Williams & Son installed and serviced an oil tank in Shirley Gilbody's house. After an oil spill, Bunker Hill Insurance Company, Gilbody's homeowner's insurer, paid for full remediation of the property.
Bunker Hill then sought reimbursement for the loss twice. First, it sought reimbursement directly from International Insurance Company of Hannover. Hannover was Williams' insurer, and its policy listed Gilbody's house as an insured location. Because Gilbody's house was an insured location, Gilbody was essentially entitled to bring a first party claim for property damage under the policy regardless of whether Williams was negligent. Since the house was an insured location under both the Bunker Hill policy and the Hannover policy, a court applied an "other insurance" analysis and determined that the loss must be split equally between the two insurers. Hannover reimbursed Bunker Hill for fifty percent of what Bunker Hill had had paid.
Bunker Hill then sought reimbursement a second time by bringing a subrogation action against Williams. That means that Bunker Hill exercised its right under the policy it issued to Gilbody to stand in her shoes and sue Williams for damages caused by its negligence, up to the amount Bunker Hill had paid Gilbody. In other words, it brought a third party claim against Williams.
A jury rendered a verdict in the full amount that Bunker Hill had originally paid Gilbody. Williams moved to offset the amount that Bunker Hill had already been reimbursed by Hannover. The Massachusetts Superior Court denied the motion, holding that the payment Hannover had made was from a source collateral to the judgment in the negligence action, because the payment had been pursuant to coverage in the Hannover policy under which Gilbody's house was an insured location (first party coverage), not under negligence coverage for Williams (third party coverage).
In Bunker Hill Ins. Co. v. G.A. Williams & Sons, __ N.E.3d __, 2018 WL 6544124 (Mass. App. Ct.), the Massachusetts Appeals Court overturned the Superior Court decision and held that an offset was required. Although the court used a fairly complicated analysis, the ruling boiled down to the common sense idea that Hannover should not have to pay the same loss twice (or one and one half times), and Bunker Hill should not get a windfall, simply because Williams had had the foresight and business sense to list Gilbody's house as an insured location on the Hannover policy. In more technical terms, the first payment from Hannover was not a collateral source payment with respect to the tort judgment against Williams; it was from the same source as the tort payment would come from.
See the comments section on this post for a different take on this case.
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1 comment:
I received the following well-taken comment from Craig Stanovich, Principal Consultant with Austin & Stanovich Risk Managers LLC:
Thank you for your blog regarding the above case. I read your blog, and then the actual opinion (thanks for the link).
For what it is worth, it seems to me that the Court made a mess of this matter at very start. The policy purchased by Williams through Hannover Insurance should never, in my view, have been considered “other insurance” relative to the Bunker Hill policy.
As a general matter, “other insurance” exists only when two or more policies protect the same insured for the same risk.
While not explicitly stated, Bunker Hill’s argument for collateral source was based on flawed reasoning that the Hannover policy protected Gilbody as an insured.
“…that the payment to it from Hannover on the declaratory judgment was made pursuant to the remediation coverage in Williams's insurance policy that insured Gilbody and, therefore, was a payment from a source collateral to the judgment in the negligence action against Williams.” [italics added]
The Appeals court decision, determining that the Hannover policy was not a collateral source, rests on its observation that Hannover policy was not for the protection of Gilbody – the very definition of an insured.
“The benefit received by Bunker Hill on behalf of Gilbody was not from a policy purchased by her for her own protection. See id. (defendant is "not to benefit from . . . contractual arrangements of the injured party with insurers"). Rather, it came from a policy purchased by the tortfeasor, Williams.”
Had the original ruling found that the Hannover policy was not “other insurance,” but rather a liability policy protecting Williams for its liability (even if that liability is for the strict liability imposed by 21E, it is nonetheless liability imposed on Williams) to Gilbody, then the subrogation action by Bunker Hill would have proceeded and Bunker Hill would have recovered the entire amount of its payment ($262,000) in subrogation.
No dispute as whether Bunker Hill could recover more in subrogation than it paid to Gilbody because the Hannover policy was a collateral source would have arisen.
Any thoughts you may wish to share are invited.
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