Monday, November 30, 2009

Superior Court declines to interpret against insurer policy language that was not part of preprinted form

In Dulac v. Chicago Title Ins. Co., 2009 WL 3838999 (Mass. Super.), the owner of a two-family home sued his title insurer for declining coverage when a prospective buyer backed out of the sale because of a perceived defect in the title.

The policy included an exclusion with an exception that stated:

Exception for Notice of Land Court Petition recorded with the Worcester Registry of Deeds at Book 13029, Page 124. Note: This policy affirmatively insures against loss or damage as a result of the attempted assertion of paramount title due to any matter set forth in said petition.

The insured attached to the complaint an opinion by a land court examiner which identified a likely defect in the title. At issue was whether that opinion came within the exception.

Judge Kaplan held that the exclusion was ambiguous. However, he declined to interpret it against the insurer and held that a question of fact existed as to what the parties understood the exclusion to mean at the time the policy issued. He wrote:

Although an ambiguity is generally construed against an insurer, this exclusion is not part of a preprinted form and it is possible that Dulac [the insured] understood the exclusion in the manner that Chicago Title now explains it

Tuesday, November 24, 2009

Superior Court holds that Massachusetts Insurance Insolvency Fund must apply separate caps to loss of consortium claims

In Massachusetts Insurers Insolvency Fund v. Smith, 2009 WL 3199209 (Mass. Super.), Judge Fabricant of the Superior Court held that separate limits apply to a main claimant and claimants seeking coverage for loss of consortium from the Massachusetts Insurers Insolvency Fund.

The Fund is an entity created by statute that pays claims on behalf of insolvent insurance companies; but by statute it pays "only that amount of each covered claim which . . . is less than three hundred thousand dollars."

Mason was a medical provider who had malpractice insurance with an insurer that is now insolvent. His policy had a coverage limit of $1,000,000.

Mason was sued by a patient for physical injury and by the patient's family members for loss of consortium. The Fund argued that the aggregate amount it could pay to all of the claimants--the patient and the family members--was $300,000. The claimants argued that the $300,000 cap applied to each of their claims individually.

Judge Fabricant noted that no Massachusetts appellate decision has addressed this question and that the Superior Court and extra-jurisdictional decisions are split. She held, based on the language of the original policy and the statute enabling the fund, that the fund must pay up to $299,999 on each separate claim.

Thursday, November 19, 2009

Superior Court holds that insurance on antique car is subject to provisions of another policy with respect to underinsured motorist benefits

In Boulette v. Safety Ins. Co., plaintiff Scott Boulette was involved in an accident while driving a car owned by his employer and insured by Safety Insurance Company. The other driver was insured by Premier Insurance Company. When the damages exceeded the Premier policy limits, Boulette applied for underinsurance benefits from Safety.

Boulette owned an antique Chevrolet Corvair on which he had insurance from Metropolitan. Boulette purchased the Metropolitan coverage solely so that the Corvair could be registered as an antique and towed to his new residence. He included in his coverage optional bodily injury and medpay benefits, but not optional underinsurance coverage.

Safety denied Boulette's claim for underinsurance benefits because of a policy provision stating, "We will not pay damages to or for anyone else who has a Massaschusetts auto policy of his or her own . . . "

Boulette contended that he could not reasonably be expected to look for underinsurance benefits from a policy covering an inoperable antique car, although he apparently did have the option of purchasing underinsurance benefits from that policy and chose not to do so.

Judge Lemire of the Superior Court agreed with Safety, holding that the plain language of its policy precluded Boulette from recovering underinsurance benefits from it.

Monday, November 16, 2009

A case only insurance coverage attorneys could love

In Mass. Care Self-Ins. Group, Inc. v. Mass. Insurers Insolvency Fund the Superior Court ruled on the interplay between Mass. Gen. Laws ch. 152 § 25A, which allows employers to form worker's compensation self-insurance groups, and Mass. Gen. Laws ch. 175D, which creates a fund which provides insurance benefits when an insurer that would otherwise provide coverage has become insolvent.

A worker's compensation self-insurance group provided coverage up to a self-insured retention limit to an injured employee of one of its members. The group had an excess carrier over the SIR that had become insolvent. When the damages paid to the injured employee exceeded the SIR, the group sought coverage from the fund.

At issue was whether the worker's compensation self-insurance group was an insurer, in which case pursuant to ch. 175D there would be no coverage from the fund because the fund does cover any claim due to an insurer.

After a thorough review of both statutes and relevant case law, the court concluded that the self-insurance group is an insurer, so that the fund did not provide coverage.

Thursday, November 12, 2009

Massachusetts federal district court holds that physical damage is required for coverage for "direct physical loss"

In Tocci Bldg. Corp. v. Zurch Am. Ins. Co., 2009 WL 3182858 (D. Mass.), Tocci was the general contractor on a hotel construction job that included a large retaining wall. A small part of the retaining wall was damaged during a heavy rainstorm.

On June 9, 2000 the town in which the project was located issued a stop work order and declared the wall unsafe as a result of the damage from the storm. In early August the town gave Tocci permission to repair the damaged section of the wall. The repairs took less than a week.

In the meantime the town concluded that the wall had not been built in accordance with the approved plans and notified Tocci that the wall need to be demolished and reconstructed. Tocci disagreed. In November, 2000, the town agreed to permit the hotel to open if Tocci would grout the entire wall. Tocci agreed only in order to prevent further delays. Tocci then sought coverage from a builders risk policy for the cost of grouting.

The policy provided coverage for "RISKS OF DIRECT PHYSICAL 'LOSS'". "Loss" was defined as "accidental loss or damage."

The United States District Court for the District of Massachusetts held that the grouting was not a covered loss because the need for it did not stem from "direct physical loss or damage" to the wall.

The insureds argued that the storm was "covered cause of loss" because it created a "risk of direct physical loss," and that physical damage was not otherwise required by the policy. The court disagreed:

It is true that the only express reference to "physical" damage is found in the definition of "Covered Causes of Loss" which, as quoted above, "means RISK OF DIRECT PHYSICAL 'LOSS'. . ." However, it would make no sense to cover an event which creates a risk of physical damage if physical damage was not a triggering event for coverage. Moreover, "loss" is expressly defined as "accidental loss or damage." It is impossible to read the insurance policy as providing coverage for "risk" in the absence of a "damage." Since it is undisputed that the grouting was not required due to damage to the retaining wall, there was no loss and hence no coverage.

Tuesday, November 10, 2009

Massachusetts Appeals Court interprets insurance requirement in construction subcontract

In RCS Group, Inc. v. Lamonica Constr., Inc., 75 Mass. App. Ct. 613 (2009), the Massachusetts Appeals Court interpreted an insurance requirement in a construction contract between general contractor RCS and subcontractor Lamonica. The contract required that

[Lamonica] shall maintain, at its own cost, such insurance as will protect it and [RCS] from . . . any claim for bodily injury, including death, and whether such [w]ork or performance are by [Lamonica] or any of [its] subcontractors or any one directly or indirectly employed by [it] . . .

Lamonica obtained insurance but did not include RCS Group as an additional insured on its policy. When an employee of Lamonica's was injured and sued RCS, RCS sued Lamonica for breach of contract.

The court held that the insurance provision did not require that Lamonica name RCS as an additional insured on its insurance policy, on the grounds that the provision was ambiguous and must be interpreted against RCS as the drafter of the contract.

The court noted that the insurance clause followed an indemnity provision in the subcontract that the court had previously ruled unenforceable. The court stated:

Had the indemnification provision been valid, as the parties intended, then liability insurance purchased in Lamonica's own name would have "protected" RCS Group fully so long as it covered Lamonica's indemnification obligations (as the insurance contract purchased by Lamonica in fact did). When examined in this context, the parties easily could have viewed the insurance policy that Lamonica purchased as one that would "protect" RCS Group, even though the policy did not include RCS Group as an additional insured.

Friday, November 6, 2009

U.S. District Court dodges question of whether insured can cure breach of duty to cooperate

In Miles v. Great Northern Ins. Co., 2009 WL 2998529 (D. Mass.), the insureds sought first-person coverage for fire damage. The insurer denied the claim on the ground the insureds had breached their duty to cooperate.

In a motion for summary judgment the insureds argued that although they initially did breach that duty, they cured the breach by later providing the requested documents.

The United States District Court for the District of Massachusetts noted that there is no controlling Massachusetts caselaw on whether a breach of the duty to cooperate can be cured prior to a court ruling that the insureds breached the duty (when it is clearly to late to cure).

The court chose not to rule on that question of law, holding instead that whether the insurer had suffered prejudice as a result of the insureds' initial breach was a question of fact.