Sleight of Coverage

By Daniel Richardson

McGoff v. Acadia Insurance Co., 2011 VT 102 (mem.).

Keep your eye on the ball with this case. 

Plaintiff is a Barre resident.  At the time of his accident, he was employed as a regional sales manager for a chain of gas stations headquartered in Massachusetts.  His job required him to regularly visit stores throughout Vermont and New Hampshire, and for his benefit his employer had furnished him with a company car, which Plaintiff kept at his home when he was not on the road. 

In June 2004, coming through Richmond, Vermont, Plaintiff was clobbered by another car and sustained serious injuries.  Plaintiff filed a claim against the driver and the driver’s car insurance.

Herein lies the first rub, the driver only carried $100,000 in liability insurance.  Since the costs of Plaintiff’s injuries far exceeded this amount, driver’s insurance company paid the full amount and walked away.

No problem, thinks Plaintiff, I’ll file a claim on my own policy for underinsured coverage. 

Herein lies the second rub, Plaintiff’s auto insurance, purchased by and through his employer, only had $20,000 in underinsured coverage.  Since this amount was less than the amount received from the other driver, this coverage was not triggered, and Plaintiff is out of luck.

Plaintiff files an action for coverage under the following theory.  Vermont law requires insurance companies to sell underinsured policies equal to the policy’s general liability coverage.  Defendant Insurance Company was obligated to sell him a policy with underinsured coverage equal to his $1 Million in general liability coverage. 

Herein lies the third rub, the policy was bought, sold, and issued in Massachusetts where such a low underinsured motorist policy is legal (it is a no-fault state).  Moreover, the policy stated that the car was to be primarily garaged in Massachusetts.  Of course, the reality is that this was a car kept almost exclusively in Vermont and appears to rarely have traveled south of the border.  Plaintiff’s argument at trial and on appeal is that reality must control.  The car was kept in Vermont, used by a Vermonter, and involved in a Vermont accident.  Therefore, it should be subject to Vermont insurance laws.

The flaw in Plaintiff’s argument that both the trial court and the SCOV pick out is the nature of the question here.  We are talking about insurance, and that means we are really talking about contracts.  And whenever, the SCOV is talking about contracts, it is talking about the written word and language that the parties chose to describe their arrangement.  In this case, that means looking at the document that the insurance company and the employer signed and circumstance surrounding its drafting. 

The facts are that the agreement was a Massachusetts based contract and that the Insurance Company only knew that a Massachusetts company wanted auto insurance for a fleet of company cars.  If later, it turns out that the company or one of its employees took the car to another state, it is not the insurance company’s obligation to change the policy or even take note of the issue.  They get to rely on their agreement. 

Herein lies the fourth and worst rub for Plaintiff, it does not matter that his car was for all intents and purposes a Vermont car, his insurance policy was a Massachusetts policy, and the SCOV is not going to impose Vermont law on a Massachusetts agreement when everything in the agreement indicates that the insurance company and, to a certain extent the employer, intended it to function within the bounds of Massachusetts law. 

To a large extent, the SCOV is bound by the law here, which only applies to Vermont insurance policies and not to in-state accident claims or out-of-state insurance policies.  Doing more would represent an expansion into the insurance law of other states and is a leap that the SCOV is not inclined to make. 

The result is a solid, judicial decision that may leave this Plaintiff out of luck but leaves in place a system that both businesses and individuals can rely upon to interpret future insurance policies.  It is a utilitarian outcome, unfair to individual but consistent and proper to the larger scheme of things.  Then again, what else would you expect with an insurance claim.