Briere v. Nat'l Union Fire Ins. Co. of Pittsburgh

678 F.Supp.3d 302

Tiffany BRIERE, individually, and Tiffany Briere,as parent and guardian of M.P., a minor Plaintiffs, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.and First Student, Inc., Defendants.

C.A. No. 1:20-CV-0460-MSM-LDA

United States District Court, D. Rhode Island

Signed June 20, 2023

Michael G. Sarli, Stephen J. Sypole, Gidley, Sarli & Marusak LLP, Providence, RI, for Plaintiff.

Elizabeth F. Ahlstrand, Pro Hac Vice, Squire Patton Boggs (US) LLP, New York, NY, Syd A. Saloman, Melick & Porter, LLP, Providence, RI, for Defendant.

MEMORANDUM AND ORDER

Mary S. McElroy, United States District Judge.

This matter involves an insurance coverage dispute for underinsured motorist benefits. Before the Court are the parties' cross-motions for summary judgment. (ECF Nos. 49, 53, 60, 65.) After consideration of the parties' arguments and the record evidence, the Court determines that the strictures of the applicable statute, R.I.G.L. § 27-7-2.1, render it inapplicable to the insurance policy at issue.

For the following reasons, the Court GRANTS the Motions for Summary Judgment of the defendant, National Union Fire Insurance Company of Pittsburgh, PA ("National Union"), and the defendant-intervenor, First Student, Inc. ("First Student") and DENIES the Motions for Summary Judgment of the plaintiffs.

I. BACKGROUND

On December 1, 2018, as part of a family outing to Massachusetts, the plaintiffs, Tiffany Briere and her minor daughter, M.P., were passengers on a bus registered in Rhode Island, owned by First Student, and operated by its employee, June McCloy. While on the return trip to Rhode Island but still travelling in Massachusetts, the bus was involved in a collision with two other vehicles, causing the bus to swerve off the road, allegedly causing the plaintiffs serious injuries.

On December 5, 2018, the plaintiffs filed a tort action in Rhode Island Superior Court, Newport County, against First Student, its driver McCloy, and the drivers of the other vehicles, Christy Gilpatrick and Pedro Correia. Briere et al. v. Gilpatrick et al., NC-2018-0441. There, the plaintiffs alleged that the three drivers negligently caused their injuries, and that First Student was vicariously liable for the negligence of McCloy. Id. The plaintiffs reached settlement agreements with the insurers for Gilpatrick and Correia but the case against First Student and McCloy proceeded.

First Student is a subsidiary of FirstGroup America, Inc. ("FirstGroup"), a Delaware transportation company with a principal place of business in Ohio.¹ (ECF No. 67-1 ¶ 4.) FirstGroup, through subsidiaries like First Student, provides bus services to customers, many of them school districts, in 49 states. Id. ¶ 5. FirstGroup uses an insurance broker, Arthur J. Gallagher Risk Management Services, Inc. ("Gallagher"), to structure an insurance program for this multi-state business. Id. ¶ 7. Relevant here, the insurance program included a primary business auto policy, with a $5 million policy limit, and an umbrella policy, with a $25 million policy limit. Id. ¶ 16; ECF No. 67-2. The primary business auto policy ("the Policy") is a fleet policy that covers vehicles in various states and contains various state-specific endorsements. (ECF No. 67-4.)

National Union issued the Policy (effective dates 12/31/17 - 12/31/18) from New York, via Gallagher, also in New York. The Policy was delivered to and accepted by FirstGroup in Ohio. (ECF No. 67-3 ¶ 10; ECF No. 67-4 at 7.)

With respect to the policy limit for uninsured/underinsured ("UM/UIM") coverage, the declarations page of the Policy refers to each state-specific UM/UIM endorsements to the Policy. (ECF No. 67-4 at 8.) But the Policy does not include a UM/UIM endorsement for Rhode Island. (ECF No. 55 ¶ 16.) First Student has provided evidence that FirstGroup's practice was to decline UM/UIM coverage in each state where it was permitted to do so, or to purchase the minimum UM/UIM coverage where outright rejection was prohibited. (ECF Nos. 62-4 at 5 & 62-7.) For the Policy, FirstGroup submitted a Rhode Island UM/UIM coverage selection form checking a box indicating rejection of UM/UIM coverage. (ECF No. 51-2 at 6-11.)

In Rhode Island, the UM/UIM statute, R.I.G.L. § 27-7-2.1, prohibits outright rejection of UM/UIM coverage for policy holders who have policy limits greater than the state minimum for bodily injury liability coverage set forth in R.I.G.L. § 31-47-2(13)(i)(A), which are $25,000 per person/$50,000 per accident. Because FirstGroup had policy limits of $5 million, the most the UM/UIM statute would allow it to reduce its UM/UIM coverage would be to the $25,000/$50,000 minimum. See R.I.G.L. § 27-7-2.1(a).

On September 18, 2020, approximately two years after the filing of the state-court action, the plaintiffs submitted claims for underinsured motorist benefits under FirstGroup's Policy with National Union. National Union denied the claim on the ground that the Policy did not provide such coverage per the UM/UIM selection form that FirstGroup submitted, which declined that coverage entirely.

The plaintiffs filed the instant action on October 23, 2020, against National Union, alleging breach of contract (Count I), insurer bad faith (Count II), and seeking a declaratory judgment (Count III). First Student, who was not named a defendant by the plaintiffs, filed a motion to intervene as to Count III because it was an insured under the Policy which was a "fronting policy," meaning the deductible equaled the policy limits, making First Student actually on the hook for payment of any benefits.² The Court allowed First Student to intervene. The Court also granted National Union's unopposed motion to sever and stay Count II, the bad-faith claim, until resolution of the breach of contract claim.

On February 28, 2022, the plaintiff filed the first of their two pending motions for summary judgment. (ECF No. 49.) In that motion, on the breach of contract claim, the plaintiffs argue that because the Rhode Island UM/UIM statute, R.I.G.L. § 27-7-2.1(a), prohibits FirstGroup from rejecting Rhode Island UM/UIM coverage, the Policy therefore must provide some such coverage, and National Union's denial was therefore a breach. Id.

On March 9, 2022, the plaintiffs filed a second motion for summary judgment, this time on Count III, seeking a declaratory judgment that because the UM/UIM statute prohibited FirstGroup from rejecting Rhode Island UM/UIM coverage, by operation of § 27-7-2.1(a), the Policy's UM/UIM limits should be reformed to equal the Policy's bodily injury limit of $5 million. (ECF No. 53.)

Both First Student and National Union filed cross-motions for summary judgment. (ECF Nos. 60 & 65.) They argued that (1) the UM/UIM statute does not apply because the policy was not delivered in Rhode Island; (2) the plaintiffs had not demonstrated that they were underinsured; or (3) that the Policy should be reformed to have the minimum UM/UIM limits required under Rhode Island law: $25,000 per person/$50,000 per accident.

On September 29, 2022, the Court denied all of the motions for summary judgment without prejudice because given the pending status of the underlying state-court tort action, it was undetermined if the plaintiffs were in fact underinsured. If in state court First Student and its driver were found liable, the plaintiffs may have been made whole from the $30 million available under First Student's primary and umbrella liability coverage (ECF No. 62 ¶ 27), rendering the question of underinsured motorist coverage academic. This Court therefore stayed the matter pending that factual resolution.

On October 19, 2022, the plaintiffs, with the agreement of First Student, voluntarily dismissed, with prejudice, the state-court action. (ECF No. 81 at 3.) The next day, the plaintiffs filed a motion in this Court to lift the stay arguing that the dismissal with prejudice constituted a full adjudication on the merits that First Student and McCloy were not tortfeasors. Id. at 1-2. Thus, under that theory, the only tortfeasors were the settling drivers of the other vehicles, Gilpatrick and Correia, who presumably were underinsured, ripening a path to UIM benefits under First Student's Policy with National Union.

National Union and First Student do not agree with the plaintiffs' view of the effect of the state-court dismissal. (ECF Nos. 82 & 83.) But they did not oppose the lifting of the stay, only asking that the motions for summary judgment be renewed and that they be permitted to submit supplemental briefing on the impact, if any, of the dismissal of the underlying action. The Court granted this request and further asked the parties for supplemental briefing on the potentially dispositive issue of constructive delivery of the Policy, an issue raised though not fully developed in the previously submitted record.

The Court now proceeds to decide the parties' cross-motions for summary judgment, discussing additional relevant facts as necessary.

II. SUMMARY JUDGMENT STANDARD

Summary judgment's role in civil litigation is "to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Garside v. Osco Drug. Inc., 895 F.2d 46, 50 (1st Cir. 1990). Summary judgment can be granted only when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56. "A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party. A fact is material if it carries with it the potential to affect the outcome of the suit under the applicable law." Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir. 2000).

III. DISCUSSION

The Court finds dispositive a threshold issue raised by the defendants: whether the...