Wheatley v. Mass. Insurers Insolvency Fund

• Decision Date: 27 April 2010
• Docket Number: SJC-10510
• Citation: 456 Mass. 594,925 N.E.2d 9
• Parties: Kirsten M. WHEATLEY v.MASSACHUSETTS INSURERS INSOLVENCY FUND.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

456 Mass. 594

925 N.E.2d 9

Kirsten M. WHEATLEY ¹v.MASSACHUSETTS INSURERS INSOLVENCY FUND.

SJC-10510

Supreme Judicial Court of Massachusetts Plymouth.

Argued Jan. 4, 2010.

Decided April 27, 2010.

Stanley W. Wheatley for the plaintiff.

Joseph C. Tanski, Boston (Kurt Mullen with him) for the defendant.

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

MARSHALL, C.J.

General Laws c. 176D defines and regulates “unfair methods of competition and unfair or deceptive acts or practices in the business of insurance.” ² G.L. c. 176D, § 3. General Laws c. 93A, § 9(1), in turn, provides, among other things, that a consumer “whose rights are affected by another person violating the provisions of” G.L. c. 176D, § 3(9), may bring an action in the Superior Court for damages and equitable relief. In 1996, the Legislature amended G.L. c. 176D, § 1 ( a ), adding the Massachusetts Insurers Insolvency Fund (insolvency fund), as well as joint underwriting associations, to the definition of “person” as that term is defined in G.L. c. 176D. St.1996, c. 313 (1996 amendment). The 1996 amendment was adopted in the wake of Barrett v. Massachusetts Insurers Insolvency Fund, 412 Mass. 774, 777, 592 N.E.2d 1317 (1992) ( Barrett ), and Poznik v. Massachusetts Med. Professional Ins. Ass'n, 417 Mass. 48, 53, 628 N.E.2d 1 (1994) ( Poznik ), in which this court held, respectively, that the insolvency fund (in Barrett ) and the Massachusetts Medical Professional Insurance Association (medical insurance association), a joint underwriting association (in Poznik ), were not subject to suit under G.L. c. 93A. In this consumer action against the insolvency fund, we are asked to determine whether the 1996 amendment caused the insolvency fund to be subject to G.L. c. 93A, among other things.

General Laws c. 176D, § 1 ( a ), provides, in pertinent part, that a “[p]erson” is “any individual, corporation, association, ... any other legal entity or self insurer which is engaged in the business of insurance, including agents, brokers, and adjusters, the Massachusetts Insurers Insolvency Fund and any joint underwriting association established pursuant to law.” ³ The insolvency fund argues that its placement in that definitional section after the words “in the business of insurance” and after the words “including agents, brokers, and adjusters,” supports a conclusion that it is a “person” for some purposes of G.L. c. 176D, but it is not a person “engaged in the business of insurance” for all purposes of that chapter. The insolvency fund, it argues, is subject to investigation and enforcement by the Commissioner of Insurance (commissioner) under G.L. c. 176D, but it is not subject to consumer actions under G.L. c. 93A. A judge in the Superior Court agreed and allowed the insolvency fund's motion for judgment on the pleadings. See Mass. R. Civ. P. 12(c), 365 Mass. 754 (1974). We granted the plaintiff's application for direct appellate review. For the reasons stated below, we conclude that the 1996 amendment had the effect of subjecting the insolvency fund, among other things, to consumer actions brought pursuant to G.L. c. 93A, § 9(1). Accordingly, we reverse the judgment.

1. Facts. We briefly summarize the allegations of the complaint, which we take as true. Jarosz v. Palmer, 436 Mass. 526, 529-530, 766 N.E.2d 482 (2002) ( “In deciding a rule 12[c] motion, all facts pleaded by the nonmoving party must be accepted as true”).

In July, 2003, Legion Insurance Company (Legion), a Pennsylvania company that provided insurance for the town of Duxbury (town), was declared insolvent by a Pennsylvania court. Accordingly, pursuant to G.L. c. 175D, § 5(1), the insolvency fund became obligated to pay certain claims arising under policies issued by Legion and to “adjust, compromise, settle and pay covered claims to the extent of the [insolvency fund's] obligation,” G.L. c. 175D, § 5(1) ( d ).⁴ One of the claims concerned a negligence action commenced against the town by a student injured in the following circumstances.

In 2001, the plaintiff, Kirsten M. Wheatley, at the time a seven year old special education student who required the use of a walker and adult supervision to walk, was a student at a Duxbury public elementary school. On October 26, 2001, while walking to the school lunch room, Wheatley's walker collided with an obstacle on the floor of the hallway as she was leaving the special education center. Falling forward, she fractured a front tooth. She was then permitted by a school nurse to eat her lunch, during which she swallowed a different tooth knocked loose by the fall. In July, 2004, following unsuccessful negotiations with the town described below, Wheatley filed a negligence action against the town seeking to recover damages for these injuries. The case went to trial, and in April, 2008, a jury awarded Wheatley $20,786.31.

Wheatley first presented her claims to the town in August, 2003, see G.L. c. 258, § 4, approximately one month after Legion had been declared insolvent. Neither the town nor the insolvency fund responded to Wheatley's presentment letter.⁵ When Wheatley filed her negligence action against the town, the insolvency fund defended the town, denying liability and asserting various affirmative defenses. Wheatley alleges that, by November, 2004, some fourteen months after Wheatley had made demand on the town and three months after she had commenced her negligence action against it, the insolvency fund had made no offer to settle her claims. She thereupon sent to the insolvency fund a demand letter pursuant to G.L. c. 93A, § 9(3), to which the insolvency fund did not respond within thirty days of receipt.⁶ Wheatley alleges here that at “all times relevant” the town's liability was “reasonably clear,” because she was in the town's “exclusive care, custody and control at the time of the accident” and was “unable to exercise any degree of care to protect herself from injury” because of her age and disabilities.

In August, 2006, some twenty-two months after sending her G.L. c. 93A demand letter to the insolvency fund, Wheatley commenced this action alleging that the insolvency fund had not “effectuated a prompt, fair and equitable settlement” of her claims, and that in the course of its defense of the town in the underlying negligence action, the insolvency fund had engaged in “multiple” unfair claims settlement practices in “willful” violation of G.L. c. 176D, § 3(9), and G.L. c. 93A, § 2, including failure “to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies,” in violation of G.L. c. 176D, § 3(9) ( b ); failure “to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies,” in violation of G.L. c. 176D, § 3(9) ( c ); refusal to pay her claim “without conducting a reasonable investigation based upon all available information,” in violation of G.L. c. 176D, § 3(9) ( d ); and failure “to effectuate prompt, fair and equitable settlement[ ]” of a claim “in which liability ha[d] become reasonably clear,” in violation of G.L. c. 176D, § 3(9) ( f ). The insolvency fund moved for judgment on the pleadings, which (as noted earlier) was allowed by a judge in the Superior Court.⁷

2 Discussion. a The statutory scheme. A consumer such as Wheatley may commence an action in the Superior Court under G.L. c. 93A, § 9(1), in two circumstances. Hopkins v. Liberty Mut. Ins. Co., 434 Mass. 556, 564-565, 750 N.E.2d 943 (2001), and cases cited (noting two circumstances).⁸ Under the first prong of § 9(1), a consumer who has been “injured by another person's use or employment of any method, act or practice declared to be unlawful by” G.L. c. 93A, § 2,⁹ or “any rule or regulation issued thereunder” may bring an action in the Superior Court for damages and equitable relief. G.L. c. 93A, § 9(1). Under the second prong of the statute, a consumer “whose rights are affected by another person violating the provisions of” G.L. c. 176D, § 3(9),¹⁰ may do so. G.L. c. 93A, § 9(1). A consumer asserting a claim under the second prong of G.L. c. 93A, § 9(1), may recover damages for violations of G.L. c. 176D, § 3(9), “without regard to whether the violation was unlawful under G.L. c. 93A, § 2.” Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747, 754, 610 N.E.2d 912 (1993). This is because of the “explicit statement to that effect” in § 9(1). Id. Wheatley asserts claims under both prongs of G.L. c. 93A, § 9(1).

b The 1996 amendment to G.L. c. 176D. In Barrett, supra at 775, 592 N.E.2d 1317, a consumer sought to recover damages from the insolvency fund under the first prong of G.L. c. 93A, § 9(1).¹¹ Reasoning that the insolvency fund is, “in essence, simply a conduit to which certain noninsolvent insurers, authorized to do business in the Commonwealth, pay a pro rata amount to enable” the insolvency fund “to pay ‘covered claims' to insureds whose insurance companies become insolvent subsequent to the issuance of their policies and claims,” this court held that a consumer could not maintain a G.L. c. 93A claim against the insolvency fund because the insolvency fund “does not engage in a ‘trade’ or ‘commerce’ and its activities are not performed within a ‘business context.’ ” Barrett, supra at 775, 776-777, 592 N.E.2d 1317. Shortly thereafter, in Poznik, supra at 50, 52-53, 628 N.E.2d 1, this court held that the medical insurance association also was not subject to suit under G.L. c. 93A, describing the medical insurance association as a statutorily mandated, “temporary, nonexclusive, nonprofit joint underwriting association whose purpose is to provide medical malpractice insurance on a self-supporting basis.” The court relied expressly on Barrett for its conclusion that the medical insurance association was “not engaged in ‘trade or commerce’ within the meaning of G.L. c. 93A,” Poznik, supra at 53, 628 N.E.2d 1, reasoning that...