Clark Equipment Co. v. Massachusetts Insurers Insolvency Fund

Decision Date12 July 1996
Citation666 N.E.2d 1304,423 Mass. 165
PartiesCLARK EQUIPMENT COMPANY v. MASSACHUSETTS INSURERS INSOLVENCY FUND.
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

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 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 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 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 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 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 Mass. 340, 346, 187 N.E. 39 (1933). Accord Lockwood v. Adamson, 409 Mass. 325, 333-334, 566 N.E.2d 96 (1991) (citing cases); Lincoln v. Hillside Park 'N Shop, Inc., 370 Mass. 209, 213-214, 346 N.E.2d 887 (1976) (presumption of same meaning not rebutted). The term "claimant" appears six times in c. 175D. 5 In § 5(1)(c ), which provides that the Fund may pay claims in the order that they are "received from the claimants," the term refers to persons who have incurred a loss and are now asserting claims against the Fund or insolvent insurer. That is also the necessary meaning of the term in §§ 8 and 9, where "claimant" refers to an insured claimant, and in § 16, which provides that the Commissioner of Insurance may terminate the Fund's operation if the Federal government enacts a plan "to avoid excessive delay or financial loss to claimants or policyholders." Clark fails to rebut the presumption that the term "claimant" in § 1(2)(a ) refers, as it does elsewhere in the chapter, to the individual or entity currently asserting a claim against the Fund or insolvent insurer.

Because, in c. 175D, "claimant" refers to the person now asserting the claim, either the underlying tort claimant or the insured may be a c. 175D claimant. 6 Under § 1(2)(a ), the residency requirement is satisfied if either the c. 175D claimant or the insured is a resident. If the c. 175D claimant is a tort claimant who resides in another State, and the insured resides in Massachusetts, recovery from the Fund is available. But if the insured is the c. 175D claimant, then the State of residence of the c. 175D claimant and the State of residence of the insured are one and the same. Thus, an insured may recover from the Fund only if it is a Massachusetts resident.

The requirement of c. 175D, § 1(2)(a ), that "the claimant or insured [be] a resident of the Commonwealth" therefore means: (1) the c. 175D claimant who is also the insured must be a resident; and (2) the c. 175D claimant who is an underlying tort claimant may be a nonresident if the insured is a resident. The underlying tort claimants in this case are not currently asserting claims. Therefore, they are not "claimants" within the meaning of c. 175D. Clark, the insured, is asserting a claim (and is therefore a c. 175D claimant) but is not a resident. Thus, the residency requirement is not satisfied, and Clark's claims are not "covered claim[s]" under G.L. c. 175D, § 1(2). 7

Other jurisdictions. We are aware of only one other appellate case in which a nonresident insured tried to collect indemnity from a guaranty association on the basis of the residency of underlying tort claimants whom the insured had already compensated. That case, T & N v. Pennsylvania Ins. Guar. Ass'n, 44 F.3d 174 (3d Cir.1994), involved an English corporation whose principal place of business was in Manchester, England. The corporation, T & N, sought to recover from the Pennsylvania Insurance Guaranty Association (PIGA) over $5 million which T & N had expended in litigation and settlement costs and which were owed to T & N by an insolvent insurer. Id. at 176. 8 The case turned on the interpretation of the terms "resident" and "covered claim" under the former Pennsylvania Insurance Guaranty Association Act, 40 Pa.Cons.Stat.Ann. §§ 1701.101 et seq. (1970) Pennsylvania Act), 9 which provided: " 'Covered claim' means an unpaid claim ... which arises under a property and casualty insurance policy of an insolvent insurer and is ... [t]he claim of a person who at the time of the insured event resulting in loss or liability was a resident of the Commonwealth...." T & N, supra at 178-179, quoting 40 Pa.Cons.Stat.Ann. § 1701.103 (since repealed [see note 9, supra ] ).

The Federal District Court found for T & N, but the Court of Appeals reversed, stating: "The purpose of the [Pennsylvania] Act is clearly to protect Pennsylvania residents. If the underlying Pennsylvania claimants can proceed against PIGA to recover their losses,...

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