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Arrowood Indemnity Co. v. King

May 18, 2010



Appeal from a judgment of the United States District Court for the District of Connecticut (Stefan R. Underhill, Judge), granting summary judgment in favor of insurance companies which, based on the location of the occurrence, among other reasons, had disclaimed any duty to defend or indemnify their policyholders in an action brought by a third party arising from an accident involving the policyholders' all-terrain vehicle.

Questions certified.

The opinion of the court was delivered by: VITALIANO,District Judge

Argued: May 22, 2009

Before: KEARSE, LIVINGSTON, Circuit Judges, VITALIANO, District Judge. *fn1

Defendants Pendleton King, Daphne King and Pendleton King Jr. ("Junior") (collectively, the "Kings") appeal from a declaratory judgment of the United States District Court for the District of Connecticut (Stefan R. Underhill, Judge) holding in favor of insurers that none of the three separate residence-related liability insurance policies owned by the Kings covered their alleged liability to a third party child who was seriously injured in an accident involving an all-terrain vehicle the Kings owned (the "ATV"). Central to the district court's determination was a finding that the accident had not occurred at an "insured location", as defined by the policies.

We conclude that this case requires us to resolve significant questions concerning the appropriate construction of the relevant policy language, involving interpretation of Connecticut insurance law and implicating public policy considerations for Connecticut. For these reasons and those that follow, we certify, pursuant to Conn. Gen. Stat. § 51-199b (2005) and 2d Cir. R. 27.2, several questions to the Supreme Court of Connecticut.


The material facts are undisputed. The Kings' home, located in Deer Park, a private residential development in Greenwich, Connecticut, that is managed by an incorporated homeowners association, sits at the southeastern corner of the intersection of Deer Park Court and Midwood Road, both private roads within the Deer Park boundaries. On May 5, 2002, Junior and a neighbor, Conor McEntee ("Conor"), both then 14 years old, were playing outdoors with an ATV owned by Junior's parents. Junior was driving the vehicle while towing Conor, who was standing on a skateboard and holding a rope tied to the back of the ATV. Conor was not wearing a helmet. As the teenagers traveled along Midwood Road, between Deer Park Court and a dead end, Conor fell and struck the pavement, which caused him to sustain a life-threatening head trauma. The accident occurred in front of 63 Midwood Road, approximately 50 to 75 feet north of the intersection where the Kings resided.

The Insurance Policies

Over a year after the ATV accident, the Kings received a letter dated August 5, 2003, from an attorney for Conor and his parents (the "McEntees") regarding Conor's injuries. Long before the accident's happening, through their insurance broker, New England Brokerage Corporation ("NEBC"), the Kings had purchased three liability policies that were in effect at the time of the accident: (1) a homeowner's policy issued by Royal Indemnity Company ("RIC") with a $500,000 per occurrence coverage limit; (2) an umbrella policy issued by Royal Insurance Company of America ("RICA") with a per occurrence limit of $5 million; and (3) an excess liability policy issued by National Surety Corporation ("National"), insuring up to $5 million more per occurrence. Shortly after receiving it, the Kings forwarded the letter from the lawyer*fn2 for the McEntees to NEBC. NEBC, in turn, notified RIC and RICA (collectively, "Royal"), as well as National, of the May 5, 2002, ATV accident.

After conducting an investigation, which included interviewing Pendleton King and Junior, reviewing the police report and examining the scene of the accident, Royal advised the Kings in writing, on November 24, 2003, that neither the homeowner's policy nor the umbrella policy provided coverage for Conor's claimed injuries. A few weeks later, on December 17, 2003, Royal filed a declaratory judgment action in the United States District Court for the District of Connecticut seeking an order that neither RIC nor RICA had a duty to defend or indemnify the Kings with respect to this accident. On April 27, 2004, the McEntees filed their by-then anticipated tort complaint in Connecticut Superior Court, naming all three Kings as defendants.

1. The Homeowner's Policy

At issue is a provision of the King's homeowner's policy which covers any person using a recreational vehicle "owned by an Insured and on an Insured [L]ocation." The policy defined an "Insured Location" to include: "[t]he residence premises"; "[t]he part of other premises, other structures and grounds used by you [the policyholders] as a residence and: (1) [w]hich is shown on your Declarations; or (2) [w]hich is acquired by you during the policy period for your use as a residence"; and finally, "any premises used by you in connection with" either of the foregoing. The declarations page of the policy listed "1 Deer Park Ct[.]" as the "residence premises."

The homeowner's policy generally excluded coverage for injuries arising out of any use associated with a motorized land conveyance vehicle and, specifically, for any vicarious liability arising out of the actions of a minor in connection with the use of such a conveyance, even if statutorily imposed. Elsewhere, however, the policy provided that this general exclusion did "not apply to . . . [a] motorized land conveyance designed for recreational use off public roads, not subject to motor vehicle registration and . . . [o]wned by an Insured and on an Insured location."

As for claim notification, the policy stated, in relevant part, that "[i]n case of an accident or an occurrence, the Insured will . . . [g]ive written notice to us or our agent as soon as practical."

2. The Umbrella Policy

In general, the version of the umbrella policy that was in effect on May 5, 2002, provided the Kings coverage for personal injuries resulting from the use of "[r]ecreational motor vehicles" they owned, including when the vehicle was operated by Junior. The policy catch here, though, was that the coverage was not operative unless the recreational motor vehicle was covered by primary insurance (the homeowner's policy) and was "described as being covered in the declarations." The ATV being operated by Junior when Conor was injured was not described in the umbrella policy's declarations. Like the homeowner's policy, the umbrella policy required*fn3 the insured to provide notice of an accident or occurrence "as soon as is practical."

3. The Excess Liability Policy

Lastly, a $5 million excess liability policy issued by National "followed form" to the RICA umbrella policy. As is typical, the excess policy required the Kings to list in the declarations the underlying insurance, that is, the policies of insurance that would be initially tapped to pay a covered loss, and then provided for the kick-in of the excess coverage, but only if the underlying insurers did not successfully disclaim coverage and their payments exhausted the full amounts of their respective coverage. If these conditions were satisfied, National was to pay on the excess loss, up to the policy limit of $5 million. On the schedule of underlying insurance, the Kings listed the RICA umbrella policy, but did not list their RIC homeowner's insurance policy.

Proceedings in the District Court

In the declaratory action, Royal sought to disclaim any duty to defend or indemnify the Kings for claims arising from the ATV accident under both the homeowner's and umbrella policies. Substantively, Royal asserted that the homeowner's policy did not apply because*fn4

Conor's injuries were not sustained on an "insured location" and that the umbrella policy did not apply because the ATV was not listed in the policy declarations; procedurally, it asserted that coverage under both was foreclosed, in any event, because the Kings had failed to comply with the insured's duty to provide notice of the accident to the insurer "as soon as practical." In answer, the Kings argued that the accident site, Midwood Road, was in fact an "insured location" under the homeowner's policy because it was a private way owned by the Deer Park Association for the exclusive use and benefit of Deer Park residents, including themselves, and thus was "used" by them "in connection with" their "residence premises." They also interposed three counterclaims against Royal: breach of contract, breach of the Connecticut Unfair Trade Practices Act ("CUTPA"), Conn. Gen. Stat. §§ 42-110a et seq., and breach of the implied covenant of good faith and fair dealing. Additionally, the Kings filed a third-party complaint, advancing claims (a) against their excess insurer, National, for breach of contract and seeking a declaratory judgment mandating coverage, and (b) against their broker, NEBC, for breach of contract, negligence and breach of fiduciary duty.

In October 2004, the district court granted Royal's motion to dismiss the CUTPA counterclaim for failure to allege that Royal engaged in a general business practice in violation of the statute, Conn. Gen. Stat. § 38a-816(6), but with leave to replead, which the Kings did. In April 2005, the district court granted NEBC's motion to dismiss the third-party claims for breach of contract and breach of fiduciary duty on the grounds that NEBC had no contract with the Kings to breach and, with respect to the fiduciary claim, that the Kings had at best pled an action in professional negligence.

In August 2006, NEBC filed cross-claims against Royal for common-law indemnification, contractual indemnification and contribution based on allegations that, after NEBC first procured the Kings' umbrella policy in 1999, Royal acted negligently and in violation of Connecticut law in unilaterally reducing the policy's ATV coverage by limiting the coverage to vehicles expressly listed in the declarations.

At the next round of the litigation, all parties filed summary judgment motions. In August 2006, RICA moved on its declaratory judgment action, contending that the umbrella policy expressly excluded coverage of recreational motor vehicles not described in the policy declarations, with a "me-too" from National against the Kings' third-party claims on the basis that the excess policy followed form to the umbrella policy. In November 2006, the Kings and RIC cross-moved in RIC's declaratory judgment action regarding the homeowner's policy. A month later, NEBC moved on its cross-claims against Royal for indemnification and contribution and, in the alternative, for judgment against the Kings on their third-party claim of negligence.

On September 28, 2007, the district court ruled against the Kings on all five summary judgment motions. The court "distilled" the parties' arguments into three broad queries, each of which it answered in the negative: "(1) Whether the Kings' homeowner's policy provides coverage with respect to McEntee's claims; (2) Whether the Kings' umbrella policy provides coverage with respect to McEntee's claims; and (3) Whether NEBC was negligent when it failed to procure an umbrella ...

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