909

Superior Court of Rhode Island, Providence

May 9, 2023

ATTORNEYS:

For Gregg Johnson: Thomas L. Moran, Esq.

For Stephen Edlund: C. Russell Bengtson, Esq.

For USAA Casualty Insurance Co.: Dana M. Horton, Esq.

DECISION

TAFT-CARTER, J.

Before this Court for decision is Plaintiff/Defendant, Stephen Edlund's (Mr. Edlund) Motion for Summary Judgment Defendant USAA Casualty Insurance Co.'s (USAA) Motion for Summary Judgment, and Defendant/Plaintiff, Gregg Johnson's (Mr. Johnson) Motion for Summary Judgment. USAA objects to Mr. Johnson and Mr. Edlund's motions, and Mr Johnson and Mr. Edlund object to USAA's motion. Jurisdiction is pursuant to G.L. 1956 §§ 8-2-14, 9-30-1, and Rule 56 of the Superior Court Rules of Civil Procedure.

I Facts and Travel

In this consolidated action, Mr. Edlund seeks coverage under a Personal Umbrella Policy that he holds with USAA for any judgment or settlement above $250,000 in the underlying tort litigation, Johnson v. Edlund, PC-2017-5261 (the Johnson action). (Edlund Mem. Supp. Mot. for Summ. J. (Edlund Mem.) 1-2.)

The underlying tort litigation arose from a motorcycle accident that occurred on July 4, 2017. (Edlund Mem. Ex. E (Johnson Dep.) 25:1-4, 42:13-14; USAA Mem. Supp. Mot. for Summ. J. (USAA Mem.) Ex. C (Edlund Dep.) 49:21-23,79:14-19.) That evening, Mr. Edlund and Mr. Johnson were riding north together on Boston Neck Road in Narragansett Rhode Island, when they lost control of their motorcycles, causing an accident. (Johnson Dep. 57:1-64:4; 84:1-85:2; Edlund Dep. 69:9-15; 85:12-87:11.) Mr. Edlund and Mr. Johnson were both injured. See Johnson Dep. 17:19-18:1; Edlund Dep. 88:1-3.

At the time of the accident, Mr. Edlund maintained a Personal Umbrella Policy (Umbrella Policy) with USAA. (Edlund Dep. 108:8-11; USAA Mem. Ex. A (Umbrella Policy) Declarations at 1.) The Umbrella Policy provides coverage for damages "in excess of the retained limit, that an insured becomes legally obligated to pay because of bodily injury or property damage resulting from an occurrence." ^[1] (Umbrella Policy 4.) An occurrence is defined as "an accident . . . which results, during the policy period, in bodily injury or property damage." Id. at 3. Additionally, "retained limit" is defined as the "required minimum limit of liability for the applicable personal lines insurance coverage shown in the Schedule of Underlying Insurance . . ." Id. at 4. Mr. Edlund's required minimum limit for Miscellaneous Vehicle Liability is $250,000 for bodily injury. (Umbrella Policy Declarations at 1.)

Nevertheless, coverage is subject to two relevant exclusions:

"A. [The] insurance does not apply to . . . 3. Punitive or exemplary damages, fines or penalties.

". . .

"G. [The] insurance does not apply to bodily injury . . . 2. Arising out of . . . a. The ownership, maintenance, use, loading or unloading of . . . a motor vehicle." (Umbrella Policy 5-7.)

Exclusion G.2 (the Motor Vehicle Exclusion), does not apply, however, "to the extent that liability coverage is provided by underlying insurance and is not excluded elsewhere in [the] policy." Id. at 7. Underlying insurance is defined as the "types of personal lines insurance coverages for which limits are shown in the Schedule of Underlying Insurance[.]" Id. at 4. Mr. Edlund's Schedule of Underlying Insurance lists "Miscellaneous Vehicle Liability" as a required type of underlying insurance. (Umbrella Policy Declarations at 1.) Miscellaneous vehicles include motorcycles. (Umbrella Policy 3.)

At the time of the accident, Mr. Edlund's motorcycle insurance, which he had maintained in the amount required by his Umbrella Policy, had lapsed approximately a year or a year and a half prior. (Edlund Dep. 130:12-22.) Significantly, the Umbrella Policy includes a condition that applies in the event that underlying insurance terminates. (Umbrella Policy 9.) Condition G of the Umbrella Policy (Required Underlying Insurance Condition) provides:

"1. If underlying insurance for bodily injury or property damage has terminated, is uncollectible, or has a limit less than the retained limit, this will not void coverage. However, we will pay for bodily injury or property damage only as though the underlying insurance was collectible and in force in the amount of the retained limit.

"2. We will not pay the difference between the retained limit and any lower limit actually in effect." Id.

On August 2, 2017, Attorney Thomas L. Moran, counsel for Mr. Johnson, sent a letter to Mr. Edlund informing him that Mr. Johnson had retained his office for representation and advising Mr. Edlund to inform his insurance carrier. See USAA Mem. Ex. D (Aug. 2, 2017 Corr.) 1. On November 2, 2017, Mr. Johnson filed the Johnson action asserting a negligence claim against Mr. Edlund. (Compl. ¶¶ 1-7, PC-2017-5261, Nov. 2, 2017.)

On January 17, 2019, Mr. Edlund notified USAA of the Johnson action. (Edlund Mem. Ex. 2. (Feb. 27, 2019 Corr.) 2.) USAA responded acknowledging Mr. Edlund's request for assistance with the cost of defense on February 27, 2019. Id. at 2. However, USAA stated that coverage for defense cost was unavailable because the defense of the lawsuit was below the retained limits. Id. USAA advised Mr. Edlund that "[i]n the event that you tender the retained limit of $250,000, USAA would be willing to address Mr. Johnsons [sic] claim. Unless and until that exhaustion occurs, USAA believes that its benefits for both indemnity and defense cost have not been triggered." Id. at 2-3.

On February 7, 2019, Attorney Moran also communicated with USAA regarding Mr. Johnson's claim. See Edlund Mem. Ex. I (Oct. 3, 2022 Corr. & Acknowledgement of Representation) 4.) USAA acknowledged Attorney Moran's letter of representation and asked that "[t]o assist us with our evaluation of your client's claim, please provide documentation about the case as it becomes available." Id. USAA nonetheless advised that:

"Our insured has an Umbrella policy with a $1,000,000 limit per occurrence. The Umbrella policy only applies to liability above the retained limits of $250,000. In the event that Mr. Edlund tender's [sic] the retained limit of $250,000, USAA would be willing to address Mr. Johnsons [sic] claim. Unless and until that exhaustion occurs, USAA maintains that its benefits have not been triggered." Id.

On July 27, 2022, Mr. Johnson, through his attorney, made a formal demand for Mr. Edlund's USAA Umbrella Policy of $1,000,000. (Edlund Mem. Ex. F (Aug. 16, 2022 Corr.) 2.) USAA responded on August 16, 2022, but it concluded that "[a]fter review and our investigation, Mr. Edlund's Umbrella policy did not provide any coverage for this incident, therefore, we are unable to discuss any settlements for your client." Id.

Nevertheless, on October 3, 2022, Mr. Edlund's attorney wrote to Missy Smith, a Casualty Claims Examiner at USAA, advising her that pursuant to USAA's February 27, 2019 letter, Mr. Edlund was "tendering the retained limit of $250,000 to you." (Oct. 3, 2022 Corr. & Acknowledgement of Representation 1.)

Receiving no response, Mr. Edlund's attorney reached out to USAA's attorney on December 8, 2022, asking for them to "[k]indly advise the proper procedure for tendering the retained limit of $250,000." (Edlund Mem. Ex. J. (Dec. 8 Corr.) 1.)

Mr. Johnson filed an Amended Complaint on October 11, 2022, adding a second count for punitive damages based on Mr. Edlund's operation of his motorcycle while intoxicated. See Docket PC-2017-5261; Am. Compl. ¶¶ 8-12. On the same day, Mr. Edlund filed the instant complaint for declaratory relief against Mr. Johnson and USAA. See Compl. for Declaratory J. (Compl. PC-2022-05909) ¶¶ 1-12, Oct. 11, 2022. The Complaint asks this Court to declare:

"A. That the Policy of Insurance issued by USAA to Edlund provides coverage to Edlund for any and all sums above $250,000.00 for those matter[s] and things referred to in the action entitled Gregg Johnson v. Stephen Edlund, C. A. No. PC-2017-5261.

"B. Edlund is entitled to full reimbursement for his costs, attorney's fees, and expenses in proceeding with this action.

"C. Edlund is entitled to damages for the failure of USAA to indemnify and/or defend him and for dealing in "bad faith".

"D That the Court construe the USAA Policy and determine the rights and liabilities of the parties and for any and other further relief that this Court deems just including but not limited to punitive damages." Id. ¶ 12.

On November 16, 2022, Mr. Johnson filed an answer admitting almost all the material allegations of Mr. Edlund's Complaint. See Def. and Interested Party Johnson's Answer to Pl.'s Compl. for Declaratory J. ¶¶ 1-12. On January 5, 2023, Mr. Edlund filed a motion to consolidate his declaratory judgment action with the Johnson action. See Docket PC-2022-05909. USAA subsequently filed its own answer and affirmative defenses, as well as a motion to sever Mr. Edlund's bad faith claims. See id. The Court granted USAA's motion to sever and Mr. Edlund's motion to consolidate on February 13, 2023. See id.

On March 30, 2023, Mr. Edlund, USAA, and Mr. Johnson filed their respective motions for summary judgment. See id. On April 14, 2023, Mr. Edlund and USAA filed their objections, and on April 17, 2023, Mr. Johnson filed his objection. Id. Accordingly, Mr. Edlund, USAA, and Mr. Johnson's cross-motions for summary judgment are now before this Court for disposition.

II Standard of Review

"Summary judgment is a drastic remedy, and a motion for summary judgment should be dealt with cautiously." DeMaio v Ciccone, 59 A.3d 125, 129 (R.I. ...