Title: Vermont Insurance Management, Inc. v. Lumbermens' Mutual Casualty Co.

State: vermont

Issuer: Vermont Supreme Court

Document:

Vermont Insurance Management, Inc. v. Lumbermens' Mutual Casualty Co. (99-090);
171 Vt. 601; 764 A.2d 1213 

[Filed 7-Nov-2000]

                                 ENTRY ORDER

                      SUPREME COURT DOCKET NO. 1999-090

                              MARCH TERM, 2000

Vermont Insurance Management, Inc.	}	APPEALED FROM:
                                        }
                                        }
     v.	                                }	Washington Superior
                                        }	
Lumbermens' Mutual Casualty Company	}
                                        }	DOCKET NO. 418-7-93 Wncv

                                                Trial Judge: Matthew I. Katz

             In the above-entitled cause, the Clerk will enter:

       Plaintiff/insured Vermont Insurance Management Company (VIM) appeals
  from a grant of  summary judgment in favor of defendant/insurer Lumbermens'
  Mutual Casualty Company  (Lumbermens).  Plaintiff filed this suit against
  defendant for insurance coverage and tort damages for  insurance bad faith
  in connection with a lawsuit against plaintiff brought by one of its former 
  employees.  The trial court granted summary judgment because it found there
  was no coverage and,  therefore, no bad faith claim either.  Plaintiff
  argues on appeal that (1) defendant waived its right to  deny coverage
  under the terms of a non-waiver agreement, (FN1)(2) the court erred in
  finding that  because the gravamen of the employee's suit was sexual
  harassment, no coverage existed under  plaintiff's insurance policies, (3)
  the court erred in finding that the employee's claims were not  covered
  under plaintiff's workers compensation policy, and (4) the court erred in
  finding that because  defendant had no duty to indemnify plaintiff,
  plaintiff had no viable bad faith claims.  We affirm.

       In 1990, Betty Wood filed a complaint in the Washington Superior
  Court, alleging that she and  John Middleton were employees of VIM, and
  that Middleton held a supervisory position.  The Wood  complaint asserted
  that Middleton had sexually harassed Wood, that VIM had knowingly tolerated 
  the harassment, and that Middleton's and VIM's conduct amounted to sex
  discrimination, negligent  and/or intentional infliction of emotional
  distress, civil assault and battery, a constructive and  wrongful
  discharge, and an invasion of privacy. 

       VIM notified Lumbermens of Wood's claims.  At the time, VIM maintained
  a general  insurance policy (business owner's policy) and a workers'
  compensation and employer's liability  insurance policy with Lumbermens. 
  Lumbermens initially denied coverage for the sexual 
  harassment/constructive discharge claim under VIM's business owner's
  policy.  It opened a claim 

 

  file under the workers' compensation/employers liability insurance policy,
  and informed VIM that  coverage under that policy was being reviewed.  It
  also informed the parties that if Wood wished to  pursue any claims through
  the workers' compensation system, she needed to file a claim with the 
  Vermont Department of Labor and Industry.  She never did so.  Later,
  Lumbermens agreed to  provide VIM a defense of the Wood litigation under
  the terms of a written non-waiver agreement,  which was signed by VIM.  The
  non-waiver agreement states: "No action of [Lumbermens] pursuant  to this
  Agreement shall in any way be construed as a waiver or estoppel or as an
  admission of  coverage under the policies."  Lumbermens retained attorney
  Lawrence Miller, who defended the  Wood litigation for VIM from 1990
  through 1992.

       At the end of 1992, settlement negotiations began when Wood announced
  a settlement demand  of $60,000.  VIM initially demanded that Lumbermens
  contribute $45,000 to such a settlement;  Lumbermens, stating that there
  were still "serious coverage questions," offered to contribute $5,000.  As
  settlement negotiations continued, VIM demanded that Lumbermens contribute
  $25,000.  When  Lumbermens offered to contribute $20,000, VIM refused, and
  instead settled the Wood litigation for  $45,000 with its own funds.  VIM
  then sued Lumbermens for breach of contract and bad faith for its  refusal
  to indemnify VIM for the settlement. 

       This court reviews a motion for summary judgment using the same
  standard as the trial court.   O'Donnell v. Bank of Vermont, 166 Vt. 221,
  224,