
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-
