UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 94-1318
MARJORIE BLEVIO,
Administratrix of the Estate
of Noah W. Blevio,
Plaintiff - Appellee,
v.
AETNA CASUALTY & SURETY COMPANY, ET AL.,
Defendants - Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Torruella, Chief Judge,
Boudin and Stahl, Circuit Judges.
Kevin Truland, with whom Gallagher & Gallagher, P.C., was on
brief for appellants.
Doris R. MacKenzie Ehrens, with whom Richard W. Murphy and
Murphy, Lamere & Murphy, P.C., were on brief for appellee.
October 20, 1994
TORRUELLA, Chief Judge. Ms. Marjorie Blevio ("Blevio")
brought a declaratory judgment action, as administratrix of the
estate of her thirteen-year-old son Noah Blevio, against Aetna
Casualty & Surety Company ("Aetna") and Royal Insurance Company
of America, Inc. ("Royal"), to determine the rights and
liabilities of the parties under two motor vehicle underinsurance
policies. The parties filed cross-motions for summary judgment.
The disposition of these motions turned on the issue of whether,
under the law of Connecticut, two insurers, who each provide
underinsured motorist coverage to a party injured in an accident,
can each set off in full, from the limits of their coverage, the
amount of the recovery obtained from the party legally
responsible for the accident. The district court found that each
insurer was not entitled to set off the recovery from the
tortfeasor in full, but rather that the two insurers could only
deduct the amount of the recovery from the aggregated
underinsured motorist coverage limits. For the following
reasons, we affirm.
I. BACKGROUND
A. Facts
The parties do not dispute the material facts of this
case. Noah Blevio died on August 9, 1991, from fatal injuries
sustained when he was hit by a pickup truck on June 30, 1991.
The combined limits of the tortfeasors' applicable bodily injury
liability policies totalled $200,000. This amount was offered to
Blevio.
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In addition, Noah Blevio had underinsured motorist
coverage up to $500,000 under his father's Aetna business policy
and up to $300,000 under his brother's Royal policy. Both
policies provided that their underinsured motorist coverage shall
be reduced by the amounts paid by, or on behalf of, the legally
responsible party. Specifically, the uninsured motorist coverage
endorsement of the Aetna Policy provides:
A. Coverage
1. We will pay all sums the "insured" is
legally entitled to recover as damages
from the owner or driver of an "uninsured
motor vehicle"1 . . .
D. Limit of Insurance
***
2. Any amount payable under this
coverage shall be reduced by:
***
b. All sums paid by or for anyone who is
legally responsible. . . .
The uninsured motorist coverage provisions of the Royal policy
provide:
A. We will pay compensatory damages
which an "insured" is legally entitled to
recover from the owner or operator of an
"uninsured motor vehicle" because of
"bodily injury,"
1. Sustained by an "insured," and
1 The Aetna policy defines an "uninsured motor vehicle" as a
motor vehicle that is underinsured, in that "the sum of all
liability bonds or policies at the time of an 'accident' provides
at least the amounts required by the applicable law where a
covered 'auto' is principally garaged but that sum is less than
the Limit of Insurance of this coverage."
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2. Caused by an accident . . . .
In addition, the endorsement attached to the Royal policy,
entitled "Amendment of Policy Provisions - Connecticut,"
provides:
II. Uninsured Motorists Coverage2
Part C is amended as follows:
***
E. The Limit of Liability provision is
replaced by the following:
Limit of Liability
***
The limit of liability shall be reduced
by all sums:
1. Paid because of the "bodily injury"
by or on behalf of persons or
organizations who may be legally
responsible . . . .
The parties do not dispute that the legally responsible
parties were underinsured and that the underinsured motorist
coverage provided under Aetna's and Royal's policies are
applicable to Blevio's claims. Nor do the parties dispute that
Aetna and Royal are entitled to a setoff by virtue of the
existence of the legally responsible parties' liability payment.
Rather, the only issue is the extent to which liability insurance
payments made on the tortfeasor's behalf can be set off. Blevio
2 The Royal policy defines "uninsured motor vehicle" as a motor
vehicle "[f]or which the sum of the limits of liability under all
bodily injury liability bonds or policies applicable at the time
of the accident is less than the sum of the limits of liability
for Uninsured Motorists Coverage applicable to each vehicle
insured for this coverage under this policy."
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contends that Aetna and Royal can only share one $200,000 setoff
equal to the amount that Blevio will actually collect from the
tortfeasors. Both Aetna and Royal claim, however, that they are
each entitled to deduct the tortfeasors' $200,000 liability
payment in order to give full effect to their separate
underinsurance setoff provisions, thereby reducing the aggregate
underinsurance coverage available to Blevio from $800,000 to
$400,000.3
B. Procedural History
Blevio filed a declaratory judgment action on June 11,
1993, asking that the district court determine the extent to
which Aetna and Royal are entitled to set off the limits of the
available bodily injury liability coverage from the underinsured
motorist coverage of their respective policies. Blevio then
filed a "Motion for Judgment on the Pleadings or for Summary
Judgment." Aetna and Royal cross-moved for summary judgment.
After a hearing, the district court entered judgment
for Blevio. The district court advised Aetna and Royal, however,
that because, at the time, no Connecticut appellate court had
directly addressed the issue, and a split of authority existed
between two Connecticut Superior Court decisions that had
addressed the issue, it would certify the issue presented to the
Supreme Court of Connecticut upon their request. Aetna and Royal
3 Pursuant to the terms of the insurance contracts, the issue of
whether Blevio is legally entitled to recover, and if so, the
amount of damages, are subject to arbitration. Arbitration has
not yet commenced, but will take place after a final decision in
this case.
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then filed an "Ex Parte Motion for Certification of Question of
Law." The district court vacated the judgment in favor of
Blevio, and allowed certification to the Supreme Court of
Connecticut. The Supreme Court of Connecticut declined the
certification request. On February 24, 1994, the district court
then entered final judgment in favor of Blevio and against Aetna
and Royal. Aetna and Royal now appeal.
II. STANDARD OF REVIEW AND APPLICABLE LAW
Our review of the district court's grant of summary
judgment is plenary. Alan Corp. v. International Surplus Lines
Ins. Co., 22 F.3d 339, 341 (1st Cir. 1994). Where, as here, the
parties do not dispute the facts upon which coverage is allowed
or denied under an insurance policy, and the existence or amount
of coverage depends solely upon a construction of the policy, a
question of law is presented. Id. at 342 (citing Atlas Pallet,
Inc. v. Gallagher, 725 F.2d 131, 134 (1st Cir. 1984)).
Therefore, like other questions of law, we are not bound by the
district court's interpretation of the policy. Alan Corp., 22
F.3d at 342.
The parties do not dispute that Connecticut law
applies. In interpreting Connecticut law, we are bound by
intermediate appellate state court decisions construing state law
unless we are convinced that the highest court of the state would
decide otherwise. Commissioner v. Estate of Bosch, 387 U.S. 456,
465 (1967); Ground Air Transfer, Inc. v. Westates Airlines, Inc.,
899 F.2d 1269, 1275 (1st Cir. 1990); see Cola v. Reardon, 787
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F.2d 681, 688 n.5 (1st Cir.), cert. denied, 479 U.S. 930 (1986)
(stating that the First Circuit was bound to apply a state
appellate court's statement of local law). We note that since
the district court issued its decision in the present case, the
Connecticut Court of Appeals has released a decision, Allstate
Ins. Co. v. Link, 645 A.2d 1052 (Conn. App. Ct. 1994), that
resolves the question involved in this appeal. Because we have
no reason to believe that the Connecticut Supreme Court would not
reach a similar result, we are bound to apply this decision.4
III. ANALYSIS
Connecticut law requires that each automobile liability
insurance policy provide uninsured motorist coverage for the
protection of persons insured thereunder against operators of
uninsured and underinsured motor vehicles.5 See Conn. Gen. St.
38a-336(a). The statute requires that each policy provide a
minimum level of uninsured/underinsured motorist protection, but
also prevents an insured from obtaining a double recovery of
damages. See Buell v. American Universal Ins. Co., 621 A.2d 262,
266-67 (Conn. 1993).
An insurance company shall be obligated
to make payment to its insured up to the
limits of the policy's uninsured motorist
coverage after the limits of liability
under all bodily injury liability bonds
4 On September 20, 1994, the Connecticut Supreme Court denied
Allstate Insurance's petition for certification to appeal from
Allstate Ins. Co. v. Link, 645 A.2d 1052 (Conn. App. Ct. 1994).
5 Statutory provisions applying to uninsured motorist coverage
apply equally to underinsured motorist coverage. Covenant Ins.
Co. v. Coon, 594 A.2d 977, 978 n.3 (Conn. 1991).
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or insurance policies applicable at the
time of the accident have been exhausted
by payment of judgments or settlements,
but in no event shall the total amount of
recovery from all policies, including any
amount recovered under the insured's
uninsured motorist coverage, exceed the
limits of the insured's uninsured
motorist coverage.
Conn. Gen. St. 38a-336(b). Correspondingly, the insurance
commissioner has adopted a regulation that provides, in pertinent
part, that an insurance policy "may provide for the reduction of
limits [of underinsured motorist liability] to the extent that
damages have been . . . paid by or on behalf of any person
responsible for the injury . . . ." Conn. Agencies Regs. 38a-
334-6(d)(1). The Aetna and Royal policies' underinsured motorist
coverage provisions contain language that essentially track the
Connecticut law, and provide that their policies' liability
limits shall be reduced by any sum paid by, or for, anyone who is
legally responsible.
As noted above, the Connecticut Court of Appeals has
recently construed Conn. Agencies Regs. 38(a)-334-6(d)(1), and
addressed the situation of setoffs in the context of multiple
underinsured motorist coverage in Allstate Ins. Co. v. Link, 645
A.2d 1052 (Conn. App. Ct. 1994). The Court of Appeals held that
multiple insurers providing underinsured motorist coverage to an
insured cannot each setoff in full the amount of the recovery
from the tortfeasor. Id. at 1058. In Allstate Ins. Co., Link
was injured when the automobile she was driving was struck by a
vehicle operated by a tortfeasor. Id. at 1054. The tortfeasor's
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insurance company paid $100,000 to Link, exhausting the limits of
the tortfeasor's bodily injury liability coverage. Id. At the
time of the accident, Link held two separate automobile insurance
policies with Allstate. Id. One policy provided for $200,000 of
uninsured/underinsured motorist coverage, and the other policy
provided for $400,000 of such coverage. Id. Link claimed
underinsured motorist benefits under both policies. Id. After
arbitration, the Connecticut Superior Court found that the
tortfeasor was underinsured, and that Link was entitled to
underinsured motorist benefits from each of the two policies.
Id. The court determined that the amount of available
underinsured motorist coverage was $600,000, but that each policy
should have deducted from its cumulative limit the sum of
$100,000 previously paid by the tortfeasor. Id. at 1054-55.
Link appealed, claiming that the court improperly reduced the
amount of underinsured motorist benefits awarded to her by
crediting Allstate with twice the amount actually paid out by the
tortfeasor, thus creating a windfall to Allstate and depriving
Link of a payment of $100,000 due her that she did not receive.
Id. at 1057.
The Connecticut Court of Appeals agreed and found that
Link was entitled to have available a total of $600,000 in
underinsured motorist benefits under the two Allstate policies.
Id. at 1057-58. While noting that no Connecticut Supreme Court
case had specifically addressed this issue, the Court of Appeals
stated that some related cases had implied that a tortfeasor's
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contribution should be shared among the policies covering the
insured. Id. at 1057. The court stated:
The amount of damages paid by the
tortfeasor may reduce the total amount of
underinsured motorist benefits available
to a claimant. It may not reduce the
amounts paid out by each policy. To hold
otherwise would mean that an award due an
insured is reduced unfairly by twice the
amount actually paid out by or on behalf
of the tortfeasor and that an insured is
entitled to double the tortfeasor's
credit merely by issuing separate
policies. Such a result would be
unfairly detrimental to the insured.
Id. at 1058. The court then concluded that from the $600,000
total, Allstate should have been credited with only the $100,000
actually paid by the tortfeasor. Id.
A similar result is mandated here. Blevio was entitled
to an aggregate of up to $800,000 of underinsured motorist
benefits under the two policies -- up to $500,000 from the Aetna
policy and up to $300,000 under the Royal policy. Because the
tortfeasor effectively contributed $200,000, Aetna and Royal are
entitled to reduce the total amount of underinsured benefits
available to Blevio, $800,000, to $600,000 of available benefits.
The two insurers must allocate the $200,000 deduction between
them fairly, sharing the loss pro rata to the extent of their
coverage.6
6 The parties do not challenge the district court's
determination that both Aetna and Royal should be considered
"primary" insurers in the context of this appeal, and that if
this Court upholds the district court's determination that Aetna
and Royal are required to allocate the deduction between them,
they should share the loss pro rata to the extent of their
coverage (i.e., Aetna with $500,000 coverage may take 5/8th or
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For the foregoing reasons, the judgment of the district
court is affirmed.
$125,000 of the setoff, and Royal with $300,000 coverage may take
3/8th or $75,000).
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