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United States Fire Insurance Co. v. Worcester Insurance Co.1/20/2005
n the cross-motions for summary judgment, US Fire brought a motion for reconsideration as well as a motion to vacate the judgment pursuant to Mass.R.Civ.P.60(b), 365 Mass. 828 (1974). These motions were based on allegations that Worcester had made misrepresentations of fact on the issue of whether it had exhausted its policy limits in settling its claims against Youngblood. The judge denied both motions.
2. The Arguments on Appeal
US Fire does not dispute that the six claims against Youngblood involved personal injuries and property damage which were covered by both the primary and excess insurance policies or that Worcester paid $1,000,000, its policy limit, in exchange for five settlements and one limited release from the six claimants. Rather, US Fire argues that because the settlements reached by Worcester were not good faith settlements and included payment of counsel fees to it, Worcester's policy limits were not exhausted, and, therefore, Worcester was not discharged from its duty to defend Youngblood.
3. Discussion
We take up first US Fire's argument that the "Other Insurance" condition, Condition H of its policy, made Worcester responsible for all the costs of Youngblood's defense. That condition reads in full:
"Other Insurance. If there is any other collectible insurance available to the 'Insured' (whether such insurance is stated to be primary, contributing, excess or contingent) that covers a loss that is also covered by this policy, the insurance provided by this policy will apply in excess of, and shall not contribute with, such insurance. This Condition H does not apply to any insurance policy purchased specifically (and which is so specified in such insurance policy) to apply in excess of this policy."
US Fire argues that because Condition H of its policy provides that it has no obligation to contribute "if there is other insurance, 'whether such insurance is stated to be primary, excess, or contingent,'" it is a so-called "super escape clause." It then contends that Section III H 1, the "Other Insurance" condition set out in Worcester's policy, made it an excess insurer. That condition reads:
"If there is other insurance covering the same loss or damage, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance."
As support for its argument, US Fire cites United States Fid. & Guar. Co. v. Hanover Ins. Co., 417 Mass. 651, 654-656 (1994).
Assuming for purposes of US Fire's argument that Worcester's "other insurance" clause made its coverage excess and subject to US Fire's "super escape clause," id. at 656-657, the fact remains that Condition H of US Fire's policy did not come into play because Worcester exhausted its policy limits and there was, as stated in Condition H of US Fire's policy, no "other collectible insurance available to the 'Insured.'"
We turn next to the question of whether Worcester had exhausted its policy limit. US Fire's first contention on this point is that Aetna Cas. & Sur. Co. v. Sullivan, 33 Mass. App. Ct. 154 (1992), holds that when an insurer is faced with multiple claims against its insured, the insurer has a duty to use its policy limits reasonably and in good faith to settle as many claims as reasonably possible in order to reduce the insured's exposure. In Aetna, id. at 157-158, the court stated:
"Under what we believe to be the fair meaning of the [policy] language, in the circumstances, the insurer would be discharged from any further duty to defend if it shou
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