Wilson v. James L. Cooney Ins. Agency, 05-P-382.

Decision Date20 April 2006
Docket NumberNo. 05-P-382.,05-P-382.
Citation845 N.E.2d 1187,66 Mass. App. Ct. 156
CourtAppeals Court of Massachusetts

Richard F. Wholley, Haverhill, for the defendant.

Michael DeMarco (Aimée E. Bierman with him) for the plaintiff.



Frank E. Wilson brought suit, on his own behalf and as assignee of Southboro Medical Group (SMG), against the James L. Cooney Insurance Agency (Cooney) for negligence and violation of G.L. c. 93A. Wilson's theory of liability was that Cooney (which had obtained professional liability coverage for Wilson) owed Wilson a duty to inform him when SMG (the medical group Wilson was associated with as an independent contractor and for which Cooney had also obtained liability coverage) no longer carried vicarious liability coverage protecting itself from exposure created by malpractice on the part of its independent contractors, including Wilson.

When SMG found itself vicariously liable for Wilson's negligence following a successful malpractice suit against him, SMG pursued its indemnification rights against Wilson under the parties' independent contractor agreement. Wilson alleged in the instant action that he was harmed by Cooney's conduct because the lack of vicarious liability coverage led to SMG's exposure to the claimant, which created Wilson's exposure to SMG. A jury returned a verdict in favor of Wilson on his negligence claim against Cooney, and the trial judge denied Cooney's motion for judgment notwithstanding the verdict or, in the alternative, for a new trial. Because Wilson could not establish a cognizable injury on these facts, and because Massachusetts law does not impose a duty on Cooney in these circumstances, we vacate the verdict and reverse the judgment.1

Factual background. Since 1986, Wilson, a physician board-certified in obstetrics and gynecology, worked as an independent contractor for SMG.2 Their relationship was governed by a written independent contractor agreement (SMG-Wilson independent contractor agreement), which contains provisions requiring both Wilson and SMG to indemnify each other for each other's acts of negligence and also requiring both of them to maintain professional liability insurance in the amount of $1,000,000 per individual claim and $3,000,000 in the aggregate.3 There was no requirement in the SMG-Wilson independent contractor agreement that either party carry vicarious liability coverage for potential liability exposure caused by the other's negligence.

At all relevant times, Cooney had obtained insurance coverage for both SMG and Wilson.4,5 Although Cooney knew Wilson was an independent contractor for SMG, having received information from SMG about its independent contractors as requested in renewal forms and information requests, Cooney was never provided a copy of the SMG-Wilson independent contractor agreement by Wilson or SMG. SMG was one of Cooney's largest accounts, with Cooney handling nearly all of SMG's insurance needs, and Cooney was in regular contact with SMG. Cooney was not in regular contact with Wilson, however. Wilson never initiated contact with Cooney or any of its employees or agents, never communicated verbally with them, never asked them for advice, never sought to raise his coverage limits, and never communicated with Cooney about SMG's coverage.6 The only contact between Wilson and Cooney involved the renewal of Wilson's malpractice policy.

For many years, SMG's insurance policy automatically provided vicarious liability coverage for SMG should SMG face exposure for the negligent acts of independent contractors like Wilson. At some point in late 1990 or early 1991, vicarious liability coverage was no longer provided unless SMG paid additional significant premiums. Cooney did not inform SMG of the change in insurance coverage until March, 1993. On March 16, 1993, SMG sent a letter to Cooney requesting the vicarious liability coverage. On July 1, 1993, Cooney informed SMG that the additional insurance would cost approximately $82,000. SMG elected not to purchase the vicarious liability coverage at that time because of its "excessive" cost, and did not obtain such insurance until early 1996. At no relevant time did SMG inform Wilson or any of its independent contractors of its decisions in regard to vicarious liability coverage.

In late June, 1993, a medical malpractice action was commenced against Wilson (the Jones action). In that action, Wilson was sued for negligence associated with the delivery of a neurologically impaired child, and SMG was joined as a defendant under a theory of vicarious liability. SMG did not have vicarious liability coverage in place at the time the Jones action was brought.7 After a trifurcated proceeding, Wilson was found negligent and SMG was found vicariously liable. Prior to a trial on damages, Wilson and SMG settled the Jones action for $1,440,918.19. Wilson's insurer, ProMutual, contributed $1,000,000 (the coverage under Wilson's medical malpractice policy). SMG paid the $440,918.19 balance because it had no vicarious liability coverage.

SMG then sought indemnity from Wilson under the SMG-Wilson independent contractor agreement. Ultimately, the parties agreed to an arrangement whereby Wilson agreed to pay one-half of the $440,918.19 paid by SMG and one-half of legal fees incurred by SMG ($18,600.72) regarding the uninsured loss, in exchange for SMG's assigning to Wilson its rights to sue Cooney for the absence of vicarious liability insurance.8

Wilson thereafter sued Cooney on his own behalf and as assignee of SMG. With respect to his own claim against Cooney, Wilson asserted that Cooney was negligent in failing to inform Wilson that SMG no longer carried vicarious liability coverage, and that Cooney's negligence resulted in harm to Wilson when SMG sought indemnity against Wilson under the SMG-Wilson independent contractor agreement. After trial, with respect to the assigned claim of SMG, the jury found that Cooney was negligent but awarded SMG no damages, apparently because of SMG's comparative negligence.9 With respect to Wilson's own claim, the jury found that Cooney was also negligent and awarded Wilson $275,000.10 Cooney moved for judgment notwithstanding the verdict (or, in the alternative, for a new trial), arguing that Wilson could not as matter of law recover because Cooney did not have a heightened duty to advise Wilson of changes in SMG's coverage, nor could he recover in tort as a potential beneficiary of SMG's contractual relationship with Cooney.11 The trial judge denied Cooney's motion and this appeal followed.

Discussion. The most obvious defect in the challenged verdict and ruling arises from the fact that Wilson could not as matter of law have established a prerequisite of negligence liability, which was his burden to prove, namely, proximately caused injury. See Wainwright v. Jackson, 291 Mass. 100, 102, 195 N.E. 896 (1935); Kent v. Commonwealth, 437 Mass. 312, 320, 771 N.E.2d 770 (2002). Even if in June, 1993, SMG had had in place a policy affording vicarious liability coverage for its independent contractors' malpractice, that would not (contrary to the trial judge's erroneous belief) have reduced, much less eliminated, Wilson's exposure. Had the excess liability of $440,918.19 been paid by that hypothetical insurer, Wilson would have nonetheless remained at risk, for the insurer would have had the right to recover the additional amount it had paid from Wilson under the subrogation provision in its contract with SMG. The presence of vicarious liability coverage would not have changed the fact or amount of Wilson's exposure, just the identity of the person to whom he would ultimately be exposed. Thus, even were Cooney deemed to have had some sort of duty to advise Wilson about SMG's coverage (or lack thereof), its failure to have done so could not have been a factor (much less a substantial factor) leading to Wilson's loss. See Flattery v. Gregory, 397 Mass. 143, 147, 489 N.E.2d 1257 (1986); Hebert v. Enos, 60 Mass.App.Ct. 817, 820-821, 806 N.E.2d 452 (2004).12

Wilson's direct negligence claim against Cooney was also not actionable under Massachusetts law because Cooney had no legal duty to inform Wilson when SMG no longer carried vicarious liability coverage protecting itself from the negligent acts of its independent contractors. Wilson argues that the following facts support the imposition of such a duty in these circumstances: (1) Cooney was the broker for both Wilson and SMG, and had a longstanding business relationship of procuring professional liability insurance for them; (2) as their broker, Cooney had various duties to SMG and Wilson, including the duty to notify them of policy changes and assist them in assessing their risks; (3) SMG and Wilson relied on Cooney to keep them apprised of policy changes; (4) unbeknownst to SMG or Wilson, SMG's vicarious liability coverage changed drastically, and Cooney did not timely inform SMG or Wilson of the change; and (5) Cooney knew that Wilson was an independent contractor of SMG.

As Wilson's broker, Cooney is Wilson's agent and undeniably had certain duties to him, including "us[ing] due care in the implementation of the agency ... and in carrying out instructions of the principal-client."13 Bicknell, Inc. v. Havlin, 9 Mass.App.Ct. 497, 500, 402 N.E.2d 116 (1980). See Rae v. Air-Speed, Inc., 386 Mass. 187, 192, 435 N.E.2d 628 (1982) ("Massachusetts law, in accordance with the general rule, clearly permits a potential insured ... to recover in tort for the failure of an insurance agent to perform his duty to obtain an insurance policy"); Campione v. Wilson, 422 Mass. 185, 195, 661 N.E.2d 658 (1996). As we stated in Bicknell, Inc., 9 Mass.App.Ct. at 500-501, 402 N.E.2d 116:

"The nature and extent of the duty of care owed by an...

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