Opinion ID: 771956
Heading Depth: 1
Heading Rank: 3

Heading: Nature of the Controversy in Which the Questions Arose

Text: 21 On appeal, David Israel argues that the umbrella policy, properly interpreted, does not completely deny coverage to an insured who fails to maintain underlying insurance, but only requires the insured to bear responsibility for any loss up to the underlying limits before gaining access to the umbrella coverage. Israel also argues that even if underlying insurance had to be maintained, his mother's maintenance of such coverage on her own car satisfies the requirement. State Farm disputes both arguments and also asserts that in any case, David Israel was not a resident of his mother's household and so is not insured under the policy. Thus, this appeal presents three questions: (1) was David Israel a resident of the Gunthers' Stamford household at the time of the accident; (2) under the umbrella policy, is the effect of a failure to maintain underlying insurance the complete denial of umbrella coverage for Israel or simply that Israel will be responsible for any loss up to the underlying limits before gaining access to the umbrella coverage; and (3) assuming that the policy completely precludes coverage in the event of a failure to maintain underlying insurance, are the policy's requirements satisfied by Lenore Gunther's maintenance of such insurance? 22 As a federal court exercising diversity jurisdiction, we follow applicable state law--here, the law of Connecticut. See, e.g., Belmac Hygiene, Inc. v. Belmac Corp., 121 F.3d 835, 840 (2d Cir. 1997). The district court's grant of summary judgment is reviewed de novo, taking all factual inferences in favor of the non-moving party. See, e.g., Lane Capital Mgmt., Inc. v. Lane Capital Mgmt., Inc., 192 F.3d 337, 343 (2d Cir. 1999).
23 Under Connecticut law, residence is determined by reference to a number of factors, including the intent of the individual, the frequency of contact with a household and other household members, whether an individual maintains a separate residence, the location of personal belongings, the capacity of an individual to maintain an independent household, the address used for personnel and business purposes, the address at which mail is received and the address used for formal purposes such as voting and filing taxes. See Remington v. Aetna Cas. and Sur. Co., 692 A.2d 399, 402 (Conn. 1997). 24 As noted above, David Israel spent about two-thirds of his time in his mother's Stamford household. In Stamford, he had his own room, cooked his own meals, kept about half of his clothes, a computer and various files, did chores and maintenance work and garaged a car that he owned. He received some of his mail at the Stamford address, as well as communications from his union and from his employer, and when Susan Israel visited him in Connecticut, she stayed with him at the Stamford house. While it is true, as State Farm points out, that David Israel owned a home in Florida, received mail there and was licensed to drive and registered to vote in Florida, this does not necessarily preclude his maintenance of a Connecticut residence as well. Under Connecticut law an individual may have more than one residence. See id. Given that Israel spent a majority of his time at the Stamford residence, and exhibited significant day-to-day connections with the household, we agree with the district court that he is appropriately considered a resident of the Stamford home and, thus, an insured under the terms of the umbrella policy. 25
26 The remaining issues in the case involve the appropriate interpretation of the policy's provisions in connection with the failure to maintain underlying uninsured motorist coverage. These issues are more perplexing. As noted above, the umbrella policy consists of the nine-page booklet, the uninsured motorist addendum, the declarations page, and four pages of endorsements. The Your Duties to Us section of the nine-page booklet and the uninsured motorist addendum both address the effect of a failure to maintain underlying insurance. The former states that [i]f the required underlying limits are not maintained, you will be responsible for the underlying limit amount of any loss. However, the latter provides that [i]f these underlying limits are not maintained, this coverage will not apply. Thus, one provision suggests that in such a circumstance, an insured will merely be responsible for any loss up to the underlying limits before gaining access to the umbrella coverage, while the other provision indicates that the umbrella coverage will not be available to the insured at all. David Israel argues that these two provisions when read together create a fundamental ambiguity regarding the effect of an insured's failure to maintain underlying coverage. 5 27 State Farm responds that the Your Duties to Us section also states that We may not provide coverage if you refuse to... maintain your underlying insurance. The uninsured motorist addendum's more definite statement that coverage will not be available if underlying limits are not maintained is in no way inconsistent with this earlier provision, State Farm argues, and the addendum's more definite statement may not simply be read out of the policy. State Farm also argues that in any case, as found by the district court, the Your Duties to Us section of the umbrella policy applies in the context of liability coverage only, and is not relevant to uninsured motorist claims. In support of this argument, State Farm points to language in the Your Duties to Us section requiring an insured to notify State Farm if a suit is filed against him or her, a duty that would appear to be applicable only in the context of liability coverage, where the insured would be a defendant. 28 Interpreting the provisions of the policy addressing underlying coverage thus requires a determination of whether the Your Duties to Us section applies to the uninsured motorist coverage and, if so, a further determination of whether the Your Duties to Us language, in combination with the language in the uninsured motorist addendum, creates an ambiguity. 29 With regard to the applicability of the Your Duties to Us section, Israel argues that the uninsured motorist addendum must necessarily be read with reference to the entire nine-page Personal Liability Umbrella Policy booklet, including the Your Duties to Us section. For instance, Israel points out that while the uninsured motorist addendum does not define such crucial terms as you or insured, any detailed understanding of the coverage described in the uninsured motorist addendum necessarily depends on the definitions of these terms as set out in the nine-page booklet. Israel argues that nothing in the policy language suggests that while the Definitions section of the nine-page booklet applies to the uninsured motorist addendum, the Your Duties to Us section does not. Israel also disputes the district court's holding that all the conditions imposed in the latter clearly refer to the liability cover[age] of the policy (emphasis in original). He argues that on the contrary, these conditions must also be read as applying to uninsured motorist coverage, since, for example, this section is the only place in the policy that states that the insured is required to notify State Farm of an accident, an obvious prerequisite to any uninsured motorist claim. Finally, while Israel does not raise this point, it is also worth noting that the uninsured motorist addendum expressly states, All other provisions of this policy apply, thereby arguably incorporating the Your Duties to Us section of the nine- page booklet. 30 If the Your Duties to Us section does apply to the uninsured motorist coverage, the question arises whether the underlying coverage provision in Your Duties to Us conflicts with the underlying coverage provision in the uninsured motorist addendum, creating an ambiguity under Connecticut law sufficient to justify construing the policy against the insurer as drafter of the insurance contract. We have found no Connecticut precedent--and none has been cited to us--that is directly on point. Both parties point out that Connecticut courts have set out broad state-law principles of policy construction and interpretation that must provide the background for resolving the present question. Under Connecticut law, terms in a policy are to be construed from the perspective of a reasonable layperson in the position of the purchaser of the policy, Ceci v. Nat'l Indem. Co., 622 A.2d 545, 547 (Conn. 1993), and any ambiguity in the policy's terms must be construed against the insurer as drafter of the contract, see Streitweiser v. Middlesex Mut. Assurance Co., 593 A.2d 498, 500 (Conn. 1991). On the other hand, these rules may not be applied unless the terms or provisions in question are indeed ambiguous, and such ambiguity is not demonstrated by the mere fact that the parties advance different interpretations of the language in question. See Stephan v. Pennsylvania Gen. Ins. Co., 621 A.2d 258, 261 (Conn. 1993). In addition, we note that in the context of primary uninsured motorist policies, the Connecticut courts have repeatedly held that a limitation of liability on uninsured motorist coverage must be construed most strongly against the insurer. See, e.g., Streitweiser, 593 A.2d at 500; American Universal Ins. Co. v. DelGreco, 530 A.2d 171, 181 (Conn. 1987). 31 While we are aware of these general principles, we are not sure how the Connecticut courts would apply them to the specific facts of this case. In particular, it is not clear to us whether Connecticut's strong public policy in favor of uninsured motorist coverage, see generally Streitweiser, 593 A.2d at 500-01, and the resulting presumption against an insurer limiting this coverage, see id. at 500, have any application in the context of an umbrella policy generally or in this case in particular. In addition, we have found no case--nor has one been cited to us--that specifically addresses whether a policy is ambiguous when it first states that in a particular circumstance coverage may not be provided and then states that in the same circumstance coverage will not be provided. Nor are we confident that under Connecticut law a policy's specification of a particular result of a failure to maintain underlying insurance (e.g., responsibility for any loss up to the underlying limits) implies as a matter of law that the specified result will be the sole consequence of the failure to maintain coverage. 32
33 Finally, David Israel argues that even if the umbrella policy is appropriately read as precluding all coverage when underlying uninsured motorist coverage is not maintained, his claim should nevertheless be honored, since his mother (Lenore Gunther) maintained such coverage for the Gunthers' automobile. Under Israel's interpretation, only the specifically named insureds (i.e., Lenore and William Gunther) must maintain underlying coverage in order for all insureds to gain the benefit of the umbrella coverage. 34 The nine-page booklet portion of the umbrella policy states, In this policy, `you' and `your' refer to the `insured' as defined (emphasis in original); insured is defined to include not only the named insured, but (among others) all relatives residing with the named insured. The uninsured motorist addendum indicates, You must maintain underlying limits for uninsured motor vehicle coverage equal to the limits listed in the Declarations (emphasis in original). In turn, the declarations page of the policy provides, You agree that the underlying insurance policies listed below: (1) Are in force and will be continued in force for at least the limits shown. (2) Insure all land motor vehicles and watercraft owned by, rented by, or regularly furnished to you. The required underlying uninsured motorist coverage, maintained by Lenore Gunther but not by David Israel, is included among the listed policies that follow. David Israel asserts that the umbrella policy, when read as a whole, assigns multiple meanings to the word you, and that, under Hansen v. Ohio Casualty Insurance Co., 687 A.2d 1262 (Conn. 1996), the ambiguity thus created must be construed against State Farm as the drafter of the contract. 35 Specifically, Israel argues that while the nine-page booklet defines you as any insured, the declarations page implicitly defines you more narrowly, as the named insured only--here, the Gunthers--and that the policy should therefore be interpreted to require only the named insured to maintain the underlying coverage set out on the declarations page. Israel's argument rests on several aspects of the declarations page. First, he points to the declarations page's termination provision, which states, If this policy is terminated we will give you and the Mortgagee/Lienholder written notice in compliance with the policy provisions or as required by law. Israel argues that here you cannot mean all insureds, since State Farm cannot be obligating itself to give notice to all relatives who may reside with the named insured, as it has no procedure to learn of the existence of these individuals in the absence of a claim. He also points out that while the declarations page notes in regard to the types of underlying policies required that these terms are defined in the policy, the declarations page nowhere indicates that the word you is defined in the policy, thus suggesting that on the declarations page, you does not mean all insureds. Finally, Israel argues that the nine-page booklet's provision that [i]n this policy, `you' and `your' refer to the insured as defined (first emphasis added), suggests that this definition is not applicable to the declarations page. Were the declarations page to require all insureds to maintain underlying insurance, Israel asserts, it would refer to you and all insureds. Instead the declarations page uses you to mean only Lenore and William Gunther, Israel argues, and so only the Gunthers are required to maintain the underlying insurance set out on the declarations page. 36 State Farm characterizes Israel's interpretation as tortured and in conflict with the clear meaning of the policy. It claims that the declarations page provision that you will be given notice of termination in compliance with the policy provisions simply indicates that notice will be delivered to the named insured's address, as provided in the policy. In such a case, State Farm argues, other insured residents of the household would receive notice of the canceled policy pursuant to the policy's provisions. State Farm also points to the declarations page's provision that Your policy consists of this page, any endorsements and the policy form, and argues that this statement undermines Israel's attempt to read the declarations page separately from the policy's definition of you. 37 In Hansen v. Ohio Casualty Insurance Co., the Connecticut Supreme Court found you to be ambiguous when a policy defined you as referring to the named insured--a small, family-held corporation--yet other parts of the policy used you as though the word referred to an individual, making reference to your family members, bodily injuries, and the like. See 687 A.2d at 1266. As a result of this ambiguity, the court held that the plaintiff, a shareholder in the closely-held corporation, was entitled to individual coverage under the policy. See id. at 1267. While there are superficial similarities between Hansen and the present case, in that the meaning of the word you is the focus of debate in both, the specific legal holding of Hansen seems inapplicable here, and it is not clear to us whether the case is appropriately read as embodying a general rule that insurers will be held to an exceptionally high standard of clarity in their use of the word you. As a result, we are unsure of how broadly to construe the Hansen holding and are thus faced with the danger of either over-extending or inappropriately cabining it.