¶ 1. Plaintiff Clifton Blake appeals the superior court’s grant of summary judgment for defendant Nationwide Insurance Company (“Nationwide”). Plaintiff argues that Nationwide had a duty to defend the insured’s employee, Clifford Riddle, in the underlying negligence action and that Nationwide’s failure to defend should estop it from asserting that injuries caused by Riddle’s negligence were not covered by the policy. Plaintiff also claims that the superior court: (1) erroneously granted Nationwide summary judgment based on the finding that plaintiff’s injuries occurred in the course of his employment; (2) made procedural errors in awarding summary judgment; (3) erroneously refused to compel Nationwide to produce its file in discovery; and (4) erroneously dismissed his count alleging that Nationwide acted in bad faith. We hold that defendant had no duty to defend and, therefore, is not estopped from denying coverage under the employment exclusion. We also hold that the court properly granted summary judgment, denied the motion to compel discovery, and dismissed the bad faith claim. We affirm.
¶ 2. Plaintiff and Clifford Riddle, both Jamaican migrant farm workers, were involved in a motor vehicle accident on July 17, 1997. Riddle was driving a truck owned by their employer, Donald Harlow, and plaintiff was a passenger in the truck when it struck a tree. 1 Plaintiff sustained severe injuries as a result. The truck was insured under a policy issued to Donald and Madeline Harlow by defendant Nationwide. The policy contains specific exclusions for “bodily injury to others for which any insured may be held liable under a workmen’s compensation, unemployment compensation, disability benefits, or similar law” and “bodily injury to an employee of any insured, while the employee is engaged in activities of employment.” As a result of his injuries, plaintiff received workers’ compensation benefits from the Harlows’ workers’ compensation insurer.
¶ 3. Plaintiff sought legal counsel to explore other waysito recover for his injuries, and on September 16, 1998, plaintiff’s counsel sent a letter to the Harlows informing them that his office would be representing plaintiff in plaintiff’s claim regarding the “work-related automobile accident,” and that they should forward the letter to both their workers’ compensation
¶ 4. On December 2, 1999, plaintiff brought suit against the Harlows and Clifford Riddle to recover for injuries sustained in the accident. Apparently the Harlows had initially sought a defense, but Nationwide denied their claim under one of the exclusions listed above. 2 In any event, plaintiff dismissed the claims against the Harlows and when Riddle did not appear, obtained a default judgment and eventually a damage award against him in the amount of $3,887,193.72. Riddle never sought a defense from Nationwide, and Nationwide provided no defense to him. Thus, Nationwide was not involved in the underlying litigation.
¶ 5. After securing the default judgment and before the assessment of damages, plaintiff notified Nationwide that it had breached its obligation to defend Riddle. Nationwide responded that the claim had been denied prior to litigation because “this policy does not cover bodily injury to an employee of any insured, while the employee is engaged in activities of employment.” Following the damage assessment, plaintiff notified Nationwide that it was obligated to pay the judgment and that he would seek punitive damages if Nationwide failed to pay. Apparently, Nationwide did not respond to this letter, and this suit ensued on March 15,2003.
¶ 6. Plaintiff’s complaint alleged that Nationwide’s policy covered Clifford Riddle as a permissive user of the Harlows’ automobile at the time of the accident. It alleged the underlying litigation and the default judgment of $3,887,193.72 and stated that “despite having ample knowledge of the claim [Nationwide] has failed to defend and/or make any payments on the judgment.” It alleged that Nationwide was obligated to pay the judgment and had acted in bad faith in not doing so. It sought the amount of the underlying judgment plus compensatory damages for Nationwide’s actions in bad faith, punitive damages, and attorneys’ fees.
¶ 7. Nationwide moved to dismiss the action for failure to state a claim because there was no privity of contract between plaintiff and Nationwide and because coverage was excluded as Riddle was acting in the course of his employment when the accident occurred. Plaintiff countered with a motion to enforce the underlying judgment, arguing that Nationwide’s failure to defend Riddle in the underlying action estopped it from defending in the instant action, In support of this motion, plaintiff attached correspondence between plaintiff’s counsel and claims adjusters for Nationwide.
¶ 8. It became clear from these initial filings that plaintiff was pursuing two theories of Nationwide’s liability. The first and primary theory was that Nationwide was obligated to pay the underlying judgment, whether or not there was coverage under the policy, because it breached its duty to defend Riddle in the underlying action without seeking a declaratory judgment on the issue of coverage. The second theory was that there was coverage under the policy because the exclusions on which Nationwide relied did not apply. The superior court denied the motion to
¶ 9. We note that the motions the court decided were plaintiff’s attempts at preemptive strikes to obtain early decisions on the merits without trial and without the factual development necessary for a trial or even a motion for summary judgment. The court could have decided that all of the claims in the motions were premature, as it did with respect to plaintiff’s second theory, but it decided to rule against
plaintiff on the merits of his main claim. Plaintiff could not complain about this disposition because he brought it on himself by filing the motion and supporting letters. Nationwide might have claimed that the motion for enforcement was really one for summary judgment because of the attached factual material, see
Lueders v. Lueders,
¶ 10. In ruling on the first theory, the superior court concluded that even if plaintiff’s estoppel theory was valid, it would not apply in this case because Nationwide had no reason to believe there was a dispute over coverage:
From Blake’s own submissions, it appears that Nationwide informed Blake of its position that his injuries were not covered because he was the insured’s employee — a plausible position, certainly — no later than April 1999. Yet, it does not appear that there was any further communication between Blake and Nationwide until April 2001, after a default judgment against Riddle had been entered. Moreover, even then, Blake provided no factual or legal explanation of why he believed the exclusion did not apply. Estoppel is an equitable doctrine, and when an insurer states a non-frivolous position regarding non-coverage, it would not be equitable to invoke estoppel because it failed to pursue a declaratory judgment, when the party disputing non-coverage did nothing to let the insurer know that a viable dispute existed and a declaratory judgment action was needed.
The court added that “we certainly do not want to encourage insurers to seek a declaratory judgment every time they deny coverage, even if there is no viable dispute.”
¶ 11. Nationwide then moved for summary judgment on the second theory, asserting that the workers’ compensation and employment-related policy exclusions to its coverage applied such that plaintiff’s injuries were not covered by the Harlows’ policy. The superior court initially denied the motion but reconsidered when Nationwide filed Donald Harlow’s affidavit, which stated that plaintiff was injured in the course of his employment with the Harlows. Nationwide argued that Harlow’s affidavit established that plaintiff was working at the time of the accident, and thus plaintiff’s injuries fell under the employment-related exclusion to the policy. Plaintiff did not produce any evidence to contest the affidavit. The superior court granted Nationwide’s motion for summary judgment on April 22, 2005, finding there was no genuine issue as to the fact that plaintiff’s injuries occurred in the scope of employment. Plaintiff appeals from the judgment and the denial of the motion to enforce. 3
We have often explained that an insurer’s duty to defend is broader than its duty to indemnify____Generally, the insurer’s duty to defend is determined by comparing the allegations in the complaint of the underlying suit to the terms of coverage in the policy____If any claims are potentially covered by the policy, the insurer has a duty to defend.
City of Burlington v. Nat’l Union Fire Ins. Co.,
¶ 13. Although in many cases the presence of a duty to defend can be determined by comparing the coverage provisions of the policy with the allegations in the complaint, this is not such a case because the relevant policy exclusions involve factual questions not covered in the complaint, namely, whether the accident occurred in the scope of employment. The insurer is entitled to independently examine whether the policy exclusions apply and deny coverage under an applicable exclusion. In doing so, it bears the risk that its coverage decision is wrong and it will be liable for a judgment in a case in which it did not participate. See
Cincinnati Ins. Co. v. Vance,
¶ 14. Plaintiff argues that it is debatable whether the policy exclusion for injury to an employee “while ... engaged in activities of employment” applies. We do not find this argument supported by the
¶ 15. Nor do we agree with plaintiff that Nationwide had a duty to seek a declaratory judgment on coverage. Plaintiff relies for this argument on Smith v. Nationwide Mutual Insurance Co., a case in
which the insurer commenced a defense but discontinued it under a cooperation clause because the insured would not allow counsel selected by insurer to appear for him in the underlying litigation.
¶ 16. This case involves the insurer’s duty to defend and not the insured’s duty to cooperate. If a declaratory judgment action were required in this case, it would be required in every case in which an insurer denied coverage, irrespective of whether the grounds were contested or even contestable. The litigation from such a rule would be significant, and virtually all of it would be unnecessary. Again, we reiterate that an insurer who refuses to defend runs the risk that it will be exposed to a default or negotiated judgment much larger than if it vigorously defended in situations where its coverage decision is found to be erroneous. Because of this risk, “preemptive suits to determine coverage obligations have become a common approach of insurers in Vermont.”
Id.
¶ 24. We see no need to turn the strong incentive to bring such an action into a mandate in all cases of denial of coverage. See
Vance,
¶ 17. For the above reasons, we conclude that Nationwide had no duty to defend Riddle in the underlying action. Because of this conclusion we do not reach two other issues raised by the parties. We do not reach Nationwide’s argument that plaintiff lacks standing to bring this action, particularly where neither the Harlows nor Riddle
sought a defense for Riddle either explicitly or impliedly.
4
We also do not
¶ 18. This brings us to plaintiff’s second theory that there is coverage for plaintiff’s injuries from the accident under Nationwide’s policy. On this theory, plaintiff argues that the court should not have granted summary judgment against him because “there are several genuine issues of material facts in dispute” and because the court committed procedural errors in ruling on the motion.
¶ 19. The superior court ruled that plaintiff could bring this direct action against Nationwide to establish coverage if he fit within 8 V.S.A. § 4203(3). That section provides that if the insured is insolvent or bankrupt, the injured party may bring a direct action against the insurer.
6
See
id.
As a result, plaintiff alleged that Riddle was insolvent. Although Nationwide
The claim that the accident occurred within the scope of employment was asserted via the fact that worker’s compensation benefits had been paid. At this time, however, the Court has available an affidavit which shows that this issue cannot be in dispute. Plaintiff has not provided the Court with any evidence to dispute the information in Mr. Harlow’s affidavit other than to argue that the worker’s compensation benefits were paid without requirement of a formal claim.
Therefore, the Court finds that the Nationwide policy’s exclusion of claims made by employees who were injured while acting within the scope of their employment applies to this case, that there is no genuine issue as to this material fact, and that Defendant is entitled to judgment as a matter of law. •
¶ 20. When reviewing a trial court’s grant of summary judgment, we apply the same standard as the trial court.
Serecky,
¶ 21. Plaintiff makes two additional arguments for why the summary judgment decision was wrong: (1) the court failed to give plaintiff a hearing before granting the motion; and (2) the court failed to render a reasoned opinion with clear findings of fact. The short answer to the first claim is that “[i]n any case, the court ... may dispose of the motion without argument.” V.R.C.P. 78(b)(2). With respect to the second claim, the function of the court in considering a motion for summary judgment is not to make findings on disputed factual issues. See
Fritzeen v. Trudell Consulting Eng’rs, Inc.,
¶ 22. Finally, plaintiff raises two additional issues. First, he argues that the court committed error by not giving him access to Nationwide’s claims file in discovery. Plaintiff sought an order to grant him access to the file after the court had ruled that he could not
enforce the default judgment against Nationwide without proving there was coverage. The court ruled that the file was irrelevant to the remaining issue of whether plaintiff was acting within the scope of his employment when the accident occurred. We agree that the grounds for the discovery order no longer existed. See
Concord Gen. Mut. Ins. Co. v. Madore,
Affirmed.
Notes
Clifford Riddle and Donald Harlow are not involved in this appeal.
The record in this case does not contain any detail of the interaction between Nationwide and the Harlows or the circumstances under which the Harlows were dismissed from the underlying litigation.
Nationwide argues that the scope of this appeal should be limited to issues raised in the summary judgment decision of April 22, 2005, because V.R.A.P. 3(d) requires an appellant to “designate the judgment, order, or part thereof appealed from,” and plaintiff designated only the summary judgment entry and not earlier decisions or the final judgment. We have stated that “[c]ourts liberally construe the requirements of Rule 3.”
In re Shantee Point, Inc.,
Although the Harlows may have sought a defense for themselves at one time in the underlying litigation, there is no indication that they contested Nationwide’s refusal to provide one.
Many of the cases plaintiff relies on to support his estoppel argument are inapplicable because they involve disputes where the insured brought suit against the insurer for failure to defend, and thus standing was not at issue. E.g.,
Amato v. Mercury Cas. Co.,
We also note a split in the ease law over whether the insured must seek a defense to invoke the duty to defend. Compare
Cincinnati Cos. v. W. Am. Ins. Co.,
While some states have adopted the rule that equitable estoppel bars an insurer from later arguing questions of coverage where the insurer failed to defend the insured or seek a declaration regarding coverage in the underlying lawsuit, see, e.g.,
Joslyn Mfg. Co. v. Liberty Mut. Ins. Co.,
Plaintiff raises the issue that the superior court should have found Riddle insolvent as a matter of law and ruled that § 4203(3) authorizes this direct action by the injured party against the insurer. In view of our disposition, we do not reach this issue.