Church of Christ in Lexington v. St. Paul Surplus Lines Ins. Co.
| Decision Date | 20 June 1986 |
| Citation | 494 N.E.2d 45,22 Mass.App.Ct. 407 |
| Parties | CHURCH OF CHRIST IN LEXINGTON v. ST. PAUL SURPLUS LINES INSURANCE COMPANY. |
| Court | Appeals Court of Massachusetts |
Brian R. Merrick, Boston, for defendant.
Michael S. Greco (Richard S. Boskey, Boston, with him), for plaintiff.
Before GRANT, KASS and FINE, JJ.
The Church of Christ in Lexington (church) brought this action in the Superior Court to recover interest on an $800,000 fire loss covered by a policy of fire insurance issued to the church by St. Paul Surplus Lines Insurance Company (St. Paul), a Minnesota corporation. The question we must decide is whether the interest payable provision of the standard fire insurance policy set forth in G.L. c. 175, § 99, takes precedence over a nonconforming provision in the St. Paul policy.
St. Paul is a "surplus lines" insurance company, one which is neither an insurer organized under Massachusetts law nor a foreign corporation admitted to transact insurance business in the Commonwealth. Under the authority of G.L. c. 175, § 168, as amended through St. 1961, c. 413, § 1, a person may receive a license as a special insurance broker to negotiate, in very limited circumstances, contracts to provide insurance on property located in Massachusetts. Insurance may be written by such specially licensed brokers with surplus lines companies only when "the full amount of insurance required to protect said property or interests is not procurable ... from among [Massachusetts or admitted foreign insurance] companies." See generally Corday's Dept. Store, Inc. v. New York Fire & Marine Underwriters, Inc., 442 F.2d 100 (7th Cir.1971); Railroad Roofing & Bldg. Supply Co. v. Financial Fire and Cas. Co., 85 N.J. 384, 427 A.2d 66 (1981); Long & Gregg, Property & Liability Insurance Handbook 1012-1027 (1965).
A judge allowed the church's motion for summary judgment in the full amount claimed by the church, $152,551. The judge apparently concluded that St. Paul, the "surplus lines" insurer, was bound by the interest provisions of the Massachusetts standard fire insurance policy, notwithstanding a clause in the St. Paul policy issued to the church which was more favorable to the insurer. We agree with the judge's determination that the church was entitled to summary judgment in the full amount.
We summarize the facts. The church obtained fire insurance in the amount of $800,000 from St. Paul on a building the church owned in Boston. The policy was countersigned on behalf of St. Paul in St. Paul, Minnesota. It was a standard form contract based upon the "New York Standard Fire Insurance Policy." However, it included the following provision:
"STANDARD FIRE INSURANCE POLICY: If property covered hereunder is located in a state or province that requires a Standard Fire Insurance Policy at variance with this [p]olicy, then this [p]olicy shall cover such property in accordance with the provisions of such required Standard Fire Insurance Policy."
On July 21, 1982, the church building sustained fire damage. The parties could not agree on the amount of the loss. The St. Paul policy provided for an appraisal procedure to be used in the event of such a disagreement. The Massachusets standard fire insurance policy provides for a reference procedure which differs in some respects from the appraisal procedure but is designed to accomplish the same purpose, i.e., to settle the amount of the loss. The parties agreed to submit the dispute to three referees. On August 6, 1984, the referees determined that the church had sustained a loss in the full amount of the policy, $800,000. Having ruled at the outset that the proceedings were governed by G.L. c. 175, § 99, the referees included interest in their award in accordance with the provision in the Massachusetts standard fire insurance policy. General Laws c. 175, § 99, clause Twelfth, paragraph 18, as amended through St. 1973, c. 1064, provides in relevant part:
"The company shall be liable for the payment of interest to the insured at a rate of one percent over the prime interest rate on the agreed figure commencing thirty days after the date an executed proof of loss for such figure is received by the company, said interest to continue so long as the claim remains unpaid."
Under the St. Paul policy the loss is not payable until sixty days have elapsed since the submission of proof of loss, and "ascertainment of the loss is made either by agreement between the insured and [the] company expressed in writing or by the filing with [the] company of an award...." St. Paul interprets this provision as requiring interest to run only from the date of the award. St. Paul paid the $800,000 principal amount of the referees' award but has refused to pay any portion of the $152,551 interest awarded by the referees.
There are difficult issues, which the parties address, relating to the authority of the Legislature to regulate surplus lines insurance companies and, if that authority exists, whether it was intended that G.L. c. 175, § 99, apply to surplus lines insurance contracts. 1 We need not resolve those issues, however, because we think a reasonable person contracting to buy insurance would read the language of the St. Paul policy as incorporating the provisions of the Massachusetts standard fire policy. To the extent that there is any ambiguity, the policy must be construed against the insurer. See Charles Dowd Box Co., Inc. v. Fireman's Fund, Ins. Co., 351 Mass. 113, 119-120, 218 N.E.2d 64 (1966); Morin v. Massachusetts Blue Cross, Inc., 365 Mass. 379, 390, 311 N.E.2d 914 (1974); Bates v. John Hancock Mut. Life Ins. Co., 6 Mass.App.Ct. 823, 824, 370 N.E.2d 1386 (1978); Keeton, Insurance Law § 6.3 (1971). Looking to the language of the St. Paul policy, Massachusetts is "a state ... that requires a Standard Fire Insurance Policy at variance with [the St. Paul policy]." Therefore the St. Paul policy "shall cover such property in accordance with the provisions of such required Standard Fire Insurance Policy."
It may be that the Legislature could not lawfully regulate St. Paul, a nonadmitted foreign company, to the extent...
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