Dorchester Mut. Ins. Co. v. Krusell

• Decision Date: 13 August 2020
• Docket Number: SJC-12856
• Citation: 485 Mass. 431,150 N.E.3d 731
• Parties: DORCHESTER MUTUAL INSURANCE COMPANY v. Timothy KRUSELL & others.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

485 Mass. 431

150 N.E.3d 731

DORCHESTER MUTUAL INSURANCE COMPANY

v.Timothy KRUSELL & others.¹

SJC-12856

Supreme Judicial Court of Massachusetts, Norfolk..

Argued April 6, 2020

Decided August 13, 2020

Charles S. Beal for the defendants.

Kevin M. Truland, Boston, for the plaintiff.

Kathy Jo Cook, Thomas R. Murphy, Salem, Kevin J. Powers, Boston, J. Michael Conley, Braintree, & John T. Ford, for Massachusetts Academy of Trial Attorneys, amicus curiae, submitted a brief.

Present: Gants, C.J., Lenk, Lowy, Budd, Cypher, & Kafker, JJ.

LENK, J.

At issue in this case is whether a homeowners' insurance policy issued by Dorchester Mutual Insurance Company (Dorchester Mutual) to the parents² of Timothy Krusell requires Dorchester Mutual to indemnify the Krusells in a personal injury suit. The principal question we must resolve is the scope of an exclusion in that policy precluding coverage for "[b]odily injury ... arising out of sexual molestation, corporal punishment or physical or mental abuse," and whether it applies where, as here, Krusell pushed Robert Christian Haufler during a conversation on a public sidewalk, causing him to fall and sustain serious injuries.

Haufler commenced a personal injury action in the Superior Court against the Krusells. Arguing that Krusell's conduct was a form of "physical abuse" for which coverage was unavailable, Dorchester Mutual sought a declaratory judgment that it had no duty to indemnify the Krusells for Haufler's personal injury claims. The Krusells responded that because the term "physical abuse" is ambiguous, the "abuse and molestation" exclusion did not preclude coverage. They maintained as well that Dorchester Mutual's refusal to engage in settlement talks constituted an unfair settlement practice in violation of G. L. c. 93A and G. L. c. 176D. A Superior Court judge concluded that the exclusion precluded coverage and granted Dorchester Mutual's motion for summary judgment. The judge also determined that Dorchester Mutual's refusal to enter into settlement discussions did not violate G. L. c. 93A and G. L. c. 176D.

We conclude that the term "physical abuse," as used in the policy, is ambiguous, but that a reasonable insured would interpret the term as not precluding coverage for Haufler's claim. Accordingly, the order granting summary judgment in favor of Dorchester Mutual with respect to its duty to indemnify the Krusells was error and must be reversed. We discern no error, however, in the allowance of summary judgment on so much of the Krusells' cross claim as asserted violations of G. L. c. 93A and G. L. c. 176D.³

1. Facts. We recite the facts in the light most favorable to the Krusells as the nonmoving party. See Premier Capital, LLC v. KMZ, Inc., 464 Mass. 467, 474-475, 984 N.E.2d 286 (2013). a. The incident. At approximately 12:30 A.M. on September 13, 2014, Krusell, then twenty-three years old, and a college friend were walking in downtown Newport, Rhode Island. They struck up a conversation with Haufler, then sixty-two, and his companion; Haufler's companion and Krusell's friend were acquaintances, but Krusell and Haufler had never met. Krusell and Haufler were discussing a record-breaking swordfish Haufler said he had caught, about which Krusell expressed some skepticism. While the events immediately preceding the push are disputed, it is uncontested that, at some point, Krusell pushed Haufler, causing him to lose his balance and fall onto a parked automobile before striking the pavement.⁴ Krusell ran from the scene after Haufler hit the vehicle, purportedly to avoid getting into a fight, and did not see Haufler fall to the ground. Haufler suffered broken bones and other injuries requiring hospitalization, which ultimately resulted in permanent damage to his right arm.

In October of 2014, Haufler filed a civil complaint against Krusell asserting negligence, reckless indifference, intentional infliction of emotional distress, and assault and battery. Krusell's parents were joined in their capacity as cotrustees of a real estate trust in which Krusell held a beneficiary interest (the family home).⁵

b. Claim settlement. Dorchester Mutual agreed to defend the claim under a reservation of rights, citing a coverage exclusion in the Krusells' policy for intentional acts (intentional acts exclusion).⁶ The Krusells sought to settle the claim with Haufler, and repeatedly urged Dorchester Mutual to participate in settlement negotiations. Dorchester Mutual declined to do so, on the ground that it had insufficient information to reach a final determination whether the claim would be covered.⁷ It was unable to obtain a statement of the events from Krusell because he faced criminal charges in connection with the incident; on advice of counsel, he declined to provide a statement while those charges were pending.⁸ As a result, Dorchester Mutual had only the information in Haufler's complaint, a copy of the police report, and a brief account from Krusell's attorney.

After Dorchester Mutual declined to participate in settlement negotiations, the Krusells eventually settled the claim for $750,000; they believed that $500,000 would be covered under their insurance policy. Dorchester Mutual, however, informed the Krusells that due to the "pending coverage, liability and damage issues," it remained unable to consider payment.

2. Prior proceedings. Dorchester Mutual commenced an action in the Superior Court seeking a judgment declaring that it had no duty to indemnify the Krusells under the terms of their homeowners' insurance policy. The Krusells counterclaimed; they argued that Dorchester Mutual's refusal to indemnify, and its refusal to participate in settlement discussions, constituted a breach of contract, a breach of the implied covenant of good fair and fair dealing, and a violation of G. L. c. 93A and G. L. c. 176D.

Dorchester Mutual argued -- for the first time in its motion for summary judgment -- that even if Krusell did not intend to injure Haufler and the intentional acts exclusion was thus inapplicable, a different exclusion precluded coverage. This exclusion, known as the "abuse and molestation exclusion,"⁹ precluded coverage for " ‘[bodily injury’ or ‘property damage’ arising out of sexual molestation, corporal punishment or physical or mental abuse."

Dorchester Mutual argued that the phrase "physical abuse" unambiguously described Krusell's conduct, and that the exclusion thereby precluded coverage.

The judge agreed that Krusell's conduct constituted physical abuse, and thus that the abuse and molestation exclusion precluded coverage. Accordingly, the judge granted Dorchester Mutual's motion for summary judgment on both the question of indemnification and the G. L. c. 93A and G. L. c. 176D claims. The Krusells filed an appeal in the Appeals Court, and we transferred the case to this court on our own motion.

3. Discussion. The Krusells assert error in the judge's conclusion that the abuse and molestation exclusion precludes coverage of Haufler's claim. They also argue that Dorchester Mutual waived its right to raise the exclusion, or is estopped from doing so, because Dorchester Mutual did not mention the exclusion when reserving its right to deny coverage, instead relying on the intentional acts exclusion.¹⁰ In addition, the Krusells contend that the judge erred in granting Dorchester Mutual's motion for summary judgment on the G. L. c. 93A and G. L. c. 176D claims.

a. Standard of review. "The standard of review of a grant of summary judgment is whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to judgment as a matter of law." Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120, 571 N.E.2d 357 (1991). We review decisions allowing summary judgment de novo. See Federal Nat'l Mtge. Ass'n v. Hendricks, 463 Mass. 635, 637, 977 N.E.2d 552 (2012). "An order granting or denying summary judgment will be upheld if the trial judge ruled on undisputed material facts and his [or her] ruling was correct as a matter of law" (citation omitted). Allmerica Fin. Corp. v. Certain Underwriters at Lloyd's, London, 449 Mass. 621, 628, 871 N.E.2d 418 (2007).

b. Whether the abuse and molestation exclusion precludes coverage. The crux of the parties' dispute is whether, in the context of a homeowners' insurance policy, the term "physical abuse" in the abuse and molestation exclusion precludes coverage for Krusell's conduct. The Krusells contend that the term "physical abuse" is ambiguous and should be read to require intentional conduct, or should be limited to conduct involving a sexual element, neither of which would preclude coverage here. Construing the term much more broadly, Dorchester Mutual maintains that the phrase "physical abuse" in the exclusion provision encompasses any form of physically harmful treatment, and that the abuse and molestation exclusion precludes coverage.¹¹

For the reasons discussed infra, we conclude that the term "physical abuse" in the exclusion provision is ambiguous. We therefore consider what an objectively reasonable insured would expect to be covered, and conclude that a reasonable insured would interpret the term "physical abuse" as not precluding coverage for the conduct at issue here.

i. Policy provisions. The Krusells' homeowners' policy provides "personal liability" coverage for a claim or lawsuit "brought against an ‘insured’ because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ to which this coverage applies." An "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in: a. ‘Bodily injury’; or b. ‘Property damage.’ "

Personal liability coverage under the policy is excluded for a number of enumerated reasons. As relevant here, one such exclusion, entitled "Sexual Molestation, Corporal Punishment Or Physical Or...