Case Title: Smith v. Nationwide Mutual Insurance Co.

Citation: 175 Vt. 355, 2003 VT 61, 830 A.2d 108

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2003-06-27T00:00:00Z

Document:
Smith v. Nationwide Mutual Insurance Co. (2002-020); 175 Vt. 355; 830 A.2d 108

2003 VT 61

[Filed 27-Jun-2003]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                                 2003 VT 61

                                No. 2002-020

  Michelle Smith	                         Supreme Court

                    	                        On Appeal from
       v.	                                Caledonia Superior Court
  	

  Nationwide Mutual Insurance Co.	September Term, 2002

  Dennis R. Pearson, J.

  Joseph C. Benning, Lyndonville, for Plaintiff-Appellee.

  John E. Brady and Brendan P. Donahue of Brady & Callahan, P.C.,
    Springfield, for Defendant-Appellant.

  PRESENT:  Amestoy, C.J., Dooley, Morse (FN1), Johnson and Skoglund, JJ.

       ¶  1.    SKOGLUND, J.   This is a declaratory judgment action
  concerning automobile insurance.  Defendant Nationwide Mutual Insurance
  Company ("Nationwide") appeals from an order  holding it liable to its
  insured for a judgment entered against him in a lawsuit arising from an
  automobile accident that Nationwide failed to defend.  Nationwide argues
  that it owed no defense because its insured breached its duties under the
  contract of insurance and was unable to defend without his cooperation.  We
  hold that the insurer's obligations under the contract of insurance were
  not relieved by the insured's actions in this case.  We affirm.   

       ¶  2.    The underlying facts of the tort litigation that generated
  this suit and subsequent appeal are undisputed.  In March 1995, plaintiff
  Michelle Smith and her daughter were driving their automobile along Route
  122 in Wheelock, Vermont, when they collided with a telephone pole that had
  been downed after being hit by a vehicle driven by Wayne-Arthur: Sullivan. 
  Both Smith and her daughter were injured in the accident.  A subsequent
  state police accident report assigned Sullivan the entire fault for the
  accident.  At that time, Sullivan was insured under an automobile liability
  insurance policy issued by defendant Nationwide. 

       ¶  3.    Nationwide received appropriate notice of the accident and
  conducted an investigation.  Following its investigation, Nationwide
  settled a personal injury claim with Smith's daughter and a property damage
  claim for Smith's vehicle.  Nationwide did not, however, resolve Smith's
  personal injury claim.  Consequently, Smith filed suit against Sullivan in
  superior court to recover for her personal injuries.  In February 1998,
  Sullivan was personally served with the summons and complaint in
  plaintiff's action.  In response, Sullivan filed numerous pro se pleadings
  challenging his personal identification and insisting that he be addressed
  as "Wayne-Arthur: Sullivan."  Based on these pleadings, the court
  established personal jurisdiction over Sullivan. 

       ¶  4.    Sullivan forwarded the relevant court documents to
  Nationwide.  Nationwide recognized its obligation to its insured under its
  insurance policy and retained Attorney Michael Gannon to represent Sullivan
  in Smith's personal injury suit.  Gannon and Sullivan exchanged letters and
  telephone calls, and met at least once to discuss Gannon's representation
  of Sullivan.  However, for reasons apparently stemming from a belief that
  any and all court proceedings against him or in which he is involved
  violate fundamental principles of natural law, the Uniform Commercial Code,
  and state and federal constitutions, Sullivan objected to Gannon's filing
  of an appearance on his behalf.  As a result, Gannon did not enter an
  appearance on behalf of Sullivan.  Nationwide took no further action to
  defend Sullivan or determine its coverage obligations.  

       ¶  5.    Sullivan did not appear at a July 1998 merits hearing in
  Smith v. Sullivan, Docket # 50-3-98 Cacv, and the trial court entered a
  default judgment in favor of Smith.  Subsequently, the trial court
  scheduled, noticed, and held a damages hearing on November 13, 1998. 
  Nationwide had actual notice of the default judgment and at least ten days
  prior notice of the damages hearing.  Indeed, on November 3, Nationwide
  sent a letter warning Sullivan of the possible consequences of his
  "non-cooperation" with Nationwide and his designated attorney, noting that
  "a money judgment may be entered against you" and that Nationwide would not
  "indemnify you against any judgment."  Neither Sullivan nor Nationwide
  appeared at the hearing.  Apart from the letter to Sullivan, Nationwide
  took no additional steps to represent Sullivan's interests or its own
  interests at the damages hearing.  On November 30, the court entered a
  judgment for Smith in the amount of $60,000.  

       ¶  6.    In July 1999, Smith filed this action against Nationwide to
  recover the damages the court had awarded her in her suit against Sullivan. 
  In its answer to Smith's complaint, Nationwide denied liability to
  plaintiff based on what it characterized as Sullivan's failure to
  cooperate.  One year later, in July 2000, Nationwide filed a motion for
  summary judgment, which was denied.  After a period of discovery, Smith
  filed her own motion for summary judgment.  Nationwide opposed the motion
  and renewed its own motion for summary judgment.  

       ¶  7.    Following a hearing, the court issued a written decision
  granting Smith's motion for summary judgment, denying Nationwide's
  cross-motion, and ordering Nationwide to pay Smith the amount of damages
  awarded in the underlying suit.  The court held as a matter of law that
  Sullivan did not breach the "assistance" clause of the policy, and that
  Nationwide was not substantially prejudiced by Sullivan's conduct. 
  Nationwide filed a motion for reconsideration and a motion to amend the
  judgment Smith had obtained against Sullivan.  The court issued a
  post-judgment order denying Nationwide's motion to reconsider, but granting
  its motion to amend, reducing the amount of damages awarded to $50,000, the
  per-person coverage limit of the policy.  This appeal followed. 

       ¶  8.    This Court's review of summary judgment is de novo, and in
  proceeding with that review, we apply the same standard as the trial court. 
  Springfield Terminal Ry. Co. v. Agency of Transp., __ Vt. __, __,