Ferrari v. Toto

CourtAppeals Court of Massachusetts
Citation9 Mass.App.Ct. 483,402 N.E.2d 107
PartiesMaria FERRARI, Administratrix, et al. 1 v. Albert TOTO.
Decision Date28 May 1980

Norman J. Fine, Boston, for plaintiffs.

Joseph C. Tanski, Boston, for defendant.


KASS, Justice.

The question reported to this court, pursuant to G. L. c. 231, § 111, and Mass.R.Civ.P. 64, 365 Mass. 831 (1974), is whether workmen's compensation benefits received by Pasquale Ferrari (the intestate of the plaintiff Maria Ferrari) negate, set off or limit the obligation of the Massachusetts Insurers Insolvency Fund (Fund) to pay the plaintiffs' claims arising out of an accident which occurred in the scope of Pasquale Ferrari's employment, but was caused by a negligent third party. We hold that the liability of the Fund is reduced by so much as the claimant has received on account of the same injury from workmen's compensation insurance.

The facts set forth in a statement of agreed facts are as follows: On July 10, 1974, Pasquale, while in the course of his employment, was struck by an automobile driven negligently by Albert Toto and suffered injuries warranting recovery of damages in excess of $35,000. Pasquale received over $35,000 in workmen's compensation benefits under the statutory scheme set forth in G. L. c. 152; he and his wife also sued Toto for damages arising out of the accident. 2 At the time of the accident, Toto was insured for liability to the extent of $20,000 by Rockland Mutual Insurance Company (Rockland), which was subsequently adjudged insolvent by the Supreme Judicial Court. As a consequence of Rockland's insolvency, the Fund became potentially liable for claims against the policies issued by that company, of which the plaintiffs' claim was one. G. L. c. 175D, § 5(1)(b ), inserted by St. 1970, c. 261, § 1.

On the ground that Pasquale had already recovered workmen's compensation benefits in excess of the limits of Toto's policy with Rockland, the Fund denied liability to the Ferraris on that policy. The parties have agreed that resolution of the question reported will dispose of the case; i. e., if the Fund is required to pay the plaintiffs at all, their recovery will be the full $20,000 limit of the policy, but nothing more.

Under G. L. c. 152, § 15, as amended through St. 1971, c. 941, § 1, "(any) sum recovered (in an action against a third party) shall be for the benefit of the (workmen's compensation) insurer, unless such sum is greater than that paid by it to the employee." It follows that because Pasquale had already received $35,000 from his employer's workmen's compensation insurer, the plaintiffs would retain nothing of what they might recover on account of the Rockland insurance policy; i. e., anything they recovered would redound to the benefit of the workmen's compensation insurer. See Richard v. Arsenault, 349 Mass. 521, 524, 209 N.E.2d 334 (1965); Mahoney's Case, 371 Mass. 891, 892, 356 N.E.2d 700 (1976). Since the Fund, in turn, assesses the net cost of its claim payments to its member insurance companies, G. L. c. 175D, § 5(1)(c ), a disbursement by the Fund on account of the plaintiffs' claim would result largely in the shuffling of funds among insurance companies.

The statutory scheme which established the Fund seeks to avoid this sort of movement of funds among insurers. General Laws c. 175D, § 5(1)(a ), obligates the Fund to the extent of "covered claims" against insolvent insurers, but § 1(2), inserted by St. 1970, c. 261, § 1, excludes from the definition of covered claims "any amount due any reinsurer, insurer, insurance pool or underwriting association." As used in c. 175D, however, the word "insurer" has a specifically defined meaning which applies "unless the context clearly requires otherwise." 3 That statutory definition says "insurer" shall mean "any person who (a) writes any kind of insurance to which this chapter applies, including the exchange of reciprocal or interinsurance contracts, and (b) is licensed to transact insurance in the commonwealth." 4 Under G. L. c. 175D, § 2, workmen's compensation is one of nine forms of direct insurance which the statute excepts from participation in the Fund. 5 We are faced with the question, therefore, whether the exclusion of amounts due an insurer from claims for which the Fund must pay is limited to Fund member insurers or whether "the context clearly requires otherwise" and the exclusion extends to segments of the insurance industry which are not participants in the Fund. We think the latter is the case. In setting up the class of claims not covered, § 1(2) refers to "any amount due any reinsurer, insurer, insurance pool, or underwriting association." An insurance pool or underwriting association would not fit into the c. 175D definition of "insurer" as a member insurer, and the class referred to in the exclusion provision must, in context, mean something more, i. e., insurers beyond member insurers. Chapter 175D is patterned after the "Post-Assessment Property and Liability Insurance Guaranty Association Model Act" 6 in which the distinction is more clearly drawn. In the Model Act, at § 5(5), the defined term equivalent of G. L. c. 175D, § 1(5), is "member insurer"; the covered claim exclusion refers to any insurer, without the member qualification (Model Act § 5(3)). Reading c. 175D as a whole and comparing it to the Model Act, we perceive no design by the Legislature to expand the category of covered claims, with consequent impact on the insurance buying public in the form of higher premium rates. Cf. Commissioner of Ins. v. Massachusetts Insurers Insolvency Fund, 373 Mass. 798, 803-804, 370 N.E.2d 1353 (1977).

Moreover, having in mind the purposes of the Fund discussed below, it does not seem to us that a claim, to the extent it has already been compensated from some other source, is an unpaid claim. In order to qualify as a "covered claim" under the statute, a claim must be unpaid. G. L. c. 175D, § 1(2). See Florida Ins. Guar. Assn. v. Dolan, 355 So.2d 141, 142 (Fla.Dist.Ct.App.1978).

We are of the opinion that the Fund is excused from paying claims if the ultimate beneficiary is an insurance company.

This reading of the statutory design rests as well on the description and analysis of the Fund which the Supreme Judicial Court made recently in Massachusetts Motor Vehicle Reins. Facility v. Commissioner of Ins., --- Mass. ---, --- - ---, a 400 N.E.2d 221. In that opinion the court observed that the statutory scheme embodied in c. 175D is intended to benefit the public by ensuring that all drivers with policies covered by the Fund will be paid for losses incurred, id. at ---, b i. e., the driving public is to be protected against the consequences of financial failure by an automobile liability insurer. In cases such as this, an alternative source of compensation from an insurance carrier is available, and members of the driving public, or persons injured by the...

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    ...which the Guaranty Association would be due a set-off. The Guaranty Association relies on the case of Ferrari v. Toto, 9 Mass.App. 483, 402 N.E.2d 107 (1980), aff'd, 383 Mass. 36, 417 N.E.2d 427 (1981), in which the Massachusetts Insurers Insolvency Fund ("the Fund") was excused from paying......
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    ...other source, is an unpaid claim. In order to qualify as a `covered claim' under the statute, a claim must be unpaid." Ferrari v. Toto, 9 Mass.App.Ct. 483, 402 N.E.2d 107, 109 (1980), aff'd in relevant part, 383 Mass. 36, 417 N.E.2d 427 (1981). See also Florida Ins. Guaranty Ass'n v. Dolan,......
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