Wolov v. Michaud Bus Lines, Inc.

• Decision Date: 29 October 1985
• Citation: 484 N.E.2d 644,21 Mass.App.Ct. 60
• Parties: Michael WOLOV, et al. 1 v. MICHAUD BUS LINES, INC.; Royal Globe Insurance Company, third-party defendant.
• Court: Appeals Court of Massachusetts

Page 644

484 N.E.2d 644

21 Mass.App.Ct. 60

Michael WOLOV, et al. ¹ v. MICHAUD BUS LINES, INC.; Royal Globe Insurance Company third-party defendant.

Appeals Court of Massachusetts Essex.

Argued Sept. 18, 1985.

Decided Oct. 29, 1985.

Catherine A. White, Boston, (Thomas D. Burns, Boston, with her), for Michaud Bus Lines, Inc.

Thomas D. Dolan, Lynn, for Royal Globe Ins. Co.

Before KASS, KAPLAN, and SMITH, JJ.

KAPLAN, Justice.

This appeal is an occasion for renewing the theme of the Gilbane and Sterilite cases ² regarding the extent of the obligation of a liability insurer to defend claims that are asserted by third persons against the insured.

The North Shore Jewish Community Center in Marblehead ran a daily summer camp named Camp Simcha in Middleton. It arranged by contract with Michaud Bus Lines for the transportation of the young campers to and from the camp. At 8:13 A.M., July 8, 1975, Eric Wolov, aged six, was waiting at the corner of Atlantic and Sea View Avenues, Marblehead, for the Michaud bus, due to arrive at that time for pickup. The bus was grievously late. As Eric lingered at the corner, a car drew up, an occupant evidently invited Eric to board, Eric did so, and the car drove off. He had been kidnapped. This happened under the eye of Judith Wolov, Eric's mother, who was keeping Eric in view from the window of her house, 125 feet away. Ransom money was demanded. By good fortune, Michael Wolov, the father, was able at risk to himself to retrieve the boy later that day. The kidnapper was apprehended.

On July 8, 1977, Michael and Judith and Eric (by Michael as next friend) commenced an action in Superior Court against Michaud Bus Lines ³ alleging the foregoing and demanding damages for their injuries arising, so the complaint charged, from Michaud's failure to provide the bus on time. The complaint was in eight counts entitled, respectively, breach of contract, breach of warranty (evidently under the Uniform Commercial Code), negligence, gross negligence, breach of the highest degree of care, wilful and wanton conduct, misrepresentation and fraud, and false and deceptive practices. Michaud notified its liability carrier, Royal Globe Insurance Company, of the claim, but Royal Globe did not respond. After the action had gone to default through the failure of the defendant Michaud to answer or move, with Royal Globe still unresponsive, Michaud engaged counsel, who succeeded in removing the default. Thereupon counsel moved under Mass.R.Civ.P. 12(b)(6), 365 Mass. 755 (1974), to dismiss the action for failure to state a claim. A judge, without opinion, allowed the motion as to all counts except the first, that on "contract." Neither the Wolovs nor Michaud requested a determination pursuant to Mass.R.Civ.P. 54(b), 365 Mass. 821 (1974), to allow interlocutory appeal.

Michaud, then, under Mass.R.Civ.P. 14(a), 365 Mass. 760 (1974), as defendant/third-party plaintiff, impleaded Royal Globe, as third-party defendant, seeking, in effect, a declaration that Royal Globe was bound to provide "defense and indemnification." Royal Globe moved for summary judgment dismissing the third-party complaint. Profert was made of the liability policy. A judge allowed the motion, also without opinion, and Michaud takes its appeal from the judgment, a rule 54(b) determination regarding this judgment having been obtained. We reverse the judgment.

The policy--a "Comprehensive General Liability" policy--is in familiar form. Under "Insurance Agreements" at the head of the policy, we find: "The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of Coverage A bodily injury ... to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury ... even if any of the allegations of the suit are groundless, false or fraudulent ..."

Royal Globe does not dispute that the alleged casualty by kidnapping was an occurrence, as defined, ⁴ and it has now acted on the assumption, which is a reasonable one, that bodily injury is sufficiently adumbrated in the Wolovs' complaint and thus it had some duty to defend. ⁵ It is presumably on that basis that Royal Globe has paid the fees of counsel for Michaud for services through the rule 12(b)(6) motion.

On the assumption indicated, and in the absence of a relevant "exclusion," the duty to defend exists regardless of the legal theory manifested in the Wolovs' lawsuit--whether it be negligence or warranty or something else--and regardless of the soundness of the theory or its chances of final success. The process of deciding "the question of the initial duty of a liability insurer to defend third-party actions against the insured" consists of "envisaging what kinds of losses may be proved as lying within the range of the allegations of the complaint, and then seeing whether any such loss fits the expectation of protective insurance reasonably generated by the terms of the policy." Gilbane, 391 Mass. at 146-147, 461 N.E.2d 209, quoting from Sterilite, 17 Mass.App. at 318, 458 N.E.2d 338. We think the initial duty exists here.

Royal Globe contends, however, that there is an "exclusion" peculiarly applicable to the remaining count entitled in "contract." The policy states: "This insurance does not apply: ... to liability assumed by the insured under any contract or agreement ... ⁶ but this exclusion does not apply to a warranty of fitness or quality of the named insured's products or a warranty that work performed by or on behalf of the named insured will be done in a workmanlike manner." First, common sense, as well as decided cases, suggest that in the present policy the clause "liability assumed by the insured under any contract or agreement" probably refers to arrangements very different from the transportation contract between North Shore and Michaud; the interpretation urged by Royal Globe would greatly reduce the protection afforded to Michaud on its ordinary operations which no doubt arise often from agreements of some kind. ⁷ Second, if that clause could be read, standing alone, to reach the North Shore-Michaud contract, then that contract would be withdrawn from the clause--as an exception to the exclusion--by the language about a "warranty" that the work performed by the insured "will be done in a workmanlike manner" (including timely performance). Such a common-law warranty would be implied in the contract even though not expressed in terms, ⁸ and the insurer's duty to defend would run to claims of third persons for bodily injury allegedly occasioned by breach of the warranty. Thus the contract-exclusion provision furnishes no refuge for Royal Globe. ⁹

We need to distinguish sharply the case of Bond Bros., Inc. v. Robinson, 393 Mass. 546, 471 N.E.2d 1332 (1984), where a majority of the court held that a certain specific exclusion set out in a "General Liability Multi/Cover Endorsement" controlled, so as to supersede and nullify the...