Boyle v. Zurich American Insurance Co.
| Decision Date | 13 June 2014 |
| Docket Number | MICV2011-02244 |
| Parties | Joseph P. Boyle et al. v. Zurich American Insurance Company No. 127633 |
| Court | Massachusetts Superior Court |
FINDINGS OF FACT, RULINGS OF LAW, AND MEMORANDUM OF DECISION AFTER NON-JURY TRIAL
This lawsuit arises from serious injuries suffered by Joseph Boyle when a tire on a truck being repaired by C& N Corporation exploded and severely lacerated his arm and hand. Boyle and his wife obtained a $2, 648, 715.80 default judgment. The Boyles then sued C& N's insurer, the Zurich American Insurance Company, claiming that Zurich failed to settling their claims once C& N's liability was reasonably clear and breached a contractual duty to pay postjudgment interest. After C& N assigned its rights against Zurich to the Boyles, they further claimed that Zurich breached its legal duties to C& N by not settling the Boyles' claims. Zurich settled the Boyles' direct claims against it by agreeing to pay $1, 324, 357 in postjudgment interest that had accrued on the default judgment. The claims assigned by C& N to the Boyles were tried in a bench trial.
The Court concludes that Zurich breached its contractual duty to defend C& N by failing to settle the Boyles' claims against C& N within the $50, 000 policy limit. Zurich is therefore liable to C& N for the excess portion of the judgment obtained by the Boyles above the policy limit, plus postjudgment interest to the extent that it has not already been paid by Zurich as part of the settlement of the Boyles' own claims. Zurich's duty to defend was triggered even though C& N breached its contractual obligation to notify Zurich of the lawsuit. Since C& N had previously put Zurich on notice of the accident Zurich's duty to defend was triggered when the Boyles notified Zurich that they had brought suit, C& N had been defaulted, and a damages assessment hearing had been scheduled. Zurich breached this duty by ignoring the lawsuit and negligently failing to settle the Boyles' claims within the policy limits. The Court finds that if Zurich had told the Boyles that there was a $50, 000 policy limit before the default judgment entered against C& N, the Boyles would have agreed to settle and release their claims against C& N in exchange for payment of $50, 000 because they knew that C& N had no ongoing business or income and that its only asset was its insurance policy. Although C& N is and was essentially insolvent, under Massachusetts law Zurich cannot evade liability for its breach of contract on that ground. Nor does it matter that after the Boyles told Zurich about the damages assessment hearing they failed to file an affidavit confirming that fact, as required by G.L.c. 231 § 58A.
The Court further concludes, however, that Zurich is not liable to C& N under G.L.c. 93A. Since C& N was engaged in trade or commerce and bought insurance to cover its business activities, C& N's claim that Zurich engaged in unfair or deceptive acts or practices arises under G.L.c 93A, § 11, and not under § 9 of that statute. As a result, Zurich's violation of its duty under G.L.c. 176D to settle the claims against C& N once its liability became reasonable clear does not automatically constitute a violation of c. 93A. Zurich's inaction once it learned of the Boyles' lawsuit was a negligent breach of its contractual duties, but did not rise to the level of an unfair or deceptive act or practice that violates c. 93A. Zurich's refusal to pay more than the policy limit even after the Boyles obtained their large default judgment against C& N was based on a plausible interpretation of its insurance policy and thus did not violate c. 93A either: it was reasonable, even if ultimately incorrect, for Zurich to believe that its duty to defend had never been triggered because C& N failed to inform Zurich that the Boyles had brought suit.
The Court conducted a jury-waived trial in this case on May 19 and 21, 2014. The Court makes the following findings of fact based on the credible evidence presented at trial, the undisputed facts to which the parties stipulated before trial, and reasonable inferences drawn from the evidence.
Joseph Boyle was injured in C& N's repair shop on March 8, 2006. At that time of the accident, C& N was a business engaged in trade or commerce in Massachusetts. On that day Nicholas Rago, who was then an employee and co-owner of C& N, had picked up a customer's truck, affixed C& N's repair plates to the truck, driven it to C& N's garage, and put it up on the lift. The customer wanted C& N to diagnose a noise in the truck's transmission. Rago and Boyle were friendly. Boyle had been employed as a motor vehicle mechanic for 28 years at the time he was injured. Rago knew that Boyle was an expert in repairing truck transmissions. So Rago asked Boyle to step into the garage and listen to the truck transmission while Rago revved the truck engine to the equivalent of driving at about 20-30 miles per hour. As he did so the truck's rear wheels were spinning. One of the tires exploded, severely lacerating Boyle's left forearm and hand.
Because of the injury Boyle underwent several surgeries, incurred medical bills of roughly $106, 000. He suffered permanent scarring and partial loss of function in his left arm and hand. Boyle was unable to work for about a year, had to take less skilled and lower-paying jobs, and as a result lost earning capacity in the amount of $256, 000. Due to Boyle's injuries, his wife Janice suffered the loss of his services, society, affection, companionship, and consortium.
The Boyles' injuries were covered by the Massachusetts Business Auto policy that Zurich issued to C& N. Since C& N had affixed its repair plate to the truck at the time that Boyle was injured, the truck was a " covered auto" under the Zurich policy. The personal injuries suffered by Mr. Boyle and the loss of consortium suffered by Mrs. Boyle were injuries covered by the Zurich policy, because they constituted or arose from bodily injury caused by a covered auto and occurred while the policy was in effect. The Zurich policy had a $50, 000 coverage limit.
Zurich was put on notice of the Boyles' claims on March 20, 2006, just twelve days after Boyle was injured. Rago had notified C& N's insurance agent, Tarpey Insurance Group, of the accident and Boyles' injuries. Tarpey then gave Zurich written notice of the Boyles' claim. Zurich assigned a claim number and opened a claims file. Zurich's claims file is kept only in electronic form. Any paper that needs to be added to the claims file is scanned in and added to the file electronically. The paper version is then destroyed. A Zurich investigator interviewed Rago on June 6, 2006. Rago described the accident. He also informed Zurich that Joseph Boyle had undergone two surgeries because of the accident and had at least one more surgery to come.
Zurich soon learned that the Boyles had retained Attorney Edward McNelley counsel, were planning to assert a bodily injury claim, and wanted to learn the policy limits in C& N's insurance policy. But Zurich never responded to repeated inquiries by McNelley. On June 26, 2006, McNelley wrote to Rago and put C& N on notice that Joseph Boyle intended " to pursue a bodily injury claim." Rago forwarded this letter to Tarpey, which sent McNelley's letter on to Zurich on August 4, 2006. Zurich received this letter but never responded to or sought to contact McNelley. After hearing nothing from Zurich, McNelley obtained from Tarpey contact information for Zurich and the claim number that Zurich had assigned to the Boyles' claim. On October 27, 2006, McNelley wrote directly to Zurich, informed it that Joseph Boyle planned to pursue a bodily injury claim, and asked Zurich to reveal C& N's policy limits, as required by law.[1] Zurich received this letter, placed it in the Boyle claims file, but never responded to it. On December 5, 2006, McNelley wrote directly to Zurich a second time, marked the letter " 2nd Request, " and again informed Zurich that Boyle intended to pursue a claim and again ask for the policy limits. Once again, Zurich received this letter and placed it in the claims file, but never responded to Attorney McNelley.
Attorney McNelley knew that C& N and Rago had no assets or meaningful income. The Court credits McNelley's testimony that, given these circumstances, if Zurich had informed him that the coverage limit in C& N's policy was $50, 000 he would have advised the Boyles to settle the case--and, thus, release their claims--for that amount. But Zurich never made any attempt to contact McNelley. At some point McNelley referred the Boyles' claims to the law firm of Gillis & Bikofsky, P.C.
By October 2007, Zurich had concluded that C& N was liable for the Boyles' injuries. By early 2008 Zurich had concluded that these claims were covered under the Business Auto policy that Zurich had issued to C& N. Zurich knew that its policy limit was $50, 000. But C& N never conveyed these conclusions to C& N, never completed its investigation of and never tried to determine the likely value of the Boyles' claims, never warned C& N that it faced liability in excess of the $50, 000 policy limit, and never made any attempt to settle the Boyles' claims within the policy limit until long after a default judgment was entered against C& N.
The Court credits the testimony by Zurich's manager of catastrophic claims in the Northeastern United States that if she had seen the post-surgery photos of Boyle's arm and hand she would have immediately have known that C& N's exposure exceeded the $50, 000 policy limit, tendered the policy limits, tried to resolve and obtain a release of the Boyles' claims against C& N in...
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