Case Title: Korda v. Chicago Insurance Co.

Citation: 180 Vt. 173, 2006 VT 81, 908 A.2d 1018

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2006-08-04T00:00:00Z

Document:
Korda v. Chicago Insurance Co. (2004-530); 180 Vt. 173; 908 A.2d 1018

2006 VT 81

[Filed 04-Aug-2006]


       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.


                                 2006 VT 81

                                No. 2004-530


  Joan Korda, Executrix of                       Supreme Court
  the Estate of Murray Korda
  and Union Mutual Insurance Company
                                                 On Appeal from
       v.                                        Addison Superior Court


  Chicago Insurance Company  November Term, 2005


  Helen M. Toor, J.

  Donald R. Powers of Powers & Byers LLP, Middlebury, for Plaintiff-Appellant
    Korda.

  F. Brian (Ted) Joslin and Laura Q. Pelosi of  Theriault & Joslin, P.C.,
    Montpelier, for  Plaintiff-Appellant Union Mutual Insurance Company.

  John B. Webber and Timothy Budd of Webber, Chapman & Kupferer, Ltd.,
    Rutland, and Alfred C. Constants III of Caron, Constants & Wilson,
    Rutherford, New Jersey, for Defendant-Appellee.


  PRESENT:  Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.

        
       ¶  1.  DOOLEY, J.  This case arises from a fatal car accident. 
  Appellants in this case are the Estate of Murray Korda (the Estate) and one
  of two uninsured motorist carriers (UIM carriers) (FN1) who insured Mr.
  Korda at the time of the accident.  Below, the UIM carriers filed suit
  under the Estate's name with its permission against defendant Chicago
  Insurance Company (Chicago), the insurer of Champlain Valley Speech and
  Language Practice, LLC (CVSLP), the company whose employee caused the
  accident, for failure to defend the underlying lawsuit, which had resulted
  in a stipulated judgment of $2,000,000 against CVSLP.  The lower court
  dismissed the failure-to-defend case because it found (1) the two-year
  wrongful-death limitations period, which had run by the time the original
  complaint was filed, applied to the UIM carriers' subrogation action, and
  (2) the Estate lacked standing to sue Chicago because CVSLP had not
  assigned its rights to the Estate until nearly three years after the
  Estate's suit against Chicago was filed.  We conclude the assignment
  related back to the filing of the Estate's action against Chicago so that
  the Estate had the capacity to bring the action and did so within the
  applicable limitations period.  We also conclude that the subrogation
  action was filed within the limitations period of 8 V.S.A. § 4203(2),
  assuming the allegations of the complaint are proved.  We reverse the
  superior court's dismissal of the action and remand.

       ¶  2.  The following facts are undisputed.  On September 30, 1998, Amy
  Wyatt, an employee of CVSLP, was driving to see a patient when she struck
  an oncoming car, killing the driver, Murray Korda.  Ms. Wyatt possessed a
  $20,000 automobile insurance policy, which was paid to Murray Korda's
  estate. (FN2)  Joan Korda, executrix of the Estate, then looked to CVSLP
  for further compensation for Mr. Korda's death.  At the time of the
  accident, CVSLP had a liability insurance policy with Chicago.  The actual
  coverage of the policy is at issue in the underlying case.  Generally,
  Chicago disclaimed coverage and refused to defend or indemnify CVSLP. 
                         
       ¶  3.  On July 10, 2000, the Estate sued CVSLP for damages arising
  out of the wrongful death of Mr. Korda.  CVSLP again asked Chicago to
  defend and indemnify, and Chicago again declined coverage.  Thereafter, the
  Estate and CVSLP entered into a settlement agreement, dated November 2,
  2000.  The settlement agreement noted that CVSLP was effectively
  judgment-proof, and the Estate provided CVSLP with a covenant not to
  execute once CVSLP accepted service of the complaint.  The agreement
  provided for a stipulated judgment in the amount of $2,000,000, but delayed
  entry of that judgment pending litigation (described below) against two
  insurance carriers, Champlain Casualty Company of Vermont and Hartford
  Underwriters Insurance Company, that provided underinsured motorist
  coverage to Murray Korda.  The agreement also contained the following
  provision: 

      5.  Upon final settlement or adjudication of the Estate's claims
    against Champlain Casualty and Hartford Insurance Company, and
    upon request of the Estate, or of Champlain Casualty or Hartford
    Insurance Company as subrogee of the Estate's claims, CVSLP . . .
    will assign [its] . . . rights to a claim against Chicago
    "Insurance Company" for defense and indemnification under the
    insurance policy . . . issued by Chicago "Insurance Company" to
    CVSLP and CVSLP will also consent to the right to bring suit on
    such claims in the name of CVSLP.  Neither Champlain Casualty nor
    Hartford Insurance Company shall be permitted to obtain any rights
    in the Chicago "Insurance Company" Defense/Indemnification Rights
    unless such insurer first executes and delivers to [CVSLP's
    counsel] . . . a duly executed and authorized covenant [not to
    execute] . . . .  Any reassignment by the Estate to Champlain
    Casualty or Hartford Insurance Company of the Chicago "Insurance
    Company" Defense/Indemnification Rights will not be effective
    unless and until such insurer first executes and delivers to
    CVSLP's counsel a covenant as described above.  In the event of
    such assignment(s), CVSLP . . . will provide reasonable
    cooperation to the Estate or its subrogees if such cooperation is
    required for the Estate or its subrogees to pursue the assigned
    rights against Chicago "Insurance Company."

  Chicago was not a party to the settlement agreement.
   
       ¶  4.  Meanwhile, the Estate looked to the two uninsured motorist
  carriers that insured Murray Korda at the time of the accident, Hartford
  Underwriters Insurance Company and Champlain Casualty Company of Vermont,
  predecessor to Union Mutual Insurance, for coverage.  Each of Mr. Korda's
  UIM policies had a limit of $500,000, and, on February 1, 2001, the Estate
  settled with each of the UIM carriers for $212,500, for a total of
  $425,000.  The settlement agreement between the Estate and the UIM carriers
  has a number of relevant provisions, summarized as follows:  

    (1) the Estate will assign to the UIM carriers its claims against
    CVSLP and Chicago; 

    (2) the Estate will obtain the stipulated judgment provided for in
    the agreement with CVSLP;

    (3) the UIM carriers "may prosecute in the name of the Estate
    and/or CVSLP an action against Chicago "Insurance Company" for all
    compensatory and other damages . . . for which Chicago "Insurance
    Company" may be liable to the Estate or CVSLP, whether in
    contract, tort or otherwise";

    (4) if the UIM carriers prevail in litigation against Chicago, the
    proceeds will be split between the Estate and the UIM carriers;

    (5) the UIM carriers will execute the covenant not to execute
    against CVSLP and deliver it to CVSLP's lawyer; 

    (6) on receipt of the settlement money, the Estate will dismiss
    the suit against the UIM carriers; and

    (7) the Estate will release all claims against the UIM carriers. 

  Based on the above agreements, a stipulated judgment in the amount of
  $2,000,000 for the Estate and against CVSLP was entered on October 16, 2001
  in the Chittenden Superior Court.

       ¶  5.  On December 13, 2001, the UIM carriers brought suit in Addison
  Superior Court in the name of the Estate against Chicago for breach of
  contract and negligent failure to settle.  The complaint did not state how
  the Estate had standing to bring the action or that the complaint was
  actually filed by the UIM carriers in the name of the Estate.  It did
  allege that "CVSLP is insolvent," to which Chicago answered that it lacked
  information to respond.  

       ¶  6.  In October 2003, Chicago moved for summary judgment, seeking a
  declaration that it owed CVSLP no duty to defend pursuant to a policy
  exclusion; the Estate opposed this motion and filed a cross-motion for 
  summary judgment.  

       ¶  7.  Before the summary judgment motions on the merits of the
  coverage issues could be decided, disputes arose over whether the action
  was properly brought.  Chicago first filed a motion claiming that the UIM
  carriers were the real parties in interest and requesting that they be
  substituted as plaintiffs.  In March 2004, Chicago filed a second summary
  judgment motion, alleging that: (1) the UIM carriers were bringing suit
  under an assignment of the Estate's judgment against CVSLP, and the common
  law prohibited such an assignment; (2) the action was not a subrogation
  action, and even if it was, it violated Vermont Rule of Civil Procedure
  17(c); and (3) the underlying action was the product of collusion and
  champerty and was unreasonable.  In response, plaintiff alleged that it was
  raising both a breach of contract and a subrogation claim, the assignment
  was valid because it assigned a breach of contract claim and not a personal
  injury claim, and the settlement between the Estate and CVSLP was
  reasonable and did not involve champerty or collusion.  In support of its
  response and to respond to Chicago's motion to name the UIM carriers as
  parties, the Estate filed a motion to amend its complaint to name the UIM
  carriers as additional plaintiffs and to explicitly raise a subrogation
  claim in the name of the carriers.  The proposed amended complaint alleged
  that CVSLP had assigned its rights against Chicago to the Estate on April
  6, 2004.
   
       ¶  8.  On April 30, 2004, Chicago moved to dismiss, contending  the
  Estate lacked standing to sue until CVSLP assigned its rights against
  Chicago to the Estate. (FN3)  According to Chicago, CVSLP failed to
  actually assign its rights until April 6, 2004, nearly three years after
  the lawsuit was initiated and outside the two-year statute of limitations
  in wrongful-death actions.  In response to plaintiff's motion to amend and
  explicitly raise subrogation, Chicago also argued the UIM carriers'
  subrogation action was time-barred.

       ¶  9.  In its decision, the trial court addressed only Chicago's
  motion to dismiss and the Estate's motion to amend the complaint to raise a
  subrogation claim.  It did not address any of the motions for summary
  judgment that were pending.  The court addressed three specific issues: (1)
  whether the subrogation claims of the UIM carriers were time-barred; (2)
  whether the action against Chicago should be dismissed because neither the
  Estate nor the UIM carriers had standing to bring it; and (3) whether the
  contract claims against Chicago should be dismissed as barred by the
  applicable statute of limitations.  

       ¶  10.  On the first issue, the court ruled that the subrogation claim
  of the UIM carriers against Chicago was governed by the limitations period
  for wrongful-death actions contained in 14 V.S.A. § 1492(a).  Since that
  limitations period is two years, and the UIM carriers brought suit three
  years after the 2001 accident, the court held the subrogation action was
  time-barred.  On this basis, it denied plaintiff's motion to amend the
  complaint to assert the subrogation claim explicitly.  On the second issue,
  the court ruled that "[b]ecause Plaintiff had no assigned rights to sue
  Chicago at the time the lawsuit was filed, the complaint must be dismissed
  for lack of standing."  On the third issue, the court decided that the
  relevant statute of limitations on the contract claim was contained in 8
  V.S.A. § 4203(2), which provides:  
   
      No action shall lie against the [insurance] company to recover for
    any loss under th[e] [insurance] policy, unless brought within one
    year after the amount of such loss is made certain either by
    judgment against the insured after final determination of the
    litigation or by agreement between the parties with the written
    consent of the company.

  This statute of limitations, the court concluded, expired in October 2002,
  one year after the judgment was entered against CVSLP.  Since the
  assignment did not occur until April 2004, the court held that the contract
  action against Chicago was not filed in time.  The court dismissed the
  complaint, with prejudice.  

       ¶  11.  For the sake of clarity, we start with the second issue: the
  court's decision to grant Chicago's motion to dismiss because plaintiffs
  brought their action against Chicago before CVSLP assigned its rights to
  the Estate so that plaintiffs lacked standing to bring the action. 

       ¶  12.  Plaintiffs put forward two responses on this issue: (1)
  because CVSLP had a contractual obligation to make the assignment,
  plaintiffs had an equitable assignment sufficient to allow them to bring
  suit; and (2) the standing created by the signing of the assignment related
  back to the filing of the case, such that plaintiffs had standing from the
  beginning of the action and the case was filed within the applicable
  statute of limitations.  We conclude that the second response is correct,
  and that the dismissal of the action was erroneous.

       ¶  13.  A motion to dismiss for failure to state a claim upon which
  relief can be granted should be denied unless it is beyond doubt that there
  exist no facts or circumstances that would entitle the plaintiff to relief. 
  Union Mut. Fire Ins. Co. v. Joerg, 2003 VT 27, ¶ 4, 175 Vt. 196,