Case Title: Peerless Insurance Co. v. Frederick

Citation: 177 Vt. 441, 2004 VT 126, 869 A.2d 112

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2004-12-23T00:00:00Z

Document:
Peerless Insurance Co. v. Frederick  (2003-039); 177 Vt. 441; 869 A.2d 112

2004 VT 126

[Filed 23-Dec-2004]

  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.

                                 2004 VT 126

                                No. 2003-039

  Peerless Insurance Company                    Supreme Court

                                                On Appeal from
       v.                                       Bennington Superior Court

  Robert J. Frederick and                       April Term, 2004
  Young Buck Enterprises, Inc.

  John P. Wesley, J.

  Pietro J. Lynn and Jennifer G. Mihalich of Lynn & Associates, P.C.,
  Burlington, for Plaintiff-Appellee.

  John Paul Faignant of Miller Faignant & Behrens, P.C., Rutland, for
  Defendant-Appellant.

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

       ¶  1.     SKOGLUND, J.    This action involves various insurance
  claims resulting from a fire that destroyed a building in which appellant,
  Young Buck Enterprises (Young Buck), operated the Bennington Station
  Restaurant.  Young Buck leased the property from MacDonald & Secor Realty,
  Inc. (M&S).  The suit began as a subrogation action between M&S's insurer,
  Peerless Insurance Company (Peerless), and the lessee, Young Buck.  Young
  Buck denied liability and counterclaimed, alleging fraudulent inducement to
  purchase insurance, wrongful denial of insurance coverage, and insurer bad
  faith based on the filing of a subrogation action.  Peerless eventually
  withdrew its subrogation claims, leaving only Young Buck's counterclaims. 
  Peerless moved for summary judgment on all of Young Buck's claims, and the
  trial court granted the motion.  Young Buck appeals from the trial court's
  decision on its claims of wrongful denial of coverage and insurer bad
  faith.  We affirm. 

       ¶  2.     The undisputed facts, as found by the trial court, are as
  follows.  On February 24, 2000, a fire destroyed the property rented by
  Young Buck at 150 Depot Street in Bennington, Vermont.  Pursuant to the
  lease between M&S and Young Buck, Young Buck had purchased an insurance
  policy through Peerless's local insurance agent, the Wills Agency.  This
  policy, the so-called Commercial Lines Package, provided both Young Buck
  and M&S with commercial property, commercial general liability, flood,
  crime, and liquor liability insurance.  

       ¶  3.     Another policy was purchased from Peerless that provided
  M&S, as the only named insured, with fire insurance.(FN2) In the beginning
  of the rental relationship, M&S paid the premiums on this fire insurance
  policy and then sought reimbursement from Young Buck.  Eventually, Young
  Buck began paying the fire insurance premiums directly to the Wills Agency.  
   
       ¶  4.     Young Buck was frequently dilatory in making the premium
  payments on the Commercial Lines policy.  As a result, Peerless had sent
  cancelation notices to Young Buck on several occasions.  Usually, Young
  Buck responded to these notices by making the premium payments before the
  cancelation date.  On occasion, Young Buck did not make payment until after
  Peerless had canceled the policies.  Prior to the fire that prompted this
  suit, Peerless reinstated the policies after each cancelation following
  Young Buck's representation that it had not sustained an intervening loss. 

       ¶  5.     On January 31, 2000, Peerless sent a notice of cancelation
  to Young Buck for nonpayment of the Commercial Lines Package premium. 
  According to the notice, the policy would be canceled effective February
  17, 2000, if payment was not received by that date.  On two separate
  occasions, the Wills Agency contacted Young Buck and reminded the company
  that payment was due.   When Peerless did not receive payment by February
  17, 2000, it canceled the Commercial Lines policy.  At that time, the
  separate fire policy, which Young Buck was required to maintain for the
  benefit of M&S, was in place with all premium payments current. 

       ¶  6.     On February 24, 2000, shortly before 9:30 a.m., a fire broke
  out at the Bennington Station Restaurant.  As fate would have it, at
  approximately the same time, one of Young Buck's employees came to the
  Wills Agency and dropped off a check payable to Peerless for the
  outstanding premium payment.  Peerless declined to reinstate the canceled
  Commercial Lines policy, and the Wills Agency returned the check to Young
  Buck on February 25, 2000.

       ¶  7.     Peerless paid approximately $90,000 in losses to M&S
  pursuant to the fire insurance policy.  As part of processing the claim for
  fire damages, Peerless hired a cause and origin expert who concluded that
  Young Buck's misuse of a laundry dryer was the source of the fire. 
  Peerless also reviewed the lease between Young Buck and M&S and was advised
  by counsel that the lease contained no provisions precluding subrogation. 
  Hence, Peerless initiated a subrogation action against Young Buck as a
  third-party tortfeasor to recover the money paid to M&S.  In an amended
  complaint, Peerless added two contractual claims concerning insurance
  premiums it alleged remained due and owing under the canceled Commercial
  Lines policy.  
   
       ¶  8.     Young Buck filed a three-count counterclaim wherein it
  alleged that Peerless: (1) wrongfully denied Young Buck insurance coverage
  under the Commercial Lines policy; (2) fraudulently induced Young Buck to
  purchase insurance by misrepresenting its cost; and (3) acted in bad faith
  by bringing a subrogation action.  When, during the discovery process,
  Peerless learned that Young Buck was paying the premiums for M&S's fire
  insurance coverage directly, Peerless voluntarily dismissed its subrogation
  claims.  The trial court granted Young Buck's motion for summary judgment
  on Peerless's contractual claims, so that only Young Buck's counterclaims
  remained.

       ¶  9.     Young Buck then moved for summary judgment on the narrow
  issue of whether, as a lessee, it was a coinsured under M&S's fire
  insurance policy.  The court concluded that Young Buck was implicitly a
  coinsured under the lease agreement, which contained a mutual waiver of
  subrogation and required Young Buck to pay M&S's fire insurance premiums. 
  Peerless then moved for summary judgment on Young Buck's three
  counterclaims, which the court granted.  Young Buck appeals as to its first
  and third counterclaims.

       ¶  10.     In reviewing an order granting summary judgment, we apply
  the same standard of review as that applied by the trial court.  Doe v.
  Forrest, 2004 VT 37, ¶ 9, 15 Vt. L. Wk. 125,