Merchants Ins. Grp. v. Spicer

• Decision Date: 09 September 2015
• Docket Number: No. 14–P–798.,14–P–798.
• Citation: 88 Mass.App.Ct. 262,38 N.E.3d 1018
• Parties: MERCHANTS INSURANCE GROUP v. Kevin SPICER & others.
• Court: Appeals Court of Massachusetts

88 Mass.App.Ct. 262

38 N.E.3d 1018

MERCHANTS INSURANCE GROUP

v.Kevin SPICER¹ & others.²

No. 14–P–798.

Appeals Court of Massachusetts, Suffolk.

Argued March 4, 2015.

Decided Sept. 9, 2015.

Darrel Mook (Patricia B. Gary, Boston, with him) for the plaintiff.

Douglas S. Martland, Boston, for the intervener.

Present: COHEN, HANLON, & SULLIVAN, JJ.

Opinion

COHEN, J.

The central question presented in this appeal is whether an insurer may bring an action in Superior Court to retroactively void a workers' compensation policy while an injured employee's claim under that policy is pending in the Department of Industrial Accidents (DIA). The plaintiff, Merchants Insurance Group (Merchants), claiming fraud in the inducement, initiated such an action, and, there being no opposition from the insured employer or the injured employee, secured a declaratory judgment in its favor. Subsequently, however, a judge of the Superior Court reopened the case at the request of the employee and the Workers' Compensation Trust Fund (Fund)³ and dismissed Merchants' complaint, without prejudice, for lack of subject matter jurisdiction. Upon review of Merchants' appeal from the judgment of dismissal, we conclude that the judge correctly ruled that its claim for rescission of the workers' compensation policy was subject to the doctrine of exhaustion of administrative remedies, and could not be pursued in the Superior Court. For this and other reasons explained below, we affirm the judgment of dismissal.

Background. On December 30, 2011, Joel Estaban Perez was seriously injured while working for Kevin Spicer, doing business as Uptown Landscaping (Spicer).⁴ Perez sought workers' compensation benefits under a policy issued by Merchants to Spicer, and Merchants contested the claim.⁵ After an informal conference, a DIA administrative judge ordered Merchants to pay Perez weekly temporary total incapacity benefits, pursuant to G.L. c. 152, § 34, and medical benefits, pursuant to G.L. c. 152, §§ 13, 30, pending an evidentiary hearing on the merits. Both parties appealed the interim conference order and requested a formal

hearing pursuant to G.L. c. 152, § 11.

In June, 2012, while Perez's DIA case was awaiting the formal hearing, Merchants successfully moved to join the Fund as a party to the DIA case. At about the same time, Merchants also filed a complaint in Superior Court naming Spicer and Perez as defendants. In that complaint, Merchants sought rescission of two insurance policies (a workers' compensation policy and a general liability policy) that it had issued to Spicer, on the ground that Spicer had made material misrepresentations in applying for the policies. Merchants also sought a judgment declaring that the policies were void ab initio and that it had no duty to defend or indemnify Spicer in connection with Perez's pending claim for workers' compensation benefits. As against Spicer, Merchants also sought damages in the amount of any payments it had been required to make to Perez under the workers' compensation policy thus far.

Neither Spicer nor Perez put up any resistance. Spicer never appeared in the action, and on June 28, 2013, a default judgment entered against him along the lines requested by Merchants.⁶ Perez answered Merchants' complaint but did not oppose its motion for summary judgment. On August 23, 2013, a judgment entered against Perez, declaring that both of the policies issued by Merchants to Spicer were void ab initio and rescinded, and that Merchants had no obligation to defend, indemnify, or pay any sums on account of any claims or actions arising out of Perez's injuries, including the pending DIA case. Because the Superior Court case was never actively litigated, at no time was there any determination that Spicer, in fact, had made misrepresentations to Merchants, or that any such misrepresentations met the criteria necessary to defeat or avoid Merchants' obligations under the policies. See G.L. c. 175, § 186(a ).⁷

With the declaratory judgment in hand, Merchants went before the administrative judge assigned to the Perez matter and moved that it be dismissed from the DIA case. The administrative judge denied the motion⁸ and scheduled a G.L. c. 152, § 11, formal hearing for November 4, 2013. Merchants then filed a second Superior Court action, requesting that the DIA and the administrative judge be enjoined from going forward with “any proceedings” against Merchants in Perez's workers' compensation case. In response, Perez filed a motion in the first Superior Court action, seeking relief from the declaratory judgment in favor of Merchants, on the ground that the court had been without jurisdiction to entertain Merchants' complaint. See Mass.R.Civ.P. 60(b)(4), 365 Mass. 827 (1974).

Informed of this development, the judge in the second Superior Court action granted a temporary restraining order halting the DIA proceedings until such time as Perez's motion for relief from judgment in the first action was determined.⁹ Meanwhile, in the first action, the Fund sought and was granted leave to intervene pursuant to Mass.R.Civ.P. 24, 365 Mass. 769 (1974), and proceeded to submit filings in support of Perez's motion for relief from judgment. Merchants responded with an opposition, essentially arguing that the Superior Court did have jurisdiction and that relief under rule 60(b) would be inappropriate.

At the hearing on the motion for relief from judgment, Perez and the Fund requested that the case be dismissed because Merchants

had failed to exhaust its administrative remedies, and, hence, the court lacked subject matter jurisdiction to adjudicate its claims.¹⁰ The motion judge agreed; she vacated prior orders and judgments in the case and ordered the entry of a new, final judgment dismissing Merchants' complaint without prejudice.

Discussion. We review the question of jurisdiction de novo. See Buccaneer Dev., Inc. v. Zoning Bd. of Appeals of Lenox, 83 Mass.App.Ct. 40, 41, 980 N.E.2d 458 (2012). In the present circumstances, the question can be further narrowed to whether Merchants was required to exhaust its administrative remedies at the DIA.

The exhaustion rule (or doctrine) has long been a part of our system of jurisprudence. See Saint Luke's Hosp. v. Labor Relations Commn., 320 Mass. 467, 469, 70 N.E.2d 10 (1946) ; East Chop Tennis Club v. Massachusetts Commn. Against Discrimination, 364 Mass. 444, 448–452, 305 N.E.2d 507 (1973). Like its closely-related counterpart, the primary jurisdiction doctrine, the exhaustion rule promotes “proper relationships and sensible coordination of work between courts and administrative agencies that are charged with regulatory responsibilities.” Massachusetts Correction Officers Federated Union v. County of Bristol, 64 Mass.App.Ct. 461, 467 n. 9, 833 N.E.2d 1182 (2005). See Lumbermans Mut. Cas. Co. v. Workers' Compensation Trust Fund, 88 Mass.App.Ct. ––––, ––––, ––– N.E.3d –––– (2015) ; Staveley v. Lowell, 71 Mass.App.Ct. 400, 403 n. 7, 882 N.E.2d 362 (2008).

Application of the exhaustion rule to any particular case requires not only an understanding of its purposes, but also “of the particular administrative scheme involved.” McKart v. United States, 395 U.S. 185, 193, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969). We must therefore take into consideration

the objectives of G.L. c. 152, the workers' compensation act (act), and the manner in which it is administered.

1. General Laws c. 152. The act was passed into law in 1911, as a humanitarian measure designed to provide prompt and adequate compensation and medical benefits to an employee (and the employee's dependents) in the event of injury or death occasioned by a work-related accident. See Young v. Duncan, 218 Mass. 346, 349, 106 N.E. 1 (1914) ; Neff v. Commissioner of the Dept. of Indus. Accs., 421 Mass. 70, 73, 653 N.E.2d 556 (1995) ; Spaniol's Case, 466 Mass. 102, 106–107, 992 N.E.2d 1028 (2013). Motivated by public dissatisfaction with “inadequate” common-law remedies, the Legislature attached “new incidents” to the relationship of employer and employee, enforced by a sui generis process analogous to that of equity procedure, to promote the goal of assuring prompt and adequate assistance to injured workers (and their dependents). Opinion of the Justices, 309 Mass. 562, 568, 35 N.E.2d 1 (1941). It also established a scheme of interlinked rights, obligations, and remedies “all its own, not previously known to the common or statutory law.” Ahmed's Case, 278 Mass. 180, 184, 179 N.E. 684 (1932). As a remedial statute, the act is to be afforded a broad interpretation, viewed in light of its purposes and in aid of its “beneficent design.” Neff v. Commissioner of the Dept. of Indus. Accs., supra (quotation omitted).

a. Adjudicatory process. There are four procedural steps in the adjudicatory process of a contested workers' compensation claim. The first step is an informal conciliation proceeding, see G.L. c. 152, § 10 ; if the parties cannot reach a voluntary accord, the second step is an informal conference before an administrative judge, id. at §§ 10, 10A. The third step is a formal hearing before an administrative judge, see id. at § 11; and the fourth is an appeal to the reviewing board, see id. at § 11C. See generally Murphy v. Commissioner of the Dept. of Indus. Accs., 415 Mass. 218, 223–225, 612 N.E.2d 1149 (1993) ; Neff v. Commissioner of the Dept. of Indus. Accs., supra at 74, 653 N.E.2d 556 ; Murphy's Case, 53 Mass.App.Ct. 708, 712, 761 N.E.2d 998 (2002).

Judicial review of a final decision of the reviewing board is had in this court, not the Superior Court. G.L. c. 152, § 12. The Superior Court is a proper forum only if a party seeks to enforce an order of the reviewing board—a situation not presented here. Ibid. In this case, Perez and Merchants reached only the conference stage at the DIA, which resulted in an order for temporary benefits. Thus, the administrative proceedings were far from exhausted when Merchants elected to file its complaint...