Insurers Insolvency Fund v. Premier Ins.

Citation869 N.E.2d 576,449 Mass. 422
Decision Date12 July 2007
Docket NumberSJC-09793.
PartiesMASSACHUSETTS INSURERS INSOLVENCY FUND v. PREMIER INSURANCE COMPANY & others<SMALL><SUP>1</SUP></SMALL> (and three consolidated cases).<SMALL><SUP>2</SUP></SMALL>
CourtUnited States State Supreme Judicial Court of Massachusetts

John D. Curran, Quincy, for Premier Insurance Company.

John H. Bruno, II, for Hanover Insurance Company.

Christine Vargas, Boston (Mark Robins with her) for Massachusetts Insurers Insolvency Fund.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, & COWIN, JJ.

SPINA, J.

In these consolidated cases, transferred from the Appeals Court on our own motion, we consider the scope of the obligation of the Massachusetts Insurers Insolvency Fund (Fund) to compensate an individual injured in a motor vehicle accident where the vehicle causing the accident is owned by a governmental entity, a municipality, and is insured by an insurer that becomes insolvent. For the reasons that follow, we conclude that the Fund's obligation to compensate the injured individual does not arise, if at all, until the individual's own uninsured motor vehicle (UM) coverage has been exhausted.

1. Background. On November 14, 2000, Adrianna Furness was fatally injured when her motor vehicle hit a tree while being pursued by a police cruiser owned by the town of Braintree. She was covered under a standard Massachusetts automobile insurance policy, seventh edition (standard automobile policy), issued by Hanover Insurance Company (Hanover), which included UM benefits. On February 28, 2001, Grazia Laferla was injured in a motor vehicle accident with a street sweeper owned by the city of Lynn. She was covered under a standard automobile policy issued by Premier Insurance Company (Premier), which included UM benefits. On March 7, 2001, Jeffrey Frank was injured in a motor vehicle accident with a snowplow owned by the town of Sharon. He was covered under a standard automobile policy issued by Premier, which included UM benefits. On August 27, 2001, Michelle Cote was injured in a motor vehicle accident with a truck owned by the city of Fitchburg. She was covered under a standard automobile policy issued by Premier, which included UM benefits.

The drivers of the municipally owned vehicles were alleged to be legally responsible for the injuries sustained by the four individuals in their respective accidents. At the time of each accident, each municipality had motor vehicle insurance coverage under a policy issued by Legion Insurance Company (Legion). However, on July 28, 2003, the Commonwealth Court of Pennsylvania, a court of competent jurisdiction, declared Legion insolvent. See Koken v. Legion Ins. Co., 831 A.2d 1196 (Pa.Commw.Ct.2003), aff'd sub. nom. Koken v. Villanova Ins. Co., 583 Pa. 400, 878 A.2d 51 (2005). See also G.L. c. 175D, § 1(4) (defining "[i]nsolvent [i]nsurer").

The three injured individuals and the estate of Adrianna Furness (collectively, the claimants) sought UM coverage from their respective automobile insurers, Hanover and Premier (collectively, the UM insurers).3 Each claim was denied based on a provision in the standard automobile policy stating that motor vehicles owned by a governmental unit are not considered to be "uninsured" (government vehicle exclusion).4 The claimants then sought compensation from the Fund. Their claims were denied on the ground that, pursuant to G.L. c. 175D, § 9, they first had to exhaust their UM coverage under their own standard automobile policies.

a. Proceedings in the Superior Court in Suffolk County. In late 2004, the Fund commenced separate actions in the Superior Court in Suffolk County for declaratory judgment and other relief against the UM insurers.5 It sought a determination of the rights and obligation of the parties for the payment of bodily injury benefits under the motor vehicle policies of an insolvent insurer, Legion, where there was a source of UM coverage for such claims from solvent insurers, Premier and Hanover.6 The Fund and the UM insurers then filed cross motions for summary judgment.

On September 15, 2005, a judge allowed the Fund's motion for summary judgment and denied the UM insurers' motions. Judgment was entered in each case declaring that by reason of Legion's insolvency, the UM insurers were obligated to provide UM benefits to the claimants in the appropriate amounts under their respective policies. Further, the Fund was not obligated to pay any of the claimants' claims as covered claims resulting from Legion's insolvency until the claimants' own UM coverage was first exhausted. Finally, if any of the claimants did exhaust the UM coverage of their own policies, any amount payable by the Fund thereafter on a covered claim had to be reduced by an amount equal to the UM limits in the relevant policy.7

b. Proceedings in the Superior Court in Norfolk County. In parallel proceedings, Jeffrey Frank commenced an action in the Superior Court in Norfolk County for declaratory relief against the Fund and Premier. In his subsequent motion for summary judgment against the Fund or, in the alternative, against Premier, Frank asserted that one or the other party was responsible for indemnification of his damages. Premier filed a cross motion for summary judgment. The Fund opposed Premier's cross motion for summary judgment and requested a declaration of its obligation to Frank.

On November 4, 2005, a judge denied Frank's motion for summary judgment and allowed Premier's motion.8 The judge concluded that the government vehicle exclusion in the standard automobile policy operated to preclude Frank from UM coverage, notwithstanding the insolvency of Legion. Further, the judge opined that before Frank could turn to the Fund as a source of compensation for his covered claim against Legion, he first had to seek recovery from the town of Sharon, pursuant to G.L. c. 258, § 2.9

2. Obligations of the Fund. The UM insurers now contend that, pursuant to the clear language of the standard automobile policy, vehicles owned by governmental entities are never considered "uninsured," and, therefore, the UM insurers are not responsible for providing UM coverage with respect to those particular vehicles. As a consequence, the UM insurers continue, they are not obligated here to compensate the claimants for their injuries because of the insolvency of Legion. Instead they assert, it is the Fund that should be responsible for paying such claims. The UM insurers argue that the uninsured motor vehicle statute, G.L. c. 175, § 113L, does not conflict with their position. We disagree.

The interpretation of an insurance policy is a question of law for the trial judge and the reviewing court. See Cody v. Connecticut Gen. Life Ins. Co., 387 Mass. 142, 146, 439 N.E.2d 234 (1982). Like all contracts, the terms of an insurance policy will be construed "according to the `fair meaning of the language used, as applied to the subject matter.'" Davis v. Allstate Ins. Co., 434 Mass. 174, 179, 747 N.E.2d 141 (2001), quoting Bilodeau v. Lumbermens Mut Cas. Co., 392 Mass. 537, 541, 467 N.E.2d 137 (1984). See Massachusetts Insurers Insolvency Fund v. Safety Ins. Co., 439 Mass. 309, 313, 787 N.E.2d 555 (2003) (policy language must be "read as a whole and in the context of the insurance scheme in Massachusetts").

The language of the standard automobile policy is controlled by the Commissioner of Insurance. See id. at 312, 787 N.E.2d 555; Goodman v. American Cas. Co., 419 Mass. 138, 140, 643 N.E.2d 432 (1994). Therefore, the uninsured motor vehicle provision "is not construed against [the UM insurers], but in conformity with the statute, G.L. c. 175, § 113L, which dictates its content." Massachusetts Insurers Insolvency Fund v. Safety Ins. Co., supra. Given that the underlying motor vehicle accidents here involved municipally owned vehicles that were insured by an insolvent insurer, arguably rendering those vehicles "uninsured," we consider G.L. c. 175, § 113L, in conjunction with the statute that created and governs the Fund, G.L. c. 175D. To the extent possible, these statutes must be construed so as to create a harmonious whole, consistent with the legislative purposes of both statutes. See Independence Park, Inc. v. Board of Health of Barnstable, 403 Mass. 477, 480, 530 N.E.2d 1235 (1988); Boston Hous. Auth. v. Labor Relations Comm'n, 398 Mass. 715, 718, 500 N.E.2d 802 (1986).

Massachusetts is a "compulsory insurance" State, requiring that a liability insurance policy be secured as a condition to the registration of a motor vehicle. See G.L. c. 90, § 1A; Metropolitan Prop. & Cas. Ins. Co. v. Westberg, 61 Mass.App.Ct. 247, 249 n. 4, 809 N.E.2d 544 (2004). However, motor vehicles owned by the Commonwealth or any political subdivision thereof are exempt from this requirement. See G.L. c. 90, § 1A. Notwithstanding this statutory exemption, municipalities can choose to purchase insurance for their vehicles, as happened here. See G.L. c. 258, § 8 ("A public employer may procure insurance for payment of damages incurred pursuant to this chapter"). Once this occurs, municipalities are no longer self-insureds. Instead, for purposes of G.L. c. 175, § 113L, they become akin to private insureds who purchase insurance for their own motor vehicles.

All motor vehicle liability insurance policies, including those issued to the claimants and those purchased by the municipalities, must include, pursuant to G.L. c. 175, § 113L, UM coverage for injuries sustained in an accident involving an uninsured vehicle, which includes a motor vehicle where the liability insurer thereof has become insolvent.10 "The aim of the uninsured motorist statute is to minimize the catastrophic financial loss for victims of automobile accidents caused by the negligence of uninsured tortfeasors." Surrey v. Lumbermens Mut. Cas. Co., 384 Mass. 171, 177, 424 N.E.2d 234 (1981). Section 113L does not include an exemption from UM coverage for vehicles owned by a governmental entity that has chosen to purchase...

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