Merrimack Mut. Fire Ins. Co. v. Nonaka

• Decision Date: 19 January 1993
• Citation: 606 N.E.2d 904,414 Mass. 187
• Parties: MERRIMACK MUTUAL FIRE INSURANCE COMPANY v. Keizo NONAKA & others. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 904

606 N.E.2d 904

414 Mass. 187

MERRIMACK MUTUAL FIRE INSURANCE COMPANY v. Keizo NONAKA & others. ¹

Supreme Judicial Court of Massachusetts,

Middlesex.

Argued Nov. 2, 1992.

Decided Jan. 19, 1993.

Kenneth L. Carson, Boston, for plaintiff.

Roger A. Cox, Boston, for Keizo Nonaka.

Before LIACOS, C.J., and WILKINS, NOLAN, LYNCH and GREANEY, JJ.

WILKINS, Justice.

On June 11, 1990, Anthony J. D'Urso shot Keizo Nonaka wounding him seriously. The plaintiff (Merrimack) commenced this action seeking a declaratory judgment that a Merrimack homeowner's insurance policy covering D'Urso as an insured did not provide coverage of Nonaka's claim against D'Urso. That insurance policy excluded coverage for bodily injury "which is expected or intended by the insured." A jury in this action found that D'Urso intentionally shot Nonaka. Subsequently, a second jury awarded $900,000 to Nonaka in his action against D'Urso. ²

Nonaka does not argue that, by its terms, the Merrimack policy covers his claim against D'Urso. He argued below successfully that Merrimack must afford him coverage of that claim because of Merrimack's conduct in defending the Nonaka claim for approximately five months without giving D'Urso notice of a reservation of rights or a disclaimer of coverage. Because the trial judge found that D'Urso was in no way prejudiced by Merrimack's defense of the tort case, he rejected Nonaka's claim that Merrimack was estopped to deny coverage. His decision in favor of Nonaka was based on his conclusion that Merrimack's dominion over the case, before it commenced this action, "during most of the pretrial period, during which important events such as the deposition of the plaintiff [Nonaka] and the preliminary pretrial conference occurred" obligated it to cover the Nonaka claim. In the judge's view, Merrimack's delay was too great, even if there was no prejudice to D'Urso.

We granted Merrimack's application for direct appellate review. We vacate the judgment and order the entry of a declaration that Merrimack is not obliged to provide coverage of Nonaka's claim against D'Urso.

We recite the significant facts found by the judge or established in the pleadings. On July 30, 1990, Nonaka sued D'Urso alleging only negligent conduct. On August 24, counsel for D'Urso filed an answer. In September, D'Urso's counsel notified Merrimack of the claim. Early in October, counsel selected by Merrimack entered an appearance for D'Urso and original counsel for D'Urso withdrew his appearance. New counsel for D'Urso conducted a deposition of Nonaka in October. Early that month Merrimack retained coverage counsel. On November 19, Nonaka filed an amended complaint that alleged assault and battery as well as other claims, including negligence, and added D'Urso's son Anthony as a defendant. On January 25, 1991, the filing of a second amended complaint was allowed. That complaint alleged no intentional conduct. On February 21, the tort case was called for a preliminary pretrial conference, and an early trial date was set. On March 11, Merrimack filed this declaratory judgment action. Later that month counsel selected by the D'Ursos appeared for them in Nonaka's tort action (at Merrimack's expense), and counsel selected by Merrimack withdrew his appearance. On May 23, the jury in this action found that D'Urso intentionally shot Nonaka. On May 31, judgment was entered for Nonaka in his action against D'Urso.

Any claim that Merrimack's conduct bars it from disclaiming coverage must rest either on estoppel or on waiver. Sweeney v. Frew, 318 Mass. 595, 598, 63 N.E.2d 350 (1945). Estoppel is not involved here because D'Urso did not rely to his detriment on anything Merrimack did or did not do. See Royal-Globe Ins. Co. v. Craven, 411 Mass. 629, 635, 585 N.E.2d 315 (1992). ³ To succeed Nonaka must establish that Merrimack waived its right to disclaim coverage.

An insurance company is obliged to provide coverage to an insured who has violated a provision of the policy if the company has waived its right to assert the policy breach as a ground for denying liability. Waiver consists of the insurer's voluntary or intentional relinquishment of a known right. See Sheehan v. Commercial Travelers Mut. Accident Ass'n of Am., 283 Mass. 543, 186 N.E. 627 (1933); Powell v. Fireman's Fund Ins. Cos., 26 Mass.App.Ct. 508, 511, 529 N.E.2d 1228 (1988). An insurer's intention to waive a ground for not providing coverage may be inferred from the circumstances. Eaton v. Globe & Rutgers Fire Ins. Co., 227 Mass. 354, 364, 116 N.E. 536 (1917). See Hurley v. Metropolitan Life Ins. Co., 296 Mass. 130, 136, 5 N.E.2d 16 (1936). One class of waiver case involves a claimed breach of an insured's duty to the insurer, such as the failure promptly to notify the insurance company of a claim or the failure of an insured to cooperate with the insurance company. See, e.g., DiMarzo v. American Mut. Ins. Co., 389 Mass. 85, 99, 449 N.E.2d 1189 (1983); Rose v. Regan, 344 Mass. 223, 181 N.E.2d 796 (1962). ⁴ Another class of waiver case involves claimed misrepresentations by the insured that led the insurer to provide insurance coverage. See, e.g., Employers' Liab. Assurance Corp., Ltd. v. Vella, 366 Mass. 651, 321 N.E.2d 910 (1975). ⁵

Nonaka's argument rests on a claim that the entry of an appearance for D'Urso by an attorney selected by Merrimack in fulfilment of its duty to defend Nonaka's claim and the continuation of that appearance for approximately five months resulted, as a matter of law, in a waiver of Merrimack's right to disclaim coverage. The concept of waiver has had no part to play in the insurance law of the Commonwealth when an insured has argued that the insurance company has waived the limits of coverage defined in the insurance policy. In Palumbo v. Metropolitan Life Ins. Co., 293 Mass. 35, 199 N.E. 335 (1935), we said that "whatever may be the scope of waiver in the law of insurance, it does not extend to the broadening of the coverage, so as to make the policy cover a risk not within its terms. That would require a new contract, and cannot be accomplished by waiver." Id. at 37-38, 199 N.E. 335. See New England Gas & Elec. Ass'n v. Ocean Accident & Guar. Corp. Ltd., 330 Mass. 640, 665, 116 N.E.2d 671 (1953); Wedgwood v. Eastern Commercial Travelers Accident Ass'n, 308 Mass. 463, 467, 32 N.E.2d 687 (1941). This is the majority view in this country. See A.D. Windt, Insurance Claims and Disputes § 6.33 at 361 (2d ed. 1988) ("coverage under an insurance contract cannot be created or enlarged by waiver"). This principle, argued to us by Merrimack and not discussed in Nonaka's brief, is dispositive of this case. The waiver cases on which Nonaka relies are not applicable to this case.

Even if we were to reexamine the question whether an insurance company could be found to have waived the limits of coverage stated in its policy, this case would not support a waiver theory. There was, of course, no express waiver. An implication that Merrimack intended to waive the coverage question is not warranted. Because there were negligence counts in each successive complaint, it was reasonable for Merrimack to conclude that it had a duty to defend all aspects of the case. See Aetna Casualty & Sur. Co. v. Continental Casualty Co., 413 Mass. 730, 732 n. 1, 604 N.E.2d 30 (1992) (weightof authority imposes duty to defend all counts of complaint if insurer has duty to defend at least one count). ⁶ Merrimack retained coverage counsel shortly after...