Opinion
No. CV02-0282069
April 26, 2005
MEMORANDUM OF DECISION MOTIONS FOR SUMMARY JUDGMENT #106 #141
I SUMMARY OF THE PROCEEDINGS
On December 16, 1996, the plaintiff Giglio was in an accident with a vehicle operated by an individual named DeMaio and owned by the Town of Wallingford. Giglio instituted legal action against DeMaio and Wallingford in Docket No. CV98-0264711. DeMaio and Wallingford were insured by the Reliance Insurance Company, which was declared insolvent by court action in the State of Pennsylvania on or about October 31, 2001 and Gigilo was insured by American Economy Insurance Company.
On September 3, 2002, the present action for uninsured motorist benefits was brought by the plaintiff Giglio against American Economy Insurance Company. This present action was thereafter consolidated with Gigilo's legal suit against DeMaio and Wallingford which carries the docket number CV98-0264711. American Economy has filed a motion for summary judgment, dated November 4, 2002, claiming that there is no uninsured motorist coverage available to Giglio pursuant to an exclusion in her policy for vehicles owned by a government entity. Giglio filed her objection to this motion on January 15, 2003.
Thereafter, the Connecticut Insurance Guaranty Association (CIGA) moved to intervene in this action, anticipating that if American Economy's motion for summary judgment is granted, Giglio will assert that CIGA is obligated to pay her claim for damages under Wallingford's policy with Reliance. CIGA's motion to intervene was denied by the court (Graham, J.) on July 7, 2003. However, CIGA was given leave to file an amicus curiae brief in opposition to American's motion for summary judgment, and, in fact, did file a "Brief of Amicus Curiae" on August 15, 2003.
CIGA has since settled the action brought by Giglio against DeMaio and Wallingford in Docket No. CV98-0264711. As part of her settlement of that claim, Giglio assigned her rights under her American Economy policy to CIGA and withdrew her action against DeMaio and Wallingford. CIGA was then substituted for Giglio in the present action and is pursuing a Declaratory Judgment Action against American Economy by way of an amended complaint.
While there are numerous pleadings in the court's file, the operative pleadings being considered by the court are as follows:
1. American Economy's motion for summary judgment against Giglio dated November 4, 2002, claiming that there are no uninsured motorist benefits;
2. Brief of Amicus Curiae, CIGA dated August 15, 2003, objecting to American's motion for summary judgment;
3. CIGA's motion for summary judgment on its declaratory judgment action against American Economy, asserting that there is uninsured motorist coverage for Giglio under the terms of Giglio's policy with American. CIGA also seeks indemnification from American Economy for the sum CIGA has paid to Giglio;
4. American Economy's objection to CIGA's motion for summary judgment, dated December 14, 2004 and its addendum to its own motion for summary judgment;
5. Stipulation of facts by American Economy and CIGA, dated December 15, 2004; and
6. CIGA's January 7, 2005, reply to American's objection to CIGA's motion for summary judgment and objection to American's addendum to its motion for summary judgment.
As Giglio's action against DeMaio and Wallingford has been settled and withdrawn, and as Giglio has assigned her rights against American to CIGA, the court has not considered Giglio's or DeMaio's and Wallingford's objection to American's motion for summary judgment.
II SUMMARY OF FACTS
On December 16, 1996, Giglio was operating her vehicle on a public highway in Wallingford, Connecticut. She alleges that a police vehicle owned by Wallingford and operated by DeMaio, a Wallingford policeman, entered her line of traffic and collided with her vehicle, causing her serious personal injuries and damages. On that date, the Town of Wallingford was insured by the Reliance Insurance Company for liability insurance and Giglio was insured by the defendant American Economy Insurance Company under automobile insurance policy number 02-06-034475-2, which Giglio alleges entitles her to uninsured and underinsured motorist policy benefits. Giglio alleges that because of the insolvency of the Reliance Insurance Company, the automobile insurance policy that was in effect for Wallingford and DeMaio is no longer available to her to compensate her for her losses. Further, she alleges that in any event, any other coverage that may be available would be in an amount less than the applicable limits for uninsured/underinsured motorist coverage available to her under her policy with American Economy.
In response to these allegations, American Economy has filed its answer and several special defenses. The Third Special Defense by American claims that the plaintiff Giglio is not entitled to uninsured/underinsured motorists benefits under her policy with American because the tortfeasor's vehicle is owned by a governmental unit, which is a specific exclusion in Giglio's policy.
Thereafter on November 4, 2002, American filed its motion for summary judgment, claiming that Giglio may not recover uninsured motorist benefits from American. American argues that the policy under which Giglio seeks uninsured motorist benefits specifically excludes from its definition of what is an "uninsured motor vehicle" those vehicle that are owned by governmental units, such as the vehicle operated by DeMaio and owned by Wallingford. In support, American has submitted a copy of the subject insurance policy. CIGA filed its amicus curiae brief opposing American's motion for summary judgment.
Part C — Uninsured/Underinsured Motorists Coverage Insuring Agreement reads as follows:
A. If a limit for this coverage is displayed on the declarations, we will pay compensatory damages which an "insured" is legally entitled to recover from the owner or operator of an "uninsured motor vehicle" or "underinsured motor vehicle" because of" bodily injury:"
1. Sustained by an "insured," and
2. Caused by an accident.
The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the "uninsured motor vehicle" or "underinsured motor vehicle."
C . . . In addition neither "uninsured motor vehicle" nor "underinsured motor vehicle" includes any vehicle or equipment: . . .
2. Owned by any governmental unit or agency . . .
On March 12, 2004, CIGA as substituted plaintiff for Giglio, pursuant to Gigilo's assignment of rights to CIGA, filed an "Amended Complaint for Declaratory Judgment" pursuant to General Statutes § 52-29 and Practice Book §§ 17-54 et seq. The amended complaint requests the court to determine a question of actual controversy between CIGA and American regarding the rights and obligations of the parties for payment of a claim for bodily injury under the auto policy of an insolvent insurer where there is a source of uninsured motorist insurance coverage for such claim from a solvent insurer.
Sec. 52-29 reads as follows:
(a) The Superior Court in any action or proceeding may declare rights and other legal relations on request for such a declaration, whether or not further relief is or could be claimed. The declaration shall have the force of a final judgment.
(b) The judges of the Superior Court may make such orders and rules as they may deem necessary or advisable to carry into effect the provisions of this section.
Sec. 17-54. Declaratory Judgment reads as follows:
The judicial authority will, in cases not herein excepted, render declaratory judgments as to the existence or nonexistence (1) of any right, power, privilege or immunity; or (2) of any fact upon which the existence or nonexistence of such right, power, privilege or immunity does or may depend, whether such right, power, privilege or immunity now exists or will arise in the future. See Nationwide Mutual Ins. Co. v. Allen, 83 Conn.App. 526, 530, 850 A.2d 1047 (2004).
CIGA is a non-profit, unincorporated legal entity created and existing under General Statutes §§ 38a-836 et seq. ("CIGA Act"). Under the Act, CIGA is obligated to pay certain "covered claims" as defined by General Statutes § 38a-841(1)(a), subject to certain limitations and exceptions, and must deny all other claims. See General Statutes § 38a-841(1)(d). General Statutes § 38a-838(6) of the CIGA Act defines "covered claim" as:
[A]n unpaid claim . . . which arises out of and is within the coverage and subject to the applicable limits of an insurance policy . . . insured by an insurer, if such insurer becomes an insolvent insurer.
By reason of Reliance's insolvency, CIGA determined it became obligated to pay certain covered claims arising out of and within the coverage of Reliance policies as provided by the CIGA Act, subject to the provisions of the CIGA Act. CIGA's obligation to pay such covered claims is limited by General Statutes § 38a-841 to "that amount of each claim which is in excess of one hundred dollars and is less than three hundred thousand dollars . . ." Section 38a-845 of the CIGA Act provides, in part, that "[a]ny person having a claim against an insurer under any provision in an insurance policy other than a policy of an insolvent insurer, which is also covered under sections 38a-836 to 38a-853, inclusive, shall exhaust first his right under such policy. Any amount payable on a covered claim under said sections shall be reduced by the amount recoverable under the claimant's insurance policy or chapter 568."
CIGA claims that § 38a-334-6(c)(2)(C) Regs., Conn. State Agencies is not intended to apply where the government vehicle (Wallingford) was insured, but the insurer has been determined to be insolvent, and therefore, the exclusion for government-owned vehicles in the American policy is inapplicable to the extent the vehicle was insured, but the insurer has been determined to be insolvent. CIGA argues that American must pay uninsured motorist benefits to Giglio and because Giglio has failed to exhaust her uninsured motorist coverage, CIGA has no obligation on account of the collision between Gigilo, DeMaio and Wallingford. Further, CIGA argues that § 38a-334-6(c)(2)(C) Regs., Conn. State Agencies is invalid to the extent it purports to permit an exclusion of uninsured motorist coverage where the governmental vehicle was insured but the insurer has been determined to be insolvent.
CIGA specifically requests that the court grant its motion for summary judgment and declare that:
1. Regs., Conn. State Agencies § 38a-334-6(c)(2)(C) and the American Economy policy exclusion based on this regulation are invalid in the circumstances presented in the instant case where a governmental-owned vehicle is insured, but the insurer is declared insolvent;
2. By reason of Reliance's insolvency, American is obligated to provide uninsured motorist coverage to Giglio;
3. Giglio is required to exhaust the uninsured motorist coverage in the American policy;
4. If Giglio does exhaust the uninsured motorist coverage in the American policy, any amount payable to CIGA on a covered claim (the amount which DeMaio and Wallingford is legally obligated to pay as damages up to the lesser of the Reliance policy limits, must be reduced by an amount equal to the uninsured motorist policy limits, and that accordingly, CIGA has no obligation to Giglio; and
5. Order American to reimburse CIGA all funds paid by CIGA to Giglio in connection with the December 2003 settlement.
In response to CIGA's amended complaint, American has filed two special defenses. First, American claims that CIGA's action is barred because the American policy at issue prohibits the transfer of the insured's rights and duties under the policy without the written consent of American and such consent has neither been sought nor secured. Second, American claims again, that the tortfeasor who caused the accident was operating a vehicle owned by a governmental entity and the American policy excludes uninsured motorist coverage for vehicles owned by a governmental unit or agency.
In its objection to CIGA's motion for summary judgment, American repeats its claims regarding a policy exclusion under uninsured motorist coverage for vehicles owned by a governmental unit and the prohibition of a transfer of an insured's rights and duties under the policy without the written consent of American. Additionally, American argues that the government-owned vehicle exclusion set forth in § 38a-334-6(c)(2)(C) Regs., Conn. State Agencies and in American's policy do not conflict with the CIGA Act, General Statutes §§ 38a-836 et. seq.
III Legal Standards Pertaining to Summary Judgment and a Declaratory Judgment
"A Motion for Summary Judgment is designed to eliminate the delay and expense of litigating an issue where there is no real issue to be tried." Wilson v. New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989). "In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the non-moving party." Hertz Corp. v. Federal Ins., Co., 245 Conn. 374, 381, 713 A.2d 820 (1998). In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any issues exist. Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988). The moving party has the burden of demonstrating the absence of any genuine issue of material fact. Hertz Corp. v. Federal Ins. Corp., supra, 245 Conn. 381. "The opposing party must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact." Id. The party moving for summary judgment "is required to support its motion with supporting documentation, including affidavits." Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 796, 653 A.2d 122 (1995). "A material fact is a fact which will make a difference in the result of a case." Suarez v. Dickmont Plastics Corp., 229 Conn. 99, 639 A.2d 507 (1994). The test used by the court is to determine if the moving party would be entitled to a directed verdict if the same set of facts were presented at trial. Connell v. Colwell, 214 Conn. 242, 246-47, 571 A.2d 116 (1990). A directed verdict is properly rendered if a trier of fact cannot reasonably and legally find in any fashion other than that directed. Santopietro v. New Haven, 239 Conn. 207, 225, 682 A.2d 106 (1996).
A declaratory judgment action is a special proceeding under General Statutes § 52-29. See Echo Four v. Hill, 3 Conn.App. 118, 122, 485 A.2d 926, cert. denied, 195 Conn. 801, 487 A.2d 564 (1985). "The purpose of a declaratory judgment action . . . is to secure an adjudication of rights where there is a substantial question in dispute or a substantial uncertainty of legal relations between the parties . . ." (Internal quotation marks omitted.) Mannweiler v. LaFlamme, 232 Conn. 27, 33, 653 A.2d 168 (1995). "There is no question that a declaratory judgment is a suitable vehicle to test the rights and liabilities under an insurance policy." St. Paul Fire Marine Ins. Co. v. Shernow, 22 Conn.App. 377, 380, 577 A.2d 1093 (1990), aff'd, 222 Conn. 823, 610 A.2d 1281 (1992). The sole function of a trial court in a declaratory judgment action is to determine the rights of the parties under existing law. See Preston v. Connecticut Siting Council, 21 Conn.App. 85, 89, 571 A.2d 157, cert. denied, 215 Conn. 805, 574 A.2d 221 (1990).
Pursuant to Practice Book § 17-55 a declaratory judgment action may be maintained if all of the following conditions have been met:
(1) The party seeking the declaratory judgment has an interest, legal or equitable, by reason of danger of loss or of uncertainty as to the party's rights or other jural relations;
(2) There is an actual bona fide and substantial question or issue in dispute or substantial uncertainty of legal relations which requires settlement between the parties; and
(3) In the event that there is another form of proceeding that can provide the party seeking the declaratory judgment immediate redress, the court is of the opinion that such party should be allowed to proceed with the claim for declaratory judgment despite the existence of such alternate procedure.
See Broadnax v. New Haven, 270 Conn. 133, 179 n. 29, 851 A.2d 1113 (2004).
"The court may address the merits of a declaratory judgment action upon a motion for summary judgment." (Internal quotation marks omitted.) American Home Assurance Co. v. Stamford Propane, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 95 0149399, 19 Conn. L. Rptr. 352, (March 7, 1997, D'Andrea, J.); see also England v. Reliance Ins., Superior Court, judicial district of Ansonia-Milford at Milford, Docket No. CV 02-0079606-S, 36 Conn. L. Rptr. 581, (Feb. 24, 2004, Carroll, J.); United States Automobile Assn. v. Marbury, 46 Conn.App. 99, 102 n. 3, 698 A.2d 914 (1997).
IV Connecticut Insurance Guaranty Association
The Connecticut Insurance Guaranty Association (CIGA) seeks a declaratory judgment action for the purpose of resolving certain issues relating to its obligation pursuant to the Connecticut Insurance Guaranty Association Act. The association was established for the purpose of providing a limited form of protection for policyholders and claimants in the event of insurer insolvency. The protection it provides is limited based upon its status as a nonprofit entity and the method by which it is funded. Specifically, the association is a nonprofit legal entity created by statute to which all persons licensed to transact insurance in the state must belong. CIGA was established by General Statutes § 38a-839 and is governed by the Connecticut Insurance Guaranty Association Act, which is codified at General Statutes § 38a-836 et seq. The association was established in order to reimburse, to a limited extent, covered claims against insolvent insurers. Doucette v. Pomes, 247 Conn. 442, 474 n. 2, 724 A.2d 481 (1999); Hunnihan v. Mattatuck Mfg. Co., 243 Conn. 438, 439 n. 1, 705 A.2d 1012 (1997). The legislature recognized that insurers, including those who provide motor vehicle insurance, may become insolvent and provided for that possibility by creating the association. Connecticut Ins. Guaranty Assn. v. Zasun, 52 Conn.App. 212, 219, 725 A.2d 406 (1999). It is composed of all insurers licensed to transact business in this state that write any kind of direct insurance, except for those specifically excluded from the application of the Connecticut Insurance Guaranty Association Act. The evident basis for this determination is that CIGA shall be deemed the insurer to the extent of its obligations on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent. Connecticut Ins. Guaranty Assn. v. Union Carbide, 217 Conn. 371, 385, 585 A.2d 1216 (1991).
Sections 38a-836 to 38a-853, inclusive, shall be known and may be cited as the "Connecticut Insurance Guaranty Association Act."
General Statutes § 38a-838(6) as amended by P.A. 03-49 and P.A. 04-174 reads as follows:
(6) "Insolvent insurer" means an insurer (A) licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred, and (B) determined to be insolvent by a court of competent jurisdiction, provided the term "insolvent insurer" shall (i) not be construed to mean any insurer with respect to which an order, decree, judgment or finding of insolvency, whether permanent or temporary in nature, or order of rehabilitation or conservation has been issued by a court of competent jurisdiction prior to October 1, 1971, and (ii) include the legal successor of the insolvent insurer in the event of the merger of the insolvent insurer.
"When an insurer is determined to be insolvent under § 38a-838(7), the association becomes obligated pursuant to § 38a-841, to the extent of covered claims within certain limits. The rates and premiums charged by member insurers are authorized by General Statutes § 38a-849 to include amounts sufficient to recoup the assessments levied upon insurers by the association. Because § 38a-849 provides that insurers may pass on the costs of the assessments made against them by the association, it is in reality policyholders who pay for the protections afforded by the association. Limitations on the association's obligations, therefore, provide another form of protection against increased premiums for policyholders in addition to the primary protection afforded all claimants against losses resulting from insurer insolvency." Hunnihan v. Mattatuck Mfg. Co., supra, 243 Conn. 451. "Pursuant to General Statutes § 38a-841, the association is authorized to pay only covered claims, and must deny all other claims. In order to be reimbursable by the association, a claim against the association must be encompassed within the definition of a covered claim contained in § 38a-838(6)." Id. 449-50.
V Transfer of Policy Rights by Giglio to CIGA
The American Economy Insurance Company argues that CIGA's action for a declaratory judgment is barred because the American policy prohibits the transfer of the insured's (Giglio) rights and duties under the policy without the written consent of American, and Giglio, the insured never sought or obtained this consent. Thus, American argues that CIGA has no standing to request that the court create coverage under this policy on Giglio's behalf. The language of § 38a-334-8(F) Regs., Conn. State Agencies provides in pertinent part that a policy may contain "a provision that the insurer's consent is necessary to any assignment of interest under the policy."
The subject insurance policy provides under Section D. "Other Termination Provisions" as follows:
Transfer of Your Interest in this Policy
B. Your rights and duties under this policy may not be assigned without our written consent.
CIGA in opposition argues that while generally, insurance policies cannot be assigned without the consent of the insurer, this rule does not apply to an assignment after a loss has occurred. See. 3 Couch on Insurance § 35.7 (3d ed. 1999) (noting anti-assignment clauses do not prohibit assignments after a loss has occurred); see also, 6B-182 Appleman on Insurance § 4269 (1st ed.) ("After a loss has occurred and rights under the policy have accrued, an assignment may be made without the consent of an insurer.") CIGA relies primarily on the decision regarding a motion to dismiss in Peck v. Public Service Mutual Ins. Co., 114 F.Sup.2d 51 (D.Conn. 2000). In Peck the plaintiff's claims were brought by her as a judgment creditor, assignee, and subrogee pursuant to the provisions of the direct action statute and the terms of the written assignment from South Norwalk Redevelopment. Id. 54. On December 4, 1998, the plaintiff Peck obtained a judgment in the Connecticut Superior Court against South West Norwalk Redevelopment for $250,000 plus post-trial interest. South Norwalk Redevelopment had not satisfied the judgment and assigned to Peck all of its rights under the Public Service Mutual insurance policy during a settlement conference prior to an appeal. Public Service Mutual, the insurer for South Norwalk refused, for various reasons discussed in the decision, to satisfy the judgment. Thereafter, the plaintiff Peck filed her legal action against Public Service Mutual.
Sec. 38a-321. (Formerly Sec. 38-175). Liability of insurer under liability policy reads as follows:
Each insurance company which issues a policy to any person, firm or corporation, insuring against loss or damage on account of the bodily injury or death by accident of any person, or damage to the property of any person, for which loss or damage such person, firm or corporation is legally responsible, shall, whenever a loss occurs under such policy, become absolutely liable, and the payment of such loss shall not depend upon the satisfaction by the assured of a final judgment against him for loss, damage or death occasioned by such casualty. No such contract of insurance stall be cancelled or annulled by any agreement between the insurance company and the assured after the assured has become responsible for such loss or damage, and any such cancellation or annulment shall be void. Upon the recovery of a final judgment against any person, firm or corporation by any person, including administrators or executors, for loss or damage on account of bodily injury or death or damage to property, if the defendant in such action was insured against such loss or damage at the time when the right of action arose and if such judgment is not satisfied within thirty days after the date when it was rendered, such judgment creditor shall be subrogated to all the rights of the defendant and shall have a right of action against the insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment.
"Connecticut's direct action statute, C.G.S.A. § 38a-321 (formerly § 38-175), provides that once a final judgment is rendered against an insured for loss or damage covered by a policy of insurance and the judgment remains unsatisfied for more than 30 days, the judgment creditor shall be subrogated to all the rights of the defendant and shall have a right of action against such insurer to the same extent that the defendant in such action could have enforced his claim against such insurer had such defendant paid such judgment. (Emphasis added.) In Brown v. Employer's Reinsurance Corp., 206 Conn. 668, 672, 539 A.2d 138 (1988), the Connecticut Supreme Court discussed the underlying purpose of the direct action statute, stating that the legislature's intent in enacting the statute was to give the injured person the same rights under the policy as the insured. The statute protects those injured by judgment-proof insureds by subrogating the injured party or judgment creditor to the rights of the insured against his insurer. Id. The Court held that a party subrogated to the rights of an insured under the direct action statute obtains no different or greater rights against the insurer than the insured possesses and is equally subject to any defense the insurer may have against the insured under the policy. Id. at 673, 539 A.2d 138. Consequently, the Court held that in order for a party to proceed under the direct action statute, the insured must have had a viable statutory or contractual claim against the insurer. Id. (Emphasis added.)" (Internal quotations marks omitted.) Peck v. Public Service Mutual Ins. Co., supra 114 F. Sup.2d 55.
One of the issues discussed in Peck was whether the non-assignment clause in Public Service Mutual's policy barred plaintiff Peck's claim for breach of the implied covenant of good faith and fair dealing. Public Service argued that South Norwalk's assignment to Peck was void because it was in direct violation of the policy's non-assignment clause. The court found that based on plaintiff's ability to bring this action pursuant to the direct action statute, it appeared that the assignment from South Norwalk Redevelopment to Peck was superfluous, and that plaintiff Peck now had the benefit of the direct action statute which invested in her the same rights as the insured had against its insurer. Id. 56. "We have found no authority holding that this statutory right could be defeated by a non-assignment clause in a policy to which the judgment creditor was not a party. Indeed, to allow a non-assignment clause to defeat the judgment creditor's ability to pursue his or her claims against the insurer would defeat the underlying purpose of the direct action statute." Id. 56.
In discussing non-assignment clauses in policies the court in Peck further commented:
Although there is some authority to the contrary, the great majority of courts have held that general stipulations in policies prohibiting assignments apply only to assignments before a loss, and do not prevent an assignment after a loss has occurred. The rationale underlying these decisions is that the non-assignment clause ordinarily prohibits only the assignment of the policy, as distinguished from a claim arising thereunder. An assignment before a loss involves a transfer of a contractual relationship, whereas an assignment after a loss is the transfer of a right to a money claim. Additionally, the purpose of a non-assignment clause is to protect the insurer from increased liability, and after events giving rise to the insurer's liability have occurred, the insurer's risk cannot be increased by a change in the insured's identity.
(Internal citations omitted.) Peck v. Public Service Mutual Ins. Co. supra, 114 F.Sup.2d 56. See Rumbin v. Utica Mutual Ins. Co., 254 Conn. 259, 757 A.2d 526 (2000) (ruling that an assignment of an annuity contract is valid and enforceable despite a breach of a contract's anti-assignment provision); see also, Rumbin v. Utica Mutual Ins. Co. supra, 254 Conn. 278-79 (Norcott, J. dissenting) (I disagree, however, with the majority's determination that our common law, and § 322 of the Restatement (Second) of Contracts, give the plaintiff, . . . the freedom to ignore a validly executed, and freely made, anti-assignment provision in order to transfer his right to payment under the structured settlement agreement.")
In the present matter, Giglio transferred her rights under the American Economy policy after her automobile accident with DeMaio, who was operating the vehicle owned by the Town of Wallingford and after the insolvency of the Reliance Insurance Company. The insolvency of Reliance triggered Giglio's risk to her uninsured motorist coverage under the American policy. Because any rights that Giglio might have against American had accrued, the consent of American, prior to Giglio's assignment of her rights to CIGA, was not necessary. The court therefore will proceed to answer the question whether the governmental vehicle exclusion relied upon by American Economy in denying uninsured motorist coverage to Giglio applies when the government-owned vehicle is insured but the insurer becomes insolvent.
VI CT Page 7399
American Economy has filed for summary judgment arguing that their motor vehicle insurance policy issued to Giglio specifically excludes from its definition of uninsured motor vehicles, those vehicles which are owned by governmental units. CIGA has objected to this motion for summary judgment and has, in turn, filed its own motion for summary judgment asking that the court declare that the governmental vehicle exclusion relied upon by American Economy Insurance Company in denying uninsured motorist benefits to Giglio, does not apply in circumstances where a government-owned vehicle is insured, but the insurer becomes insolvent. American has filed its objection to CIGA's motion for summary judgment.
General Statutes § 38a-336 makes the inclusion of uninsured and underinsured motorist coverage mandatory in all automobile insurance policies. The public policy underlying this law is to protect financially responsible, insured motorists, from financially irresponsible motorists. Under General Statutes § 38-845 Giglio was required to exhaust her uninsured motorist coverage with American. American denied her request for uninsured motorist coverage based on the fact that the vehicle operated by DeMaio was owned by Wallingford, a governmental entity. American relies upon Regs., Conn. State Agencies § 38a-334-6(c)(2)(C), which allows the insurer's obligation to pay uninsured motorist benefits to be made inapplicable if the uninsured motor vehicle is owned by "any government or agency thereof." This exclusionary language is included in Giglio's policy with American.
Sec. 38a-336 states in relevant part as follows:
(a)(1) Each automobile liability insurance policy shall provide insurance, herein called uninsured and underinsured motorist coverage, in accordance with the regulations adopted pursuant to section 38a-334 . . . for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and underinsured motor vehicles, and insured motor vehicles, the insurer of which becomes insolvent prior to payment of such damages, because of bodily injury, including death resulting therefrom.
CIGA argues that if the court adopts American's proposed interpretation of Regs., Conn. State Agencies § 38a-334-6(c)(2)(C), the regulation would conflict with the CIGA Act, thereby rendering the regulation invalid. CIGA further argues that American's interpretation of the regulation would relieve American of the burden to provide uninsured motorist benefits and would shift the burden of paying Giglio's loss onto CIGA, and that this directly conflicts with the CIGA Act. Specifically, § 38a-845 of the CIGA Act expressly provides:
Any person having a claim against an insurer under any provision in an insurance policy of an insolvent insurer, which is also a covered claim under sections 38a-836 to 38a-853 inclusive, shall exhaust first his right under any such policy.
See General Statutes § 38a-845 (emphasis added). In support of its argument CIGA notes that Giglio's policy with American provides that Giglio will be afforded uninsured motorist coverage in the event that she is injured by a person determined to be legally responsible who is insured by an "insolvent insurer." The exhaustion provision of the CIGA Act is to render CIGA a guarantor of last resort. Any amount payable by CIGA on a covered claim, therefore, should be reduced by the amount of other insurance recoveries. See, e.g. Harbor Ins. Co. v. Conn. Ins. Guar. Ass'n., 711 F.Sup. 70, 72 (D.Conn. 1989).
Secondly, CIGA argues that § 38a-838(6) of the CIGA Act excludes from the definition of "covered claim" any amount due any insurer. See § 38a-386(6). Therefore, the CIGA Act prohibits CIGA from paying claims for the benefit of an insurer, such as, American, as CIGA was established for the benefit of consumers, not insurers.
CIGA states that any conflict with the regulation and the CIGA Act can and should be avoided because the regulation is "readily capable" of a different and more harmonious interpretation when viewed in light of the CIGA Act and the enabling legislation. CIGA proposes that the court find that the Coverage Provision in the regulation defines the term "uninsured" to include "a motor vehicle insured against liability by a insurer that is or becomes insolvent" in order to mandate exhaustion of solvent uninsured motorist coverage in the insolvency situation contemplated by the CIGA Act. In contrast, the court should find that in the Exclusion Provision the term "uninsured" is used solely to refer to a vehicle for which insurance was not purchased, so that the exclusion for government-owned vehicles does not divest any of the coverage in the insolvency situation that is subject to the CIGA Act. CIGA continues that if the court enforces American's exclusion for uninsured motorist coverage for government-owned vehicles, CIGA would be forced to cover the claim despite the presence of American, a solvent insurer. CIGA contends that the Legislature specifically mandated that claimants should turn to CIGA as a last resort when there is no solvent insurer who has collected premiums to insure against the loss at issue. It is CIGA's position that nothing in General Statutes § 38a-334 (the "Enabling Act") which authorizes the Insurance Commissioner to adopt regulations, requires the interpretation advocated by American. The Enabling Act does not purport to carve out an exception to government-owned vehicles, or to the exhaustion requirements set forth in the CIGA Act. The Enabling Act simply mandates that all automobile liability policies provide, among other things, uninsured motorist coverage.
Lastly, CIGA argues that if the court adopts American's interpretation of the Regulation and the policy exclusion for government-owned vehicles, the court should nonetheless find that American is obligated to provide uninsured motorist coverage to Giglio in this case because the Regulation conflicts with the CIGA Act and alternatively, the Enabling Act, and thus is invalid under the facts and circumstances of this case. See Med-Trans of Conn. v. Department of Pub. Health, 242 Conn. 152, 167-68 (1997) (when a statute and a regulation conflict, the statute must prevail); see also, Sanghavi v. Paul Revere Life Ins. Co., 214 Conn. 303, 307 (1990) (invalidating provision in insurance policy because it was contrary to General Statutes). Once again, CIGA maintains that there is nothing in the Enabling Act's plain and unambiguous mandate that all motor vehicles have uninsured motorist coverage that would permit the exclusion for government-owned vehicles that is included in Regs., Conn. State Agencies § 38a-334-6(c)(2)(C).
In advocating its own motion for summary judgment and at the same time objecting to CIGA's motion for summary judgment and declaratory judgment, American repeats its argument that the policy excludes uninsured motorist benefits for government-owned vehicles and that there is no ambiguity in the plain language used in the policy. McGlinchey v. Aetna Casualty and Surety Co., 224 Conn. 133, 137 (1992). The policy exclusion is permitted by Regs., Conn. State Agencies § 38a-334-6(c)(2)(C), and when an insurer seeks to limit its liability based on a regulation's language, there must be substantial congruence between the regulation's language and the policy's language. If there is substantial congruence, then the policy language must be applied as written, even when it precludes recovery. Lawery v. Valley Forge Ins. Co., 224 Conn. 152, 156 (1992). Id. American states that the language in Giglio's policy tracks the regulation's language almost verbatim. Id.
In construing Regs., Conn. State Agencies § 38a-334-6(c)(2)(C), the court first looks to its text, as directed by Public Act 03-154. Tele Tech of Connecticut Corp. v. Dept. of Public Utility Control, 270 Conn. 77, 796-97 (2004). "[I]n order for P.A. 03-154 to apply to a particular legislative text, [the court] must first determine that, considering the text along with other statutes, `the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results . . .' "Furthermore, in this context, [the court has] defined the term ambiguous to mean the text is susceptible of more than one plausible meaning." Carmel Hollow Associates Ltd. Partnership v. Bethlehem, 269 Conn. 120, 150-51, 848 A.2d 451 (2004).
American also takes issue with CIGA's argument that the government-owned vehicle exclusion set forth in Regs., Conn. State Agencies § 38a-334-6(c)(2)(C) and included in Giglio's policy conflicts with the CIGA Act, General Statutes § 38a-836 et seq. American argues that the insurance commissioner is obligated to adopt regulations regarding minimum provisions to be included in insurance policies and the regulations issued by the commissioner are presumed valid and have the force and effect of a statute. Orkney v. Hanover Insurance Company, 248 Conn. 195, 203-04 (1999), citing General Accident Ins. Co. v. Wheeler, 221 Conn. 206, 211 (1992). "Connecticut statutes make uninsured motorist coverage mandatory for private passenger automobile insurance; General Statutes § 38a-334 et seq.; and confer broad authority on the insurance commissioner to adopt regulations with respect to the minimum provisions that such policies must contain." General Statutes § 38a-334(a); Dugas v. Lumbermens Mutual Casualty Co., 217 Conn. 631, 643, 587 A.2d 415 (1991); Roy v. Centennial Ins. Co., 171 Conn. 463, 473, 370 A.2d 1011 (1976); Frager v. Pennsylvania General Ins. Co., 155 Conn. 270, 279, 231 A.2d 531 (1967); Vitanza v. Amica Mutual Ins. Co., 76 Conn.App. 570, 581, 820 A.2d 324 (2003); J. Berk M. Jainchill, Connecticut Law of Uninsured and Underinsured Motorist Coverage (2d Ed. 1999) § 3.2, pp. 181-82. While it is true that any regulation which exceeds the authority granted to the insurance commissioner is void; Citano v. Berkshire Mutual Ins. Co., 171 Conn. 248, 255, 368 A.2d 54 (1976); Berlinski v. Ovellete, 164 Conn. 482, 492 n. 4, 325 A.2d 239 (1973); within their scope, the regulations have the force of statutes. Roy v. Centennial Ins. Co., supra, 171 Conn. 473; Fidelity Casualty Co. v. Darrow, 161 Conn. 169, 179, 286 A.2d 288 (1971). Furthermore, "if a regulation has been in existence for a substantial period of time and the legislature has not sought to override the regulation, this fact, although not determinative, provides persuasive evidence of the continued validity of the regulation. Id. 204, quoting Vitti v. Allstate Ins. Co., 245 Conn. 169, 174, 713 A.2d 1269 (1998).
American's argument therefore is that the CIGA Act, General Statutes § 38a-845 requires a person having a claim "shall exhaust first his right under any such policy." However, in the Giglio policy there is no uninsured motorist coverage, due to the exclusion for government-owned vehicles. While CIGA may be a guarantor of last resort, this status does not create coverage under American's policy where none exists, and CIGA may not shift a payment obligation to American simply because American is a solvent insurer.
American suggests that Giglio had an option to pursue a recovery against Wallingford, the solvent owner of the government-owned vehicle, but failed to do so. Had she done so, a question remains whether CIGA had an obligation under the CIGA Act to pay Giglio's claim, and whether CIGA has a cause of action for indemnity against the Town of Wallingford rather than against American. However, this issue is not before the court and the court therefore, makes no determination as to this suggestion by American.
The court agrees with the American Economy Insurance Company that there is no uninsured motorist coverage for Giglio in the American policy. Uninsured motorist benefits were validly excluded for government-owned vehicles pursuant to § 38a-334-6(c)(2)(C) of the Regulations of Connecticut State Agencies. The court further declares that said regulations and the subsequent exclusion in Giglio's policy with American do not conflict with the CIGA Act or the public policy embodied in the uninsured motorist statute (§ 38a-336) or the CIGA Act.
It is noted that the regulations of the insurance commissioner may present some apparently anomalous results under certain circumstances. Roy v. Centennial Ins. Co., 171 Conn. 463, 474, 370 A.2d 1011 (1976). The purpose of mandatory insurance and uninsured motorists protection requirements can only be to ensure that certain protections are afforded all motorists. In the event of insurer insolvency, CIGA is a protection. These statutory devices cannot serve to eliminate all differences in treatment which may result to an insured motorist including the insolvency of an insurer who has issued liability insurance coverage to motor vehicles owned by a governmental entity. See Id. 475. It is the function of the legislature, not the judiciary, to address this problem. "This court cannot, however, by a tortured construction of the statutory and regulatory provisions, indirectly eliminate possible inequities in coverage, where the legislature has failed to do so directly." Id. 476. "The automobile liability insurance business is one which is extensively regulated; and judicial revision of the terms upon which such policies are issued may produce extensive repercussions throughout the insurance industry of the state." (Internal citations omitted.) Id. 473. "While a strong policy argument can be advanced in support of the plaintiff's desired expansion of the definition of "uninsured" to prevent the particular anomaly presented herein, it is not the function of this court to attempt to improve legislation by reading provisions into it. Furthermore, the adoption of such a specific expansion of the scope of a statute relating to an extensively regulated industry is one particularly appropriate for further legislative consideration and action rather than implementation by judicial fiat." (Internal citations omitted.) Simonette v. Great American Ins. Co., 165 Conn. 466, 473, 338 A.2d 453 (1973).
CIGA argues that if § 38a-334-6(c)(2)(C) permits the exclusion of motor vehicles owned by government entities from uninsured motorist coverage, the regulation is invalid because, in the plaintiff's view, permitting such exclusions contravenes the purpose of the uninsured motorist statute and the CIGA Act. It is well settled that the insurance commissioner is specifically authorized by statute to promulgate regulations regarding exclusions applicable to uninsured motorists coverages. General Statutes § 38a-334(a). "Regulations issued by the insurance commissioner to implement the statutes governing uninsured [and underinsured] motorist coverage are presumed valid and have the force and effect of a statute. The person claiming the invalidity of a regulation has the burden of proving that it is inconsistent with or beyond the legislative grant . . . [Furthermore], the insurance commissioner has a very broad grant of regulatory authority in filling in the interstices of the uninsured and underinsured motorist coverage legislation, and in doing so his regulation is entitled to great deference . . ." (Internal citations and internal quotation marks omitted.) Orkney v. Hanover Insurance Company, 248 Conn. 195, 203, 727 A.2d 700 (1999) quoting Vitti v. Allstate Ins. Co., supra, 245 Conn. 181-82.
Sec. 38a-334a. (Formerly Sec. 38-175a). Minimum provisions in automobile liability policies reads in relevant part as follows:
(a) The Insurance Commissioner shall adopt regulations with respect to minimum provisions to be included in automobile liability insurance policies issued after the effective date of such regulations and covering private passenger motor vehicles, as defined in subsection (e) of section 38a-363 . . . Such regulations shall relate to the insuring agreements, exclusions, conditions and other terms applicable to the bodily injury liability, property damage liability, medical payments and uninsured motorists coverages under such policies, shall make mandatory the inclusion of bodily injury liability, property damage liability and uninsured motorists coverages and shall include a provision that the insurer shall, upon request of the named insured, issue or arrange for the issuance of a bond which shall not exceed the aggregate limit of bodily injury coverage for the purpose of obtaining release of an attachment.
Contrary to the claim made by CIGA, permitting the exclusion of vehicles owned by government entities from uninsured motorist coverage does not contravene the purpose of the uninsured motorist statute (§ 38a-336). The legislature has amended that statute many times without attempting to override the regulation that permits the exclusion, or to modify it in the event of the insolvency of an insurer of a government-owned vehicle. This is strong evidence that the commissioner's authorization of the exclusion is valid. There is nothing inconsistent between the public policy underlying uninsured motorist coverage and a regulation that permits a coverage exclusion based upon a demonstrated ability to pay such as in the case of a government-owned vehicle. Id. at 195.
The Enabling Act for uninsured motorist coverage and the exclusion regulation do not conflict. The Enabling Act does not require that uninsured motorist coverage be provided under all circumstances or under all conditions. The CIGA Act was enacted to cover this situation where Wallingford's insurer, Reliance became insolvent. Pursuant to General Statutes § 38a-838(6) CIGA paid Giglio's claim within the limits provided by the CIGA Act. CIGA has not paid a claim for the benefit of American because there is no coverage available to Giglio under her American policy. The exclusion regulation has not yielded an absurd or unworkable result, as Giglio has been appropriately provided with financial protection by CIGA. "[W]e presume that laws are enacted in view of existing relevant statutes . . . and that [s]tatutes are to be interpreted with regard to other relevant statutes because the legislature is presumed to have created a consistent body of law . . ." Connecticut Ins. Guaranty Assn. v. Zasun, supra, 52 Conn.App. 218-19; Hunnihan v. Mattatuck Mfg. Co., supra, 243 Conn. 444; Conway v. Wilton, 238 Conn. 653, 663-64, "Just as it is accepted that the legislature does not enact superfluous statutes . . . the same is true of administrative regulations." (Citations omitted.) Gianetti v. Norwalk Hospital, 211 Conn. 51, 60, 557 A.2d 1249 (1989). Piersa v. Phoenix Insurance Company, 82 Conn.App. 752, 761-62, 848 A.2d 485 (2004).
For the reasons set forth herein, the court grants American Economy Insurance Company's motion for summary judgment dated November 4, 2002, and denies CIGA's motion for summary judgment and request for declaratory relief dated April 13, 2004, regarding its amended complaint for a declaratory judgment. There are no uninsured motorist benefits available to CIGA or Giglio under the insurance policy issued to Giglio by the American Economy Insurance Company.
THE COURT
By Arnold, J.