Rosciti v. Insurance Co. of the State of Pennsylvania

Summarized by Bodie Colwell , Preti Flaherty LLP
14 years 4 months ago

Citation:

Rosciti v. Ins. Co. of the State of Pa., No. 10-2087 (1st Cir. Oct. 7, 2011).

Tag(s):

Ruling:

The United States Court of Appeals for the First Circuit found that the limiting provision in the excess insurance policy would violate the public policy of Rhode Island and reversed and remanded for further proceedings. The court agreed with the district court that there was no conflict between the two provisions of the insurance policy, and thus, under the terms of the policy ISCOP would be liable above the retained limit only after Monaco exhausted the retained limit. That limiting provision, however, cannot be enforced because of Rhode Island’s public policy of “preventing insurance companies from avoiding their obligations when an insolvent insurance cannot make an expenditure toward discharging liability.”

Procedural context:

Appeal from the United States District Court for the District of Rhode Island granting of Insurance Company of the State of Pennsylvania's motion for summary judgment.

Facts:

The Roscitis sued Monaco, the manufacturer of their mobile home, in Superior Court of Rhode Island over alleged defects to the mobile home that resulted in water leakage and the growth of toxic mold. Monaco was self-insured for liability up to $500,000, and Insurance Company of the State of Pennsylvania (“ICSOP”) provided excess insurance for liability above $500,000. Monaco filed for Chapter 11 bankruptcy protection shortly after the Roscitis filed their lawsuit. Invoking a Rhode Island statute allowing tort victims to recover damages directly from liability insurers of a bankrupt tortfeasor within the limits of the insurance policy (Rhode Island's "direct action" statute), the Roscitis added ICSOP as a defendant. ISCOP removed the case to the U.S. District Court for the District of Rhode Island. In district court, ISCOP moved for summary judgment. ISCOP contended that there was no coverage available for the Roscitis’ claim under the excess policy with Monaco and thus, their claim should be dismissed. In support, ISCOP argued that a limiting provision in Monaco's policy caused ISCOP's duty to pay to arise only after Monaco paid their initial $500,000. In response, the Roscitis contended that other language in the policy provided that Monaco's bankruptcy would not relieve ISCOP of its payment obligations and that these two provisions created a conflict in the policy which Rhode Island law required be resolved in the Roscitis' favor. The district court granted summary judgment and found that there was no conflict between the provisions. Further, it held that Monaco had not exhausted the retained limit and ISCOP’s obligations could not be triggered even if the Roscitis’ claim was over the $500,000 limit. Thus, the district court found that the Rosciti’s claim could never be “covered” under the policy.

Judge(s):

Torruella (author), Boudin, and Lipez

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