Milton, Laurence & Dixon, LLP
Grounded in Tradition. Anything but Ordinary.



Posts tagged Insurance
When is a scallop like a sweater?

The Appeals Court rejects the premise that an insured must specify the precise cause of damage to claim coverage under CGL policies. 

In a considered opinion, the Appeals Court found against Hanover Insurance Company in an insurance coverage case buttressing their earlier ruling in Beacon Textiles. See The Hanover Ins. Group, Inc. v. Raw Seafoods, Inc., (April 2017)

In July 2011, 37,000 pounds of scallops were found to be decomposed while making their way through customs in Denmark. The entity that processed the scallops, RSI, accepted responsibility for the damaged goods, although the cause of the damage remains an unsolved mystery. 

Atlantic Fisheries sued RSI, including a count for negligence for the damage to the scallops. RSI’s insurance carrier, Hanover, defended RSI, while reserving its right to deny coverage under the policy. At summary judgment, the Federal Court held that RSI was negligent under the doctrine of res ipsa loquitur. 

Unsolved Mysteries
Hanover sought a declaratory judgment that either the damage to the scallops was not caused by an "occurrence" within the meaning of the insurance policy, or the damage to the scallops fell under one or more exclusions to the policy, with the practical effect that Hanover would not be responsible to pay the judgment in the underlying litigation.

The Appeals Court found that this mysterious occurrence falls under the definition of “accident,” noting that the type of damage in the case had never happened before or since, there was no evidence that the spoilage was the result of an intentional act. Further, the underlying litigation by Atlantic against RSI went to judgment on a claim of negligence in the form of res ipsa loquitur. 

If you want to destroy my sweater… 
In Beacon Textiles, the Court held that where an unknown defect affected yarn while the insured was in control of the product, the insured could claim coverage under the accident provision of an insurance policy. Here, the Appeals Court reversed the lower court’s finding of summary judgment for Hanover, stating that the Beacon Textiles precedent, combined with the finding of negligence in the underlying litigation and the broad construction of the term "occurrence" in a CGL policy, compels us to conclude that RSI has a reasonable expectation of proving that the unexplained damage was caused by an occurrence. See Vappi & Co., 348 Mass. at 432 ("This court will be slow to adopt any narrow construction of the term 'accident' which will limit or defeat any coverage fairly intended to be given by a policy described by the insurer in such broad terms.)

-Defronzo, J. (with credit to "Undone" by Wheezer)

Appeals Court Continues to Define 93A and 176D for Massachusetts Insurers

Judge Massing, writing for the Appeals Court, today highlighted the common-sense application of 93A and 176D for Massachusetts insurers. Silva v. Norfolk & Dedham Mutual Fire Ins. Co. (2017).In a jury waived trial, the Plaintiff alleged the insurer violated Massachusetts General Laws c. 93A and 176D, Massachusetts’ consumer protection statute and its corollary, which require insurers to act appropriately in the investigation and settlement of claims. 

The Plaintiff argued that the insurer refused to pay the claim absent a reasonable investigation. While applying the “clearly erroneous” standard, the Appeals Court agreed with the trial court judge, finding that the insurer’s investigation, detailed over 66 pages of log entries made by claims adjusters and including assignment of an independent adjuster, private investigator and medical experts was sufficient. The Appeals Court, citing the well-known standard that, “So long as the insurer acts in good faith, the insurer is not held to standards of omniscience or perfection.” Bolden v. O'Connor Café of Worcester, Inc., 50 Mass. App. Ct. 56, 67 (2000), quoting from Peckham v. Continental Cas. Ins. Co., 895 F.2d 830, 835 (1st Cir. 1990), liability, which includes both fault and damages, was not reasonably clear and did not require settlement. Expanding on that, however, the Appeals Court further held that evidence acquired by the insurer after the fact which supported its decision to withhold an offer of settlement could be considered when determining whether the insurer violated 93A and/or 176D. 

Of interest in this case is the Appeals Court’s decision to uphold the trial court in excluding the testimony of an expert witness on the issue of whether the investigation of the claim by the insurer was reasonable. In doing so, the Appeals Court agreed that the trial judge has the ultimate authority and broad discretion to permit or exclude expert testimony. Further, expert testimony which is simply an opinion of law – here, the application of 93A is not a proper subject for determination by anyone other than the fact-finder. 

The insurer opted to make a conditional post trial settlement offer for the policy limit. Overturning the trial judge, who found that the insurer violated 93A and 176D for failing to include post judgment interest in the settlement offer, the Appeals Court clarified the holding in Davis v. Allstate Ins. Co., the seminal case in post-judgment offers of settlement. See Davis v. Allstate Ins. Co., 434 Mass. 174, 181-183 (2001). The Appeals Court clarified today, that after judgment enters for the claimant, if the insurer does not unconditionally offer its policy limit to satisfy the judgment, the insurer is responsible for post judgment interest on the entire amount of the judgment until an unconditional offer is made. 

The Massachusetts Appeals Court continues to take a practical view of the application of 93A and 176D to Massachusetts insurers. The appropriate investigation and documentation of that investigation continues to be of paramount importance. Further, the court continues to carefully consider the need and use of expert witnesses, both as supporting players in the investigation of a claim, and at the time of trial. - DeFronzo, J.