Morgan v. Metro. Grp. Prop. & Cas. Ins. Co., No. 721-11-10 Wrcv (DiMauro, J., Mar. 3, 2012)

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                                                       STATE OF VERMONT

SUPERIOR COURT                                                                                         CIVIL DIVISION
Windsor Unit                                                                                           Docket No. 721-11-10 Wrcv

Sean Morgan
      Plaintiff

v.

Metropolitan Group Property and Casualty Ins. Co.
      Defendant


                              Decision on Defendant’s Motion for Summary Judgment

         Plaintiff Sean Morgan was responsible for a fatal car accident in 2001. His automobile
liability carrier paid the full amount of coverage and his parents promised to pay decedent’s
estate an additional amount in monthly payments, but about five years later, the parents defaulted
on their promises and the decedent’s estate sued plaintiff and his parents for breach of contract.
Plaintiff’s automobile liability carrier refused to defend him in the breach-of-contract action,
viewing the contract claims as beyond the scope of liability. Plaintiff filed this action seeking
damages for the insurance company’s decision that it owed him no duty of defense.

        Defendant sought to dispose of the case by motion for judgment on the pleadings based
on the argument that an automobile insurer has no duty to defend its insureds against breach-of-
contract claims. In response, plaintiff relied on two federal cases in which the courts held that an
insurer had a duty to defend its insured from indemnification claims brought by the carrier for
vehicle lessors who had been held vicariously liable for the insured’s negligence under a
provision of New York state law: Allianz Ins. Co. v. Lerner, 416 F.3d 109 (2d Cir. 2005) and
Tokio Marine and Fire Ins. Co., Ltd. v. Grodin, 2006 WL 3054321 (S.D.N.Y. Oct. 27, 2006). In
a written decision, Judge Hayes explained that these two cases appeared to be limited to the
context of indemnification and therefore did not present a strong factual basis for an extension of
the insurer’s duty to defend in this case. But Judge Hayes also noted that the language of the
Second Circuit opinion indicated that the court there recognized that its reasoning might extend
beyond the indemnification context such that “a broad duty to defend” might “theoretically
extend[] beyond the standard range of possibly covered claims to reach any claims against an
insured so long as they are the result of a covered auto accident.” 416 F.3d at 116 (internal
quotations omitted). Noting the novelty of the arguments, Judge Hayes deferred resolution of the
matter to the summary-judgment stage, where the parties could provide a more persuasive
explanation for why Lerner should be “either applied to or distinguished from the present
circumstances.” Judge Hayes specifically asked the parties to “find legal precedents in support
of the arguments they are making.”
        Defendant has now moved for summary judgment. Defendant argues that the language
of the defense obligation in Lerner was broader than the language contained in plaintiff’s policy.
Defendant has also sharpened its focus on the difference between an indemnification action that
arises as a matter of law out of a covered automobile accident and a case like this one, in which
the contractual liability is not rooted in the automobile accident itself but rather in the subsequent
breach of a settlement agreement.

        Plaintiff has mostly renewed his same arguments. He contends that the duty to defend
ought to extend beyond the standard range of claims to reach any claim against an insured
resulting from a covered auto accident. On this point, plaintiff’s position is that an automobile
carrier must defend the insured against any complaint that would not exist “but for” the covered
accident. Plaintiff was unable to find any additional authorities supporting his position beyond
citations to cases explaining the general parameters of the duty to defend.

        The undersigned has reviewed the cited cases and the prior ruling. It appears that
plaintiff is asking the court for a ruling that would, for the first time, extend Lerner beyond the
context of an indemnification claim that arises as a matter of law out of a covered automobile
accident to a contractual claim that arises from subsequent events—in this case, a breach of a
settlement agreement that occurred years after the covered automobile accident. It is not even
clear that Lerner meant to endorse such an outcome (as the court twice took pains to emphasize
that the indemnification claims at issue in that case were not based on any events other than the
car accident itself), but even if it did, such a recognition was merely dicta and not part of the
holding of the case. Lerner and Grodin are factually distinguishable from this case, in which the
contractual liability is alleged to have occurred as the result of subsequent and separate events:
the missed payments. Because plaintiff has not pointed to any other holding that extends the use
of the “but for” test beyond the indemnification context present in Lerner and Grodin, this court
declines to be the first to rule that an automobile liability insurer must defend its insured against
a complaint seeking contractual damages based on a breach of a promissory note that occurred
years after the covered automobile accident.


                                              ORDER

       Defendant’s Motion for Summary Judgment (MPR #4), filed September 28, 2011, is
granted. A final judgment order shall issue separately.

       Dated at Woodstock, Vermont this ___ day of March, 2012.


                                                       ____________________________
                                                       Theresa S. DiMauro
                                                       Superior Court Judge




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