Mulliss v. American Protection Ins. Co.
| Decision Date | 04 February 1987 |
| Docket Number | Civ. A. No. 84-178. |
| Citation | 653 F. Supp. 685 |
| Parties | Christopher G. MULLISS v. AMERICAN PROTECTION INSURANCE COMPANY and New Hampshire Insurance Co. |
| Court | U.S. District Court — District of Vermont |
Samuel H. Press, Samuelson, Portnow & Little P.C., Burlington, Vt., for plaintiff.
William H. Quinn, Pierson, Affolter & Wadhams, Burlington, Vt., for defendant American Protection Ins. Co.
William H. Pearson, Downs, Rachlin & Martin, South Burlington, Vt., for defendant New Hampshire Ins. Co.
This diversity action comes before us on cross-motions by plaintiff Mulliss ("plaintiff") and defendant American Protection Insurance Co. ("defendant") for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Both parties seek a determination of defendant's liability for uninsured motorist benefits under a policy issued by defendant and covering plaintiff.1 The resolution of this issue hinges on an interpretation of the "offset-reduction" clause contained in the uninsured motorist coverage provisions of defendant's policy.
Defendant also asks us to determine third-party defendant New Hampshire Insurance Company's liability to plaintiff on an automobile liability policy it issued to third-party defendant Gerard A. Lavoie, Jr. Finally, plaintiff has made a separate motion pursuant to Federal Rule of Civil Procedure 37 to compel discovery against defendant regarding certain materials relating to plaintiff's claims against defendant for tortious refusal to honor insurance policy provisions. For the reasons stated below, we GRANT plaintiff's motion for partial summary judgment and DENY defendant's motion. We also GRANT plaintiff's motion to compel discovery.
For the purpose of deciding the instant motions for partial summary judgment, the parties to this action have stipulated to or have admitted by failing to object to the following facts.
On May 22, 1983, the plaintiff in this action, Christopher Mulliss, was severely injured when a motorcycle upon which he was riding as a passenger was involved in an accident. The accident was caused by the negligence of the motorcycle's driver, Gerard A. Lavoie, Jr. Lavoie was also the owner of the motorcycle. At the time of the accident, the motorcycle was insured under a policy issued by the Universal Underwriters Insurance Company ("UUI"). This policy carried a bodily injury liability limit of $20,000 per person per accident. This coverage is the minimum coverage required for automobile liability policies in Vermont. Vt.Stat.Ann. tit. 23, § 801(a). At the time of the accident, Lavoie also had an automobile liability insurance policy issued by the New Hampshire Insurance Company. ("NHI"). This policy also had a stated bodily injury liability limit of $20,000 per person per accident. Plaintiff was an insured under the provisions of his mother's automobile liability insurance policy, issued by defendant, which provided up to $40,000 of bodily injury coverage to insured individuals injured by uninsured ("UM") or underinsured ("UIM") motorists. The relevant portions of defendant's policy are laid out in our discussion below. After the accident, all three of the insurance companies involved denied coverage under their respective policies for plaintiff's injuries.
On May 31, 1984, plaintiff filed suit against Lavoie in Vermont Superior Court alleging negligence by Lavoie and demanding damages in excess of $60,000. On that same day, plaintiff filed this diversity action in this court against defendant American Protection. Plaintiff's complaint alleges breach of contract due to defendant's failure to pay UIM benefits under the terms of its policy, tortious refusal to pay policy benefits, tortious breach of fiduciary duties, and tortious interference with a protected property interest. Plaintiff's ad damnum seeks $100,000 compensatory and $200,000 punitive damages, plus attorney's fees.
In its answer, defendant asserts, inter alia, that plaintiff is not entitled to UIM benefits under defendant's policy until all of the tortfeasor's liability policies have been exhausted by payment. Subsequent to its answer, defendant filed a consolidated amended third party complaint against third-party defendants Lavoie, UUI and NHI. This complaint asks the court for a declaratory judgment that UUI and NHI are liable to plaintiff up to the full limits of the liability policies they issued to Lavoie; that defendant is not liable to plaintiff for UIM benefits until UUI and NHI have fully paid under their policies; and that defendant's UM policy liability limit of $40,000 should be reduced dollar for dollar by any sums paid plaintiff by Lavoie or his liability insurers, under the terms of the offset-reduction clause in defendant's policy. In its answer to defendant's consolidated amended third-party complaint, NHI denies any liability under the policy it issued to Lavoie and seeks declaratory relief to that effect.
On October 1, 1985, plaintiff and Lavoie entered into a "Covenant Not To Execute" in which plaintiff, in return for the payment of $20,000 by UUI on behalf of Lavoie, agreed to dismiss his Vermont Superior Court suit and to release all claims he may have had against Lavoie and UUI. Subsequent to this agreement, third-party defendant UUI was dismissed by order of this court dated October 15, 1985 in accordance with a stipulation of the parties.
Finally, although it is nowhere stipulated by the parties, both assume for the purpose of deciding their respective motions for partial summary judgment that plaintiff's damages are in excess of $80,000. (See Plaintiff's Memorandum at 3, Defendant's Memorandum at 2).
The relevant portions of defendant American Protection's policy regarding coverage of insured individuals for bodily injury inflicted by uninsured or underinsured tortfeasors are as follows:
The last quoted provision is commonly known as an "offset-reduction" clause. The parties' dispute concerning defendant American Protection's liability under its uninsured motorist's coverage centers upon the interpretation of the offset-reduction clause.
Defendant argues that under the terms of the offset-reduction clause in its policy, its maximum liability to plaintiff for uninsured motorist benefits is the $40,000 policy limit less any amounts collected by plaintiff from the tortfeasor's liability carriers. While defendant makes only minimal reference to the language of the policy itself, defendant implicitly interprets the phrase "Any amounts otherwise payable for damages under this coverage" in its offset-reduction clause to mean that "the total amount of coverage provided, if payable" or "the limit of liability, if payable" by the insurance company "shall be reduced by all sums paid" for bodily injury by the tortfeasor or his insurer. Defendant argues vigorously that such an interpretation of the language of the offset-reduction clause is in accord with the minimum underinsurance requirements of Vt.Stat.Ann. tit. 23, §§ 941(e) and (f).
Plaintiff argues that the "Any amounts otherwise payable for damages" language of the offset-reduction clause, when read in conjunction with the broad language of the "Insuring Agreement" which provides that "defendant will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury", indicates that defendant may only deduct payments made by the tortfeasor or his insurance carrier from the total amount of plaintiff's damages, and not simply from defendant's policy limit for uninsured motorist coverage. In support of its position, plaintiff cites numerous state court decisions interpreting similar language in offset-reduction clauses. Plaintiff also cites the well-established rule of insurance policy construction which mandates that ambiguous clauses in insurance policies which may reasonably be subject to two interpretations must be liberally construed in favor of the insured.
In a supplemental memorandum in support of his motion for partial summary judgment, plaintiff also brings to our attention a recent "Declaratory Ruling" by the Vermont Department of Banking and Insurance. This ruling construes Vermont's underinsured motorist statute, Vt.Stat. Ann. tit. 23, § 941, in the manner urged by plaintiff in this case. Defendant's reply to this supplemental memorandum asserts that this "Declaratory Ruling" is really nothing more than an advisory opinion because it was not decided pursuant to an actual case or controversy. Defendant asserts that such an advisory opinion is entitled to no weight and alleges that the opinion was actually drafted by an attorney for a party who espoused such a position in an ex parte proceeding without...
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