Opinion
FBTCV156048414
11-16-2016
Domingos Gabriel v. The Mount Vernon Fire Ins. Co
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Edward T. Krumeich, J.
This case was tried to the court based on stipulated facts. Defendant Mount Vemon Fire Insurance Company (" the Insurer") seeks a declaration that the umbrella policy it issued to the insured (" the Policy") does not cover the loss sustained by plaintiffs, Domingo and Laurinda Gabriel, judgment creditors and assignees of its insured. For the reasons stated below, the Court holds that the umbrella policy does cover plaintiffs' losses.
The insured's liability to plaintiffs arose from an accident in which a van driven by the insured collided with a building resulting in injury to plaintiffs. Plaintiffs recovered judgments from the insured in the amounts of $1,200,000 and $600,000, respectively. The insured's primary insurance carrier, National Grange Mutual Insurance Company (" NGM") paid out its policy limit of $300,000. The Insurer denied the claim to apply the $1,000,000 umbrella coverage to the unpaid balance of the judgment. The Policy was assigned to plaintiffs, who are also subrogated to the rights of the insured, and this action commenced to enforce the Policy to collect the unsatisfied portions of the judgments.
The Insurer denied coverage under the umbrella policy because the NGM policy provided bodily injury liability coverage of less than $500,000 for this automobile accident. The Insurer's denial of coverage is based upon its reading of the Policy, notably the definition of " Underlying Insurance, " which is defined in Section 1(R) as " . . . the policy with . . . [t]he limit shown for that policy in the DECLARATIONS in Item 6., Required Underlying Insurance Coverage . . ." Item 6 of the Policy required minimum underlying insurance for automobile liability of $500,000. The Insurer argues that the insureds failed to satisfy a condition precedent to the umbrella coverage because the NGM policy limits were less than $500,000. According to the Insurer's line of argument, there never was a primary insurance policy that could meet the definition of " Underlying Insurance" under the Policy so the excess insurance coverage never went into effect. The Insurer also asserts that there is an applicable exclusion in Section III(G) for " a loss . . . [c]aused by your business or business property unless underlying insurance provides coverage for the loss." Because there was no underlying insurance policy with a minimum $500,000 coverage, and thus no underlying insurance that met the definition in the Policy, the Insurer asserts coverage is excluded for the van being driven by the insured in the course of his business without underlying insurance.
Item 6 provides, in pertinent part: " Required Underlying Insurance Coverage: you agree that the higher of the MINIMUM UNDERLYING LIMITS below . . .; (1) is in force and will continue in force and (2) insures all . . . automobiles . . . owned by, leased or regularly furnished to you."
Plaintiffs argue that the NGM policy was an underlying policy within the meaning of the Policy although its coverage limits were less than the required $500,000 minimum limit; plaintiffs contend the Policy provides in Section IV(A) what would happen if the underlying policy was less than the policy limits prescribed in the Declarations: These are things you must do for us. We may not provide coverage if you do not assist us as follows:
A. Under Coverage A, maintain your underlying insurance. You agree to maintain all insurance policies affording in total the coverage and the greater of the limit shown in the DECLARATIONS in item 6., Required Underlying Insurance Coverages . . . If Required Underlying Limits are not maintained, or are not maintained at the greater of the limit of liability shown in item 6., Required Underlying Insurance Coverages . . . you will be responsible for paying the amount of loss or loss adjustment expenses that would have been paid by that policy had its full limit of liability been available . . . Your failure to comply with the foregoing paragraphs will not invalidate this policy, but in the event of such failure, we shall be liable under this policy for indemnity and/or defense expense only to the extent that we would have been liable had you complied with these obligations.
Under plaintiff's interpretation, the excess insurance coverage under the Policy would not apply to indemnify the first $500,000 in liability, but would thereafter be available to satisfy the insured's unsatisfied obligations to plaintiffs. I agree with the plaintiffs.
Under our law, the terms of an insurance policy are to be construed according to the general rules of contract construction . . . The determinative question is the intent of the parties, that is, what coverage the . . . [insured] expected to receive and what the defendant was to provide, as disclosed by the provisions of the policy . . . If the terms of the policy are clear and unambiguous, then the language, from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning . . . However, [w]hen the words of an insurance contract are, without violence, susceptible of two [equally responsible] interpretations, that which will sustain the claim and cover the loss must, in preference, be adopted . . . " [T]his rule of construction favorable to the insured extends to exclusion clauses . . ."
Our jurisprudence makes clear, however, that " [a]lthough ambiguities are to be construed against the insurer, when the language is plain, no such construction is to be applied . . . Indeed, " courts cannot indulge in a forced construction ignoring provisions or so distorting them as to accord a meaning other than that evidently intended by the parties." Heyman Associates No. 1 v. Ins. Co. of State of Pa., 231 Conn. 756, 770-71, 653 A.2d 122 (1995) (citations omitted).
The law is also clear that " [w]hen interpreting an insurance policy, [the court] must look to the contract as a whole, consider all relevant portions together and, if possible, give operative effect to every provision in order to receive a reasonable overall result." Lexington Insurance Co. v. Lexington Healthcare Group, Inc., 311 Conn.29, 37-38, 84 A.3d 1167 (2014).
An insurance policy must be construed from viewpoint of the insured. See Nat. Grange Mut. Ins. Co. v. Santaniello, 290 Conn. 81, 88, 961 A.2d 387 (2009) (" [t]he determinative question is the intent of the parties, that is, what coverage the . . . [insured] expected to receive and what the [insurer] was to provide, as disclosed by the provisions of the policy"). However, except in cases of ambiguity, courts need not construe a policy against the insurer.
" In determining whether the terms of an insurance policy are clear and unambiguous, [a] court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity . . . Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms . . . As with contracts generally, a provision in an insurance policy is ambiguous when it is reasonably susceptible to more than one reading . . . Under those circumstances, any ambiguity in the terms of an insurance policy must be construed in favor of the insured because the insurance company drafted the policy . . . This rule of construction may not be applied, however, unless the policy terms are indeed ambiguous." Nat. Grange, 290 Conn. at 90.
The purpose of having an umbrella policy is to provide insurance coverage when the insured's primary policies are exhausted. See Heyman, 231 Conn. at 761 (" [a]n excess liability policy, also known as an umbrella policy, provides coverage that is secondary to an insured's primary policy").
This case is unlike Israel v. State Farm Auto. Ins. Co., 259 Conn. 503, 509, 789 A.2d 974 (2001), in which the Supreme Court was asked to interpret an umbrella policy with conflicting provisions. The Supreme Court found the policy to be ambiguous and held that the insured who had not maintained an underlying insurance policy did have coverage under an umbrella policy for uninsured motorist benefits, enforcing a contract provision similar to Section IV(A) in the Policy here, which provided " that in the event of an insured's failure to maintain underlying coverage, the insured will be responsible for any loss up to the amount of the required underlying coverage before the umbrella coverage takes effect." Here, there is no conflicting provision and no ambiguity. The Insurer's effort to create conflict out of " whole cloth" by cherry-picking words out of context is unavailing.
The Insurer seizes on the word " maintain" in Section IV(A) and asserts that it cannot be construed to mean the same thing as " obtain", a term not used in the applicable sections or defined in the Policy. The Insurer argues that Section IV(A) is limited to existing policies that are " maintained" and was never intended to apply where the insured's underlying insurance did not meet the minimum limits required in the Declarations because the insured never " obtained" an underlying policy with required minimum policy limits. There is nothing in the Policy that suggests the parties intended such a hyper-technical interpretation of Section IV(A). A layperson reading the language would reasonably interpret the provision to apply where, as here, there was an underlying policy but it had limits less that the $500,000 required under the Declaration. Section IV(A) eschews any intention to " invalidate this policy" and instead states the reasonable proposition that the excess coverage does not kick in until the minimum limits of underlying policies are credited and there is a net loss above retained limits. The requirement in Item 6(1) that underlying insurance with minimum limits " is in force and will remain in force" is consistent with the duty to maintain underlying insurance with minimum coverage. There is nothing in the Policy that indicates any distinction as to the application of Section IV(A) based on whether underlying insurance with minimum required coverage is " in force" upon issuance or where the " will be in force" representation applies only where there once was such a policy in force but is not available to the required limits at the time of future loss; nothing in the Policy indicates that the former situation would invalidate coverage while the latter would not " invalidate the policy." Moreover, the coverage issue is determined at the point when a covered loss is incurred and a claim is made, not when the policy was issued. If the insurer had intended satisfaction of the underlying policies minimum coverage limits to be a condition precedent to coverage, it would have said so. Instead, the Policy declares unambiguously the failure to maintain underlying policies covering the loss that meet minimum limits would not invalidate the Policy but merely adjusts the net loss to be paid by the Insurer. This is a fair result for both parties. As a practical matter, the parties are in exactly the same place if at the time of the claim there is a deficit in the underlying coverage, no matter whether the minimum limits were ever met in the underlying policies. This interpretation is consistent with the basic coverage which states the insurer will cover loss up to the policy limits above the " retained limit", " we will pay your net loss in excess of the retained limit", defined as the " limit of underlying insurance available to you for injury or damage to which this coverage applies" in Sections IIA and IP. In accordance with its clear and unambiguous language, Section IV(A) applies whenever there is a gap in the retained limit of the underlying policies due to failure to abide by the required minimum limits.
" It is a 'basic principle of insurance law that policy language will be construed as laymen would understand it and not according to the interpretation of sophisticated underwriters . . .' Cody v. Remington Electric Shavers, 179 Conn. 494, 497, 427 A.2d 810 (1980)." Fiallo v. Allstate Ins. Co., 138 Conn.App. 325, 338, 51 A.3d 1193 (2012).
This is not a case where there is no underlying insurance covered the loss, merely that the primary insurance left $200,000 in liability uncovered. Under those circumstances the unambiguous language of Section IV(A) allocates that risk to the insured.
The clear and unambiguous language of Section IV(A) also applies to the exclusion in III(G), which excludes a loss " caused by your business unless underlying insurance provides coverage for the loss." Here, there was underlying insurance providing coverage and Section IV(A) governs how the loss is allocated between the Insurer and insured.
Judgment should enter in favor of plaintiffs as against the Insurer declaring that the Policy applies to indemnify them for the net loss resulting from the unsatisfied judgments against the insured.