Vickodil v. Lexington Ins. Co.

• Citation: 412 Mass. 132,587 N.E.2d 777
• Parties: William J. VICKODIL, Sr., et al. 1 v. LEXINGTON INSURANCE COMPANY.
• Decision Date: 09 March 1992
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 777

587 N.E.2d 777

412 Mass. 132

William J. VICKODIL, Sr., et al. ¹ v. LEXINGTON INSURANCE COMPANY.

Supreme Judicial Court of Massachusetts Suffolk.

Argued Sept. 9, 1991.

Decided March 9, 1992.

Gary D. Buseck, Boston (Harry A. Pierce & William A. Cotter, Jr., with him), for defendant.

Herbert D. Lewis, Boston, for plaintiffs.

Before LIACOS, C.J., and NOLAN, O'CONNOR and GREANEY, JJ.

O'CONNOR, Justice.

The plaintiff William J. Vickodil sustained serious personal injuries and his wife, the plaintiff Jean R. Vickodil, sustained related losses as a result of a collision in Pennsylvania between a vehicle operated by William and a vehicle owned by Amram Enterprises, Ltd. (Amram), and operated by its employee. The plaintiffs obtained judgments against Amram and its employee totalling $1,473,934.10. At the time of the accident, Amram had motor vehicle liability insurance with three insurance companies. Aetna Life and Casualty Insurance Company (Aetna) provided primary coverage up to $100,000 per person. Northeastern Fire Insurance Company of Pennsylvania (Northeastern) provided coverage in excess of the primary limits to a maximum of $1,000,000. The defendant Lexington Insurance Company (Lexington) was a second-level excess insurer, insuring Amram and its employee above the combined coverage of Aetna and Northeastern up to $5,000,000.

After the plaintiffs obtained the judgments in the tort case, Aetna paid them its $100,000 coverage. However, Northeastern became insolvent and made no payment. As a result, the Pennsylvania Insurance Guaranty Association Fund, which under Pennsylvania law had responsibility for paying claims against insolvent insurers, including Northeastern, up to a prescribed limit, paid the plaintiffs $299,900. Lexington paid the plaintiffs $473,394.10, which was the amount of the judgments in excess of $1,000,000. Thus, the plaintiffs have received $873,834.10, which is $600,100 less than their total tort judgments. By this action, they seek a judgment declaring that the lower limit of Lexington's coverage "dropped down" from coverage for loss in excess of $1,000,000 to coverage for loss in excess of the $399,900 underlying coverage that has already been paid.

Lexington moved to dismiss the complaint under Mass.R.Civ.P. 12(b), 365 Mass. 754 (1974), "for reasons which more particularly appear in the memorandum of law submitted [with the motion]." Since the memorandum was not reproduced in the record appendix, the record before us does not disclose the grounds of the motion. A judge in the Superior Court denied the motion to dismiss without any written explanation disclosed by the record. Shortly after Lexington filed its motion to dismiss, the plaintiffs filed a motion for summary judgment and the same judge allowed it. He reasoned as follows: "There exists ambiguity in Lexington's excess policy which requires that it 'drop down' to replace the insolvent [Northeastern's] coverage. The Lexington policy fails to specifically and directly address the consequences of the insolvency of an underlying insurer. Any ambiguity should be resolved in favor of the insured and coverage should be provided. Therefore, due to the insolvency of the first-level excess insurer, defendant Lexington Insurance Company's second-level excess policy 'drops down' to furnish coverage for the unpaid amount of the insured liability." The judge did not identify any policy language creating an ambiguity. It may be that, in his view, the policy's failure to "specifically and directly address the consequences of the insolvency of an underlying insurer" itself created the ambiguity to which he referred.

In their briefs, the parties have devoted considerable attention to issues of jurisdiction, choice of law, and the timeliness of this action. It is likely that those issues were raised by Lexington's motion to dismiss. We agree with the plaintiffs that the Superior Court had personal jurisdiction over Lexington, which is a Delaware corporation with a principal place of business in this Commonwealth, and that it had subject matter jurisdiction pursuant to G.L. c. 231A, § 1 (1990 ed.). Also, we assume without deciding that Massachusetts law controls the resolution of this case, as the plaintiffs contend, and that the action is not time barred. We make these assumptions which favor the plaintiffs because we conclude that, in any event, under Massachusetts law Lexington's coverage does not drop down to fill the void created by Northeastern's insolvency. Therefore, Lexington, rather than the plaintiffs, is entitled to summary judgment.

Section I of the policy, entitled "Insuring Agreements," provides: "The Lexington Insurance Company ... hereby agrees to indemnify the insured ... against loss which is excess of the total limit(s) of all Underlying Insurance specified in Section II(b) of the Declarations subject to the limit of liability stated in Section 1(c) of the Declarations.... Liability of the Company under this policy shall not attach unless and until the Insured or the Insured's Underlying Insurance has paid or has been held liable to pay the total applicable underlying limits." Section II(b) of the Declarations says under the heading "Underlying Insurance": "Total limits of all underlying insurance including the underlying policy in excess of which this policy applies: $1,000,000. Combined Single Limit Bodily Injury and Property Damage Liability."

Except when specific policy language is required by law, Bilodeau v. Lumbermens Mut. Casualty Co., 392 Mass. 537, 541, 467 N.E.2d 137 (1984), ambiguities in policies are resolved against the insurer. Pinheiro v. Medical Malpractice Joint Underwriting Ass'n of Mass., 406 Mass. 288, 294, 547 N.E.2d 49 (1989). Massachusetts Insurers Insolvency Fund v. Continental Casualty Co., 399 Mass. 598, 600, 506 N.E.2d 118 (1987). The plaintiffs do not argue, properly we think, that the policy's failure specifically to address the consequences of the insolvency of an underlying insurer by itself creates ambiguity. The plaintiffs argue that the policy language quoted above, which is not required by law, is ambiguous in that "a reasonable insured might understand the phrase 'total limit(s)' to refer to the amount actually available under the policy referred to in Section II(b) of the declarations." The plaintiffs say that it would be "reasonable for an insured who was unfamiliar with insurance parlance to conclude that Lexington's obligation to cover losses 'excess of the total limit(s) of all Underlying Insurance specified in Section II(b) of the Declarations' required it to drop down inasmuch as the 'total limit' of the underlying coverage was reduced to zero when Northeastern became insolvent." In support of that assertion, the plaintiffs point to language in this court's opinion in Massachusetts Insurers Insolvency Fund v. Continental Casualty Co., supra.

We reject the plaintiffs' argument. Standing alone, the language the plaintiffs characterize as ambiguous cannot reasonably be construed to provide coverage in excess of "collectible" insurance as the plaintiffs contend. The language clearly defines Lexington's commitment to be that it will pay excess of the commitments made by applicable underlying insurers as set forth in Section II(b) of the Declarations, namely $1,000,000. There is a critical difference between this case and Massachusetts Insurers Insolvency Fund, supra, on which the plaintiffs rely. The excess policy in that case contained a provision similar to the provision under...