Desrosiers v. Royal Ins. Co. of America

• Citation: 468 N.E.2d 625,393 Mass. 37
• Parties: John DESROSIERS et al. 1 v. ROYAL INSURANCE COMPANY OF AMERICA.
• Decision Date: 17 September 1984
• Court: United States State Supreme Judicial Court of Massachusetts

Page 625

468 N.E.2d 625

393 Mass. 37

John DESROSIERS et al. ¹ v. ROYAL INSURANCE COMPANY OF AMERICA.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued April 4, 1984.

Decided Sept. 17, 1984.

Robert A. Curley, Jr., Boston, for defendant.

Susan C. Mormino, Cambridge, for John Desrosiers.

Before HENNESSEY, C.J., and WILKINS, LIACOS and O'CONNOR, JJ.

O'CONNOR, Justice.

This is an appeal from a judgment in the Superior Court declaring that the defendant insurer has a duty to defend and indemnify the plaintiff Desrosiers against liability with respect to certain pending tort actions alleging bodily injuries as a result of Desrosiers' negligent operation of a motor vehicle. We reverse.

The plaintiffs in the underlying tort actions, interveners here, alleged in those actions that they were aboard a motor vehicle that was owned by John M. Condon and was operated negligently by his employee, Desrosiers, with the result that a paving machine being transported by the vehicle shifted and injured them. The motor vehicle referred to in the complaints was a tractor-trailer unit. As alleged in the tort actions, the tractor was owned by Condon and was operated by his employee, Desrosiers. The tractor was insured by Continental Insurance Company and not by the defendant, Royal Insurance Company of America (Royal). The trailer was owned by Essex Bituminous Concrete Corp. (Essex), and was insured by Royal. The tractor was hired by Essex. The plaintiffs in the tort actions were employees of Essex, and they were occupants of the trailer carrying the paving machine that allegedly shifted and injured them. They received workmen's compensation benefits on account of their injuries from the workmen's compensation carrier for Essex.

Several provisions in Royal's policy are relevant to this dispute. One such provision is entitled "Coverage A--Division 1--Bodily Injury Liability--Statutory--The Commonwealth of Massachusetts--(This Coverage is Compulsory)." The provision states: "The company will pay on behalf of the insured, in accordance with the 'Massachusetts Compulsory Automobile Liability Security Act,' Chapter 346 of the Acts of 1925 of the Commonwealth of Massachusetts and all Acts amendatory thereof or supplementary thereto, all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages to others for bodily injury ... sustained by any person or persons during the policy period ... and caused by the ownership, operation, maintenance, control or use of the insured motor vehicle upon the ways of the Commonwealth of Massachusetts ...." The policy also provides with respect to division 1 of coverage A that the company will defend any suit against the insured seeking damages payable under the policy. It is further provided that "[w]ith respect to the insurance under division 1 of coverage A, the unqualified word 'insured' includes the named insured and also includes any other person responsible for the operation of the insured motor vehicle with the express or implied consent of the named insured." Essex is the named insured and Desrosiers is a so called "omnibus" insured under Royal's policy. Desrosiers was an omnibus insured because, as the driver of the tractor-trailer unit, he was responsible for the operation of the insured motor vehicle, the trailer, with the consent of Essex. Royal does not contend otherwise.

Although Royal acknowledges that Desrosiers qualifies as an insured with respect to division 1 of coverage A, it has declined to provide a defense or coverage to Desrosiers thereunder on the ground that exclusion (2) provides that the policy does not apply "under division 1 of coverage A, to bodily injury to ... any employee of the insured who is entitled to payments or benefits under the provisions of the Massachusetts Workers' Compensation Act." Royal says that by policy definition the word "insured" includes the named insured and anyone operating the insured vehicle with the named insured's consent. Thus, says Royal, the word "insured" in exclusion (2) includes Essex and Desrosiers, and since Sims, Tirabassi, and DePina were employees of Essex entitled to workmen's compensation benefits, the policy does not apply under division 1 of coverage A and Desrosiers is not entitled to coverage.

Desrosiers' answer to Royal's contention is that the policy provides that "[e]xcept with respect to division 2 [which is not involved here] of coverage A, the insurance applies separately to each insured against whom claim is made or suit is brought." Desrosiers says that by virtue of that severability of interests provision it is as though a separate policy were issued to each of the insured parties naming that party as the one and only insured. The word "insured" in exclusion (2), therefore, refers only to the party who qualifies as an insured and is seeking coverage. That would be Desrosiers in this case, and since the injured claimants were not Desrosiers' employees, Desrosiers argues, the exclusion does not apply and division 1 of coverage A does apply.

The complaints in the tort actions against Desrosiers do not mention the trailer owned by Essex or that Essex or any employee of Essex was involved in the incident which resulted in injuries to those plaintiffs. However, the obligation of the insurer to defend is based not only on the facts alleged in the complaints but also on the facts that are known or readily knowable by the insurer. Terrio v. McDonough, 16 Mass.App.Ct. 163, 167, 450 N.E.2d 190 (1983). Royal provides coverage here under division 1 of coverage A unless exclusion (2) applies. Whether the exclusion applies depends on the definition of the word "insured" in that provision.

There is considerable force in Desrosiers' argument that unless the meaning of the word "insured" in exclusion (2) is limited to the one insured that is seeking coverage, the severability of interests provision is meaningless. Royal does not satisfactorily demonstrate what other purpose that provision would serve. Furthermore, this court and courts in other jurisdictions have interpreted severability of interests provisions in the manner urged by Desrosiers. See Ratner v. Canadian Universal Ins. Co., 359 Mass. 375, 269 N.E.2d 227 (1971); Diamond Int'l Corp. v. Allstate Ins. Co., 712 F.2d 1498 (1st Cir.1983); Shelby Mut. Ins. Co. v. Schuitema, 183 So.2d 571 (Fla.Dist.Ct.App.1966), aff'd per curiam, 193 So.2d 435 (Fla.1967); Pennsylvania Nat'l Mut. Casualty Ins. Co. v. Bierman, 266 Md. 420, 292 A.2d 674 (1972); Liberty Mut. Ins. Co. v. Iowa Nat'l Mut. Ins. Co., 186 Neb. 115, 181 N.W.2d 247 (1970); Bankers & Shippers Ins. Co. v. Watson, 216 Va. 807, 224 S.E.2d 312 (1976).

Despite the cogency of Desrosiers' arguments, and despite the decided cases that have been brought to our attention, we conclude that the word "insured" in exclusion (2) includes Essex as well as Desrosiers, regardless of which of them is seeking coverage, so that Desrosiers is not entitled under division 1 of coverage A to a defense or indemnity with respect to the claims of Sims, Tirabassi, and DePina. None of the cited cases involves Massachusetts compulsory automobile liability insurance and that makes them crucially different from the present case.

The trailer was required to be registered, G.L. c. 90, § 9, and therefore by virtue of G.L. c. 90, § 1A, it was subject to our compulsory motor vehicle liability insurance law, G.L. c. 90, §§ 34A-340. Division 1 of coverage A was clearly designed to meet the bodily injury liability insurance requirements of that law and to do no more. Optional coverage was provided elsewhere in the policy. The scope of division 1 of coverage A is manifest from the caption, "Coverage A--Division 1--Bodily Injury Liability--Statutory--The Commonwealth of Massachusetts--(This Coverage is Mandatory)," and from the undertaking of the company to "pay on behalf of the insured, in accordance with [the compulsory motor vehicle liability insurance law] all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law for damages to others for bodily injury."

The trailer was required to be insured by "a policy of liability insurance which provides indemnity for or protection to the insured and any person responsible for the operation of the insured's motor vehicle with his express or implied consent against loss by reason of the liability to pay damages to others for bodily injuries ... sustained during the term of said policy by any person, other than a guest occupant of such motor vehicle or of any employee of the owner or registrant of such vehicle or of such other person responsible as aforesaid who is entitled to payments of benefits under the provisions of chapter one hundred and fifty-two" (emphasis added). G.L. c. 90, § 34A. The compulsory motor vehicle liability insurance law did not require that indemnity or protection be provided to Desrosiers against loss by reason of his liability to pay damages to Sims, Tirabassi, and DePina because they were employees of Essex, which was the owner of the trailer, and they were entitled to the benefits of G.L. c. 152, the Workmen's Compensation Law. We conclude, therefore, that division 1 of coverage A did not provide such indemnity or protection despite the severability of interests provision in the policy.

We are aware that the severability of interests provision by its terms applies to division 1 of coverage A. However, we are unable to see how this can be so, in view of the clear expression of intent that the coverage under division 1 of coverage A should be coextensive with the coverage required by law. If that clear expression of intent renders the severability of interests provision as applied to division 1 of coverage A meaningless, we are satisfied that we must accept that result despite our reluctance to conclude that any policy language is surplusage. We cannot disregard...