ROSCITI v. Insurance Co. of Pennsylvania
659 F.3d 92
1st Cir.2011Background
- Monaco manufactured a mobile home for the Roscitis; water leakage and mold allegedly caused medical issues.
- ICSOP provided excess liability coverage after Monaco’s $500,000 self-insured retained limit; excess limits ranged from $1.5M to $2.5M.
- Monaco went bankrupt after the Roscitis filed suit, triggering Rhode Island’s direct action statute allowing claims against insurers to the policy limits.
- ICSOP policy contained a Retained Limit Provision: ICSOP pays after Monaco fully exhausts its retained limit.
- Policy also contained a Bankruptcy Provision: bankruptcy does not relieve ICSOP of claims covered, but does not drop down to the retained limit.
- District court granted ICSOP summary judgment, concluding no coverage was available due to the Retained Limit Provision; the First Circuit reversed due to public‑policy concerns and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Retained Limit Provision is enforceable against public policy. | Rosciti argue Retained Limit conflicts with Bankruptcy Provision and should be overridden. | ICSOP maintains no ambiguity; Bankruptcy Provision is subject to Retained Limit and policy limits. | Retained Limit cannot be enforced; public policy overrides. |
| Does Rhode Island public policy require expanding coverage under § 27-7-2.4 despite bankruptcy? | Direct action right should reach ICSOP above $500,000 despite non-exhaustion. | Public policy does not expand coverage beyond policy terms. | Public policy supports limiting coverage to available insurance after exhaustion, not expansion. |
| Does the direct action statute void or modify the Retained Limit provisions? | § 27-7-2.4 allows recovery directly from insurer for damages up to policy limits. | Statute limits recovery to coverage available and does not override policy terms. | Statute does not void Retained Limit; but public policy requires override of Retained Limit in these facts. |
Key Cases Cited
- Amica Mut. Ins. Co. v. Streicker, 583 A.2d 550 (R.I. 1990) (ambiguities construed against insurer; direct action context discussed)
- Albany Insurance Co. v. Bengal Marine, Inc., 857 F.2d 250 (5th Cir. 1988) (insurer liable above deductible when insolvency prevents payment)
- Home Ins. Co. of Ill. v. Hooper, 229 Ill. Dec. 129, 691 N.E.2d 65 (Ill. App. 1998) (retained-limit-like provisions overridden by bankruptcy policy concerns)
- Columbia Cas. Co. v. Fed. Press Co., 104 B.R. 56 (Bankr.N.D.Ind. 1989) (retained limits defeat when insured insolvency would prevent payment)
- Pak-Mor Mfg. Co. v. Royal Surplus Lines Co., No. SA-05-CA-135-RF, 2005 WL 3487723 (W.D. Tex. 2005) (Texas approach distinguishing contract language from public policy)
- D'Amico v. Johnston Partners, 866 A.2d 1222 (R.I. 2005) (legislative intent to preserve tort victims’ rights against insolvent insureds)