Case ID: f-appx_534/html/0015-01.html
Source: Caselaw Access Project
Author: {"author": "", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

FIREMAN’S FUND INSURANCE COMPANY, Plaintiff-Counter-Defendant-Appellee, v. TD BANKNORTH INSURANCE AGENCY INCORPORATED, f/k/a Morse, Payson & Noyes Insurance, Defendant-Counter-Claimant-Appellant.
    No. 10-797-cv.
    United States Court of Appeals, Second Circuit.
    Aug. 13, 2013.
    
      Frederick M. Klein (Robert M. Sullivan, on the brief), The Sullivan Law Group LLP, New York, NY, for Appellant.
    Christopher B. Weldon (Darren P. Ren-ner, Debra M. Krebs, on the brief), Keidel, Weldon & Cunningham, LLP, New York, NY, for Appellee.
    PRESENT: DENNIS JACOBS, Chief Judge, GUIDO CALABRESI and ROBERT D. SACK, Circuit Judges.
   SUMMARY ORDER

In 2008, Appellant TD Banknorth Insurance Agency (“TD Banknorth”) and Appel-lee Fireman’s Fund Insurance Company (“Fireman’s Fund”) brought competing claims for declaratory judgment as to ownership of certain settlement funds being held in escrow. The dispute arose after a client sued TD Banknorth for alleged errors and omissions, and TD Banknorth sought coverage from its professional liability insurer, Fireman’s Fund. TD Bank-north paid its deductible ($150,000); and Fireman’s Fund contributed an additional $204,000, thus settling these claims for a combined $354,000. The parties later obtained a $208,000 settlement of their own from two third parties and placed the amount in escrow. TD Banknorth now seeks to recover the cost of its deductible from these settlement proceeds, and Fireman’s Fund seeks to cover its contribution, plus defense costs. The facts are recited in detail in our 2011 opinion in this case. See Fireman’s Fund Ins. Co. v. TD Banknorth Ins. Agency Inc., 644 F.3d 166, 168 (2d Cir.2011).

TD Banknorth relies principally on the “make whole” doctrine, which provides that “the insurer may enforce its subrogation rights only after the insured has been fully compensated for all of its loss.” United States v. Lara, No. 3:08-cr-00169(VLB), 2009 WL 3754069, at *2 (D.Conn. Nov. 6, 2009) (citing Wasko v. Manella, 269 Conn. 527, 849 A.2d 777, 784 (2004)). On cross motions for summary judgment, the United States District Court for the District of Connecticut (Droney, J.) ruled, inter alia, that the make whole doctrine does not apply to reimbursement of an insured’s deductible, and entered judgment for Fireman’s Fund. See Fireman’s Fund Ins. Co. v. TD Banknorth Ins. Agency Inc., 3:08-CV-364CFD, 2010 WL 420041, at *2 (D.Conn. Feb. 1, 2010).

On appeal, we certified the following question to the Connecticut Supreme Court: “Are insurance policy deductibles subject to Connecticut’s make whole doctrine?” Fireman’s Fund Ins. Co., 644 F.3d at 172-73. On July 30, 2013, the Supreme Court confirmed that the make whole doctrine is the default rule in Connecticut, and answered the certified question in the negative:

[W]e find persuasive the analogy that the deductible is, in effect, akin to “a primary layer of self-insurance underlying the [liability insurance] policy, which policy is, as a practical matter, the equivalent of an excess policy.... [WJhen there is a recovery, the ‘excess’ level of insurance is entitled to recover before a lower level of insurance/deductible can recover....
Accordingly, we conclude that the equitable considerations supporting the make whole doctrine are inapplicable to deductibles. If we were to decide otherwise, as TD Banknorth urges, we would effectively disturb the contractual agreement into which TD Banknorth and Fireman’s Fund entered, thereby creating a windfall for TD Banknorth for a loss that it did not see fit to insure against in the first instance when it contracted for lower premium payments in exchange for a deductible.

Fireman’s Fund Ins. Co. v. TD Banknorth Ins. Agency, Inc., 309 Conn. 449, 468 (2013) (internal citations omitted).

TD Banknorth therefore may not claim reimbursement for the cost of its deductible until Fireman’s Fund has been repaid in full. Because the expenses incurred by Fireman’s Fund, including both damages and defense costs, exceed the $208,000 of settlement funds being held in escrow, Fireman’s Fund is entitled to the entire amount.

Accordingly, we hereby AFFIRM the judgment of the district court. 
      
      . These figures are rounded to the nearest thousand.
     
      
      . In our 2011 opinion, we rejected the district court’s alternative basis for its ruling — that the subrogation clause in the parties’ insur-anee agreement abrogated Connecticut's make whole doctrine. See Fireman’s Fund Ins. Co. v. TD Banknorth Ins. Agency Inc., 644 F.3d 166, 169-71 (2d Cir.2011).
     
      
      . Pursuant to the parties' contract, the deductible covers both damages and defense costs. A 67.