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Town of Cumberland v. Rhode Island Interlocal Risk Management Trust11/24/2004
(D.R.I. 1995), to support their public policy argument. We do not agree. In Foxon, the United States District Court for the District of Rhode Island held that an insurer was not obliged to defend an insured against a claim of intentional racial harassment, stating " he Rhode Island Supreme Court has consistently held that insurance policies cannot insure for actions which are contrary to public policy." Id. at 1146. In reaching this conclusion, the court relied on Allen v. Simmons, 533 A.2d 541 (R.I. 1987). However, in Allen, this Court did not make such a broad statement; the issue addressed by this Court was whether liability for punitive damages may be shifted to the insurer. Id. at 542.
We agree with the motion justice's finding that Rhode Island public policy does not bar an insured from indemnification for intentional torts when the insurance policy explicitly provides such coverage.
Policy Exclusion for Condemnation Claims
The defendants argue that the motion justice erred in finding the Trust policy's inverse condemnation exclusion inapplicable to the town's claim. The "Inverse Condemnation Exclusion Clause" says:
"This policy does not cover claims for loss or damage or any liability of [the town] arising out of or in any way connected with the operation of the principles of eminent domain, condemnation by whatever name called regardless of whether such claims are made directly against the [town] or by virtue of any agreement entered into by or on behalf of the [town]."
In L.A. Ray Realty II, 698 A.2d at 209, this Court held that the town violated the underlying claimants' civil rights under the Due Process Clause of the Fifth Amendment (" o person shall be * * * deprived of life, liberty, or property, without due process of law") and not the Takings Clause ("nor shall private property be taken for public use, without just compensation"). U.S. Const. Amend. V.
The motion justice found that a regulatory takings analysis was unwarranted because this Court did not conclude that the underlying claimants had been deprived of all economically viable use of their property. Pointing to the concurring and dissenting opinion in L.A. Ray Realty II, 698 A.2d at 218-19 (Flanders, J., concurring in part and dissenting in part), the defendants argued that the town's actions amounted to an inverse condemnation. The motion justice rejected defendants' argument, stating that "the majority's holding clearly indicates that the [town's] actions amounted to a deprivation of the underlying claimants' property rights without due process, not an inverse condemnation." We agree with this finding; the majority in L.A. Ray Realty II specifically found a violation of the underlying claimants' rights to procedural and substantive due process and not a violation of the Takings Clause of the Fifth Amendment to the United States Constitution, nor article 1, section 16, of the Rhode Island Constitution. L.A. Ray Realty II, 698 A.2d at 210-11. Further, the record in the underlying case discloses that the claim against the town alleging inverse condemnation was withdrawn before trial. Thus, no takings claim was before this Court on appeal.
We, therefore, conclude that the inverse condemnation exclusion does not apply to the town's claim for indemnification because the settlement paid to the underlying claimants did not arise from an eminent domain proceeding or a regulatory taking.
Defendant Coregis's Assignments of Error
Coregis contends that it is not required to indemnify the town because the settlement arose out of an act of inverse condemnation, coverage of which is precluded under two exclusions. Coregis asserts that it
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