Mahoney v. Am. Auto. Ins. Co.

• Decision Date: 03 October 2013
• Docket Number: No. 12–P–163.,12–P–163.
• Citation: 989 N.E.2d 503,83 Mass.App.Ct. 677
• Parties: Wayne MAHONEY v. AMERICAN AUTOMOBILE INSURANCE COMPANY.
• Court: Appeals Court of Massachusetts

83 Mass.App.Ct. 677

989 N.E.2d 503

Wayne MAHONEY

v.AMERICAN AUTOMOBILE INSURANCE COMPANY.

No. 12–P–163.

Appeals Court of Massachusetts, Plymouth.

Argued Oct. 4, 2012.

Decided June 3, 2013.

Further Appellate Review Granted Oct. 3, 2013.

Merril S. Biscone, of New York (Pamela S. Gilman, Boston, with her) for the defendant.

J. Michael Conley, Braintree, for the plaintiff.

Present: GRASSO, FECTEAU, & AGNES, JJ.

FECTEAU, J.

On appeal from the allowance of the defendant American Automobile Insurance Company's (AAIC) motion for summary judgment, the plaintiff, Wayne Mahoney, contends that a judge in the Superior Court erred in interpreting Part 5, the “Optional Bodily Injury to Others” provision (Part 5) of a standard Massachusetts automobile insurance policy (seventh edition). Mahoney's complaint sought a declaration that AAIC is contractually obligated to indemnify Jennifer Hill, a household member of its insureds, Thomas and Sandra Joyce (the Joyces), in connection with a motor vehicle accident in which Mahoney's vehicle was struck by a vehicle rented by Hill and operated by Ellen Teague, to whom Hill had negligently entrusted it.

Acting on cross motions for summary judgment, the judge concluded that AAIC had no contractual obligation to indemnify Hill, because the plain language of Part 5 unambiguously provides that “this Part does not pay for the benefit of anyone using an auto without the consent of the owner.” Relying on the reasoning in Vergato v. Commercial Union Ins. Co., 50 Mass.App.Ct. 824, 741 N.E.2d 486 (2001)( Vergato ), the judge determined that Part 5 did not provide coverage to Hill because at the time of the accident, Teague was not operating the rental vehicle with the consent of the rental company, Hertz Rental Corporation (Hertz). We agree with the judge's interpretation and affirm the judgment.

Background. The essential facts are not in dispute. On March 17, 2007, Teague, who was not licensed, was driving a car that Hill had rented from Hertz when Teague negligently crossed the center line and struck Mahoney's vehicle, seriously injuring him. In renting the car from Hertz, Hill listed only herself as an operator, and only Hill was authorized by Hertz to operate the rental car.

After the accident, Mahoney sued Teague for negligent operation and Hill for negligent entrustment. Hertz assumed the defense of both Teague and Hill, and the suit was settled by an agreement that included the tender by Hertz of its insurance policy limits of $20,000 and Mahoney's release of Hill and Teague from personal liability in the event of a judgment in excess of available insurance limits, including any available secondary liability insurance. In the settlement agreement Teague admitted, and Hill did not contest, liability for the accident. After an assessment of damages hearing, judgment entered in favor of Mahoney against Teague and Hill in the amount of $78,000.

At the time of the accident, Hill was a household member of the Joyces, the named insureds under a standard Massachusetts automobile insurance policy issued by AAIC. As part of their policy, the Joyces had selected additional coverage in the amount of $250,000 per person under Part 5, “Optional Bodily Injury to Others,” which states in pertinent part as follows:

“Under this Part, we will pay damages to people injured or killed in accidents if you or a household member is legally responsible for the accident. We will also pay damages if someone else using your auto with your consent is legally responsible for the accident. The damages we will pay are the amounts the injured person is entitled to collect for bodily injury through a court judgment or settlement.

“This Part is similar to Compulsory Bodily Injury to Others (Part 1). Like the Compulsory Part, this part pays for accidents, involving your auto in Massachusetts. Also like the Compulsory Part, this Part does not pay for the benefit of anyone using an auto without the consent of the owner ” (emphasis supplied).¹

Discussion. “In review of a grant of summary judgment, we proceed de novo upon the same record as did the motion judge.... We must determine whether all material facts and questions of law are resolved.” Suffolk Constr. Co. v. Illinois Union Ins. Co., 80 Mass.App.Ct. 90, 93, 951 N.E.2d 944 (2011). “The interpretation of an insurance contract is no different from the interpretation of any other contract, and we must construe the words of the policy in their usual and ordinary sense.” Hakim v. Massachusetts Insurers' Insolvency Fund, 424 Mass. 275, 280, 675 N.E.2d 1161 (1997). “[W]e must ascertain ‘the fair meaning of the language used, as applied to the subject matter.’ ” Vergato, 50 Mass.App.Ct. at 826–827, 741 N.E.2d 486, quoting from Aetna Cas. & Sur. Co. v. Sullivan, 33 Mass.App.Ct. 154, 156, 597 N.E.2d 62 (1992). In addition, where the “standard form automobile liability insurance policy ... was approved by the Commissioner of Insurance ... [and] is ... controlled by the Division of Insurance ... the rule of construction resolving ambiguities in a policy against the insurer is inapplicable.” Id. at 826, 741 N.E.2d 486, quoting from Aetna Cas. & Sur. Co. v. Sullivan, supra.

AAIC argued below, and the judge agreed, that the outcome of this case is controlled by our decision in Vergato, supra. In Vergato, we considered the meaning of the same policy provision at issue in this case. There, the plaintiff owned a 1988 Ford Mustang, and her automobile insurance policy included Part 5 coverage for optional bodily injury to others. The plaintiff included her husband and three children as additional operators who were covered under the policy. When the plaintiff's vehicle was stolen, she rented a temporary replacement vehicle. In the rental agreement, she designated herself as the operator of the rental car but did not identify any other operators. However, the plaintiff permitted her children to drive the rental car and, as there relevant, she allowed her son to borrow the rental car and drive to a party. The son consumed alcohol at the party and later asked a friend, who had not been drinking, to drive the car. The friend lost control of the vehicle and struck a tree, injuring the plaintiff's son. The evidence was undisputed that neither the plaintiff's son nor his friend had the permission of the vehicle owner, the rental company, to drive the vehicle. We held that the term “owner” in Part 5 of the policy referred to the actual title holder, i.e., the rental company, and that Vergato's insurance company was under no obligation to indemnify the operator of the rental car since both the plaintiff's son and his friend had used the car without the permission of the rental company owner. Id. at 828–829, 741 N.E.2d 486.²

Mahoney contends that because the coverage sought here is for the benefit of Hill, who had consent from Hertz to operate the vehicle, and not for Teague, Vergato is inapplicable. We fail to discern a meaningful distinction between Vergato and this case. While it is undisputed that Hill, unlike Vergato's son and his friend, was authorized by Hertz, the owner, to operate the rental car, as in Vergato, any “use” of the rental car by Hill was circumscribed by her contract with Hertz. Had Hill been the owner of the vehicle and negligently entrusted it to Teague, we would view the question of the availability of Part 5 optional bodily injury insurance to indemnify Hill for her negligent entrustment of the vehicle to Teague quite differently. See Barnstable County Mut. Fire Ins. Co. v. Lally, 374 Mass. 602, 606, 373 N.E.2d 966 (1978) (“ ‘negligent entrustment’ as a distinct and specific cause of action is not exclusive of, but, rather, is derived from the more general concepts of ownership, operation, and use of a motor vehicle”). See also 6B Appleman & Appleman, Insurance Law and Practice § 4316, at 343 (rev. ed. 1979) (“A person clearly could be ‘using’ an automobile without operating it personally”). Here, Hill did not contest liability for negligent entrustment in the settlement agreement arising out of Mahoney's underlying personal injury suit defended by Hertz, and a judgment against her issued on that theory. Hill thus became “legally responsible for the accident” by way of her negligent entrustment, which under different circumstances could trigger the duty of AAIC under Part 5 to indemnify Hill, a household member of the Joyces. However, on the facts of this case, where Hill's “use” of the rental vehicle, i.e., its entrustment to Teague, was without the consent of Hertz, and Teague's “use” of the vehicle was also without the consent of Hertz, optional bodily injury coverage under Part 5 does not provide indemnity for the benefit of Hill, because the Part 5 coverage “does not pay for the benefit of anyone using an auto with the consent of the owner.”

Although not involving a rental car, Hanover Ins. Co. v. Locke, 35 Mass.App.Ct. 679, 624 N.E.2d 615 (1993), leads to the same interpretation of the scope of Part 5 coverage. There, a household member who operated the family automobile without the consent of his father, the owner and named insured, was at fault for a fatal accident. We held that the optional coverage under Part 5 of the policy was properly denied because the driver used the car without the owner's consent. Id. at 681, 624 N.E.2d 615. Similarly, in Picard v. Thomas, 60 Mass.App.Ct. 362, 372, 802 N.E.2d 581 (2004), we held that neither compulsory nor optional bodily injury coverage was available under a vehicle owner's policy for an accident in which the owner's daughter, a household member, had given permission to another to operate the vehicle, when the daughter did not have the permission of her father, the owner, to allow another person to operate it. Because the operator did not have the owner's permission, express or implied, to operate the vehicle, the owner's policy was not required to provide coverage.

The factual posture here, involving Part...