The Supreme Judicial Court of Massachusetts has rendered a decision that has many features, all of them interesting and some of them moving.
The complicated background of the decision in this case is thoroughly explored by Nina E. Kallen, Esquire in her blog article posted in Insurance Coverage Law in Massachusetts on Wednesday, October 16, 2019. I will also write another article this week about some of the other rulings in this important decision that I do not address here today.
In my judgment, one of the more important features of this decision is not readily apparent, however. I am going to ask Ms. Kallen for her comments on it by sending her a copy of this article with an email today. If we miss anything unique to this decision and Massachusetts law here, she is the right person to ask.
The decision came on October 1, 2019 in the case of Commerce Ins. Co. v. Szafarowicz, 131 N.E.3d 782 (Mass. 2019). It involves a couple of stipulated settlement agreements in a Wrongful Death Action. Commerce was defending its insured under a reservation of rights at the time, and Commerce was simultaneously pursuing a separate Declaratory Judgment Action of no coverage. Massachusetts, like most jurisdictions, permits the filing of a DJA while defending an insured under a reservation of rights to deny all coverage.
The insureds stipulated to settlement in the Wrongful Death Action before there was a determination in the Declaratory Judgment Action. The judge in the Wrongful Death Action (we are not told her or his name in the opinion) "ordered that judgment enter in favor of the [deceased claimant's] estate" far in excess of the policy limits. The policy limits were at most $500,000.00 and the original judgment was entered in the Wrongful Death Action in the amount of $5,617,510.00 (later increased to $7,669,254.41). Commerce, 131 N.E.3d at 789.
We do not know the date of the stipulated settlements because the Massachusetts Court does not tell us, but we know that "the judge ordered that judgment enter in favor of the estate" on December 28, 2016. Commerce, 131 N.E.3d at 789.
"[A]nother Superior Court judge resolved the declaratory judgment action" on February 21, 2019. The Declaratory Judgment judge (again, we are not told her or his name, only that this was a different judge from the Wrongful Death judge) held that there was no coverage for the policy's "optional bodily injury coverage of its automobile policy" because, the DJA judge found, the injuries in question "'did not arise out of an accident under the policy.'" Commerce, 131 N.E.3d at 790-91. Accordingly, said the Supreme Judicial Court in Commerce, "Commerce has no obligation to pay any amount of the $7.7 million judgment in the wrongful death action beyond the $20,000 it already paid under its compulsory bodily injury coverage." Commerce, 131 N.E.3d at 791 (emphasis by the Court).
So, to recap what happened on the facts here, the insureds stipulated to a settlement with the claimant's estate in the Wrongful Death Action for what became a judgment of $7.7 Million. That was years before the Declaratory Judgment was concluded. This means, of course, that everyone involved including Commerce, Commerce's lawyers, and the DJA judge knew that the estate was pursuing a damages determination of some 15 times what might be called the "full" policy limits of $20,000 for compulsory bodily injury coverage and $480,000 for optional bodily injury coverage.
To say again, because it bears repetition here, at the time that the DJA judge ruled in the liability insurance company's favor the insureds had already stipulated to damages far exceeding the potential policy limits. (The insureds also stipulated that their driver's negligence caused the accident which resulted in the claimant's death, a stipulation which would have triggered insurance coverage if that particular stipulation was determinative, which clearly it was not).
Nevertheless, Commerce persisted. That is clearly one way to put it. On a human level, of course the deceased claimant's loved ones are the first to command our empathy. Yet on a human level we cannot overlook the behavior of Commerce and its lawyers who for many years must have confronted the risk of losing many times, and for a lot of money, before they obtained a final Declaratory Judgment of no coverage.
That is likely to be the overlooked story of this case that I want to feature in this article today. Right or wrong, the people at the insurance company involved in this case and the lawyers who represented the insurance company in the DJA deserve to have their courage recognized, too.
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