Clark Equipment Co. v. Massachusetts Insurers Insolvency Fund

• Court: United States State Supreme Judicial Court of Massachusetts
• Writing for the Court: Before LIACOS; ABRAMS
• Citation: 666 N.E.2d 1304,423 Mass. 165
• Parties: CLARK EQUIPMENT COMPANY v. MASSACHUSETTS INSURERS INSOLVENCY FUND.
• Decision Date: 12 July 1996

Page 1304

666 N.E.2d 1304 423 Mass. 165 CLARK EQUIPMENT COMPANY
v.
MASSACHUSETTS INSURERS INSOLVENCY FUND. Supreme Judicial Court of Massachusetts,
Suffolk. Argued March 6, 1996.
Decided July 12, 1996.

Page 1305

Daniel J. Gleason, Boston (Erik A. Schmidt with him), for plaintiff.

Joseph C. Tanski, Boston (Joseph C. Marrow with him), for defendant.

Susan G. Papano, New York City, for United Policyholders, amicus curiae, submitted a brief.

Before LIACOS, C.J., and WILKINS, ABRAMS, LYNCH, and GREANEY, JJ.

ABRAMS, Justice.

At issue is whether the nonresident insured of an insolvent insurer is entitled to indemnity from the Massachusetts Insurers Insolvency Fund (Fund) for the costs of defending and settling tort claims asserted against the insured by Massachusetts residents. The Fund denied indemnification on the ground that a nonresident insured's costs are not "covered claim[s]" within the meaning of G.L. c. 175D, § 1(2)(a ) (1994 ed.). The insured, Clark Equipment Company [423 Mass. 166] Clark), brought this action for declaratory and other relief. The case was submitted on cross motions for summary judgment. A Superior Court judge entered judgment for the Fund. Clark appealed, and filed an application for direct appellate review. We granted Clark's application. We affirm.

Facts. Clark is a Delaware corporation whose principal place of business is in Indiana. Prior to February 4, 1985, Clark's principal place of business was in Michigan. Clark is in the business of manufacturing and selling forklift trucks.

From September 30, 1981, through September 30, 1985, Clark was insured by The Insurance Company of North America (INA) under policies which provided up to $5 million per year in general liability coverage, and by Integrity Insurance Company (Integrity) under policies which provided an additional $6 million per year after the INA

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coverage was exhausted. The 1983-1984 INA coverage was exhausted on May 30, 1986, by the costs of defending and settling numerous product liability lawsuits in several States. Clark tendered the claims filed against it for the 1983-1984 policy year to Integrity.

On March 24, 1987, a New Jersey "court of competent jurisdiction," G.L. c. 175D, § 1(4) (1994 ed.), declared Integrity insolvent. Clark tendered all claims and lawsuits covered by the Integrity policies to the Michigan Property and Casualty Guaranty Association (Michigan Association), and to the Indiana Insurance Guaranty Association (Indiana Association). The Indiana Association refused to accept defense or indemnity obligations for claims against Clark arising from occurrences prior to February 4, 1985, when Clark moved its principal place of business to Indiana. The Michigan Association refused to accept defense or indemnity obligations on the ground that Clark's net worth exceeded the limit established by the Michigan Property and Casualty Guaranty Act. ¹

Clark seeks reimbursement and a declaration that the Fund is liable for Clark's settlement costs, attorneys' fees, and other defense expenses arising from eight product liability suits brought against Clark by Massachusetts residents. By Clark's estimation, these combined costs as of January 9, 1995, totaled $858,569.81.

Analysis. The Fund is a nonprofit unincorporated legal [423 Mass. 167] entity created by G.L. c. 175D, § 3 (1994 ed.). Ulwick v. Massachusetts Insurers Insolvency Fund, 418 Mass. 486, 486, 637 N.E.2d 209 (1994). ² It "is obligated to pay covered claims against an insolvent insurer (up to $300,000 per claim) in place of the insolvent insurer." Id. The Fund's obligations and expenses are assessed to a broad range of insurers, ³ including all liability and property insurers who write insurance in the Commonwealth. G.L. c. 175D, §§ 1(5), 5(1)(c ) (1994 ed.). Insurers recoup the amounts which they pay into the fund by increasing their rates and premiums. G.L. c. 175D, § 13. See Commissioner of Ins. v. Massachusetts Insurers Insolvency Fund, 373 Mass. 798, 799, 370 N.E.2d 1353 (1977). The cost of paying claims against insolvent insurers "is thus ultimately passed on to the insurance-buying public." Massachusetts Motor Vehicle Reinsurance Facility v. Commissioner of Ins., 379 Mass. 527, 530, 400 N.E.2d 221 (1980). ⁴

The Fund is obligated only on "covered claim[s]," defined as "unpaid claim[s] ... which arise[ ] out of and [are] within the coverage of an insurance policy ... issued by an insurer, if such insurer becomes an insolvent insurer and ... the claimant or insured is a resident of the commonwealth." G.L. c. 175D, § 1(2)(a ). Clark concedes that it is not itself a resident, but argues that it may rely on the residency of the underlying tort claimants to meet the statute's residency requirement.

Clark's reasoning begins with the premise that "claimant" in § 1(2)(a ) refers to the underlying tort claimant (rather than the person asserting the claim against the Fund or insolvent insurer). That implies, of course, that "claimant" and "insured" are mutually exclusive categories. Clark then notes that the residency requirement of § 1(2)(a ) is satisfied [423 Mass. 168] if either "the claimant or insured is a resident of the commonwealth." Thus, according to Clark, the interpretive question is whether an "insured" and a "claimant" may each rely on the other's residency, or only on its own. Because § 9 clearly contemplates cases where the claimant

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can recover from more than one State, Clark asserts that a "claimant" and an "insured" may each rely on the residency of the other.

This argument fails because Clark's assumption that "claimant" in § 1(2)(a ) refers to the underlying tort claimant violates the traditional rule of statutory construction that, "[w]here the Legislature uses the same words in several sections which concern the same subject matter, the words 'must be presumed to have been used with the same meaning in each section.' " Insurance Rating Bd. v. Commissioner of Ins., 356 Mass. 184, 188-189, 248 N.E.2d 500 (1969), quoting Liddell v. Standard Accident Ins. Co., 283...