NGM Ins. Co. v. Firemen’s Ins. Co. of Washington, D.C., No. 307-6-08 Wmcv (Wesley, J., Mar. 9, 2011)

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                                                STATE OF VERMONT

SUPERIOR COURT                                                                  Civil Division
Windham Unit.                                                                   Docket No. 307-6-08 Wmcv

NGM INSURANCE COMPANY and
BRIAN McGUIRE,
     Plaintiffs,

            v.

FIREMEN’S INSURANCE COMPANY
OF WASHINGTON, D.C.,
     Defendant.

                                           Opinion and Order on
                                    Cross Motions for Summary Judgment

           This case arises from a negligence action in which NGM Insurance Co. (“NGM”)

defended and settled a claim against Brian McGuire. NGM argues that Mr. McGuire was

entitled to defense and indemnification from Firemen’s Insurance Co. (“Firemen’s”)

under a policy issued to his employer, Thayer Street Associates. NGM now and seeks

reimbursement for expenses incurred defending and settling the suit.

           Both parties have filed motions for summary judgment focusing, for the most

part, on Mr. McGuire’s status as either an independent contractor or employee.

Firemen’s also argues that NGM waived any claim against it by defending the prior

litigation without a reservation of rights or non-waiver agreement. Because the Court

finds that NGM has waived the claim against Firemen’s, Defendant’s Motion for

Summary Judgment is GRANTED.

           Summary Judgment is appropriate “if the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, referred to in

the statements required by Rule 56(c)(2), show that there is no genuine issue as to any
material fact and that any party is entitled to judgment as a matter of law.” V.R.C.P.

56(c)(3). Where both parties seek summary judgment, "each must be given the benefit of

all reasonable doubts and inferences when the opposing party's motion is being

evaluated." Northern Sec. Ins. Co. v. Rosenthal, 2009 VT 83, ¶ 4, 186 Vt. 578 (citation

omitted).

           The undisputed facts are as follows. Dominic Pulitano filed a negligence suit

after he was injured when temporary stairs built by Brian McGuire collapsed at a

construction site. At the time of the accident, Mr. McGuire was engaged as a carpenter

on the project by Thayer Street Associates (“Thayer Street”) and insured as an

independent contractor by NGM. Thayer Street was insured by Firemen’s.

           NGM defended the suit brought by Mr. Pulitano. During the course of this

representation, NGM became aware of facts which suggested that Mr. McGuire was

acting as an employee of Thayer Street, rather than an independent contractor.1 Had Mr.

McGuire been acting as an employee of Thayer Street, the accident would have been

covered by Firemen’s under Thayer Street’s policy. However, NGM settled the case

without reserving the right to pursue a cause of action for contribution, indemnity or

subrogation against Firemen’s at a later time.2

           Shortly thereafter, NGM brought this suit alleging that it should be indemnified

by Firemen’s for its defense and settlement of the prior litigation, because Mr. McGuire

was acting as an employee, rather than an independent contractor at the time of the

accident.

           In Jefferson Insurance v. Travelers Insurance, the Vermont Supreme Court held

1
    Admitted ¶31 of Firemen’s Statement of Additional Undisputed Facts.
2
    Admitted ¶11 of Firemen’s Statement of Additional Undisputed Facts.


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“that when with knowledge of facts that would place liability for a loss on another

insurer, an insurer negotiates and settles a claim against its insured without expressly

reserving rights to pursue a cause of action for contribution, indemnity or subrogation at a

later time, such a claim is waived.” Agency of Natural Resources v. Glens Falls

Insurance Co., 169 Vt. 426, 436 (1999)(citing Jefferson Insurance v. Travelers

Insurance, 159 Vt. 46 (1992)).3

         NGM admits that it was aware of the facts when it settled the claim on behalf of

Mr. McGuire which arguably placed liability on Firemen’s, and that it never expressly

reserved rights to seek indemnification, subrogation or contribution against Firemen’s.

Therefore, the claim against Firemen’s has been waived. Jefferson Insurance, 159 Vt. at

50–51.

         NGM almost entirely ignores Defendant’s waiver argument. Its lone

reference to this issue arises in its own motion for summary judgment which

states, “McGuire, NGM and Firemen’s agreed that the issue of Brian McGuire as

an employee and all amounts paid pursuant to this settlement agreement and any

and all costs would be preserved for this suit,” citing the settlement agreement

from the Pulitano Action. However, the settlement agreement provides no

support for this contention. The relevant portion states:

         Nothing here shall constitute a waiver in the pending coverage
         action between NGM and Acadia. NGM and Acadia reserve the
         rights in the coverage action to pursue recovery amounts paid
         pursuant to this agreement and any and all costs set forth, or could
         be set forth in said action.

This agreement says nothing of reserving rights against Firemen’s, or about the

3
 While Defendant has raised and briefed the issue of waiver in its motion for summary judgment, neither
party cited or addressed these cases, although the Court concludes that the holdings squarely govern the
outcome here.


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status of Mr. McGuire as an employee and any possible effect that status might

have on a subsequent claim by NGM against Fireman’s. Nothing in the

settlement agreement referenced by NGM qualifies as an express reservation of

rights pursuant to Jefferson Insurance.

               Choice of Law

       The issue of choice of law came up in Defendant’s pleadings, where

Defendant maintained that Massachusetts law should govern this dispute.

Plaintiff never responded to this argument and each party relies heavily on

Vermont law to support its arguments. Regardless, Plaintiff has not argued that

Massachusetts law would require a different outcome, and it appears that it would

not. See Thach v. Safety Ins. Company, 10 Mass.L.Rptr. 500, (Mass.Super.Ct.

1999) (citing Sarnafil, Inc. v. Peerless Ins. Co., 418 Mass. 295, 309, 636 N.E.2d

247 (1994) (“A ‘reservation of rights' letter is a device which allows the insurer to

give notice to its insured of some policy concerns while at the same time

continuing to act in accordance with its legal duties. This is an acceptable method

for an insurer to preserve its rights to later disclaim coverage, should information

subsequently obtained warrant such disclaimer, while at the same time giving the

insured notice of a potential problem so the insured is not lulled into failing to act

to protect himself.”); Northern Sec. Ins. Co., Inc. v. R.H. Realty Trust, 78

Mass.App.Ct. 691, FN2 (Mass.App.Ct., 2011)(Representation with a reservation

of rights permits the insurer to assume the defense of the claim against the

policyholder without waiving, surrendering, or losing the right to contend that the

claim is not subject to indemnity under the policy).




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Based on the foregoing, it is hereby ORDERED:

Defendant’s motion for summary judgment is GRANTED.

DATED                      , at Bennington, Vermont,



                           ______________________
                           John Wesley
                           Presiding Judge




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