Opinion
14-P-1359
08-20-2015
LEWIS ANILE & others v. LIBERTY MUTUAL INSURANCE COMPANY & another.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
This appeal arises from the settlement of an underlying claim by the plaintiffs against Ridgewood Renewable Power, LLC, Ridgewood Energy Holding Corporation, and Robert E. Swanson, the chairman and president of those entities (collectively Ridgewood). The plaintiffs argue that the limit of liability of Ridgewood's primary insurer is exhausted by the stipulation of judgment and ask that Ridgewood's excess insurer pay the amount of the judgment in excess of the primary policy limit of liability. On summary judgment, the Superior Court judge determined that the primary insurance policy limit of liability was not exhausted by its payments to the plaintiffs and entered judgment for the excess liability insurer. We agree and affirm the judgment.
Background. In 2005, Ridgewood purchased a $15 million primary insurance policy from The Hartford, as well as a $10 million excess insurance policy from Liberty Mutual Insurance Company (Liberty Mutual), for the same coverage period, August 1, 2005, to August 1, 2006. In 2007, one of Ridgewood's investors, Paul Bergeron, filed suit in Superior Court, alleging breach of contractual and fiduciary duties. At some point, the plaintiffs, also investors in Ridgewood, were substituted as the plaintiffs in the Bergeron case. The primary insurer, The Hartford, and the excess insurer, Liberty Mutual, were informed of the claims and periodically updated thereafter. Liberty Mutual remained firm that it would not provide coverage unless the primary policy limits were exhausted by the judgment or settlement. On October 12, 2011, Ridgewood filed the instant action against Liberty Mutual for breach of contract.
The policy was issued by Twin City Fire Insurance Company, an apparent subsidiary or affiliate of The Hartford.
In 2005, Bergeron filed a prior suit that the parties settled in 2009 for $1 million. The Hartford, the primary insurer, contributed $1 million. The 2005 claim and the claim at issue in the present appeal were treated as a single claim for the purposes of insurance coverage. The 2005 case and settlement do not affect the analysis in this case.
The plaintiffs and Ridgewood ultimately agreed to settle the Bergeron case; on December 30, 2011, a stipulated judgment entered in the amount of $20.5 million. The agreement provided that The Hartford and Ridgewood would pay jointly to the plaintiffs $11 million in exchange for the plaintiffs' promise not to sue Ridgewood for the remaining amount. Ridgewood thereafter assigned all of its rights, claims, and interest in the Liberty Mutual policy to the plaintiffs. It is undisputed that The Hartford and Ridgewood have jointly satisfied the $11 million sum, with The Hartford contributing $7 million to the settlement and Ridgewood contributing $4 million to the settlement. The Hartford also paid approximately $2.5 million in attorney's fees for Ridgewood's defense of the Bergeron case.
On June 22, 2012, the plaintiffs filed an amended complaint in the instant action. Liberty Mutual moved for summary judgment, claiming that the unambiguous language of the contract provides coverage only when the primary insurer has paid "the full amount of the [u]nderlying [l]imit of [l]iability as loss," a condition that has not been met in this case.
Discussion. 1. Policy language. a. Insuring provisions. The Liberty Mutual policy contains the following relevant provisions. First, it "only provides coverage when the [u]nderlying [l]imit of [l]iability is exhausted by reason of the insurers of the [u]nderlying [p]olicies paying or being held liable to pay in legal currency the full amount of the [u]nderlying [l]imit of [l]iability as loss." "Loss" is defined by reference to the primary policy, which defines loss as "sums which the [i]nsured [parties] . . . are legally obligated to pay solely as a result of any [c]laim [i]nsured by this [p]olicy, [i]ncluding [c]laims [e]xpenses, compensatory damages, settlement amounts, and legal fees and costs awarded pursuant to judgments."
b. Choice of law. The parties agree that this dispute is governed by New Jersey law; therefore, we interpret the policy language in accordance with the laws of New Jersey. See Hodas v. Morin, 442 Mass. 544, 549-550 (2004).
2. Analysis. Contract interpretation is a question of law that we review de novo. Kieffer v. Best Buy, 205 N.J. 213, 222-223 (2011). "Insurance policies are construed in accordance with principles that govern the interpretation of contracts; the parties' agreement 'will be enforced as written when its terms are clear in order that the expectations of the parties will be fulfilled.'" Memorial Properties, LLC v. Zurich Am. Ins. Co., 210 N.J. 512, 525 (2012), quoting from Flomerfelt v. Cardiello, 202 N.J. 432, 441 (2010). We will not "write for the insured a better policy of insurance than the one purchased." Flomerfelt v. Cardiello, supra (citation omitted).
We agree with the judge that the language of the Liberty Mutual policy unambiguously provides that excess coverage will be allowed only in the event that The Hartford has actually paid, or is legally obligated to pay, the entirety of the $15 million coverage limit under the primary policy. The operative clause can have no other possible meaning. See Qualcomm, Inc. v. Certain Underwriters at Lloyd's, London, 161 Cal. App. 4th 184, 195-197 (2008) (Qualcomm) (interpreting analogous excess policy language). The plaintiffs concede that The Hartford has not reached the $15 million threshold, having paid $9.5 million in relation to the Bergeron case. Nor has it been "held liable to pay" or legally obligated to pay more. The Hartford is not a party to the settlement or consent judgment. See id. at 196. Further, the explicit terms of the settlement and related consent judgment cap the shared payment at $11 million, with plaintiffs covenanting not to execute against Ridgewood as to the remaining balance due. Under these circumstances, Liberty Mutual was entitled to deny coverage. This result is in agreement with several other jurisdictions that have confronted analogous cases. See, e.g., Citigroup Inc. v. Federal Ins. Co., 649 F.3d 367, 372-373 (5th Cir. 2011); Qualcomm, supra; Intel Corp. v. American Guar. & Liab. Ins. Co., 51 A.3d 442, 450 (Del. 2012); JP Morgan Chase & Co. v. Indian Harbor Ins. Co., 98 A.D.3d 18, 22-23 (N.Y. App. Div. 2012).
For this reason alone, the plaintiffs' citation to Rummel v. L exington Ins. Co., 123 N.M. 752 (1997), is distinguishable.
Because the language of the Liberty Mutual policy is unambiguous, the instant case is distinguishable from Zeig v. M assachusetts Bonding & Ins. Co., 23 F.2d 665 (2d Cir. 1928), and its progeny. See Intel Corp. v. American Guar. & Liab. Ins. Co., 51 A.3d at 450. Likewise, the New Jersey case cited by the plaintiffs, Carpenter Technology Corp. v. Admiral Ins. Co., 172 N.J. 504 (2002), is inapposite. That case concerns the interpretation of a statutory scheme that does not apply here. Id. at 508. Finally, we reject as unpersuasive the plaintiffs' numerous citations to unpublished decisions from other jurisdictions.
The plaintiffs nevertheless cite to the well-settled New Jersey public policy encouraging the settlement of litigation between parties. The insurance policy at issue here was entered into freely by sophisticated parties. In accord with New Jersey law, we will enforce that policy according to the terms of its unambiguous language, regardless of any potentially competing public policy concerns. See Werner Indus., Inc. v. First State Ins. Co., 112 N.J. 30, 38 (1988) (declining to go against the unambiguous language of an insurance contract on public policy grounds where the contract covered commercial risks and involved sophisticated insureds).
Judgment affirmed.
By the Court (Green, Milkey & Maldonado, JJ.),
The panelists are listed in order of seniority. --------
Clerk Entered: August 20, 2015.