Flattery v. Gregory

• Decision Date: 20 March 1986
• Citation: 489 N.E.2d 1257,397 Mass. 143
• Parties: , 72 A.L.R.4th 1085 Douglas A. FLATTERY v. William C. GREGORY, Sr., et al. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1257

489 N.E.2d 1257

397 Mass. 143, 72 A.L.R.4th 1085

Douglas A. FLATTERY v. William C. GREGORY, Sr., et al. ¹

Supreme Judicial Court of Massachusetts Plymouth.

Argued Oct. 9, 1985.

Decided March 20, 1986.

Robert T. Nagle, Atlanta, for plaintiff.

Walter H. Mayo, III (Donna B. MacKenna, Boston, Mass., with him), for William F. Borhek.

Before HENNESSEY, C.J., and WILKINS, LIACOS, LYNCH and O'CONNOR, JJ.

O'CONNOR, Justice.

We consider for the first time whether an insurance agent owes to a traveler on the highway, injured by the negligent driving of another, a duty to fulfil the agent's pre-accident promise to the tortfeasor to obtain optional liability coverage on the tortfeasor's motor vehicle. The case reaches us as the result of an appeal from the allowance of a motion to dismiss claims against the insurance agent.

We summarize the relevant allegations in the amended complaint. On December 24, 1979, the plaintiff was the operator of a motor vehicle which collided with a 1975 Toyota automobile. The Toyota was operated by the defendant William C. Gregory, Sr., and was owned jointly by the defendants William C. Gregory, Sr., and Joalta Gregory. As a result of injuries sustained in the collision, the plaintiff recovered a judgment against William C. Gregory, Sr., in the sum of $118,181.99.

According to the amended complaint, at the time of the collision the Gregorys owned a 1973 Mercury automobile in addition to the 1975 Toyota. The defendant William F. Borhek, an insurance agent, had procured liability coverage on the 1973 Mercury for the year 1979 with bodily injury limits of $100,000 per person and $300,000 per accident. Before 1979, Borhek had arranged for the issuance to the Gregorys of motor vehicle liability policies on their vehicles containing $100,000/$300,000 bodily injury limits. "On or about July 2, 1979," the amended complaint states, "[Borhek] caused an insurance policy to be amended and issued" to the Gregorys on the 1975 Toyota (the accident vehicle) with bodily injury limits of only $20,000 per person and $40,000 per accident.

The amended complaint is in three counts, the first of which is against the defendant The Travelers Indemnity Company and is not involved in this appeal. Count 2 alleges Borhek's liability on a theory of tort. In substance, after making the assertions recited above, the plaintiff says that the Gregorys relied on Borhek to obtain $100,000/$300,000 liability coverage on the 1975 Toyota. The plaintiff further asserts that Borhek's failure to do so and his failure to advise them that the limits were only $20,000/$40,000 constituted negligence resulting in a loss to the plaintiff. Count 3 is based on contract. It reasserts the facts set forth in count 2 and, in addition, alleges that in return for valuable consideration Borhek promised the Gregorys that he would procure a liability policy covering the 1975 Toyota with limits of $100,000/$300,000 "for bodily injury to others, which class of individuals would have included the plaintiff," and that he failed to do so "[i]n breach of said contract."

Borhek moved that the complaint as to him be dismissed, alleging as grounds that the complaint fails to state a claim for which relief can be granted and that the plaintiff's claims are barred by the applicable statutes of limitations. A judge of the Superior Court allowed the motion, and subsequently judgment in favor of Borhek was entered under Mass.R.Civ.P. 54 (b), 365 Mass. 820 (1974). The plaintiff appealed to the Appeals Court and we granted his application for direct appellate review. We now reverse the judgment below. ²

Borhek is liable to the plaintiff on a tort theory only if he violated a duty to the plaintiff imposed by law. Monadnock Display Fireworks, Inc. v. Andover, 388 Mass. 153, 156, 445 N.E.2d 1053 (1983). He can be liable to the plaintiff on a contract theory only if he violated a duty to the plaintiff established by a contract between the Gregorys and himself. Restatement (Second) of Contracts §§ 304 and 309 (1981). Essential to the plaintiff's assertions of either tort or third party contract liability to him is a claim that Borhek promised the Gregorys that he would procure liability insurance with bodily injury limits of $100,000 per person and $300,000 per accident on the 1975 Toyota. Our first inquiry, therefore, is whether the complaint gives sufficient notice of a claim of such a promise so as to withstand Borhek's motion to dismiss. We conclude that the complaint adequately states a claim that Borhek promised the Gregorys that he would procure $100,000/$300,000 coverage on the Toyota. Fairly construed, the complaint alleges that such a promise was implied from Borhek's earlier procurement of motor vehicle liability policies containing $100,000/$300,000 limits on other vehicles owned by the Gregorys. Neither the details nor the extent of the earlier dealings between the Gregorys and Borhek are spelled out in the complaint, but, under our rules of notice pleading such specification is unnecessary. It is enough that in support of the complaint the plaintiff can prove a set of facts which would entitle him to relief. Rae v. Air-Speed, Inc., 386 Mass. 187, 191, 435 N.E.2d 628 (1982). Nader v. Citron, 372 Mass. 96, 98, 360 N.E.2d 870 (1977). Under the complaint, the plaintiff could prove sufficient prior dealings between Borhek and the Gregorys to warrant a finding of a promise implied from custom.

Of course, the plaintiff's complaint does not state a claim upon which relief can be granted unless, in addition to alleging Borhek's promise to the Gregorys to procure $100,000/$300,000 coverage, the complaint also permits proof of facts establishing a legally recognized duty which was owed by Borhek not just to the Gregorys but to the plaintiff as well. Violation of such a duty, imposed by law, would create tort liability. Violation of such a duty, imposed by contract, would create contract liability.

First, we consider whether the complaint sufficiently alleges a tort claim. In LaClair v. Silberline Mfg. Co., 379 Mass. 21, 26-30, 393 N.E.2d 867 (1979), we held that a jury could find a corporate president negligent, and therefore liable to the widow of a corporate employee who had died as a result of work-related injuries, for failing to obtain workmen's compensation insurance on behalf of the corporation. That was our holding despite the fact that the defendant had not made an express promise to the deceased employee or to the widow. In Rae v. Air-Speed, Inc., supra, 386 Mass. at 192-193, 435 N.E.2d 628, we held that the widow of an employee who dies as a result of work-related injuries may recover in tort from an insurance agent who promises the employer, but not the employee or the employee's widow, that he will obtain workmen's compensation for the employer but fails to do so. In Craig v. Everett M. Brooks Co., 351 Mass. 497, 222 N.E.2d 752 (1967), the defendant was a civil engineer under a contract with a real estate developer to place stakes in the ground for the guidance of the plaintiff road builder, a contractor also under contract with the developer. The defendant had made no direct promise to the plaintiff, but we held that the plaintiff could recover in tort from the defendant for the defendant's failure to set the stakes properly. We emphasized that the plaintiff had relied on the defendant's performance of its obligations under its contract with the developer, and that the extent of that reliance was known to the defendant. Id. at 501, 222 N.E.2d 752.

There is some similarity between those cases and the present case. However, there is at least one critical distinction between them, and that distinction is fatal to the plaintiff's tort claim. In each of the cited cases involving workmen's compensation insurance, the plaintiff rightfully and foreseeably expected the insurance to be in effect and relied on it. The expectation was rightful and foreseeable because the insurance was mandated by statute. Also, foreseeable expectation and reliance were present in Craig v. Everett M. Brooks Co., supra. In the present case, however, the plaintiff clearly did not foreseeably rely on the Gregorys' motor vehicle being insured in an amount greater than that required by G.L. c. 90, § 34A (1984 ed.). We have never held that in the absence of foreseeable reliance on the promised services being performed by someone, a promisor of services may be liable in tort not only to the promisee but also to potential beneficiaries of the promise. To the contrary, we have recently declared that "[w]hile [our decision in Craig, supra ] is an example of our recognition that tort liability may exist in the absence of privity of contract, ... recovery under the principles of Craig is limited to instances 'where the defendant knew that the plaintiff would rely on his services.' Rae v. Air-Speed, Inc., 386 Mass. 187, 193 (1982)." Page v. Frazier, 388 Mass. 55, 64, 445 N.E.2d 148 (1983). We conclude, therefore, that the motion to dismiss the complaint was correctly allowed as to count 2. ³

We turn to the question whether recovery under the complaint is possible on the theory that the plaintiff is a third-party beneficiary of a contract between Borhek and the Gregorys. In Rae v. Air-Speed, Inc., supra, 386 Mass. at 193-196, 435 N.E.2d 628, we held that the plaintiff could recover not only on a tort theory but on a contract theory as well. We announced in that case our adoption of Restatement (Second) of Contracts § 302 (1981). Rae, supra at 195, 435 N.E.2d 628. We impliedly adopted related sections too, such as §§ 304, 308, and 315. Quoting Brewer v. Dyer, 7 Cush. 337, 340 (1851), we "recognize[d] again the principle of law that, 'when one person, for a valuable consideration, engages with another, by simple contract, to do some act for the benefit of a third, the latter, who would enjoy the benefit of the act, may maintain an action for the breach of...