Town of South Burlington v. American Fidelity Co.
| Decision Date | 07 December 1965 |
| Docket Number | No. 340,340 |
| Citation | 215 A.2d 508,125 Vt. 348 |
| Court | Vermont Supreme Court |
| Parties | TOWN OF SOUTH BURLINGTON v. AMERICAN FIDELITY COMPANY, Ward Brace and Joan Brace. |
William E. Mikell, Burlington, for plaintiff.
A. Pearley Feen, Paul D. Sheehey, Burlington, for insurer.
Before HOLDEN, C. J., and SHANGRAW, BARNEY, SMITH and KEYSER, JJ.
A claim of personal injury, asserted to arise out of an accident caused by a defective culvert, was presented against the plaintiff by the defendant Braces. The plaintiff turned to its insurer, the defendant American Fidelity Company, for protection and defense against the liability charged. The insurer declined to defend, basing its refusal on certain exclusionary provisions in its policy. The plaintiff brought this declaratory judgment action to have the duties of the insurer under the insurance agreement defined, also joining the claimant Braces. The chancellor ordered the insurer to undertake the defense on behalf of the plaintiff.
The general liability obligation of the insurer is undisputed. It is set out in the following language in the policy:
To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and, caused by accident.
The complaint asserts without traverse the duty of the insurer to defend, which is stated in the policy itself, an exhibit in the case, as follows:
(The company shall) defend any suit against the insured alleging such injury, sickness, disease, or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent, but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient.
In its answer the insurer admitted that the plaintiff had been sued by the Braces, and that the injury complained of was alleged to have arisen as 'a result of a motor vehicle accident when the motor vehicle in which she was traveling was thrown into a hole in a culvert on Spear Street in said town.' The insurer's answer admitted, further, that the plaintiff is legally liable for the accident and injury. It defended on the ground that such liability derives from the condition of the street involved, and therefore falls within an exclusion in the policy. It bases its position on an endorsement excluding 'coverage for liability arising from the existence of streets and sidewalks.'
At that point in the litigation issue was joined on the question as to whether the allegations made in the complaint were sufficient to charge the insurer with the duty to defend. In many respects the issue resembled that arising on a demurrer to a complaint, whose sufficiency depends upon the alleging of facts supporting a claim of breach of duty. In this case, the duty involved was that of defending a liability claim.
This duty arises when raised by the allegations upon which the claim is stated, when the claimant is a stranger to the policy. Commercial Ins. Co. of New Jersey v. Papandrea, 121 Vt. 386, 390, 159 A.2d 333. As is there pointed out, the insurer is precluded, by the terms of its duty, from determining, ahead of trial, the truth or falsity of a claim that comes within the policy coverage, when determining whether or not it must defend.
So, it was for the chancellor to say whether or not the allegations raised the duty to defend, as the plaintiff argues, or stated a claim that fell within the specific exclusion in the policy, relating to streets and sidewalks, as the insurer contends. At this stage of the matter, the actual facts of the accident episode were not yet relevant. The resolution of the issue was to be derived from language, the language of the policy and the language of the complaint.
The issue must be decided within the governing proposition that the duty of the insurer to defend is broader than its obligation to indemnify. Commercial Ins. Co. v. Papandrea, supra, 121 Vt. 386, 392, 159 A.2d 333. Furthermore, since the purpose of the contract was and is to provide a shield against liability claims, the policy terms must be given an...
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...(accord); Town of Milton v. Brault, 132 Vt. 377, 380, 320 A.2d 630, 632-33 (1974) (accord); Town of South Burlington v. American Fidelity Co., 125 Vt. 348, 350, 215 A.2d 508, 510 (1965) Notwithstanding our past disinclination to address the significant inequities caused by general municipal......
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