Tort and Insurance Law Update – Part Two

Tort and Insurance Law Update – Part Two

The Home Ins. Co. v. Liberty Mutual Fire Ins. Co.
444 Mass. 599 (2005)

Insurance; Workers’ Compensation; 93A

[Employee leasing company’s workers’ compensation carrier had no duty to defend the lessee company against claims brought by injured employee, because lessee company was not a named insured on the leasing company’s workers’ compensation policy.]

Able Leasing Company, Inc. leased employee Carmelo Mercado to Pure Tech SPP, Inc. Mercado sustained injuries related to his employment while leased to Pure Tech. Mercado filed a workers’ compensation claim against Able and received compensation for his injuries through Able’s workers’ compensation insurer, Liberty Mutual. Mercado also filed a third-party action against Pure Tech, alleging negligence caused him to be injured by machinery at Pure Tech. Pure Tech’s comprehensive general liability insurer, Home Insurance, defended that action. Pure Tech settled the matter with Mercado for $850,000; some of the settlement recovery was used to satisfy Liberty ‘s lien for reimbursement of the workers’ compensation benefits. Prior to the settlement, Home demanded Liberty assume full responsibility for the defense and indemnification of Pure Tech in the Mercado matter. Liberty never responded to the letter, an action for declaratory judgment was later filed, and both parties moved for summary judgment. The motion judge granted summary judgment in favor of Liberty .

The Liberty workers’ compensation master policy named Able as the sole insured. The policy provided two kinds of coverage: Part One provided standard workers’ compensation insurance; Part Two, under which Home asserted its claims, provided employers liability coverage. In compliance with 211 Code Mass. Regs. §111.04, for each of Able’s Massachusetts clients, Liberty issued a separate policy to Able, where the named insured was “Able Leasing Company, Inc. [Leasing Company For] Pure Tech of Massachusetts.”

The SJC affirmed on different grounds the Superior Court granting of summary judgment to Liberty . The question before the SJC was whether Pure Tech was insured against Mercado’s independent tort claim under any Liberty policy, because, as Pure Tech argued, it was a “special employer” or “dual employer” of Mercado. The SJC held that Pure Tech was not covered by any Liberty policy because it was not a named insured and that the Liberty policy specifically excluded liability assumed under contract. Thus, Liberty had no liability to defend Pure Tech nor to indemnify Home for the expenses it incurred in settling the Mercado tort litigation; and Home was liable, as Pure Tech’s comprehensive general liability carrier, for claims brought by a leased employee. Because Pure Tech was not entitled to defense or indemnification from Liberty; Home’s assertion of 93A claim against Liberty failed.

Eck v. Godbout
444 Mass. 724 (2005)

Legal Malpractice; Release

[Where a general broadly worded release provision is followed by a narrow release provision specific to a certain transaction, and the two provisions are connected wit the term “and”, the second narrow provision does not limit the scope of the broad provision and the release applies to all future claims, including those not contemplated at the time the release was executed.]

Attorney Kellem represented Eck in two real estate transactions. The first transaction was in Norwood , where Eck requested the purchase and sale agreement include language protecting Eck from any claims brought against him by the purchaser as a result of hazardous waste on the property. Kellem assured Eck the purchase and sale agreement would protect him from any such claims. The second transaction was in Hull . Two years after the Hull transaction, Eck brought a legal malpractice action against Kellem in connection with the Hull transaction; Eck was represented by Attorney Godbout in that suit. While the legal malpractice action was pending, the Norwood purchaser sued Eck over the environmental hazards on the Norwood property. The legal malpractice action was settled, and a release with two operative provisions was executed. The first provision released Kellem from “all debts, demands, and liabilities whatsoever of every name and nature… which against [Kellem] I now have or ever had… ” The second provision released Kellem from claims specific to the Hull transaction. Some time after the release was executed, the trial regarding the Norwood property took place and Eck was found liable. Thereafter, Eck filed a second malpractice action against Kellem in connection with his failure to draft the purchase and sale agreement in a manner that would provide protection against environmental claims. In the same suit, Eck asserted claims against Godbout for legal malpractice. Kellem moved for summary judgment, arguing that the release executed by Eck was a general release that operated to release all claims, including claims in connection with the Norwood transaction. The trial court granted summary judgment in favor of Kellem. The Appeals Court reversed, finding that release was limited to Hull transaction.

The issue before the SJC was whether the language in the release specifically referencing the Hull transaction and Hull malpractice suite operated to limit the scope of the broadly worded release that preceeded it. A release may be prompted by settlement of a specific dispute, but broad wording in the release operates to settle all other, unrelated matters, even if they were not specifically in the parties’ minds at the time the release was executed. The court noted that the present release contained the broad release language, followed by the conjunctive “and”, and then followed by release language specific to the Hull transaction. The SJC held that the present release was a general release that released all claims against Kellem, including but not limited to the specific claim identified. The fact that a release as worded extends to matters that the parties did not specifically have in mind at the time of execution does not operate to exclude those matters from the scope of the release, and does not render the release a “mistake” in terms of contract enforcement. Eck’s claim against Kellem was barred by terms of release and summary judgment was granted in favor of Kellem.

In the Matter of Grabowski
444 Mass. 715 (2005)

Statute of Limitations; Lead Poisoning; Negligence

[Justice and equity required that plaintiff be allowed to bring claim against estate after one year statute of limitations expired, under G.L. c. 197, § 10; the SJC found no culpable neglect in plaintiff’s failure to file the claim within one year.]

Minor Rochette lived in an apartment leased by his mother from Grabowski, where he suffered lead poisoning. The premises was inspected and determined to contain lead paint hazards in violation of State law and the premises were ordered to be de-leaded by December 1998. The premises was not de-leaded until October 1999. Grabowski died on June 30, 2002. Plaintiff’s attorney sent a demand letter to decedent’s attorney on December 19, 2002. Decedent’s attorney responded with a letter on February 18, 2003 stating that she would be the estate’s administratrix and that once this appointment was made, she would negotiate with plaintiffs to settle the claim. There was no further communication between the attorneys until September 2003. No complaint was filed before the June 30, 2003 statute of limitations period ended. Plaintiff’s attorney sent letters to administratrix in July and September 2003. Notably, the insurance policy for the premises contained a lead paint exclusion, thus precluding a remedy under G.L. c. 197, § 9A. Rochette filed a claim against the Estate of Grabowski on November 21, 2003, after the one-year statute of limitations expired under G.L. c. 197, § 9, arguing that pursuant to G.L. c. 197, § 13, because he was a minor, the statute of limitations was tolled. The probate court judge granted the administratrix’s motion to dismiss.

The SJC reversed. G.L. c. 197, § 10 is a remedy that allows one to bring a claim against an estate after the one year statute of limitations passed if justice and equity require it and if the failure to bring the claim was not based on carelessness or lack of diligence. The SJC determined that this was a meritorious claim that justice and equity required it to recognize because: (1) the premises was in violation of State law; (2) the plaintiff’s attorney made a demand and the defendant’s attorney promised she would negotiate to settle the claim; (3) the administratrix did not file her petition for administration until April 2003; and (4) there is no insurance to cover the plaintiff’s injuries. The SJC also concluded that there was no culpable neglect on the part of the plaintiff because: (1) plaintiff is a minor who suffered lead poisoning, a condition covered by a statute with strict liability; (2) he is dependent on his mother to take appropriate action; (3) there is no insurance available for his injuries; (4) there is no evidence the mother did not act in good faith; (5) the estate was on notice that of plaintiff’s claim; and (6) administratrix promised she would negotiate to settle the claim. It was understandable for the attorney to assume that G.L. c. 260, § 7 tolled the statute of limitations, thereby allowing the claim under G.L. c. 197, § 13. Under these circumstances, it would be unjust to charge the plaintiff with culpable neglect.

Bailey v. Cataldo Ambulance Service, Inc.,
64 Mass. App. Ct. 228 (2005)

Expert Opinion; Certified Medical Records (G.L. c. 233, § 79G)

[Properly certified medical records were sufficient to establish medical causation, even in the absence of live medical testimony, in this auto accident case.]

Plaintiffs were injured in a rear-end collision caused by the negligence of an ambulance driver. In fact, the negligence was stipulated. The plaintiffs, who were the occupants of the car which was struck, both suffered soft tissue cervical spine injuries (“whiplash”) which resulted in prolonged medical treatment and persistent symptoms. At trial, plaintiff offered medical records, properly certified pursuant to G.L. c. 233, § 79G, as to the extent of the injuries as well as their causation. To varying degrees, the treating physicians related the injuries to the auto accident, though none of them used the “magic words” of “to a reasonable degree of medical certainty.” The defendants vigorously objected to the lack of live medical witnesses at trial, but their objections were overruled, and the matter was submitted to the jury, who ruled in plaintiffs’ favor. Defendants appealed on the single issue of the sufficiency of the medical evidence.

The Appeals Court affirmed the verdict. Citing the plain language of the statute, the court ruled that it was proper for the judge to submit the question of causation to the jury based upon the certified medical reports. The court was not troubled by the lack of “magic words” (their quotes), citing several cases in which an explicit statement of causation using the phrase “to a reasonable degree of medical certainty” was not required. The court also noted that the chain of causation in this case was a rather simple one, comparing it to cases where medical experts might not be required. Note that the court did leave the door open a crack with regard to objections in more complex cases of causation. But such cases (the example was an automobile products defects case) would likely have testifying experts in any case. The case reaffirms the intent and mechanics of G.L. c. 233, § 79G and nicely summarizes the related case law.

Dragonas v. School Committee of Melrose ,
64 Mass. App. Ct. 429 (2005)

Defamation; Conditional Privilege

[Summary judgment was not appropriate in case where facts were in dispute on defamatory remarks, and where facts were in dispute as to whether conditional privilege had been lost.]

Plaintiff was a foreign language teacher long employed by the town of Melrose . She held administrative titles, and she had been the founder of a foreign student exchange program which she supervised and which she chaperoned each year. Questions were raised by school principal about her management of the exchange program and her behavior while abroad. During the time in question, the principal held a meeting with parents of students who expected to take the spring trip to Germany , at which meeting he reportedly made disparaging remarks about the teacher. In addition, her position as department head was not renewed. She was urged to take a retirement offer by the school superintendent. She was seventy years old. After her post as department head was given to another applicant, one much younger, the teacher sued. In addition to her discrimination claim, she brought claims for defamation. Summary judgment was granted in favor of the defendants and the teacher appealed.

The Appeals Court reversed. The court found that the question of whether the remarks made to the parents were defamatory was a question of fact, but viewed in the light most favorable to the plaintiff, the remarks could be considered defamatory. Similarly, a question of fact remained on the abuse of the principal’s conditional privilege. Although the principal had a conditional privilege to share potentially defamatory information about the teacher, the condition could be lost if the information were false; if he had no reason to believe the information was true; or if the information was published unnecessarily, unreasonably or excessively. The court also reversed the summary judgment on the discrimination claims. The matter was remanded for trial.

Ortiz v. North Amherst Auto Rental, Inc.
64 Mass. App. Ct. 499 (2005)

Negligent Entrustment of Automobile

[Car rental agency could not be liable for negligent entrustment where it had checked foreign driver ID card but was without knowledge of actual status of foreign driver’s license.]

Plaintiff was injured in an automobile accident. The case was settled with the negligent driver who was driving a rented vehicle. The plaintiff pursued the car rental agency, which had rented the car to the foreign student after checking his Zimbabwe international driving permit (IDP) but not his actual driver’s license. The verdict was for the plaintiff on the negligent entrustment counts, and the agency appealed.

The Appeals Court reversed. Under international conventions, the IDP is evidence that the holder has a valid driver’s license in his or her country. Despite statutory language in G.L. c 90, § 32C requiring a lessor of motor vehicles to confirm that the operator is duly licensed, the IDP was sufficient proof even without the showing of the actual license. Since the rental agency had no other knowledge that the driver was incompetent, there was no liability.

Siegel v. Berkshire Life Insurance Company
64 Mass. App. Ct. 68 (2005)

93A; Attorney’s Fees

[If a c. 93A violation forces person to incur legal fees and expenses to vindicate her rights, then those costs can form the basis for multiple damages; the proper method for calculating fees is the lodestar method.]

The case arose from the misconduct of the insurance company, which had issued life insurance policies to the plaintiff’s husband. The company attempted to rescind the policies. Creditors had brought suit seeking an assignment of the plaintiff’s policy. The insurance company also failed to send her premium notices and encouraged the creditors’ lawsuit through certain misrepresentations. The plaintiff was forced to intervene in the creditors’ suit to protect her rights in the policy and incurred legal expenses and costs as a result. She prevailed in the underlying case protecting her rights in the policy, and in the c. 93A case, she prevailed in her claims that the insurer had committed unfair and deceptive acts. The only award to her was the attorney’s fee pursuant to G.L. c. 93A, § 9. Both parties appealed.

The Appeals Court affirmed in part. The court affirmed that the plaintiff, as an intervenor in the underlying suit, was not required to send a demand letter before making claims under c. 93A because her claims were cross claims, which are exempted from the demand letter requirements. The fact that she was required to intervene to protect her rights was sufficient “injury” to her for the act to allow damages. The attorney’s fees and costs she incurred defending in the underlying suit could serve as the basis for her multiple damages in the subsequent c. 93A case. The proper method of fee calculation is the lodestar method, which involves multiplying the number of hours reasonably spent times a reasonable hourly rate. The matter was remanded for further findings on the questions of damages and attorney’s fees.

Pritzky v. Safety Insurance Company
64 Mass. App. Ct. 751 (2005)

Underinsured Motorist Coverage

[Claimants injured in automobile accident were entitled to arbitration of underinsured motorist claim even when settlement of underlying claim did not exhaust the tortfeasor’s insurance coverage.]

Three claimants were injured in an automobile accident. As passengers, they were entitled to make underinsured motorist claims against the vehicle they were riding in. The claimants settled with the tortfeasor, whose policy was $20,000/$40,000. The claimants accepted a total of $38,000. Their case seeking an order for arbitration was dismissed after the trial court judge ruled that the claimants had failed to exhaust the underlying policy, and therefore had forfeited their underinsured motorist claim. The claimants appealed.

The Appeals Court reversed. At most, the defendant insurer was entitled to a credit of the $2,000 which the claimants failed to collect from the tortfeasor’s carrier. The claimants were, however, clearly entitled to the arbitration of the underinsured motorist claims.

Quinton v. Gavin
64 Mass. App. Ct. 792 (2005)

G.L. c. 93A, Professional Trustee

[Accountant who worked as trustee was liable under G.L. c. 93A for his unfair and deceptive acts.]

The defendant account had established approximately fifty individual trusts, which he then used largely for his own personal gain, loaning himself, his sons, and his associates money from the trusts at below market rates. He depleted trust assets, kept shoddy books, and otherwise engaged in an extensive scheme of deceit and plunder. At trial, the judge found in favor of all the plaintiffs, and awarded multiple damages against the trustee. He also awarded restitution damages to the trust based upon commercial loan rates of twelve per cent. The defendant appealed.

The Appeals Court affirmed, emphatically. The court rejected the defendant’s contention that as a trustee, he should be exempt from c. 93A claims. The court easily distinguished two trustee cases which involved business partners, and pointed out that the defendant here was certainly engaged in trade or commerce, and like other professionals such as physicians, lawyers, and stock brokers, he should be within reach of the protection afforded by c. 93A. (In fact, the court found he was rather a textbook example of who the act was intended to protect consumers from.) The damages calculations of the trial judge were affirmed as well, since the findings were supported by the evidence, since the judge was entitled to find the credibility of the defendant lacking, and since the findings were not clearly erroneous.

Choquette v. Isacoff
65 Mass. App. Ct. 1 (2005)

Legal Malpractice; In Pari Delicto

[Doctrine of in pari delicto barred claims against attorney for legal malpractice.]

Plaintiff was seeking to avoid judicial sale of his property to satisfy judgments when he went to the defendant for legal advice. A bankruptcy case was filed, which stayed pending legal actions. In the bankruptcy proceeding, the plaintiff failed to list all of his assets and his income. After pointing out the mistakes in the filings, which were signed under the pains and penalties of perjury, his attorney, the defendant, urged that no corrections were necessary. Later, while testifying under oath in the bankruptcy proceedings, the plaintiff lied about his assets and income. His lies were later uncovered, and penalties ensued, including the non-dischargability of the debts. Plaintiff sued his attorney for malpractice. In his defense, the attorney claimed that the plaintiff was in pari delicto, as he had committed perjury in the bankruptcy case. On the defendant’s motion for summary judgment, the case dismissed. The plaintiff appealed.

The Appeals Court affirmed. The court enforced the well established rule that relief will not be afforded to those who are in pari delicto. The doctrine had never been applied to a legal malpractice case before in Massachusetts , but courts in other jurisdictions had followed the rule. There was no reason to apply any exception to the rule. If the defendant was to face sanctions for his conduct, it would be through disciplinary action.

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