Ulwick v. Massachusetts Insurers Insolvency Fund

• Decision Date: 26 July 1994
• Citation: 637 N.E.2d 209,418 Mass. 486
• Parties: Wayne R. ULWICK v. MASSACHUSETTS INSURERS INSOLVENCY FUND & others. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 209

637 N.E.2d 209

418 Mass. 486

Wayne R. ULWICK v. MASSACHUSETTS INSURERS INSOLVENCY FUND & others.¹

Supreme Judicial Court of Massachusetts Middlesex.

Argued Feb. 8, 1994.

Decided July 26, 1994.

Joseph C. Tanski, Boston, for Massachusetts Insurers Insolvency Fund.

James N. Esdaile, Jr., Boston, for plaintiff.

Before LIACOS, C.J., and WILKINS, ABRAMS, NOLAN, LYNCH, O'CONNOR and GREANEY, JJ.

O'CONNOR, Justice.

The defendant Massachusetts Insurers Insolvency Fund (Fund), a nonprofit unincorporated entity created by G.L. c. 175D, § 3 (1992 ed.), is obligated to pay covered claims against an insolvent insurer (up to $300,000 per claim) in place of the insolvent insurer. G.L. c. 175D, § 5(1)(a) and (b) (1992 ed.). "[U]nless the context clearly requires otherwise," the term "covered claim" as used in G.L. c. 175D means "an unpaid claim ... which arises out of and is within the coverage of an insurance policy to which [c. 175D] applies issued by an insurer, if such insurer becomes an insolvent insurer.... 'Covered claim' shall not include any amount due any reinsurer, insurer, insurance pool, or underwriting association." G.L. c. 175D, § 1(2). "Unless the context clearly requires otherwise," the word "insurer" as used in c. 175D, means "any person ... who (a) writes any kind of insurance to which [c. 175D] applies ... and (b) is licensed to transact insurance in the commonwealth." G.L. c. 175D, § 1(5).

The issue in this case is whether the plaintiff's claim against American Mutual Insurance Company (American Mutual), an insolvent insurer, is a "covered claim" within the meaning of G.L. c. 175D. A judge of the Superior Court decided on a statement of agreed facts that the claim was a covered claim and a judgment to that effect was entered. The Fund appealed and we transferred the case to this court on our own initiative. We affirm the judgment.

On September 26, 1986, a motor vehicle which was owned by the defendant Gulla, operated by the defendant Salvatore, and insured by American Mutual, struck a motorcycle that Ulwick was operating without fault in the course of his duties as a city of Melrose police officer. The American Mutual policy provided liability coverage of $100,000 per person for personal injuries. Since the accident, Melrose has paid Ulwick's medical bills, an amount exceeding $100,000, as required by G.L. c. 41, § 100 (1992 ed.). Melrose has also paid more than $100,000 to Ulwick for lost wages pursuant to G.L. c. 41, § 111F (1992 ed.), which, in the circumstances of this case, requires a municipality to grant an incapacitated police officer leave without loss of pay. In addition, Ulwick has recovered $10,000 in uninsured motorist benefits under his own motor vehicle insurance policy.

After Ulwick commenced a tort action against Gulla and Salvatore, American Mutual's insureds, American Mutual mailed a letter to Ulwick's counsel offering to pay the full policy limit of $100,000 to Ulwick to settle the tort case. The offer was not accepted and, on March 9, 1989, without having paid the claim, American Mutual was declared insolvent. If Ulwick's claim is a covered claim, Ulwick and the Fund agree that the Fund is obligated to pay Ulwick up to $90,000, which is the American Mutual policy coverage of $100,000 minus the uninsured motorist benefit of $10,000 that Ulwick recovered from his own insurer because Gulla's vehicle was insured by an insolvent insurer. See Vokey v. Massachusetts Insurers Insolvency Fund, 381 Mass. 386, 390, 409 N.E.2d 783 (1980).

The Fund first argues that, because Melrose has paid Ulwick in excess of $200,000, Ulwick's claim against American Mutual is not an unpaid claim. We reject that argument. Ulwick's claim against American Mutual is unpaid. A covered claim is one that "arises out of and is within the coverage of an insurance policy to which [c. 175D] applies." G.L. c. 175D, § 1(2). Ulwick's claim against American Mutual is such a claim, and it is unpaid because American Mutual is insolvent. Ulwick's claims against Melrose for reimbursement of medical expenses and payment of wages during his disability, however, did not arise out of American Mutual's insurance policy. Instead, the claims against Melrose arose out of G.L. c. 41, §§ 100 and 111F. Melrose's payments of the statutory claims against it therefore did not constitute payment of Ulwick's claim against American Mutual arising out of an insurance policy. As Ulwick observes, "[i]t is the claim, not the injured person, which must be 'unpaid' in order that the claim be considered a 'covered claim.' "

We proceed now to the Fund's second argument. Of course, it is not enough that Ulwick's claim is an unpaid claim arising out of and within the coverage of American Mutual's policy. In order to be a covered claim, the claim also must "not include any amount due any reinsurer, insurer, insurance pool, or underwriting association." G.L. c. 175D, § 1(2). The Fund's argument is that, if the court were to require the Fund to pay Ulwick, Melrose ultimately would be entitled to that money under G.L. c. 41, §§ 100 and 111F. Those sections provide that, where, as here, a police officer is injured in circumstances entitling him under those sections to compensation from his municipal employer and a third person is liable for the injury, the municipal employer shall be entitled to reimbursement from any recovery from the third party. The Fund further argues that the court should treat Melrose as an insurer. If the court were to accept the Fund's argument, the result would be that Ulwick's claim would include an amount due an insurer and therefore would not be a covered claim under G.L. c. 175D, § 1(2).

The Fund's argument fails because Melrose does not come within the definition of "insurer" set forth in G.L. c. 175D, § 1(5), and the context does not require that Melrose be considered to be, or treated as, an insurer. Melrose is not a "person ... who (a ) writes any kind of insurance to which [c. 175D] applies ... and (b ) is licensed to transact insurance in the commonwealth." See § 1(5). In construing and applying G.L. c. 175D, then, we are not free to treat Melrose as an insurer, as the Fund urges us to do, unless the context of G.L. c. 175D, § 1(2), "clearly requires" us to do so, which it does not.

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. Ferrari v. Toto, 9 Mass.App.Ct. 483, 402 N.E.2d 107 (1980), S.C., 383 Mass. 36, 417 N.E.2d 427 (1981), is instructive. In that case, the plaintiff was injured in an employment related motor vehicle accident. He received more than $35,000 in workers' compensation benefits from an insurance company, that is, a company that wrote insurance and was licensed to transact insurance in the Commonwealth. At that time, however, workers' compensation was exempted from the Fund. The Appeals Court reasoned that the workers' compensation carrier did not come within the explicit definition of "insurer" in c. 175D, § 1(5), because it did not write insurance "to which this chapter [175D] applie[d]." Ferrari, 9 Mass.App.Ct. at 485, 402 N.E.2d 107. It was not, therefore, a member of the Fund. Faced, then, 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 the exclusion extends to segments of the insurance industry which are not participants in the Fund" (emphasis added), the Appeals Court concluded that "[t]he latter is the case." Id. at 485-486, 402 N.E.2d 107. In concluding that a "covered claim" does not include any amount due an insurance company regardless of whether it is a member of the Fund, the Appeals Court looked to the model act after which G.L. c. 175D is patterned, in which the covered claim exclusion clearly applies to all insurance companies regardless of their membership in the Fund. Id. at 486, 402 N.E.2d 107. The Appeals Court also reasoned that, in order to give effect to the reference in G.L. c. 175D, § 1(2), to "insurance pool[s]," and "underwriting association[s]," which cannot be members of the Fund, it is necessary to conclude that the word "insurer" in § 1(2) was intended by the Legislature to include "insurers beyond member insurers." Id. In expanding the definition of the word "insurer" to include insurance companies that were not members of the Fund, the Appeals Court did not go beyond the clear requirements of the statutory context.

None of the Appeals Court's reasoning in Ferrari, 9 Mass.App.Ct. 483, 402 N.E.2d 107 (1980), subsequently adopted by this court in 383 Mass. 36 (1981), construing the word "insurer" in G.L. c. 175D, § 1(2), as including all members of the insurance industry, is authority for the proposition that the context of G.L. c. 175D "clearly requires" that municipal employers, who are not members of the insurance industry, be treated as insurers...