County Superior Court
Plaintiff: Ronald Langlois, Esq.
Defendant: Paul S. Cantor, Esq.; Michael R. DeLuca, Esq.
matter came on for trial on the motion of Summit Insurance
Company (Summit) for a declaratory judgment. The declaratory
judgment seeks to determine the rights and obligations of the
parties pursuant to a Rhode Island Automobile Insurance
Policy issued by Summit to one of the Defendants, Eric
Summit is seeking a declaration as to whether Summit has an
obligation to pay any amounts (interest or attorneys'
fees) beyond its policy limits on any judgment in connection
with an underlying personal injury action. The counterclaim
Plaintiffs in this action, Scott Alves, John Alves, and Cathy
Alves (the Alves) are Plaintiffs in the underlying case
pending against Mr. Stricklett in the Providence County
Superior Court (PC-2011-5499). In the underlying action, the
Alves are seeking the recovery of damages arising out of an
automobile accident that occurred on April 26, 2002 when Mr.
Stricklett struck Scott Alves with his automobile. The Alves
filed a counterclaim against Summit asserting that Summit is
liable for all accrued prejudgment interest on all of the
Alves' damages, and that Summit is also liable for all
damages over and above any policy limits.
Facts and Travel
April 26, 2002, while driving his automobile on Newport
Avenue in the city of Pawtucket, Rhode Island, Erick
Stricklett hit a young pedestrian, Scott Alves. (Trial Ex.
BB, Uniform Accident Report.) The numerous witnesses that
were interviewed separately unanimously stated that Scott ran
across the street without looking. Id. At the time
of the accident, Mr. Stricklett was insured pursuant to a
Summit Insurance Company Personal Automobile Policy with
bodily injury coverage of $25, 000 per person and $50, 000
per accident. (Trial Ex. L, Letter from Summit). In December
of 2002, Summit visited the scene of the accident and took
photographs. (Agreed Statement of Facts ¶ 7). On
December 18, 2002 and January 2, 2003, counsel for the Alves
forwarded a copy of all of Scott's medical records and
bills for his treatment as of that date to Summit. (Trial
Exs. F and G, Letters to Summit.) On March 24, 2003, Summit
wrote to the Alves' counsel explaining that they
investigated the claim and found that Mr. Stricklett was not
at fault for the boy's injuries, and as a result, Summit
would not be making any settlement offers on the case. (Trial
Ex. H, Letter of Dennis J. Franchetti.) On April 15, 2003,
counsel for the Alves returned correspondence to Summit
stating that to the contrary, they felt as though Mr.
Stricklett was at fault and they were going to proceed with
the claim. (Trial Ex. I, Letter from the Alves' counsel
to Dennis J. Franchetti.) Time passed, and all counsel
appeared to be inactive on this claim for about eight years.
(Agreed Statement of Facts ¶ 8.)
February 16, 2011, counsel for the Alves again wrote to
Summit reminding them of the claim and advising that they
were pursuing a lawsuit against Mr. Stricklett. (Trial Ex. J,
Letter from the Alves' counsel to Dennis J. Franchetti.)
In June of 2011, counsel for the Alves sent a written demand
letter to Summit for $300, 000. (Trial Ex. O, Letter from the
Alves' counsel, June 15, 2011.) The letter claimed that
Summit was responsible for $25, 000 in insurance coverage
plus the $275, 000 in interest on all of Scott's damages
for Summit's failure to proceed in good faith.
Id. One week later, Summit offered Mr.
Stricklett's full policy limit of $25, 000 to the Alves.
(Trial Ex. P, Letter of June 22, 2011.) Counsel for the Alves
notified Summit a few weeks after that they were not
interested in this offer and were going to proceed with
filing suit. (Trial Ex. Q, Letter from the Alves'
counsel, July 13, 2011.)
September 26, 2011, the Alves filed suit against Summit's
insured, Mr. Stricklett, in Providence Superior Court, C.A.
No. PC-2011-5499. (Trial Ex. U, Summons and Complaint filed
by the Alves.) Due to Scott's minority at the time of the
accident, he filed that action with his parents as his
representatives. The suit alleged that Mr. Stricklett
negligently operated his vehicle. On or about October 16,
2012, Summit filed this separate action, asking the Court to
issue a declaratory judgment determining whether Summit had a
duty to pay any damages beyond the policy limits.
seeks a declaratory judgment to establish that it is not
responsible for any interest or expenses over and above the
policy limits of Mr. Stricklett's policy coverage. The
Uniform Declaratory Judgments Act (UDJA) "grants broad
jurisdiction to the Superior Court to 'declare rights,
status, and other legal relations whether or not further
relief is or could be claimed.'" Tucker Estates
Charlestown, LLC v. Town of Charlestown, 964 A.2d 1138,
1140 (R.I. 2009) (citing G.L. 1956 § 9-30-1). This Court
has discretion to grant or deny declaratory relief under the
UDJA. R.I. Orthopedic Soc'y v. Blue Cross & Blue
Shield of R.I., 748 A.2d 1287, 1289 (R.I. 2000).
first contends that an insurer is not bound to provide
indemnification beyond the scope of the coverage described in
the insurance policy. Summit references Factory Mut.
Liability Ins. Co. v. Cooper, 106 R.I. 632, 637, 262
A.2d 370 (R.I. 1970) in support of its claim that no insurer
is bound to provide indemnification beyond the scope of the
coverage described in the insurance policy.
policy at bar contains the following language:
"In addition to our limit of liability, we will pay on
behalf of a covered person:
Prejudgment interest awarded against the "insured"
on the entire judgment if we reject a written settlement
offer by the plaintiff that is equal to or less than the
applicable limit of liability. Where this does not apply, we
will pay prejudgment interest awarded against the
"insured" on that part of the judgment we
on the policy language, Summit insists that it is only
obligated to pay prejudgment interest on the "entire
judgment" only when it "reject[s] a written
settlement offer by the Plaintiff that is equal to or less
than the applicable limit of liability." On June 15,
2011, counsel for the Alves sent Summit a written demand for
a $300, 000 settlement, substantially above the written limit
of liability. (Trial Ex. O, Letter to Summit.) Summit
contends that because there has never been a written
settlement offer within the policy limits, there is no
contractual obligation to pay interest above the policy
insurance policy is a contract between the insurer and the
insured. Provisions of an insurance policy are interpreted in
accord with the rules established for the construction of
contracts. Beacon Mut. Ins. Co. v. Spino Bros.,
Inc., 11 A.3d 645, 649 (R.I. 2011). Accordingly, the
Court views the language within the "four corners of
[the] policy, viewing it in its entirety [and] affording its
terms their 'plain, ordinary, and usual
meaning.'" Town of Cumberland v. R.I. Interlocal
Risk Mgmt. Trust, Inc., 860 A.2d 1210, 1215 (R.I. 2004).
When the terms of a contract are clear and unambiguous, it
must be applied as written, and absent fraud, mutual mistake,
or other similar cause, the parties are bound by the terms of
a written instrument. Phillips v. Columbus Wholesale
Grocery Co., 60 R.I. 47, 197 A. 197, 198 (1938). Courts
tend to "refrain from engaging in mental gymnastics or
from stretching the imagination to read ambiguity into a
policy where none is present." Mallane v. Holyoke
Mut. Ins. Co. in Salem, 658 A.2d 18, 20 (R.I. 1995).
However, if the policy terms are vague or capable of more
than one reasonable meaning, the policy is strictly construed
in favor of the insured. Id. Additionally, seeking
to ascertain the intent of the parties, an insurance policy
is examined in its entirety and the language used is given
its plain, ordinary and usual meaning. Nagy v. Lumbermens
Mut. Cas. Co., 100 R.I. 734, 737, 219 A.2d 396 (1966).
terms used in Mr. Stricklett's policy are unambiguous and
should be given their plain, ordinary, and usual meaning. The
first sentence of the standard interest clause states that,
Summit agrees to pay the "[p]rejudgment interest awarded
against the 'insured' on the entire judgment if we
reject a written settlement offer by the plaintiff that is
equal to or less than the applicable limit of
liability." The applicability of the standard interest
clause is exceptionally clear. The meaning of the standard
interest clause is obvious and it leaves no room for another
interpretation and as such, the terms must be applied as
written. Phillips, 60 R.I. at 47, 197 A. at 198.
Summit received and rejected only one settlement offer, and
it was over the limit of liability. Because Summit did not
reject a written settlement offer that was equal to or less
than the applicable limit of liability, it is not responsible
for an award of prejudgment interest pursuant to the first
sentence of the standard interest clause.
second portion of this policy clause, "[w]here this does
not apply, we will pay prejudgment interest awarded against
the 'insured' on that part of the judgment we
pay" is more ambiguous. The Alves argue that this
segment conflicts with the Rhode Island rulings in
Skaling I,  (finding prejudgment interest must be
added to the judgment entered by the court); and Asermely
v. Allstate Ins. Co., (finding insurer liable for the
amount that exceeds policy limits unless it can show that
insured was unwilling to accept settlement offer).
Skaling v. Aetna Ins. Co., 742 A.2d 282, 292 (R.I.
1999); Asermely v. Allstate Ins. Co., 728 A.2d 461,
464 (R.I. 1999). The Alves rely exclusively on a Superior
Court case to establish that any provision in an insurance
contract that conflicts with state law must be superseded by
the state law. See Foote v. GEICO Indem. Corp., No.
WC-2011-0040, 2013 WL 486922 (R.I. Super. Jan. 5, 2013).
Unlike the policy in Foote, the policy at bar is
alleged to violate trends in state case law, rather than
mandatory coverage minimums mandated by statute.
Alves have failed to demonstrate that the policy language is
contrary to Rhode Island law and should therefore be
superseded. They have not established a clear violation of
either a statute, or prior case law. The findings from
Skaling I and Asermely do not precisely
align with those at bar. While the facts in those cases
justified awards of prejudgment interest, here there is no
sweeping rule that Summit's policy language violated.
Summit's policy language does not disturb Rhode Island
law, and accordingly, Summit should not be held liable for
prejudgment interest in excess of their stated insurance
policy limits because of the plain meaning of the language
within their policy. Factory Mut. Liability Ins.
Co., 106 R.I. at 637, 262 A.2d at 373.