Rae v. Air-Speed, Inc.

• Decision Date: 10 May 1982
• Docket Number: AIR-SPEE,INC
• Parties: Christine RAE, individually and as administratrix, v.et al. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 628

435 N.E.2d 628

386 Mass. 187

Christine RAE, individually and as administratrix, v. AIR-SPEED, INC. et al. ¹

Supreme Judicial Court of Massachusetts, Middlesex.

Argued Jan. 8, 1982.

Decided May 10, 1982.

Robert E. Keane, Cambridge, for plaintiff.

Richard R. Eurich, Boston (Michael A. Pezza, Jr., Boston, with him), for Hansman McAvoy & Co., Inc.

Before HENNESSEY, C. J., and WILKINS, ABRAMS, LYNCH and O'CONNOR, JJ.

LYNCH, Justice.

Christine Rae, as administratrix of the estate of her husband, Thomas Rae, appeals from the granting of partial summary judgment against her, in favor of Hansman McAvoy & Co., Inc. (Hansman), an insurance agent and broker. Thomas Rae, while employed by the defendant Air-Speed, Inc. (Air-Speed), died in the crash of an aircraft owned by the defendant Executive Airlines, Inc. (Executive), and leased to Air-Speed. The circumstances surrounding the accident are described in Ranger Ins. Co. v. Air-Speed, Inc., 9 Mass.App. 403, Mass.App.Ct.Adv.Sh. (1980) 545, 401 N.E.2d 872. On August 7, 1980, Rae filed suit, on her own behalf and as administratrix for the estate of her husband, against Air-Speed, Executive, and Kermit Mitchell (whom she described as the president and principal stockholder of both corporate defendants), alleging a violation of G.L. c. 152 (failure to provide workers' compensation insurance) and negligence (in requiring Thomas Rae to fly an aircraft not properly supplied with fuel).

On August 11, 1980, Rae, in her capacity as administratrix, amended her complaint to add Hansman as a defendant. In her first count against Hansman, Rae alleged that (1) "sometime in the early summer of 1977 (Hansman was) hired by ... Air-Speed ... and Executive ... for the purposes of placing Workmen's Compensation insurance coverage"; (2) Hansman notified Air-Speed that workers' compensation coverage became effective on July 14, 1977; and (3) "(Hansman) negligently failed to forward premium payments to Liberty Mutual (Life) Insurance Company knowing that it had a duty to do so to both ... Air-Speed ... and (Air-Speed's) employees." In support of her negligence count, Rae appended to her complaint a copy of the "notice" of insurance coverage referred to in that complaint. This notice follows:

                Date of             Renewal                   Premiums are due and payable
                Invoice    9/14/77  Date     7/14/78          on effective date of coverage
                -------------------------------------------------------------------------------
                Effective  Policy                                                     Amount
                 Date      Number   Company     Coverage      Premium       Credit    Due
                -------------------------------------------------------------------------------
                7/14/77             Liberty  Mutual-Workers'
                                                  Comp
                                                Deposit
                                                Premuim       $776.00                 $776.00
                

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

In her second count against Hansman, Rae alleged that (1) in the early summer of 1977 Hansman and Air-Speed entered into a contract whereby Hansman was to place workers' compensation insurance on behalf of Air-Speed "and for the benefit of the plaintiff's intestate who was an employee of" Air-Speed, and (2) Hansman breached its contract by failing to obtain this insurance, thereby causing damage to Rae's decedent, who would otherwise have been entitled to recovery under G.L. c. 152. On each count of her complaint against Hansman, Rae sought $750,000 in damages.

On October 3, 1980, Hansman filed a motion under Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974), to dismiss so much of Rae's complaint as alleged claims against it, on the ground that Rae had failed to state a claim on which relief could be granted. Hansman asserted that it owed no duty to the plaintiff's decedent, and that the plaintiff's decedent was neither a party to, nor a creditor beneficiary of, any alleged contract which might have existed between Hansman and Air-Speed. On October 20, 1980, a judge of the Middlesex County Superior Court granted Hansman's motion and entered judgment dismissing, without leave to amend, so much of Rae's complaint as alleged claims against Hansman. Hansman's subsequent motion for a separate and final judgment under Mass.R.Civ.P. 54(b), 365 Mass. 820 (1974), was entered on November 18, 1980. Rae appealed these judgments to the Appeals Court. We took the case on our own motion. We reverse the judgments which dismissed Rae's claims against Hansman, but only in so far as those judgments denied Rae leave to amend her complaint. We remand the case to the Superior Court in Middlesex County for further proceedings. ²

2. Standard of review of judgments on the pleadings. In testing the correctness of a judgment dismissing a complaint for failure to state a claim on which relief can be granted, we accept as true all of the allegations of the complaint and all reasonable inferences which may be drawn from the complaint and which are favorable to the party whose claims have been dismissed. Jones v. Brockton Pub. Mkts., Inc., 369 Mass. 387, 388, 340 N.E.2d 484 (1975). Further, a motion to dismiss a complaint on such grounds should not be allowed unless it appears certain that the complaining party is not entitled to relief under any state of facts which could be proved in support of the claim. Romano v. Sacknoff, 4 Mass.App. 862, 357 N.E.2d 781 (1976).

3. Dismissal for defective pleading. Hansman contends that, as a matter of pleading, Rae's negligence count is fatally defective in that she failed to allege either that Hansman agreed to pay the premiums for workers' compensation insurance directly to the insurance company which apparently was to issue the workers' compensation policy, or that Air-Speed had made payments to Hansman which Hansman negligently failed to forward to the insurance company. We agree that it would have been preferable for Rae to have been more specific. A trial judge, in his discretion, reasonably could have concluded (for example) that Rae's allegation of a negligent failure to forward payments would not support the introduction of evidence tending to show that Hansman agreed to pay premiums directly to the insurance company but negligently failed to do so. Under Mass.R.Civ.P. 15(a), 365 Mass. 761 (1974), however, "leave to amend 'shall be freely given when justice so requires.' " Consumers Savs. Bank v. Coven, 8 Mass.App. 594, 598, 395 N.E.2d 1331 (1979). The judge's dismissal of Rae's negligence count may reflect, therefor, only his agreement with Hansman's assertions regarding the substantive law underlying Rae's claims, rather than dissatisfaction with the form of her allegations. We next discuss whether, under the law of negligence, Rae could prevail against Hansman if she were allowed to amend her complaint.

4. Recovery against insurance agent by potential beneficiary of workers' compensation insurance policy for negligently failing to procure policy. The "well settled rule (is) that an insurance agent or broker who, with a view to compensation for his services, undertakes to procure insurance for another, and through his fault and neglect fails to do so, will be held liable for any damage resulting therefrom." Annot., 64 A.L.R.3d 398, 404, 410 (1975), and cases cited. Massachusetts law, in accordance with the general rule, clearly permits a potential insured (Air-Speed, in this case) to recover in tort for the failure of an insurance agent to perform his duty to obtain an insurance policy. See Rayden Eng'r Corp. v. Church, 337 Mass. 652, 660, 151 N.E.2d 57 (1958). Neither the plaintiff nor the defendant has cited any Massachusetts case in which a potential beneficiary has sued an insurance agent directly for failure to procure a policy of insurance under which the potential beneficiary would have been able to recover if the policy had been procured, and we have found none. That, of course, does not end the matter. "No litigant is automatically denied relief solely because he presents a question on which there is no Massachusetts judicial precedent.... The courts must, and do, have the continuing power and competence to answer novel questions of law arising under ever changing conditions of the society which the law is intended to serve." George v. Jordan Marsh Co., 359 Mass. 244, 249, 268 N.E.2d 915 (1971).

Hansman contends that it owed no duty to the plaintiff or her decedent, and that any duty that might exist was owed solely to the decedent's employer. We do not agree.

Professor Prosser offers some support for the plaintiff's position. He states that, "by entering into a contract with A, the defendant may place himself in such a relationship with B that the law will impose upon him an obligation, sounding in tort and not in contract, to act in such a way that B will not be injured." W. Prosser, Torts § 93, at 622 (4th ed. 1971). Liability under such a tort theory is the rule today in cases involving negligently made chattels. See Carter v. Yardley & Co., 319 Mass. 92, 96-97, 104, 64 N.E.2d 693 (1946). This court recently extended the Carter decision to encompass not only negligently made chattels, but also negligent construction of real property. McDonough v. Whalen, 365 Mass. 506, 512, 313 N.E.2d 435 (1974) ("(l)iability will be imposed ... only if it is foreseeable that the contractor's work, if negligently done, may cause damage to the property or injury to the persons living on or using the premises"). This court has also allowed recovery for the negligent furnishing of services to one not a party to the contract where the defendant knew that the plaintiff would rely on his services. Craig v. Everett M. Brooks Co., 351 Mass. 497, 501, 222 N.E.2d 752 (1967).

These decisions lead us to conclude that if the plaintiff's harm was the foreseeable result of Hansman's negligence, the plaintiff has established a cause of action in negligence....