Blevio v. Aetna Ins. Co.

• Court: Court of Appeals for the First Circuit
• Decided: October 24, 1994
• Docket: 94-1318
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

          No. 94-1318

                                   MARJORIE BLEVIO,
                             Administratrix of the Estate
                                  of Noah W. Blevio,

                                Plaintiff - Appellee,

                                          v.

                       AETNA CASUALTY & SURETY COMPANY, ET AL.,

                               Defendants - Appellants.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                     [Hon. William G. Young, U.S. District Judge]
                                             ___________________

                                 ____________________

                                        Before

                               Torruella, Chief Judge,
                                          ___________

                          Boudin and Stahl, Circuit Judges.
                                            ______________

                                _____________________

               Kevin Truland, with whom Gallagher & Gallagher, P.C., was on
               _____________            ___________________________
          brief for appellants.
               Doris  R. MacKenzie Ehrens, with  whom Richard W. Murphy and
               __________________________             _________________
          Murphy, Lamere & Murphy, P.C., were on brief for appellee.
          _____________________________

____________________

                                   October 20, 1994
                                 ____________________

TORRUELLA, Chief Judge.  Ms. Marjorie Blevio ("Blevio")
                               ___________

          brought a  declaratory judgment action, as  administratrix of the

          estate of  her thirteen-year-old  son Noah Blevio,  against Aetna

          Casualty &  Surety Company ("Aetna") and  Royal Insurance Company

          of  America,   Inc.  ("Royal"),  to  determine   the  rights  and

          liabilities of the parties under two motor vehicle underinsurance

          policies.  The parties  filed cross-motions for summary judgment.

          The  disposition of these motions turned on the issue of whether,

          under  the law  of Connecticut,  two insurers,  who each  provide

          underinsured motorist coverage to a party injured in an accident,

          can each  set off in full, from the limits of their coverage, the

          amount  of   the  recovery   obtained  from  the   party  legally

          responsible for the accident.  The district court found that each

          insurer  was  not  entitled to  set  off  the  recovery from  the

          tortfeasor in full, but  rather that the two insurers  could only

          deduct   the  amount   of  the   recovery  from   the  aggregated

          underinsured  motorist  coverage  limits.     For  the  following

          reasons, we affirm.

                                    I.  BACKGROUND
                                    I.  BACKGROUND
                                        __________

                    A.  Facts
                    A.  Facts

                    The  parties do not dispute the  material facts of this

          case.  Noah  Blevio died on August  9, 1991, from fatal  injuries

          sustained  when he was  hit by a  pickup truck on  June 30, 1991.

          The combined limits of  the tortfeasors' applicable bodily injury

          liability policies totalled $200,000.  This amount was offered to

          Blevio.

-2-

In  addition, Noah  Blevio  had  underinsured  motorist

          coverage up to $500,000 under  his father's Aetna business policy

          and  up to  $300,000  under his  brother's  Royal policy.    Both

          policies provided that their underinsured motorist coverage shall

          be reduced by the amounts  paid by, or on behalf of,  the legally

          responsible party.  Specifically, the uninsured motorist coverage

          endorsement of the Aetna Policy provides:

                      A.  Coverage

                      1.  We will pay all sums the "insured" is
                      legally  entitled  to recover  as damages
                      from the owner or driver of an "uninsured
                      motor vehicle"1 . . .

                      D.  Limit of Insurance

                                         ***

                      2.     Any  amount  payable   under  this
                      coverage shall be reduced by:

                                         ***

                      b.  All sums paid by or for anyone who is
                      legally responsible. . . . 

          The uninsured  motorist coverage  provisions of the  Royal policy

          provide:

                      A.    We  will pay  compensatory  damages
                      which an "insured" is legally entitled to
                      recover from the owner or  operator of an
                      "uninsured  motor   vehicle"  because  of
                      "bodily injury,"

                      1.  Sustained by an "insured," and 
                              
          ____________________

          1  The  Aetna policy  defines an "uninsured  motor vehicle" as  a
          motor  vehicle  that is  underinsured, in  that  "the sum  of all
          liability bonds or policies at the time of an 'accident' provides
          at  least  the amounts  required by  the  applicable law  where a
          covered 'auto' is principally  garaged but that sum is  less than
          the Limit of Insurance of this coverage."

                                         -3-

2.  Caused by an accident . . . .

          In  addition,  the  endorsement  attached to  the  Royal  policy,

          entitled   "Amendment  of   Policy  Provisions   -  Connecticut,"

          provides:

                      II.  Uninsured Motorists Coverage2

                      Part C is amended as follows:

                                         ***

                      E.   The Limit of Liability  provision is
                      replaced by the following:

                      Limit of Liability

                                         ***

                      The limit of  liability shall be  reduced
                      by all sums:

                      1.  Paid  because of the  "bodily injury"
                      by   or   on   behalf   of   persons   or
                      organizations   who    may   be   legally
                      responsible . . . .

                    The parties do not dispute that the legally responsible

          parties  were  underinsured and  that  the underinsured  motorist

          coverage  provided  under  Aetna's   and  Royal's  policies   are

          applicable to Blevio's claims.   Nor do the parties  dispute that

          Aetna and  Royal  are entitled  to  a  setoff by  virtue  of  the

          existence of the legally responsible  parties' liability payment.

          Rather, the only issue is the extent to which liability insurance

          payments made on the tortfeasor's behalf can be set  off.  Blevio
                              
          ____________________

          2  The Royal  policy defines "uninsured motor vehicle" as a motor
          vehicle "[f]or which the sum of the limits of liability under all
          bodily injury liability bonds or policies  applicable at the time
          of the accident  is less than the sum of  the limits of liability
          for  Uninsured  Motorists  Coverage  applicable  to  each vehicle
          insured for this coverage under this policy."

                                         -4-

contends  that Aetna and Royal can only share one $200,000 setoff

          equal  to the amount that  Blevio will actually  collect from the

          tortfeasors.   Both Aetna and Royal claim, however, that they are

          each  entitled  to  deduct  the  tortfeasors' $200,000  liability

          payment  in  order  to  give   full  effect  to  their   separate

          underinsurance setoff provisions,  thereby reducing the aggregate

          underinsurance  coverage  available  to Blevio  from  $800,000 to

          $400,000.3

                    B.  Procedural History
                    B.  Procedural History

                    Blevio filed a declaratory  judgment action on June 11,

          1993,  asking that  the district  court determine  the extent  to

          which Aetna and  Royal are entitled to set off  the limits of the

          available  bodily injury liability coverage from the underinsured

          motorist  coverage of  their  respective policies.   Blevio  then

          filed  a "Motion  for Judgment  on the  Pleadings or  for Summary

          Judgment."  Aetna and Royal cross-moved for summary judgment.

                    After a hearing,  the district  court entered  judgment

          for Blevio.  The district court advised Aetna and Royal, however,

          that   because, at the  time, no Connecticut  appellate court had

          directly addressed  the issue, and  a split of  authority existed

          between  two   Connecticut  Superior  Court  decisions  that  had

          addressed  the issue, it would certify the issue presented to the

          Supreme Court of Connecticut upon their request.  Aetna and Royal
                              
          ____________________

          3  Pursuant to the terms of the insurance contracts, the issue of
          whether Blevio is  legally entitled  to recover, and  if so,  the
          amount  of damages, are subject to  arbitration.  Arbitration has
          not  yet commenced, but will take place after a final decision in
          this case.

                                         -5-

then filed an "Ex  Parte Motion for Certification of  Question of

          Law."   The  district  court vacated  the  judgment in  favor  of

          Blevio,  and  allowed  certification  to  the  Supreme  Court  of

          Connecticut.    The Supreme  Court  of  Connecticut declined  the

          certification request.  On February 24, 1994,  the district court

          then  entered final judgment in favor of Blevio and against Aetna

          and Royal.  Aetna and Royal now appeal.

                      II.  STANDARD OF REVIEW AND APPLICABLE LAW
                      II.  STANDARD OF REVIEW AND APPLICABLE LAW
                           _____________________________________

                    Our  review of  the district  court's grant  of summary

          judgment  is plenary.  Alan Corp.  v. International Surplus Lines
                                 __________     ___________________________

          Ins. Co., 22 F.3d 339, 341 (1st Cir. 1994).   Where, as here, the
          ________

          parties do not dispute  the facts upon which coverage  is allowed

          or  denied under an insurance policy, and the existence or amount

          of coverage depends solely  upon a construction of the  policy, a

          question of law is  presented.  Id. at 342  (citing Atlas Pallet,
                                          __                  _____________

          Inc.  v.  Gallagher,  725   F.2d  131,  134  (1st   Cir.  1984)).
          ____      _________

          Therefore,  like other questions of law,  we are not bound by the

          district court's  interpretation of the  policy.  Alan  Corp., 22
                                                            ___________

          F.3d at 342.

                    The   parties  do  not  dispute  that  Connecticut  law

          applies.   In  interpreting  Connecticut  law, we  are  bound  by

          intermediate appellate state court decisions construing state law

          unless we are convinced that the highest court of the state would

          decide otherwise.  Commissioner v. Estate of Bosch, 387 U.S. 456,
                             ____________    _______________

          465 (1967); Ground Air Transfer, Inc. v. Westates Airlines, Inc.,
                      _________________________    _______________________

          899 F.2d  1269, 1275 (1st  Cir. 1990); see  Cola v. Reardon,  787
                                                 ___  ____    _______

-6-

F.2d 681, 688  n.5 (1st Cir.), cert. denied,  479 U.S. 930 (1986)
                                         ____________

          (stating  that the  First  Circuit was  bound  to apply  a  state

          appellate court's statement of local  law).   We note that  since

          the district court issued  its decision in the present  case, the

          Connecticut Court  of Appeals  has released a  decision, Allstate
                                                                   ________

          Ins.  Co. v.  Link,  645 A.2d  1052 (Conn.  App. Ct.  1994), that
          _________     ____

          resolves the question involved  in this appeal.  Because  we have

          no reason to believe that the Connecticut Supreme Court would not

          reach a similar result, we are bound to apply this decision.4

                                    III.  ANALYSIS
                                    III.  ANALYSIS
                                          ________

                    Connecticut law requires that each automobile liability

          insurance  policy provide  uninsured  motorist coverage  for  the

          protection of  persons insured  thereunder  against operators  of

          uninsured and underinsured motor vehicles.5   See Conn. Gen.  St.
                                                        ___

            38a-336(a).   The statute requires  that each policy  provide a

          minimum  level of uninsured/underinsured motorist protection, but

          also  prevents an  insured from  obtaining  a double  recovery of

          damages.  See Buell v. American Universal Ins. Co., 621 A.2d 262,
                    ___ _____    ___________________________

          266-67 (Conn. 1993).

                      An insurance company  shall be  obligated
                      to make payment to  its insured up to the
                      limits of the policy's uninsured motorist
                      coverage  after  the limits  of liability
                      under all bodily  injury liability  bonds
                              
          ____________________

          4   On September 20,  1994, the Connecticut  Supreme Court denied
          Allstate Insurance's petition  for certification  to appeal  from
          Allstate Ins. Co. v. Link, 645 A.2d 1052 (Conn. App. Ct. 1994).
          _________________    ____

          5   Statutory provisions applying to  uninsured motorist coverage
          apply equally  to underinsured motorist coverage.   Covenant Ins.
                                                              _____________
          Co. v. Coon, 594 A.2d 977, 978 n.3 (Conn. 1991).  
          ___    ____

                                         -7-

or insurance policies  applicable at  the
                      time of the  accident have been exhausted
                      by payment of  judgments or  settlements,
                      but in no event shall the total amount of
                      recovery from all policies, including any
                      amount  recovered   under  the  insured's
                      uninsured  motorist coverage,  exceed the
                      limits   of   the   insured's   uninsured
                      motorist coverage.

          Conn.  Gen. St.     38a-336(b).   Correspondingly, the  insurance

          commissioner has adopted a regulation that provides, in pertinent

          part,  that an insurance policy "may provide for the reduction of

          limits [of  underinsured motorist  liability] to the  extent that

          damages  have been  . .  . paid  by or  on  behalf of  any person

          responsible for the injury . . . ."  Conn. Agencies Regs.    38a-

          334-6(d)(1).  The Aetna and Royal policies' underinsured motorist

          coverage provisions contain  language that essentially  track the

          Connecticut  law, and  provide  that  their  policies'  liability

          limits shall be reduced by any sum paid by, or for, anyone who is

          legally responsible.

                    As noted  above, the  Connecticut Court of  Appeals has

          recently construed Conn. Agencies Regs.    38(a)-334-6(d)(1), and

          addressed  the situation  of setoffs in  the context  of multiple

          underinsured motorist coverage in Allstate  Ins. Co. v. Link, 645
                                            __________________    ____

          A.2d 1052 (Conn. App. Ct. 1994).   The Court of Appeals held that

          multiple insurers providing underinsured  motorist coverage to an

          insured cannot each  setoff in  full the amount  of the  recovery

          from the tortfeasor.   Id. at 1058.  In   Allstate Ins. Co., Link
                                 __                 _________________

          was injured when the automobile  she was driving was struck by  a

          vehicle operated by a tortfeasor.  Id. at 1054.  The tortfeasor's
                                             __

-8-

insurance company paid $100,000 to Link, exhausting the limits of

          the tortfeasor's bodily injury  liability coverage.  Id.   At the
                                                               __

          time of the accident, Link held two separate automobile insurance

          policies with Allstate.  Id.  One policy provided for $200,000 of
                                   __

          uninsured/underinsured  motorist coverage,  and the  other policy

          provided  for $400,000  of  such coverage.    Id.   Link  claimed
                                                        __

          underinsured motorist benefits under  both policies.  Id.   After
                                                                __

          arbitration,  the  Connecticut  Superior  Court  found  that  the

          tortfeasor  was  underinsured,  and  that Link  was  entitled  to

          underinsured  motorist benefits  from each  of the  two policies.

          Id.   The  court   determined  that   the  amount   of  available
          __

          underinsured motorist coverage was $600,000, but that each policy

          should  have  deducted from  its  cumulative  limit  the  sum  of

          $100,000 previously  paid  by the  tortfeasor.   Id. at  1054-55.
                                                           __

          Link  appealed, claiming  that the  court improperly  reduced the

          amount  of  underinsured  motorist  benefits awarded  to  her  by

          crediting Allstate with twice the amount actually paid out by the

          tortfeasor, thus  creating a  windfall to Allstate  and depriving

          Link  of a payment of $100,000 due  her that she did not receive.

          Id. at 1057.
          __

                    The Connecticut Court of  Appeals agreed and found that

          Link  was entitled  to  have available  a  total of  $600,000  in

          underinsured motorist  benefits under the two  Allstate policies.

          Id. at 1057-58.   While noting that no Connecticut  Supreme Court
          __

          case had specifically addressed this issue,  the Court of Appeals

          stated  that some related  cases had implied  that a tortfeasor's

-9-

contribution  should be  shared among  the policies  covering the

          insured.  Id. at 1057.  The court stated:
                    __

                      The  amount   of  damages  paid   by  the
                      tortfeasor may reduce the total amount of
                      underinsured motorist benefits  available
                      to  a claimant.   It  may not  reduce the
                      amounts paid out by each policy.  To hold
                      otherwise would mean that an award due an
                      insured is reduced  unfairly by twice the
                      amount actually paid out by  or on behalf
                      of the  tortfeasor and that an insured is
                      entitled   to  double   the  tortfeasor's
                      credit   merely   by   issuing   separate
                      policies.    Such   a  result  would   be
                      unfairly detrimental to the insured.

          Id. at  1058.   The court then  concluded that from  the $600,000
          __

          total, Allstate should have been  credited with only the $100,000

          actually paid by the tortfeasor.  Id.
                                            __

                    A similar result is mandated here.  Blevio was entitled

          to  an  aggregate  of  up to  $800,000  of  underinsured motorist

          benefits  under the two policies -- up to $500,000 from the Aetna

          policy and  up to $300,000 under  the Royal policy.   Because the

          tortfeasor effectively contributed $200,000, Aetna  and Royal are

          entitled  to reduce  the  total amount  of underinsured  benefits

          available to Blevio, $800,000, to $600,000 of available benefits.

          The  two insurers  must allocate  the $200,000  deduction between

          them fairly,  sharing the  loss pro rata  to the extent  of their

          coverage.6
                              
          ____________________

          6     The   parties  do  not   challenge  the   district  court's
          determination  that both  Aetna  and Royal  should be  considered
          "primary" insurers in  the context  of this appeal,  and that  if
          this Court upholds the  district court's determination that Aetna
          and Royal  are required to  allocate the deduction  between them,
          they  should share  the  loss pro  rata  to the  extent  of their
          coverage (i.e., Aetna  with $500,000 coverage  may take 5/8th  or

                                         -10-

For the foregoing reasons, the judgment of the district

          court is affirmed.
                   ________

____________________

          $125,000 of the setoff, and Royal with $300,000 coverage may take
          3/8th or $75,000).

                                         -11-