Catholic Relief Insurance Co. v. Liquor Liability Joint Underwriting Association
| Decision Date | 22 December 1997 |
| Docket Number | 930840 |
| Citation | 1997 MBAR 195 |
| Parties | Catholic Relief Insurance Company of America v. Liquor Liability Joint Underwriting Association of Massachusetts |
| Court | Massachusetts Superior Court |
Mass L. Rptr. Cite: 8 Mass. L. Rptr. 80
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): FECTEAU
This is a claim by plaintiff Catholic Relief Insurance Company of America ("Catholic Relief") against defendant the Liquor Liability Joint Underwriting Association of Massachusetts (the "LLJUA"). Catholic Relief seeks to enforce an alleged duty of the LLJUA to contribute its bodily injury coverage to the settlement of a claim over which Catholic Relief and the LLJUA were concurrent primary insurers. Catholic Relief settled a significant bodily injury claim arising out of the alleged negligence of their jointly insured risk, the Roman Catholic Bishop of Worcester (the "Diocese"), for dram shop liability of the Bell Tower Room, a function hall associated with a local diocesan parish and licensed to sell alcoholic beverages. The LLJUA did not consent to the settlement, but instead refused to contribute its policy limit to the settlement, or make any offer, on the ground that the underlying bodily injury case was defensible. Catholic Relief settled the underlying tort action for its full primary coverage limits and is seeking the full coverage limits from the LLJUA.1
The First Amended Complaint filed by plaintiff Catholic Relief contains six counts. In Count I, Catholic Relief seeks a declaratory judgment that the LLJUA was obligated to contribute to the settlement of the tort action brought by Brenda Tighe against the Diocese, and is obligated to reimburse Catholic Relief in the amount of $500,000. In Count II, Catholic Relief claims that the LLJUA breached the terms of its policy with the Diocese by failing to settle the underlying suit, causing harm to the Diocese and to Catholic Relief. Count III is a claim for reimbursement under a theory of equitable subrogation. In Count IV, Catholic Relief alleges that the LLJUA was negligent in failing to contribute to the settlement. Count V alleges that the LLJUA breached a common law duty of good faith. Finally, in Count VI, Catholic Relief alleges that it is entitled to contribution from the LLJUA.
The LLJUA defends on three basic grounds: (i) that all claims must fail because the settlement by Catholic Relief was without the consent of the LLJUA and thus in violation of the "voluntary payments" exclusion; (ii) that all claims based on subrogated or assigned rights fail because there was no damage to the Diocese; and (iii) that its (the LLJUA's) conduct in refusing to participate in the settlement of the underlying matter was not unreasonable. In addition, the LLJUA questions Catholic Relief's standing as a co-primary insurer to make direct claims apart from the theories of equitable subrogation and assignment of the Diocese's rights.
This matter came on for trial before me, sitting without jury, on August 12, 13 and 14, 1997. The parties were granted leave to file requests for findings of fact and rulings of law until August 25, 1997, and final arguments were made at that time. On consideration of the evidence and the arguments of the parties, I make the following findings of fact and rulings of law.
1. At all relevant times, Catholic Relief was a corporation organized under the laws of the State of Nebraska and is engaged in the business of providing and underwriting insurance. (Plaintiffs' amended complaint, 1.)
2. The LLJUA is a nonprofit, unincorporated association created by statute, St. 1985, c. 223, whose mandate is "to provide liquor liability insurance on a self-supporting basis" to persons and entities licensed to sell alcoholic beverages in Massachusetts. Id., 2.
3. The LLJUA is not a profit-making or profit-motivated entity. Under its enabling statute, the LLJUA's premium rates must be calculated based on its loss and expense experience and investment income from unearned premiums and reserves and the rates shall be calculated to be self-supporting only. St. 1985, c. 223, 6. Any deficit sustained by the LLJUA shall be recouped by an assessment on the policyholder, or a prospective rate increase. Id.
4. The LLJUA has no owners. Insurers providing personal injury liability insurance in Massachusetts are required to participate in the LLJUA's operations as a condition of their authority to conduct liability insurance business in the Commonwealth. St. 1985, c. 223, 2. Operating deficits of the LLJUA may be offset by temporary contributions from the insurer "members," but only until the deficits are recouped through prospective rate increases. St. 1985, c 223, 6, 7. Thus, the member insurers derive no profit or compensation from the LLJUA, nor do they suffer any loss if the LLJUA's premiums and return on investments are not sufficient to cover the LLJUA's liabilities.
5. The LLJUA is subject to extensive control by the Commissioner of Insurance (the "Commissioner"). In addition to setting the premiums, the Commissioner must approve the policy forms used by the LLJUA. St. 1985, c. 223, 6. The operations of the LLJUA are controlled by the Plan of Operation promulgated by the Commissioner. Id., 4. The Plan of Operation must provide for "economic, fair and nondiscriminatory administration and for the prompt and efficient provision of liquor legal liability insurance." Id. The Commissioner must make an examination into the affairs of the LLJUA at least annually. A representative of the Commissioner attends the meetings of the LLJUA's Board of Directors. Any applicant to or insured of the LLJUA may appeal for review to the Commissioner any ruling, action or decision of the LLJUA. Id., 9; 211 CMR 22.12.2
6. Any liquor license holder who is unable to obtain liquor liability insurance elsewhere is entitled to insurance from the LLJUA, provided only that the applicant has no unpaid premiums for prior insurance and demonstrates that it was not able to obtain liquor liability insurance in the private marketplace. St. 1985, c. 223, 5.
7. During 1991 and 1992, the LLJUA was governed by a Board of Directors consisting of eight directors elected by the member companies, four directors appointed by the Commissioner as representatives of the insured liquor licensees, and one director appointed by the Commissioner as the representative of insurance producers (insurance brokers). St. 1985, c. 223, 8; 211 CMR 22.06. Thus, unlike commercial insurers, representatives of the insureds have a direct say in the operations of the LLJUA.
8. On June 11, 1988, Maureen Sullivan ("Sullivan") was operating a motor vehicle in which Brenda Tighe ("Tighe") was a passenger when it was involved in an accident. As a result of the accident, Tighe was rendered a quadriplegic. The accident occurred following a wedding reception that Tighe and Sullivan had attended at the Bell Tower Room, a function hall adjoining the Sacred Heart Church in Milford, Massachusetts.
9. In September of 1989, Tighe filed an action (the "Tighe Suit" or the "underlying action") in Norfolk County Superior Court, Civil Action No. 89-02557, against Sullivan, the Sacred Heart Church, individually and dba The Bell Tower Room (collectively, "The Bell Tower Room"), and others. (Ex. 1A at CF 00197, CF 00206.)
10. Tighe's amended complaint in the underlying action alleged that "[a]t all times herein concerned, the defendant Sacred Heart Church, Individually and dba The Bell Tower Room owned and operated the Bell Tower Room, a function hall, located at 7 Cedar Street, Milford, County of Worcester, Commonwealth of Massachusetts." (Ex 1A at CF 00214.)
11. In her complaint, Tighe asserted: (i) that "[o]n or about June 11, 1988, the defendant, [The Bell Tower Room], through its agents, employees and servants, negligently served or permitted service of alcoholic beverages to Sullivan who consumed said alcoholic beverages in such quantities so as to cause her to become intoxicated"; (ii) that The Bell Tower Room, "continued to serve or permit service of alcoholic beverages to defendant Sullivan, when they knew or should have known that she was intoxicated"; and (iii) that The Bell Tower Room "was further negligent in allowing Sullivan to leave its premises when it knew or should have known she was intoxicated and would thereafter be driving an automobile." (Id.)
12. Tighe further alleged that as a result of the negligence of The Bell Tower Room, "Sullivan so negligently, unskillfully and carelessly operated, managed or controlled her motor vehicle while intoxicated so as to cause her motor vehicle to have an accident on the highway thereby inflicting severe and permanent personal injuries on the plaintiff, Brenda A. Tighe." (Id. at CF 00215.)
13. As of June 11, 1988, the Sacred Heart Church in Milford, Massachusetts was a part of the Roman Catholic Bishop of Worcester, a Corporation Sole under Chapter 197 of the Acts of 1950.
14. Tighe was represented in her suit by an experienced plaintiff's attorney, Edmund P. Daley of Moquin & Daley. (See Ex. 11 at 2.)
15. The LLJUA issued liquor liability policy number JL871042108 (the "LLJUA Policy") to Timothy J. Harrington, The Roman Catholic Bishop of Worcester. The LLJUA Policy provides coverage from November 25, 1987, through November 25, 1988, and contains the maximum limits permitted by the LLJUA's enabling legislation, $500,000 per person and $1,000,000 per occurrence. (Ex. 4.)
16. In accordance with its enabling legislation, the LLJUA policy form was approved by the Commissioner of Insurance. The LLJUA Policy provides coverage for "sums which...
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