Aquino v. United Prop. & Cas. Co.

• Decision Date: 21 January 2020
• Docket Number: SJC-12705
• Parties: Wenda AQUINO v. UNITED PROPERTY & CASUALTY COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

483 Mass. 820

143 N.E.3d 379

Wenda AQUINO

v.UNITED PROPERTY & CASUALTY COMPANY.

SJC-12705

Supreme Judicial Court of Massachusetts, Suffolk..

Argued October 4, 2019

Decided January 21, 2020

Seth H. Hochbaum, Wakefield, for the plaintiff.

David F. Hassett (Michael S. Melville also present), Worcester, for the defendant.

The following submitted briefs for amici curiae:

Michael L. Snyder, for Metropolitan Property and Casualty Insurance Company.

Kathy Jo Cook, Thomas R. Murphy, Salem, Kevin J. Powers, Patrick M. Groulx, Somerville, & John G. Mateus, for Massachusetts Academy of Trial Attorneys.

Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, Kafker, JJ.

KAFKER, J.

The plaintiff, Wenda Aquino, owned a home as a tenant in common with her fiancé, Kelly Pastrana. Both were named coinsureds on a homeowners' insurance policy issued by defendant United Property & Casualty Insurance Company (insurer). Pastrana set fire to the home intentionally without any involvement on the part of the plaintiff. Despite the plaintiff's lack of involvement, the insurer denied the plaintiff's claim for coverage, relying on an intentional loss exclusion in the policy that barred recovery when any coinsured intentionally caused a loss. A Superior Court judge granted in part the plaintiff's motion for partial summary judgment against the insurer, finding the intentional loss exclusion as written in the policy violated the standard policy language mandated under G. L. c. 175, § 99, Twelfth, but allowing the plaintiff to recover only one-half of the coverage limit due to her and Pastrana's equal interests under their insurance policy and Pastrana's forfeiture of his interest.

The two dispositive questions at issue in this appeal are related: first, whether an innocent coinsured may collect on a standard fire insurance policy when another coinsured intentionally sets fire to the insured premises, and second, if the coinsured may recover, how to determine the extent of that recovery. We conclude that the standard fire insurance policy set by statute imposes several, rather than joint, rights and obligations on the insureds, and the insurer's redrafting of the statutorily defined policy language to make either insured responsible for the actions of the other in setting the fire was in violation of the statute. We reach this conclusion notwithstanding a 1938 decision of this court, Kosior v. Continental Ins. Co., 299 Mass. 601, 13 N.E.2d 423 (1938), which denied equitable relief for an innocent coinsured spouse whose husband deliberately set fire to the house to recover insurance proceeds. We conclude that the Kosior case, which contains little analysis and appears to be based on outdated assumptions about the marital relationship and the legal rules associated therewith, is distinguishable, even if it remains good law. The holding in that case, however, provides a good faith basis for the insurer's decision to deny coverage in the instant case, precluding recovery by the plaintiff under G. L. c. 93A.

We hold that the policy proceeds in this case are severable, and that the plaintiff is entitled to only one-half of the insurance proceeds. Finally, we conclude that the walkway, the stairway, the railings, and the retaining wall fall under the policy's coverage for the plaintiff's dwelling. Accordingly, we affirm the decision of the Superior Court judge, granting in part and denying in part the parties' cross-motions for summary judgment.

1. Background. In 2014, the plaintiff and her fiancé, Kelly Pastrana, purchased a two-family residential dwelling in Chelsea (property) as tenants in common.¹ Both the plaintiff and Pastrana are listed on the deed and mortgage for the property. On July 5, 2016, the insurer issued a homeowners' insurance policy to the plaintiff and Pastrana effective September 3, 2016 (policy). Both the plaintiff and Pastrana were named insureds on the policy. In the policy, "you" and "your" refer to the "named insured in the Declarations," but there is not otherwise an express definition of "the named insured."

The policy provided for fire insurance. Fire insurance in Massachusetts is governed by the standard policy statute, which provides that "[n]o company shall issue policies or contracts which ... insure against loss or damage by fire or by fire and lightning to property or interests in the commonwealth, other than those of the standard forms herein set forth ...." G. L. c. 175, § 99. That standard form provides for an exclusion of coverage when there is loss by fire "caused, directly or indirectly, by ... neglect of the insured to use all reasonable means to save and preserve the property at and after a loss." G. L. c. 175, § 99, Twelfth. Further, a company "shall not be liable for loss occurring ... while the hazard is increased by any means within the control or knowledge of the insured." Id. Finally, the standard form provides, in relevant part: "In consideration of the provisions and stipulations herein or added hereto and of dollars premium this company ... does insure ... to the extent of the actual cash value of the property at the time of loss, [but not in] any event for more than the interest of the insured, against all loss by fire ...." (emphasis added). Id.

The policy issued did not, however, track the standard form language, particularly the intentional loss exclusion language. The policy provision here states, in part:

"Section I - EXCLUSIONS

"A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.

"...

"8. Intentional Loss

"Intentional Loss means any loss arising out of any act an ‘insured’ commits or conspires to commit with the intent to cause a loss. In the event of such loss, no ‘insured’ is entitled to coverage, even ‘insureds’ who did not commit or conspire to commit the act causing the loss."

The policy further provides: "[e]ven if more than one person has an insurable interest in the property covered, [the insurer] will not be liable in any one loss ... [t]o an ‘insured’ for more than the amount of such ‘insured's’ interest at the time of loss ...."

Other relevant aspects of the policy did not raise issues of conflict with the statute. Coverage A of the policy insures "[t]he dwelling on the ‘residence premises’ ... including structures attached to the dwelling," providing a coverage limit of $622,000. Coverage B of the policy insures "other structures on the ‘residence premises’ set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection." The policy limit for Coverage B is $62,200.

On May 22, 2017, a fire totally destroyed the home, and damaged the walkway, the patio, the stairway, the retaining wall, and the wrought iron railing. Pastrana intentionally set the fire. Emergency responders were incapable of fighting or suppressing the fire due to an exchange of gunfire between Pastrana, who remained in the home, and emergency responders. Pastrana died at some point during the blaze. The plaintiff was innocent of any involvement in the fire.

After the fire, the plaintiff asserted claims under the policy for destruction of the dwelling; destruction of the driveway, the walkway, the patio, the retaining wall, the stairs, and the railing on the property; loss of personal property in the dwelling; loss of rental income and additional living expenses; costs associated with the enforcement of "ordinance law" against the plaintiff as the owner of property containing a fire-damaged and unsafe structure; destruction to landscaping, trees and shrubs; and debris removal. In a letter to plaintiff dated August 18, 2017, the insurer denied its liability for the plaintiff's claims, citing Pastrana's intentional setting of the fire and the policy's intentional loss exclusion.

After the insurer denied liability, counsel for the plaintiff wrote the insurer a demand letter pursuant to G. L. c. 93A on December 15, 2017, claiming that the insurer violated G. L. c. 93A, §§ 2 and 9, and G. L. c. 176D, § 3 (9), by issuing a policy with less coverage than what is required under the language of the standard fire policy, G. L. c. 175, § 99, Twelfth, and thereby denying the plaintiff the coverage she is guaranteed under Massachusetts law. Counsel for the insurer responded on January 5, 2018, disputing that its policy was inconsistent with the Massachusetts standard fire policy.

Plaintiff commenced an action against the insurer on February 1, 2018, bringing claims for declaratory judgment, breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel, equitable estoppel, waiver, reformation of the policy to comply with G. L. c. 175, § 99, Twelfth, and unfair and deceptive trade acts and practices under G. L. c. 176D and G. L. c. 93A. On her claim for declaratory judgment, plaintiff requested that the court find that the intentional loss exclusion of the policy was void for its failure to conform with and for impermissibly restricting coverage mandated by the Massachusetts standard fire policy; that Pastrana's alleged intentional act of arson suspended insurance coverage under the policy only as to him, and not as to the plaintiff; and that the driveway, the stairs, the walkway, the foundation, and the retaining wall situated on the property fell within Coverage B of the policy, and not within Coverage A.

The insurer filed its answer on March 21, 2018, which it amended on May 22, 2018. On May 9, 2018, the plaintiff moved for partial summary judgment on her counts for declaratory judgment, breach of contract, and reformation of the policy. On the same day, the insurer simultaneously opposed the plaintiff's motion and filed a cross motion for summary judgment...