Summit Ins. Co. v. Stricklett
| Decision Date | 19 January 2017 |
| Docket Number | C.A. No. PC 2012-5368 |
| Parties | SUMMIT INSURANCE COMPANY v. ERIC STRICKLETT, SCOTT ALVES, JOHN ALVES, AND CATHY ALVES |
| Court | Rhode Island Superior Court |
DECISION
This matter came on for trial on the motion of Summit Insurance Company (Summit) for a declaratory judgment. The declaratory judgment seeks to determine the rights and obligations of the parties pursuant to a Rhode Island Automobile Insurance Policy issued by Summit to one of the Defendants, Eric Stricklett.
Specifically, Summit is seeking a declaration as to whether Summit has an obligation to pay any amounts (interest or attorneys' fees) beyond its policy limits on any judgment in connection with an underlying personal injury action. The counterclaim Plaintiffs in this action, Scott Alves, John Alves, and Cathy Alves (the Alves) are Plaintiffs in the underlying case pending against Mr. Stricklett in the Providence County Superior Court (PC-2011-5499). In the underlying action, the Alves are seeking the recovery of damages arising out of an automobile accident that occurred on April 26, 2002 when Mr. Stricklett struck Scott Alves with his automobile. The Alves filed a counterclaim against Summit asserting that Summit is liable for all accrued prejudgment interest on all of the Alves' damages, and that Summit is also liable for all damages over and above any policy limits.
On April 26, 2002, while driving his automobile on Newport Avenue in the city of Pawtucket, Rhode Island, Erick Stricklett hit a young pedestrian, Scott Alves. (Trial Ex. BB, Uniform Accident Report.) The numerous witnesses that were interviewed separately unanimously stated that Scott ran across the street without looking. Id. At the time of the accident, Mr. Stricklett was insured pursuant to a Summit Insurance Company Personal Automobile Policy with bodily injury coverage of $25,000 per person and $50,000 per accident. (Trial Ex. L, Letter from Summit). In December of 2002, Summit visited the scene of the accident and took photographs. (Agreed Statement of Facts ¶ 7). On December 18, 2002 and January 2, 2003, counsel for the Alves forwarded a copy of all of Scott's medical records and bills for his treatment as of that date to Summit. (Trial Exs. F and G, Letters to Summit.) On March 24, 2003, Summit wrote to the Alves' counsel explaining that they investigated the claim and found that Mr. Stricklett was not at fault for the boy's injuries, and as a result, Summit would not be making any settlement offers on the case. (Trial Ex. H, Letter of Dennis J. Franchetti.) On April 15, 2003, counsel for the Alves returned correspondence to Summit stating that to the contrary, they felt as though Mr. Stricklett was at fault and they were going to proceed with the claim. (Trial Ex. I, Letter from the Alves' counsel to Dennis J. Franchetti.) Time passed, and all counsel appeared to be inactive on this claim for about eight years. (Agreed Statement of Facts ¶ 8.)
On February 16, 2011, counsel for the Alves again wrote to Summit reminding them of the claim and advising that they were pursuing a lawsuit against Mr. Stricklett. (Trial Ex. J, Letter from the Alves' counsel to Dennis J. Franchetti.) In June of 2011, counsel for the Alves sent a written demand letter to Summit for $300,000. (Trial Ex. O, Letter from the Alves'counsel, June 15, 2011.) The letter claimed that Summit was responsible for $25,000 in insurance coverage plus the $275,000 in interest on all of Scott's damages for Summit's failure to proceed in good faith. Id. One week later, Summit offered Mr. Stricklett's full policy limit of $25,000 to the Alves. (Trial Ex. P, Letter of June 22, 2011.) Counsel for the Alves notified Summit a few weeks after that they were not interested in this offer and were going to proceed with filing suit. (Trial Ex. Q, Letter from the Alves' counsel, July 13, 2011.)
On September 26, 2011, the Alves filed suit against Summit's insured, Mr. Stricklett, in Providence Superior Court, C.A. No. PC-2011-5499. (Trial Ex. U, Summons and Complaint filed by the Alves.) Due to Scott's minority at the time of the accident, he filed that action with his parents as his representatives. The suit alleged that Mr. Stricklett negligently operated his vehicle. On or about October 16, 2012, Summit filed this separate action, asking the Court to issue a declaratory judgment determining whether Summit had a duty to pay any damages beyond the policy limits.
Summit seeks a declaratory judgment to establish that it is not responsible for any interest or expenses over and above the policy limits of Mr. Stricklett's policy coverage. The Uniform Declaratory Judgments Act (UDJA) "grants broad jurisdiction to the Superior Court to 'declare rights, status, and other legal relations whether or not further relief is or could be claimed.'" Tucker Estates Charlestown, LLC v. Town of Charlestown, 964 A.2d 1138, 1140 (R.I. 2009) (citing G.L. 1956 § 9-30-1). This Court has discretion to grant or deny declaratoryrelief under the UDJA. R.I. Orthopedic Soc'y v. Blue Cross & Blue Shield of R.I., 748 A.2d 1287, 1289 (R.I. 2000).
Summit first contends that an insurer is not bound to provide indemnification beyond the scope of the coverage described in the insurance policy. Summit references Factory Mut. Liability Ins. Co. v. Cooper, 106 R.I. 632, 637, 262 A.2d 370 (R.I. 1970) in support of its claim that no insurer is bound to provide indemnification beyond the scope of the coverage described in the insurance policy.
The policy at bar contains the following language:
Relying on the policy language, Summit insists that it is only obligated to pay prejudgment interest on the "entire judgment" only when it "reject[s] a written settlement offer by the Plaintiff that is equal to or less than the applicable limit of liability." On June 15, 2011, counsel for the Alves sent Summit a written demand for a $300,000 settlement, substantially above the written limit of liability. (Trial Ex. O, Letter to Summit.) Summit contends that because there has never been a written settlement offer within the policy limits, there is no contractual obligation to pay interest above the policy limits.
An insurance policy is a contract between the insurer and the insured. Provisions of an insurance policy are interpreted in accord with the rules established for the construction of contracts. Beacon Mut. Ins. Co. v. Spino Bros., Inc., 11 A.3d 645, 649 (R.I. 2011). Accordingly, the Court views the language within the "four corners of [the] policy, viewing it in its entirety [and] affording its terms their 'plain, ordinary, and usual meaning.'" Town of Cumberland v. R.I. Interlocal Risk Mgmt. Trust, Inc., 860 A.2d 1210, 1215 (R.I. 2004). When the terms of a contract are clear and unambiguous, it must be applied as written, and absent fraud, mutual mistake, or other similar cause, the parties are bound by the terms of a written instrument. Phillips v. Columbus Wholesale Grocery Co., 60 R.I. 47, 197 A. 197, 198 (1938). Courts tend to "refrain from engaging in mental gymnastics or from stretching the imagination to read ambiguity into a policy where none is present." Mallane v. Holyoke Mut. Ins. Co. in Salem, 658 A.2d 18, 20 (R.I. 1995). However, if the policy terms are vague or capable of more than one reasonable meaning, the policy is strictly construed in favor of the insured. Id. Additionally, seeking to ascertain the intent of the parties, an insurance policy is examined in its entirety and the language used is given its plain, ordinary and usual meaning. Nagy v. Lumbermens Mut. Cas. Co., 100 R.I. 734, 737, 219 A.2d 396 (1966).
The terms used in Mr. Stricklett's policy are unambiguous and should be given their plain, ordinary, and usual meaning. The first sentence of the standard interest clause states that, Summit agrees to pay the "[p]rejudgment interest awarded against the 'insured' on the entire judgment if we reject a written settlement offer by the plaintiff that is equal to or less than the applicable limit of liability." The applicability of the standard interest clause is exceptionally clear. The meaning of the standard interest clause is obvious and it leaves no room for another interpretation and as such, the terms must be applied as written. Phillips, 60 R.I. at 47, 197 A. at198. Summit received and rejected only one settlement offer, and it was over the limit of liability. Because Summit did not reject a written settlement offer that was equal to or less than the applicable limit of liability, it is not responsible for an award of prejudgment interest pursuant to the first sentence of the standard interest clause.
The second portion of this policy clause, "[w]here this does not apply, we will pay prejudgment interest awarded against the 'insured' on that part of the judgment we pay" is more ambiguous. The Alves argue that this segment conflicts with the Rhode Island rulings in Skaling I,1 ( prejudgment interest must be added to the judgment entered by the court); and Asermely v. Allstate Ins. Co., ( insurer liable for the amount that exceeds policy limits unless it can show that insured was unwilling to accept settlement offer). Skaling v. Aetna Ins. Co., 742 A.2d 282, 292 (R.I. 1999); Asermely v. Allstate Ins. Co., 728 A.2d 461, 464 (R.I. 1999). The Alves rely exclusively on a Superior Court case to establish that any provision in an insurance contract that conflicts with state law...
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