Title: Debartolo v. Underwriters at Lloyd's of London

State: vermont

Issuer: Vermont Supreme Court

Document:

Debartolo v. Underwriters at Lloyd's of London (2006-027)

2007 VT 31

[Filed 25-Apr-2007]

                                 ENTRY ORDER

                                 2007 VT 31

                      SUPREME COURT DOCKET NO. 2006-027

                             OCTOBER TERM, 2006


  Desiree Debartolo                    }         APPEALED FROM:
                                       }
      v.                               }
                                       }         Rutland Superior Court
                                       }
  Underwriters at Lloyd's of London    }
                                       }         DOCKET NO. 313-5-03 Rdcv

                                                 Trial Judge: William D. Cohen

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  Insurer, Lloyd's of London, appeals the superior court's
  grant of summary judgment to its insured, Desiree Debartolo.  Insurer
  argues that the superior court erred: (1) in concluding that the policy it
  issued to insured  provided coverage for damage to a restaurant property
  she owned, and (2) in finding that insured did not deliberately conceal
  that she had reopened the restaurant before the loss.  We affirm.       

       ¶  2.  The facts, which were largely stipulated below, may be briefly
  summarized.  Ms. DeBartolo owned a restaurant property in Poultney,
  Vermont.  She closed the restaurant in the fall of 2000 and let her
  commercial insurance lapse.  The holder of the mortgage on the property
  demanded that Ms. DeBartolo obtain property coverage sufficient to pay the
  $92,000 outstanding mortgage debt.  Accordingly, in March of 2001, Ms.
  DeBartolo applied, through her agent, for a six-month policy with a
  property coverage limit of $92,000, enough to cover the balance on the
  mortgage. (FN1)  Ms. DeBartolo represented, on the application, that the
  restaurant was "closed for the season."    
                    
       ¶  3.  Ms. DeBartolo's agent placed the coverage with Lloyd's of
  London through one of its United States agents, S&H Underwriters.  Lloyd's
  is a surplus lines insurer in Vermont, and therefore can issue coverage
  only if it is not reasonably available from other sources.  8 V.S.A. §
  5024.  The agent sent Ms. DeBartolo a copy of the policy, which was
  effective March 14, 2001, along with a letter on May 1, 2001.  The letter
  stated that if Ms. DeBartolo decided to reopen the restaurant, she must
  notify the agent so that he could "make the necessary changes regarding the
  insurance."  Ms. DeBartolo received the letter and the policy before the
  loss but did not read either.  The policy's Declarations page described the
  covered property as a "vacant restaurant" on Route 30 in Poultney.  The
  policy explicitly provided coverage for property damage resulting from
  fire, with several pages of specific exclusions and limitations delineating
  risks not covered.  No exclusion or limitation stated that the reopening of
  the restaurant would void the coverage.  The policy also included a vacancy
  permit, which provided that the "VACANCY Loss Condition does not apply to
  direct physical loss or damage: (1) At the location; and (2) During the
  Permit Period; shown in the Schedule or in the Declarations."

       ¶  4.  Ms. DeBartolo opened the restaurant for business on May 26,
  2001.  At some point in the preceding days, a plumbing leak soaked a
  carpet, which Ms. DeBartolo attempted to dry using a kerosene heater.  The
  heater caused a fire on May 30, 2001, resulting in damage to the restaurant
  exceeding the policy's property coverage limit.  Ms. DeBartolo concedes
  that the restaurant was not vacant at the time of the loss.  

       ¶  5.  Lloyd's denied coverage for the loss, contending that the
  policy provided property coverage only while the restaurant remained
  vacant, and asserting that Ms. DeBartolo had intentionally concealed a
  known material fact-the reopening-both at the time of the loss and when she
  applied for coverage.  Ms. DeBartolo commenced a breach-of-contract action
  against insurer in 2003, also alleging that insurer's denial of coverage
  was made in bad faith.  Insurer raised as defenses the same claims it
  raised in the denial letter.  The parties stipulated to the above-detailed
  facts and submitted cross-motions for summary judgment.

       ¶  6.  The superior court concluded that the policy was ambiguous as
  to whether coverage would continue if the restaurant reopened.  The court
  therefore construed the policy in favor of Ms. DeBartolo, granted her
  motion for summary judgment, and ordered Lloyd's to pay the full
  property-coverage amount, less the $500 deductible, plus prejudgment
  interest and costs.  The superior court later issued a supplemental finding
  that Ms. DeBartolo had not concealed from Lloyd's that she had reopened the
  restaurant. (FN2)  This appeal followed.

                                     I.

       ¶  7.  Lloyd's argues, first, that the trial court erred in granting
  summary judgment to Ms. DeBartolo because the policy's plain language
  unambiguously limits property coverage to a vacant restaurant.  It notes
  that the policy's Declarations page describes the covered property as a
  vacant restaurant, and contends that this description is material to, and
  limits the extent of, property coverage under the policy.  DeBartolo
  asserts, by contrast, that the policy is at best ambiguous as to whether
  property coverage would continue when the restaurant reopened, and should
  therefore be construed in favor of finding coverage.  

        
       ¶  8.  We review a grant of summary judgment de novo, applying the
  same standard as the trial court.  Town of Lunenburg v. Supervisor & Bd. of
  Governors of the Unorganized Towns & Gores of Essex County, 2006 VT 71, ¶
  6, ___ Vt. ___,