International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc.

• Decision Date: 14 September 1990
• Docket Number: No. 89-P-565,89-P-565
• Citation: 560 N.E.2d 122,29 Mass.App.Ct. 215
• Court: Appeals Court of Massachusetts
• Parties: INTERNATIONAL MOBILES CORP. v. CORROON & BLACK/FAIRFIELD & ELLIS, INC.

Page 122

560 N.E.2d 122

29 Mass.App.Ct. 215

INTERNATIONAL MOBILES CORP. v. CORROON & BLACK/FAIRFIELD & ELLIS, INC.

No. 89-P-565.

Appeals Court of Massachusetts,

Suffolk.

Argued May 15, 1990.

Decided Sept. 14, 1990.

Alan K. Posner, Boston, for plaintiff.

James D. Smeallie (Joshua C. Krumholz, Boston, with him), for defendant.

Before KASS, SMITH and GILLERMAN, JJ.

KASS, Justice.

Under that line of decisions--the most recent example is Bowen v. Eli Lilly & Co., 408 Mass. 204, 557 N.E.2d 739 (1990)--which considers when an action accrues for purposes of applying a statute of limitations, discovery of the wrong and, in negligence cases, the concurrence of some harm trigger the running of the limitations period. ¹ We conclude that in the case before us, an action against an insurance agent for failure to place coverage, the statute of limitations did not begin to run on the negligence and G.L. c. 93A counts until the plaintiff suffered harm by reason of settlement of an underlying tort action. As to a contract claim, however, we decide that the statute of limitations bars the action. We, therefore, reverse in part and affirm in part a judgment for the defendant entered in the Superior Court.

Judgment was entered on the basis of the allowance of a motion for summary judgment. The material facts, as is necessary if a case is to be considered on a motion for summary judgment, are not in dispute. See Mass.R.Civ.P. 56, 365 Mass. 824 (1974); Federal Deposit Ins. Corp. v. Csongor, 391 Mass. 737, 740, 464 N.E.2d 942 (1984). We summarize those facts.

International Mobiles Corp. ("Mobiles"), the plaintiff, leases ice cream vans to street vendors. From 1973 to 1979, Mobiles engaged the defendant Corroon & Black/Fairfield & Ellis, Inc. ("Corroon"), an insurance broker, to advise it about insurance needs and to purchase necessary coverage. Among a number of liability policies placed by Corroon for Mobiles in 1976 and 1977 was an excess coverage fleet policy with Northeastern Fire Insurance Company of Pennsylvania ("NFI"), covering ice cream vans operated by lessees--so Mobiles thought--in Maryland, Pennsylvania, Rhode Island, and Virginia. Mobiles paid an $8,500 insurance premium for NFI's 1977 coverage.

On June 16, 1977, a five year old girl was badly hurt in Portsmouth, Rhode Island, while buying ice cream from a van leased from Mobiles. She was struck by an oncoming automobile as she crossed the street to her home for more money. The girl's parents, on her behalf, brought a negligence action in 1980 against multiple defendants which, as to Mobiles, was based on the theory that the Mobiles van should have been equipped with flashing lights, horns, bells, and gongs to serve as warning and safety devices. Corroon notified Mobiles' insurance carriers, including, on January 19, 1981, NFI.

NFI responded on March 2, 1981, that the van involved in the Rhode Island accident was not included among those insured and that, indeed, only vehicles in Pennsylvania and Virginia were covered. Accordingly, NFI disclaimed coverage.

NFI's abstention from the field did not immediately alter the shape of the battle in Rhode Island. Mobiles' primary liability insurer, Wausau Insurance Company, assumed the defense for Mobiles. In June, 1986, after several days of trial, the case against Mobiles was settled for $380,000. Wausau paid the first $10,000. Mobiles had looked to NFI for the first level of excess coverage, between $10,000 and $100,000, and to First State ² for the overage. First State agreed to "drop down" to $60,000 as the starting point of its excess coverage and to pay $320,000, provided Mobiles contributed $50,000. On September 25, 1987, well within the three years (see G.L. c. 260, § 2A) of when it was required for the first time to make a payment, but well beyond three years after the date of NFI's disclaimer, Mobiles commenced the action against Corroon.

1. The negligence claim. Negligence in the abstract does not support a cause of action. A negligence claim cannot be maintained and, therefore, does not accrue, without a showing of some harm resulting from the negligence. Cannon v. Sears, Roebuck & Co., 374 Mass. 739, 742, 374 N.E.2d 582 (1978). Dinsky v. Framingham, 386 Mass. 801, 803, 438 N.E.2d 51 (1982). That some degree of harm came to the plaintiff as a result of the defendant's negligence is all that is required; the extent of the injury need not be ascertainable at the time of the accrual of the action. Olsen v. Bell Tel. Labs., Inc., 388 Mass. 171, 175, 445 N.E.2d 609 (1983). Massachusetts Elec. Co. v. Fletcher, Tilton & Whipple, P.C., 394 Mass. 265, 268-269, 475 N.E.2d 390 (1985). Cantu v. St. Paul Cos., 401 Mass. 53, 57, 514 N.E.2d 666 (1987). Bowen v. Eli Lilly & Co., 408 Mass. at 207, 557 N.E.2d 739. See Levin v. Berley, 728 F.2d 551, 553-555 (1st Cir.1984).

In the general run of cases, negligence actions accrue when the accident happens and a person is injured. Cannon v. Sears, Roebuck & Co., 374 Mass. at 741, 374 N.E.2d 582. The ladder collapses and the woman on it suffers a broken leg. Suspected negligence and harm are apparent, and the statute of limitations begins to run. See White v. Peabody Constr. Co., 386 Mass. 121, 129, 434 N.E.2d 1015 (1982); Frank Cooke, Inc. v. Hurwitz, 10 Mass.App.Ct. 99, 109, 406 N.E.2d 678 (1980). When negligence and harm are inherently unknowable, as in the case of an undiagnosed and asymptomatic disease, the running of the three-year limitations period begins "on the happening of an event likely to put the plaintiff on notice." Hendrickson v. Sears, 365 Mass. 83, 89-90, 310 N.E.2d 131 (1974). White v. Peabody Constr. Co., 386 Mass. at 129, 434 N.E.2d 1015. Joseph A. Fortin Constr., Inc. v. Massachusetts Hous. Fin. Agency, 392 Mass. 440, 443, 466 N.E.2d 514 (1984). Bowen v. Eli Lilly & Co., 408 Mass. at 205-207, 557 N.E.2d 739. Notice here refers not to discovery of every fact necessary to prevail on the claim, but rather to discovery of the plaintiff's injury as causally connected to the defendant's negligence. White v. Peabody Constr. Co., 386 Mass. at 130, 434 N.E.2d 1015. Salin v. Shalgian, 18 Mass.App.Ct. 467, 470, 467 N.E.2d 475 (1984). The plaintiff receives notice, and the statutory period begins to run, when the plaintiff knows or reasonably should have known that it sustained appreciable harm as a result of the defendant's negligence. Massachusetts Elec. Co. v. Fletcher, Tilton & Whipple, P.C., 394 Mass. at 268, 475 N.E.2d 390. Cantu v. St. Paul Cos., 401 Mass. at 57, 514 N.E.2d 666.

So it is that a negligence action may be maintained against an insurance agent or broker who undertakes to procure an insurance policy and fails to do so, Rae v. Air-Speed, Inc., 386 Mass. 187, 192, 435 N.E.2d 628 (1982), but not unless there has been some appreciable harm to the potential insured. See massachusetts Elec. Co. v. Fletcher, Tilton & Whipple, P.C., 394 Mass. at 268, 475 N.E.2d 390. The failure to obtain insurance obviously will not cause injury in every case. ³ If no accident produces a claim, the failure will have been negligence in the abstract. See Rae v. Air-Speed, Inc., 386 Mass. at 193, 435 N.E.2d 628. Some courts have said that legal injury has not occurred until the insured actually suffers the unprotected loss. See Manzanita Park, Inc. v. Insurance Co. of N. America, 857 F.2d 549, 558 (9th Cir.1988), and cases cited; Lipitz v. Washington Natl. Ins. Co., 513 F.Supp. 606, 607 (E.D.Pa.1981). See, by analogy, cases involving failure to provide competent legal services, Cantu v. St. Paul Cos., 401 Mass. at 53, 514 N.E.2d 666; Salin v. Shalgian, 18 Mass.App.Ct. at 468, 467 N.E.2d 475; Pelletier v. Chouinard, 27 Mass.App.Ct. 92, 534 N.E.2d 813 (1989); Levin v. Berley, 728 F.2d at 552. In those actions in negligence, the requirement that the plaintiff sustain appreciable harm was met when the plaintiff incurred expenses, most often associated with employing a new lawyer to prosecute or defend against an action which would not have occurred but for the defendant-attorney's negligence. See, e.g., Pelletier v. Chouinard, 27 Mass.App.Ct. at 95, 534 N.E.2d 813; Manzanita Park, Inc. v. Insurance Co. of N. America, 857 F.2d at 558. It might be supposed that Mobiles' consciousness of contingent liability was damage enough, but the authorities are chary of treating the threat of future harm without realization of some tangible harm, like out-of-pocket payments, as the basis for concluding that damage has occurred and the cause of action has accrued. See Levin v. Berley, 728 F.2d at 553-554; Whitcomb v. Pension Dev. Co., 808 F.2d 167, 171 (1st Cir.1986); Budd v. Nixen, 6 Cal.3d 195, 200-201, 98 Cal.Rptr. 849, 491 P.2d 433 (1971); Prosser, Torts § 30 at 143 (4th ed. 1971).

In the instant case, although Mobiles had reason to think that Corroon had bungled when NFI responded in 1981 that its policy did not cover vehicles in Rhode Island, Mobiles incurred no expense nor, on this record, suffered any discernible detriment as a result of Carroon's negligence. The expense of Mobiles' defense, as we have noted, was borne entirely by Wausau and that relatively peculiar circumstance bears decisively on the outcome of the case. This is not a case where some damage had been sustained, as by the payment of legal fees, but its extent was unknown. See Gore v. Daniel O'Connell's Sons, Inc., 17 Mass.App.Ct. 645, 648-649, 461 N.E.2d 256 (1984). Whether there is any harm at all is a question distinct from whether the magnitude of the harm is ascertainable, albeit definite. Mobiles in 1981 could not have maintained a cause of action against Corroon because it could allege no damage; any complaint would have been an altogether vulnerable object of a well pleaded motion to dismiss under Mass.R.Civ.P. 12(b)(6), 365 Mass. 755 (1974), or Mass.R.Civ.P. 56. When that is understood, resolution of this aspect of the case becomes apparent.

There is some transitory attraction to the idea, once a...