Saturday, August 29, 2015

Massachusetts Appeals Court holds that ch. 93A s. 11 claim can include personal injuries and that insurer did not violate s. 11 when it did not settle verdict that was appealed

Associated Building Wreckers contracted to demolish an abandoned building adjacent to property owned by Gary Silva.  Silva operated an auto body and repair business on his property. 

During the demolition the abandoned building collapsed onto Silva's property

Silva sued Steadfast for damages to his business and property and for personal injuries.  After trial the judge awarded Silva $366,607.36 as damages on a breach of contract claim and $10,000 for personal property damage. 

The trial judge ruled in favor of Associated on Silva's other claims.

Silva appealed the rulings on some of the claims and on the amount of damages awarded.  The appeal was unsuccessful and the judgment was affirmed.

Associated then filed a motion for relief from judgment in the underlying action on the ground that the judgment failed to apply the setoff as provided by the judge in his original findings.  The motion was allowed, with the judge finding that Silva had already received insurance payments in the amount of $186,464 which would offset the award.  Judgment entered in the amount of $342,201.53, which included interest and some costs.  Steadfast paid the judgment three weeks later.

Silva sued Associated's insurer, Steadfast Insurance Company, asserting that it had violated Mass. Gen. Laws chs. 93A and 176D by failing to effectuate a prompt, fair, and equitable settlement after the original judgment in Silva's favor.

A trial court judge granted summary judgment to Steadfast, holding that  Steadfast had not violated ch. 176D because Silva rendered uncertain the amount of total liability by appealing the underlying judgment.

On appeal, in Silva v. Steadfast Ins. Co., __ N.E.3d __, 2015 WL 4661296, the Massachusetts Appeals Court first addressed whether the claim came under §9 or §11 of ch. 93A.  Section 9 claims are filed by consumers against businesses.  In most circumstances a demand letter must be sent 30 days before a §9 claim can be filed.  A violation of ch. 176D is automatically a violation of §9.

Section 11 claims are filed by businesses against businesses.  No demand letter is required.  A violation of ch. 176D is not an automatic violation of §11.

Steadfast argued that the claim came under §9 because it included a claim for both personal and business injuries.  The Massachusetts Appeals Court rejected that argument, holding that current case law does not prevent Silva, as a matter of law, from bringing suit under §11 simply because he pursued damages relating to both personal and business injuries.  Moreover, Silva, Associated, and Steadfast were all engaged in trade or commerce during the claims, incidents and transactions at issue.  Silva's business was damaged by Associated's conduct of business.  Assocaited's business was insured by Steadfast's business insurance.

The court also held that third-party claimants can bring suit under both §9 and §11. 

The court next examined whether Steadfast had failed to effectuate prompt, fair and equitable settlement of claims in which liability had become reasonably clear.  Silva's argument was based solely on Steadfast's failure to settle the claim after the original underlying verdict. 

The court held that when Silva appealed the verdict, he "open[ed] up both the scope of liability and the amount of damages."  However, because Associated did not cross-appeal, some amount of liability and damages had, at that point, been established. 

The court held that Steadfast did not as a matter of law violate ch. 93A §11.  It drew that conclusion because the amount of damages was not reasonably clear once Silva chose to appeal.  In addition, after Silva lost the appeal the amount of damages required multiple adjustments in the trial court. 

Thursday, August 27, 2015

First Circuit holds that exclusion for injury to contractors applies only to injury to insured's contractors

Benchmark contracted to renovate a house.  The homeowners had hired an architect named Thomas Huth.  Huth hired Sara Egan to apply decorative painting to one of the walls.  Egan's employee Meghan Bailey worked on that task.  She fell from a ladder positioned on top of scaffolding.

Bailey sued Benchmark, alleging that it negligently erected and maintained the ladder and scaffolding.  Benchmark sought a defense from its insurer, USLIC.

USLIC denied that it had a duty to defend, relying on an exclusion excluding coverage for bodily injury to any employee of any contractor arising out rendering services of any kind for which any insured may become liable in any capacity.

     Sidenote:  The full exclusion is actually much more complicated.  A few months ago I wrote a post about why insurance policies are impossible to understand.  This exclusion is a perfect example of a clause that starts off making sense and then rambles and wanders until you have no idea how the end of it goes with the beginning.  The court (or the attorneys) did an admirable job of distilling it down to relevant clauses. 

"Contractor" was not defined in the policy.

In U.S. Liab. Ins. Co. v. Benchmark Constr., __ F.3d __, 2015 WL 4747164, the United States Court of  Appeals for the First Circuit held that there were two ambiguities in the exclusion.

First, the court held that the phrase "bodily injury to any employee of any contractor arising out of rendering services of any kind for which any insured may become liable" was ambiguous because it is not clear whether the phrase "for which any insured may become liable" modifies "services" or "bodily injury." 

(Anyone who has diagrammed sentences would know that the phrase modifies "services."  As that art has fallen off most schools' curriculums I don't fault the court for holding that the clause is ambiguous.)

Benchmark argued that the phrase modified "services," so that the policy excludes the claims of a contractor's employee only if the contractor's employee is injured while performing services for which the insured has some responsibility.  Under that interpretation, the exclusion is limited to bodily injury to employees of contractors Benchmark hires or has some contractual responsibility to.  Benchmark therefore contended that the exclusion applies only if Benchmark retained the right to exert any control over Bailey's decorative painting services and could be accountable for liabilities arising from or related to her work. 

USLIC argued that the phrase modifies "bodily injury," so that it applies to bodily injury to any contractor, subcontractor or employee of a contractor or subcontractor injured on the job if Benchmark may become liable for that injury.  Although Benchmark had no contractual relationship with Bailey, according to USLIC the exclusion applies because she was employed by a contractor. 

The court held that because reasonably intelligent people could differ as to what the phrase modifies the exclusion is ambiguous.  Because ambiguities are interpreted in favor of the insured, it must be interpreted as Benchmark asserted.  Because Benchmark could not become liable for Bailey's decorative painting, the exclusion does not apply.

The court also held that the meaning of the word "contractor" in the exclusion is ambiguous. 

Benchmark argued that contractor means Benchmark contractors.  USLIC argued that contractor means "anyone with a contract."  Since Egan had a contract to apply decorative paint, she was a contractor under this definition.

The court held that reasonably intelligent people could differ about the meaning of the word "contractor" and therefore the word must be interpreted in favor on Benchmark.  For that additional reason, the exclusion did not apply.

Congratulations to my law school classmate and colleague Mike Sams, incidentally one of the best attorneys I have ever had on the other side of a case, who represented Benchmark. 

Monday, August 17, 2015

Appellate Division holds claimant's failure to attend IME is complete defense to PIP claim

Barron Chiropractic provided treatment to Corey Hinds after Hinds was in a car accident while operating a car owned and insured by ERAC.

Barron sought PIP payments for the treatments.  ERAC argued that it was not obligated to pay the PIP claim because Hinds failed to attend independent medical examinations scheduled by ERAC's third-party administrator.

In Barron Chiropractic & Rehabilitation, P.C. v. Enterprise Rent-A-Car Co. of Boston, Inc., 2015 WL 4619841 (Mass. App. Div.), the Massachusetts Appellate Division affirmed summary judgment for ERAC.  "Where, as here, the insured fails to submit to a request for an IME, that amounts to non-cooperation which is a complete defense.  The insurer is not required to make any payments where that condition precedent was not met."