Bunker Hill Ins. Co. v. G.A. Williams & Sons, Inc.

• Decision Date: 13 December 2018
• Docket Number: No. 17-P-1625,17-P-1625
• Citation: Bunker Hill Ins. Co. v. G.A. Williams & Sons, Inc., 94 Mass.App.Ct. 572, 116 N.E.3d 47 (Mass. App. 2018)
• Parties: BUNKER HILL INSURANCE COMPANY v. G.A. WILLIAMS & SONS, INC.
• Court: Appeals Court of Massachusetts

94 Mass.App.Ct. 572

116 N.E.3d 47

BUNKER HILL INSURANCE COMPANY¹

v.G.A. WILLIAMS & SONS, INC.²

No. 17-P-1625

Appeals Court of Massachusetts, Norfolk..

Argued October 9, 2018

Decided December 13, 2018

Scott E. Regan, Northborough, for the defendant.

Anna K. Bennett, Quincy, for the plaintiff.

Present: Meade, Sullivan, & McDonough, JJ.

MEADE, J.

The defendant, G.A. Williams & Sons, Inc.(Williams), appeals from a judgment entered in Superior Court following the denial of its motion to offset the jury award in this tort action brought against it by Bunker Hill Insurance Company(Bunker Hill), as subrogee of Shirley Gilbody, with the remediation costs paid by its insurer to Bunker Hill pursuant to an earlier declaratory judgment action.The motion judge determined that the earlier payment was from a collateral source and, as such, was not required to be offset against the jury verdict.Judgment entered against the defendant in the full amount of the jury verdict.Because the source of the offset was not collateral to the defendant, we determine that the defendant's motion for offset of damages should have been allowed, and we modify the judgment accordingly.³

Background.This case arises from an oil spill on property owned by Shirley Gilbody and insured by a homeowner's insurance policy purchased by her and issued by Bunker Hill.Williams installed an oil tank in Gilbody's home in 2003 and, at all material times, was the oil service company for Gilbody.The oil spill occurred in April, 2012.Williams had purchased and paid the premiums for an insurance policy with International Insurance Company of Hannover, Ltd.(Hannover).The parties do not dispute that the policy was in effect at all times material to this case.The Hannover policy covered, as an insured location, the property owned by Gilbody.

When the oil spill occurred, Gilbody notified her insurer, Bunker Hill.Bunker Hill paid for the full remediation of the property, $262,894.05, under a reservation of rights.Pursuant to a declaratory judgment action, Bunker Hill sought compensation from Hannover for damage to the insured location, Gilbody's property.In that declaratory judgment action, a Superior Court judge determined that both the Bunker Hill policy and the Hannover policy covered Gilbody's property, that each policy contained "other insurance clauses," and that these clauses were mutually repugnant.SeeMission Ins. Co. v. United States Fire Ins. Co., 401 Mass. 492, 517 N.E.2d 463(1988).The judge determined that each insurer would bear fifty percent of the cost of remediation of Gilbody's property.A declaratory judgment entered, and Hannover reimbursed Bunker Hill for fifty percent of the cost of remediation, $131,447.03.

In 2012, Bunker Hill, as subrogee to its insured, Gilbody, also filed the present action against Williams for negligence, breach of contract, and violation of G. L. c. 21E(negligence action).⁴After trial, the jury rendered a negligence verdict in favor of Gilbody in the full amount of the cost of the remediation of the property, $262,894.05.⁵Williams then filed its motion to offset the amount of damages in the negligence action by the amount that Bunker Hill had received pursuant to Williams's insurance policy with Hannover in the declaratory judgment action, $131,447.03.

Bunker Hill sought entry of judgment for the full amount of the jury verdict arguing 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.The judge agreed with Bunker Hill and determined that because the claims were "analytically different," the collateral source rule applied and precluded an offset.Judgment entered in the full amount of the jury verdict.

Discussion."The measure of damages is a question of law reviewed de novo on appeal, seeBurke v. Rivo, 406 Mass. 764, 764-765[551 N.E.2d 1](1990)(proper measure of damages recoverable in tort is question of law), but the amount of damages awarded is a factual issue reviewed on appeal under an abuse of discretion standard.SeeBartley v. Phillips, 317 Mass. 35, 43[57 N.E.2d 26](1944)."Twin Fires Inv., LLC v. Morgan Stanley Dean Witter & Co., 445 Mass. 411, 424, 837 N.E.2d 1121(2005).Here, we determine that the damage award in this case is the result of an error of law; we order the modification of judgment to reflect the offset.SeeBrown v. Leighton, 385 Mass. 757, 758, 434 N.E.2d 176(1982)("counsel agreed that whether the defendant was entitled to credit toward any verdict to the extent of the plaintiff's recovery against a third party was a question of law").

"When an insurer settles a claim and thereby acquires a subrogation right, whether by agreement or by operation of law, it succeeds to any right of action that the insured may have against a third person whose negligence or wrongdoing caused the loss, and may recover the loss from that person on a pro tanto (to the extent of its payment) basis."Apthorp v. OneBeacon Ins. Group, LLC, 78 Mass. App. Ct. 115, 119, 935 N.E.2d 365(2010), citingNew England Gas & Elec. Ass'n v. Ocean Acc. & Guar. Corp., 330 Mass. 640, 659, 116 N.E.2d 671(1953);Liberty Mut. Ins. Co. v. National Consol. Warehouses, Inc., 34 Mass. App. Ct. 293, 296-297, 609 N.E.2d 1243(1993).Because Bunker Hill paid for the remediation of its insured's damaged property, it is entitled to seek subrogation for the payments it made to Gilbody.Apthorp, supra.Bunker Hill argues that because it paid the full amount of the remediation, $262,894.05, it is entitled in subrogation to that amount in the negligence action.⁶Bunker Hill also asserts that no offset is required because the payment from Hannover was not in relation to any negligence on the part of Williams -- it was for property remediation under a section of the insurance policy that did not imply fault on the part of the insured; consequently, the collateral source rule precluded an offset in the present action.Although we agree that Bunker Hill is entitled to subrogate its claim, an offset is required under these facts.

As a general rule, "a tortfeasor's liablity to an injured person shall not be reduced by the amount of compensation received by the injured person pursuant to an insurance policy"(quotation omitted).Short v. Marinas USA Ltd. Partnership, 78 Mass. App. Ct. 848, 857, 942 N.E.2d 197(2011)."In terms of operation, the collateral source rule has both a substantive aspect that relates to the law of damages, and an evidentiary component that governs what types of evidence may be admitted in evidence at trial."Law v. Griffith, 457 Mass. 349, 355, 930 N.E.2d 126(2010).⁷This case relates to the substantive aspect of the rule as it concerns whether the rule applies to an offset of insurance proceeds paid to Bunker Hill as Gilbody's homeowner insurer."One line of cases applies the ‘benefit of the bargain’ rationale of the collateral source rule; that is, ‘the plaintiff who contracts for insurance with his or her own funds should receive that benefit’ without the other party using it to offset a claim for expenses"(citation omitted; footnote omitted).Brady v. Citizens Union Sav. Bank, 88 Mass. App. Ct. 416, 421, 38 N.E.3d 301(2015).

By claiming that the insurance payment for the property remediation pursuant to the declaratory judgment is collateral because it is based on the insurance contract that covered Gilbody as an insured, Bunker Hill argues that the nature of the payment is collateral to the damages award in the jury verdict that found Williams negligent.In support of this argument, Bunker Hill relies on Boyle v. Zurich Am. Ins. Co., 472 Mass. 649, 36 N.E.3d 1229(2015);Law, 457 Mass. 349, 930 N.E.2d 126;Short, 78 Mass. App. Ct. 848, 942 N.E.2d 197;andPalochko v. Reis, 67 Mass. App. Ct. 103, 108, 852 N.E.2d 127(2006).However, that reliance is misplaced.Because Williams, not Gilbody, procured the Hannover policy to cover Gilbody's property, there is no unfairness in allowing Williams to offset the damage award by the amounts paid by Hannover.As discussed below, the cases relied on by Bunker Hill are factually distinct from the facts of this case.

In Boyle, the plaintiff sought damages for injuries sustained by the plaintiff when a tire exploded in a tire shop owned by C & N Corporation(C & N).The plaintiffs, Boyle and his wife, sued C & N, whose insurer, Zurich American Insurance Company(Zurich), refused to defend the lawsuit against its insured.Id. at 650, 36 N.E.3d 1229.After C & N defaulted in the lawsuit and then negotiated a settlement of damages with the Boyles that included an assignment of rights against Zurich, the Boyles sued Zurich for a failure to settle their individual claims after liability had become reasonably clear, and for a breach of the duty to defend C & N. Id.The Boyles settled with Zurich on their individual claims against it and released Zurich from any claims they had in their individual capacities.Id. at 652, 36 N.E.3d 1229.On the remaining claim for Zurich's breach of the duty to defend, the judge determined that Zurich breached its duty but also determined that the settlement amount the Boyles received pursuant to their release of the claims in their individual capacities would be deducted from the damages awarded for the breach of the duty to defend that Zurich owed C & N.⁸Id. at 653, 36 N.E.3d 1229.On appeal, the Supreme Judicial Court held that this offset was error because "[t]he crux of the Boyles' individual claims was that Zurich had wronged them as third-party beneficiaries of C & N's policy by failing to settle the Boyles' suit when liability had become reasonably clear.This wrong ... is analytically independent of the wrong that supported C & N's claim against Zurich (assigned to the Boyles) -- i.e., Zurich did not provide C...