Vermont Mutual Insurance Company v. The Cincinnati Specialty Underwriters Insurance Company
OPINION AND ORDER granting 15 Plaintiff's Motion for Summary Judgment and denying 17 Defendant's Cross-Motion for Summary Judgment. Signed by Judge Christina Reiss on 2/13/2019. (jbr)
UNITED STATES DISTRICT COURT
DISTRICT OF VERMONT
CINCINNATI SPECIAL TY
201! FEB 1 PM 2= 45
BY_,.._ _ __
U.S. DISTRICT COURT
DIS TRICT OF VERMONT
Case No. 2:18-cv-76
OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT AND DENYING DEFENDANT'S CROSS-MOTION FOR
(Docs. 15 & 16)
Plaintiff Vermont Mutual Insurance Company brings this action against Defendant
Cincinnati Underwriters Specialty Insurance Company seeking a declaratory judgment as
to which party is contractually obligated to provide primary coverage for a claim against
Marcie and Scott Hawkins (the "Insureds") arising out of the death of a foster child at
their East Montpelier, Vermont home.
Pending before the court are Plaintiffs motion for summary judgment (Doc. 15)
and Defendant's cross-motion for summary judgment (Doc. 16). Plaintiff asks the court
for a declaratory judgment compelling the parties to pay a pro rata share of the claim
based on their policy limits. Defendant seeks a declaratory judgment declaring Plaintiffs
insurance policy primary coverage and its own policy excess coverage. On this basis,
Defendant seeks a further declaration that it has no duty to defend the Insureds. After
oral argument on December 28, 2018, the court took the matter under advisement.
The Undisputed Facts.
Plaintiff issued Homeowners Insurance Policy #HO 17011903 (the "VMIC
Policy") effective from July 31, 2016 through July 31, 2017 to the Insureds. The VMIC
Policy contains an excess insurance clause entitled "Other Insurance - Coverage E Personal Liability" which states: "This insurance is excess over other valid and
collectible insurance except insurance written specifically to cover as excess over the
limits ofliability that apply in this policy." (Doc. 15-2 at 19.)
Defendant issued "specialty lines" insurance policy #CSU0078301 (the
"Cincinnati Policy") to the State of Vermont's Department for Children and Families,
Family Services Division, ("DCF") effective from December 31, 2016 through December
31, 2017. The Cincinnati Policy identified the named insured as "Licensed Foster
Parents of Department for Children & Families, Family Services Division." (Doc. 15-3
at 2.) The Cincinnati Policy also contains an excess insurance clause entitled "Other
Insurance" which states:
For Coverage A of this Coverage Part:
a. Excess Insurance
( 1) If coverage is provided to any insured under any other valid policy for
any loss resulting from any "claim[,"] then this policy will be excess of
the amount of any deductibles, retentions and limits of liability under
such other policy whether such policy is stated to be primary,
contributory, excess, contingent or otherwise, unless such policy is
written specifically as excess to this policy by reference of this policy
number in such other policy Schedule or Declarations.
(2) When this insurance is excess, we will have no duty under Coverage A
to defend any insured against any "suit" if any other insurer has a duty
to defend that insured against that "suit[."] If no other insurer defends,
we will undertake to do so, but we will be entitled to the insured's rights
against those other insurers.
(3) When this insurance is excess over other insurance, we will pay only
our share of the amount of the loss, if any, that exceeds the sum of:
(i) The total amount that all such other insurance would pay for the
loss in the absence of this insurance; and
(ii) The total of all deductibles and self-insured amounts under all
that other insurance.
(4) We will share the remaining loss, if any, with any other insurance that is
not described in this Excess Insurance provision and was not bought
specifically to apply in excess of the Limits of Insurance shown in the
Declarations of this Coverage Part.
b. Primary Insurance
If this insurance is primary, our obligations are not affected unless any
other insurance is also primary. Then, we will share with that other
insurance by the method described in Paragraph c. below.
c. Method of Sharing
If all of the other insurance permits contribution by equal shares, we will
follow this method also. Under this approach, each insurer contributes
equal amounts until it has paid its applicable limit of insurance or none of
the loss remains, whichever comes first.
If any of the other insurance does not permit contribution by equal shares,
we will contribute by limits. Under this method, each insurer's share is
based on the ratio of its applicable limit of insurance to the total applicable
limits of insurance of all insurers.
Id. at 28.
On July 5, 2017, a child placed by DCF in the Insureds' care died while at their
home. On or about September 2017, counsel for the child's mother and sister placed
Plaintiff and Defendant on notice of a claim arising from the death of the minor foster
Conclusions of Law and Analysis.
Standard of Review.
Summary judgment must be granted when "there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P.
56(a). "A fact is ' material' . .. if it ' might affect the outcome of the suit under the
governing law. "' Rodriguez v. Vil!. Green Realty, Inc. , 788 F.3d 31 , 39 (2d Cir. 2015)
(quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986)). "A dispute of fact
is 'genuine' if 'the evidence is such that a reasonable jury~could return a verdict for the
nonmoving party."' Id. at 39-40 (quoting Anderson, 477 U.S. at 248). The court
"constru[ es] the evidence in the light most favorable to the nonmoving party and draw[ s]
all reasonable inferences in his favor." McElwee v. Cty. of Orange, 700 F.3d 635 , 640
(2d Cir. 2012).
The moving party always "bears the initial responsibility of informing the district
court of the basis for its motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, which it believes demonstrate the absence of a genuine issue of material
fact. " Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks
omitted). When the moving party has carried its burden, its opponent must produce
"sufficient evidence favoring the nonmoving party for a jury to return a verdict for that
party." Anderson, 477 U.S. at 249. "The function of the district court in considering the
motion for summary judgment is not to resolve disputed questions of fact but only to
determine whether, as to any material issue, a genuine factual dispute exists." Kaytor v.
Elec. Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010). In this case, the parties agree that the
material facts are undisputed and the question presented by their cross motions is one that
may be resolved as a matter oflaw. See Aon Corp. v. Hoh/week, 223 F. Supp. 2d 510,
514 (S.D.N.Y. 2002) (holding that "when the material facts are undisputed, it is
appropriate for a [c]ourt to resolve questions of law").
Whether the VMIC Policy and the Cincinnati Policy Contain Mutually
Repugnant Excess Insurance Clauses.
It is undisputed that both the VMIC Policy and the Cincinnati Policy contain
coincidental excess clauses. Fireman 's Fund Ins. Co. v. CNA Ins. Co., 2004 VT 93 , ,i 39,
177 Vt. 215 , 235 , 862 A.2d 251 , 266 (defining coincidental excess insurance as "primary
insurance that is rendered excess by operation of a policy provision, like an 'other
insurance' clause, in a specific set of circumstances"). At oral argument, the parties also
agreed that neither policy was a "true excess policy" requiring the policyholder to obtain
primary insurance. See id. ("True excess coverage occurs where a single insured has two
policies covering the same loss, but one policy is written with the expectation that the
primary will conduct all of the investigation, negotiation and defense of claims until its
limits are exhausted.") (internal citation omitted). Additionally, Defendant concedes that
its policy does not contain an "escape clause." See Scott M. Seaman & Jason R. Schulze,
Allocation ofLosses in Complex Insurance Coverage Claims § 5 :3(c) (2018) (noting that
an escape clause "extinguishes the insurer's liability to the extent of [the] other
Plaintiff contends that because the VMIC Policy and the Cincinnati Policy contain
substantially similar coincidental excess insurance clauses, these clauses are mutually
repugnant. On this basis, Plaintiff argues that it is entitled to judgment as a matter of law
granting a declaratory judgment obligating Plaintiff and Defendant to pay a pro rata share
of the claim based on their respective policy limits. 1
Defendant argues that the excess insurance clauses set forth in the two policies are
not mutually repugnant and that under the terms of the policies Plaintiff is the primary
insurer and Defendant is the excess insurer. Because the Cincinnati Policy "contains a
comprehensive excess insurance clause that narrowly defines the circumstances in which
the policy functions as primary insurance," Defendant contends it does not qualify as
"valid and collectible insurance" and Plaintiffs excess clause is not invoked. (Doc. 16 at
Courts "interpret insurance contracts according to their terms and the intent of the
parties as expressed by the policies ' language. " Fireman's Fund Ins. Co. , 2004 VT 93 at
177 Vt. at 220, 862 A.2d at 256. '"Other insurance' clauses are used by insurers to
'limit an insurer' s liability where other insurance may cover the same loss."' Id.
(quoting 15 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 219:1 (1999)).
"Whether an insurer' s ' other insurance' clause will operate in a given situation depends
largely on the specific language of the relevant policies." Id.
In its Complaint, Plaintiff further demanded a declaration that the Cincinnati Policy was
primary and the VMIC Policy was excess for any and all claims arising out of the death of the
minor foster child. At oral argument, Plaintiff clarified that it had abandoned this demand for
purposes of the pending motions for summary judgment.
"[I]f policies have dissimilar 'other insurance' clauses most courts 'attempt to
reconcile the clauses in a manner that will give effect to the intent of the parties."'
,r 23 (citation omitted). 2
Although the excess clause in the Cincinnati Policy contains
greater detail, the clauses in both policies state that the insurance coverage they provide is
excess over other valid insurance. Minor, non-material differences in language are
insignificant if the impact of the policy provisions at issue is the same. See Am. Cas. Co.
of Reading Pa. v. Health Care Indem., Inc., 520 F.3d 1131, 1136 (10th Cir. 2008) (noting
that courts "look to the substance of the policy language, not whether any particular
'magic word' is used" in interpreting competing other insurance clauses). Defendant's
observation that the VMIC Policy refers to "valid and collectible insurance" whereas the
Cincinnati Policy refers only to "valid" insurance is thus immaterial because the effect of
both provisions is to render coverage excess only with regard to insurance written
specifically as excess coverage with reference to the policy number. Compare Doc. 15-3
at 28 ("this policy will be excess ... unless such policy is written specifically as excess to
this policy by reference of this policy number"), with Doc. 15-2 at 19 ("[t]his insurance is
excess over other valid and collectible insurance except insurance written specifically to
cover as excess over the limits of liability that apply in this policy").
Because Defendant's policy does not "disclaim any and all liability if other
insurance is available[,]" but instead provides that it will be "excess" of any other valid
policy, it is properly characterized as an excess clause. Am. Cas. Co. ofReading Pa., 520
F.3d at 1136. Because Plaintiffs policy contains fundamentally equivalent language, it
requires the same conclusion. As the excess clauses in the two policies cannot be
Defendant argues that the policy provisions at issue in this case are analogous to those at issue
in Fireman 's Fund Insurance Co., compelling a finding that the VMIC Policy and the Cincinnati
Policy are reconcilable. In Fireman's Fund Insurance Co., however, the court harmonized an
excess insurance clause with a policy that contained no excess clause but rather contained an
"other insurance" clause that stated that it was primary for any covered automobile while hired
or borrowed by the insured. Id. The Vermont Supreme Court found the two clauses could be
reconciled, declaring that one policy provided primary coverage while the other policy provided
excess coverage. Here, in contrast, both policies contain mutually indistinguishable coincidental
excess insurance clauses. Fireman's Fund Insurance Co. is thus inapposite.
reconciled, they are "mutually repugnant" and thus the "result is that neither is effective
and each insurer shares primary coverage." Fireman 's Fund Ins. Co., 2004 VT 93 at ,i
22, 177 Vt. at 226, 862 A.2d at 259-60; see also Champlain Cas. Co. v. Agency Rent-ACar, Inc. , 716 A.2d 810, 814 (Vt. 1998) (stating that "[t]he majority rule is that
conflicting excess ' other insurance' clauses are mutually repugnant, and each is void");
Am. Cas. Co. ofReading Pa., 520 F.3d at 1136 (holding that because "[n]either policy
has language comparable to what we construed as creating escape clauses" and "both
policies provide excess coverage[,]" the clauses must be disregarded and the loss shared
by each insurer). Under Vermont law, a pro rata contribution by both insurers is
therefore required. See State Farm Mut. Auto Ins. Co. v. Powers, 732 A.2d 730, 735 (Vt.
1999) (noting that in "a dispute between multiple insurers all claiming to provide either
excess or primary coverage, . . . the coverage would be apportioned among the insurers
on a pro rata basis").
For the reasons stated above, the court GRANTS Plaintiffs motion for summary
judgment (Doc. 15) and DENIES Defendant's cross-motion for summary judgment (Doc.
16). The court hereby declares that Plaintiff and Defendant are each obligated to pay a
pro rata share based on their policy limits of the claims arising from the death of the
minor child in the Insureds' care.
Dated at Burlington, in the District of Vermont, this Jk_ day of February, 2019.
Christina Reiss, District Judge
United States District Court
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