Mass. Care Self-Ins. Group, Inc. v. Mass. Insurers Insolvency Fund

Citation937 N.E.2d 939,458 Mass. 268
Decision Date12 November 2010
Docket NumberSJC-10652.
PartiesMASSACHUSETTS CARE SELF-INSURANCE GROUP, INC. v. MASSACHUSETTS INSURERS INSOLVENCY FUND.
CourtUnited States State Supreme Judicial Court of Massachusetts

George C. Rockas (Young B. Han with him), Boston, for the plaintiff.

Gregory P. Deschenes (Joseph C. Tanski with him), Boston, for the defendant.

Present: MARSHALL, C.J., IRELAND, SPINA, COWIN, CORDY, BOTSFORD, & GANTS, JJ.

SPINA, J.

This case requires us to determine whether a claim filed with the Massachusetts Insurers Insolvency Fund (Fund) by a workers' compensation self-insurance group is a "[c]overed claim" within the meaning of G.L. c. 175D, § 1(2). Massachusetts Care Self-Insurance Group, Inc. (Mass Care), a workers' compensation self-insurance group established under G.L. c. 152, §§ 25E-25U, sought recovery from the Fund in respect of certain excess and reinsurance policies issued by Mass Care's insolvent insurer, Reliance National Indemnity Company (Reliance). The Fund denied the claim. In response, Mass Care fileda declaratory judgment action in the Superior Court that was resolved on cross motions for summary judgment. The judge ruled that the Reliance policies are not "direct insurance" and are therefore outside the scope of guaranty fund coverage. The judge also concluded that Mass Care is an "insurer" for purposes of G.L. c. 175D, § 1(2), and, as a result, Mass Care's claim falls within an exclusion to the definition of "covered claim." Declaratory judgments entered stating that "(1) [t]he ... claim is not a covered claim; and (2)[t]he Fund is not required to pay the ... claim or any future amounts incurred thereunder by [Mass Care]."

Mass Care appealed and we granted its application for direct appellate review. We affirm, but on somewhat different grounds from those of the motion judge, and hold that, because it is a member of the insurance industry, a claim filed by Mass Care is not a covered claim within the meaning of the statute.

1. Facts. There are no material facts in dispute. Mass Care is a not-for-profit workers' compensation self-insurance group organized under G.L. c. 152, §§ 25E-25U, incorporated under G.L. c. 180, and approved by the Commissioner of Insurance. It presently consists of thirty-nine member employers engaged in the business of providing nursing home care, long-term care, and assisted residential living in the Commonwealth.

The Fund is a "statutorily mandated, nonprofit, unincorporated association of all insurers writing certain kinds of direct insurance in the Commonwealth ... available to settle certain unpaid claims which arise out of and are within the coverage of an insurance policy issued by an insolvent insurer." Wheatley v. Massachusetts Insurers Insolvency Fund, 456 Mass. 594, 596-597 n. 4, 925 N.E.2d 9 (2010), quoting Barrett v. Massachusetts Insurers Insolvency Fund, 412 Mass. 774, 776, 592 N.E.2d 1317 (1992). The Fund is obligated to pay covered claims against an insolvent insurer (up to $300,000 per claim) in place of that insurer. G.L. c. 175D, § 5(1)( a ) & ( b ). See Ulwick v. Massachusetts Insurers Insolvency Fund, 418 Mass. 486, 489, 637 N.E.2d 209 (1994).

On December 14, 1995, Susan Gorski, a registered nurse then employed by East Longmeadow Nursing Home (Longmeadow), was injured in the course of her employment. Longmeadow was a member of Mass Care as of December 14, 1995, and at allrelevant times. Pursuant to a Massachusetts workers' compensation and employers' liability coverage certificate issued by Mass Care to Longmeadow, Mass Care is obligated to to "pay promptly when due the benefits required of [Longmeadow] by the workers' compensation law." Longmeadow therefore sought workers' compensation coverage for the Gorskiclaim from Mass Care. Between January, 1996, and December, 2005, Mass Care paid more than $273,000 on the claim.

At the time of Gorski's injury, Reliance had issued two insurance policies (Reliance policies) to Mass Care—a "Specific Excess Workers' Compensation and Employers' Liability Policy" identifying Mass Care as the insured and a "Cover Note of Reinsurance" identifying Mass Care as the reinsured company. Both Reliance policies contain a $250,000 per accident retention that has been exceeded by the Gorski claim. Reliance was adjudged insolvent in October, 2001, and the Fund took over the administration of Reliance's claims pursuant to G.L. c. 175D. In December, 2005, Mass Care requested that the Fund reimburse it for those payments on the Gorski claim that exceeded its retention under the Reliance policies.

The Fund denied the reimbursement request and Mass Care instituted the present action. Mass Care has requested a declaration that "[t]he Gorski claim is a covered claim pursuant to G.L. c. 175[D], § 1," while the Fund has sought a declaration that "[t]he claim submitted to the Fund by [Mass Care] relating to Susan Gorski is not a covered claim under G.L. c. 175D."

2. Discussion. Because this case was decided on cross motions for summary judgment with no dispute as to all material facts, one of "the moving part[ies] is entitled to judgment as a matter of law." Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120, 571 N.E.2d 357 (1991). The judge ruled that the statutory definition of "covered claim" excludes Mass Care's claim, which Mass Care alleges is error. The issue before us is therefore one of statutory interpretation that we review de novo. Costa v. Fall River Hous. Auth., 453 Mass. 614, 620, 903 N.E.2d 1098 (2009), quoting Commerce Ins. Co. v. Commissioner of Ins., 447 Mass. 478, 481, 852 N.E.2d 1061 (2006).

Mass Care can be entitled to payment from the Fund only if its claim is a covered claim within the meaning of the statute. G.L. c. 175D, § 5(1)( d ) (Fund shall "adjust, compromise,settle and pay all covered claims ... and shall deny all other claims"). Chapter 175D defines "[c]overed claim," in relevant part, as "an unpaid claim ... which arises out of and is within the coverage of an insurance policy to which this chapter applies" and that does not include "any amount due a reinsurer, insurer, insurance pool or underwriting association." G.L. c. 175D, § 1(2). As with all terms defined in c. 175D, however, the definition of covered claim is elastic such that it is given its defined meaning "unless the context clearly requires otherwise." G.L. c. 175D, § 1.

The question presented, whether Mass Care's claim is a covered claim, is therefore broader than the subsidiary points regarding "direct insurance" and the definition of "insurer" that were presented to the judge below and have been briefed and argued on appeal. We find it unnecessary to address the "direct insurance" issue but do consider it useful to review our prior case law and the "insurer" issue before reaching the grounds on which we ultimately decide this case.

This is not the first time in the Fund's forty years of operation that parties have come before the courts seeking further definition of the term "covered claim." In Ferrari v. Toto, 9 Mass.App.Ct. 483, 485-486, 402 N.E.2d 107 (1980), the first such case, the Appeals Court found itself "faced with the question ... 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 theexclusion extends to segments of the insurance industry which are not participants in the Fund." The Appeals Court considered that, in addition to insurers, "[a]n insurance pool or underwriting association would not fit in 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 members insurers." Id. at 486, 402 N.E.2d 107. The reasoning of the Appeals Court thus rested on the scope of "the class referred to in the exclusion provision" rather than the definition of the word "insurer." Id. We granted further appellate review and agreed, stating that the Appeals Court correctly concluded that "the claim was not a 'covered claim' because it was for an amount due an insurer within the meaning of G.L. c. 175D, § 1(2)." Ferrari v. Toto, 383 Mass. 36, 37, 417 N.E.2d 427 (1981). While intending to "agree with theAppeal's Court's reasoning and conclusion," id., our paraphrasing may have had the unintended effect of redirecting the thrust of the Appeals Court's analysis from the scope of the exclusion provision to the definition of the word "insurer."

We again considered G.L. c. 175D, § 1(2), in Ulwick v. Massachusetts Insurers Insolvency Fund, 418 Mass. 486, 487-488, 637 N.E.2d 209 (1994) ( Ulwick ), where a police officer employed by the city of Melrose was struck and injured by an automobile insured by American Mutual Insurance Company. The city, as required by G.L. c. 41, §§ 100 and 111F, paid medical costs and lost wages to the officer subject to reimbursement should the injured officer secure recovery from a third party.1 Id. at 488-489, 637 N.E.2d 209. The officer also sought recovery from the driver and owner of the vehicle that struck him. Id. at 487, 637 N.E.2d 209. American Mutual initially undertook the defense but, following its insolvency, the Fund assumed the obligation. Id. at 487-488, 637 N.E.2d 209. The Fund argued that because the city acted as a self-insurer, "the court should treat Melrose as an insurer" for purposes of the exclusion provision. Id. at 489, 637 N.E.2d 209. The question accordingly was framed as whether the definition of the word "insurer" should be "expanded" and the mode of analysis was set forth in those terms. We said, "Expansion of the explicit definition of the word 'insurer' may be justified only when, and to the extent that, the context of the statute clearly requires such expansion in order that the statute be internally consistent and consistent with the obvious legislative objective in enacting it." Id. at 489, 637 N.E.2d 209. By a divided c...

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