United States Court of Appeals
For the First Circuit
No. 03-1382
RITA M. FOISY,
Plaintiff, Appellee,
v.
ROYAL MACCABEES LIFE INSURANCE COMPANY AND
REASSURE AMERICA LIFE INSURANCE COMPANY,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Kenneth P. Neiman, U.S. Magistrate Judge]
Before
Lipez, Circuit Judge,
Coffin, Senior Circuit Judge,
and Barbadoro,* District Judge.
Francis M. Lynch with whom Philip M. Howe and Lecomte,
Emanuelson & Doyle were on brief for appellants.
Raipher D. Pellegrino with whom Hope C. Button and Raipher D.
Pellegrino Associates were on brief for appellee.
January 22, 2004
*
Of the District of New Hampshire, sitting by designation.
COFFIN, Senior Circuit Judge. This case arises from a dispute
between appellant Royal Maccabees Life Insurance Company and
appellee Rita Foisy, who purchased an annuity policy from
Maccabees. Foisy received sixty months of annuity payments, but
claims that under the terms of the policy, she was entitled to
lifetime payments. Maccabees disagrees, contending that the policy
she purchased provides only the sixty months of benefits and
nothing further. Foisy filed suit in Massachusetts state court,
and Maccabees removed to federal court on the basis of diversity.1
A jury trial resulted in a verdict for Foisy on claims of breach of
contract and negligent misrepresentation. On appeal, Maccabees
challenges the timeliness of Foisy's action and the evidentiary
basis for the jury verdict. We affirm the district court on all
counts.
I. Background
In 1994, seventy-six year old Rita Foisy consulted her son-in-
law, Gerald Healy, about how she might use $40,000 received from
her late husband's life insurance to secure an income stream for
herself. Healy, an independent licensed insurance broker and
credentialed financial consultant, agreed to research annuity
1
In accordance with 28 U.S.C. § 636(c) and Fed. R. Civ. P.
73(b), the parties consented to a magistrate judge's conduct of all
proceedings in the case, including jury trial and entry of the
final judgment, with direct review by this court.
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products on her behalf. Healy contacted Bader Insurance Agency,2
with whom he had an established business relationship,3 for
information on annuity policies. Bader, in turn, contacted
Maccabees.
In response to Bader's inquiry, Maccabees provided three
"illustrations" of annuity policies for Foisy, each detailing a
different scenario available for a $40,000 premium. Bader passed
the illustrations on to Healy, who then met with Foisy to explain
the various policy options. Foisy elected what both she and Healy
believed to be an annuity that provided lifetime monthly payments
of $710.99, including a guaranteed minimum of 60 payments totaling
$42,659.40. Healy and Foisy understood that should Foisy die
before the minimum 60 payments, her beneficiary received the
remainder of the guaranteed sum; if Foisy died after the 60 minimum
payments, the annuity would simply cease with her death and there
would be no payment to the beneficiary. Healy filled out the
portion of the annuity application reserved for writing agents (and
in the process applied for an agent's license from Maccabees),
Foisy signed the application, and the monthly payments began in May
1994.
2
Bader Insurance Agency held general agency contracts with a
number of insurers, and in turn sought writing agents to sell the
products of those insurers to consumers.
3
Bader and Healy routinely did business together; Healy
frequently approached Bader with requests for product information
on behalf of his - Healy's - clients.
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Foisy received exactly the benefits she expected until, in the
fall of 1999, she began bouncing checks and discovered that the
annuity payments that had been deposited directly into her checking
account had stopped in May. When Healy contacted Maccabees on her
behalf,4 the company maintained that Foisy's policy provided only
60 monthly payments, nothing thereafter, and that the provisions of
the contract had thus been fulfilled.5
Healy's efforts to persuade Maccabees that the policy provided
lifetime benefits failed, and Foisy subsequently filed suit. She
received a jury verdict in her favor on counts of breach of
contract and negligent misrepresentation, and was awarded damages
of $29,150.20 and $20,000, respectively. Although Maccabees pled
the statute of limitations as a defense, at the close of evidence
the district court determined as a matter of law that Foisy's
4
Maccabees was acquired by another company in 1999; the
administration of all contracts issued outside of New York was
transferred to a third party in Texas, initially called Cybertech
and subsequently Reassure America. We will refer only to
Maccabees, rather than any of the successor entities.
5
In insurance industry parlance, Foisy believed she had
purchased a "certain and continuous" annuity while Maccabees
maintained the policy was a "certain only" annuity. A certain and
continuous annuity provides a minimum number of guaranteed
payments, regardless of whether the annuitant dies before the
minimum payments are complete. If the annuitant outlives the
guaranteed minimum, payments will continue for life, ending upon
the death of the annuitant. A certain only annuity yields a
specified number of payments and nothing beyond. A third option,
only tangentially relevant here, is the lifetime annuity, in which
the annuitant receives payments for life, with no guaranteed
minimum.
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claims were timely, and thus the jury did not consider any
limitations issues. The district court denied Maccabees' post-
trial motions for judgment as a matter of law or in the alternative
a new trial.
Maccabees appeals the district court's judgment on multiple
grounds. First, the company objects to the court's decision on the
statute of limitations, arguing that it is entitled to judgment as
a matter of law because the claims were barred or, at a minimum,
the jury should have decided the limitations question. Second,
with respect to the contract claim, Maccabees contests the district
court's decision to allow the jury to interpret disputed language
in the policy. According to Maccabees, the contract was
unambiguous and should have been interpreted in its favor by the
judge. The company further claims that, in any event, the evidence
was insufficient to support a finding of breach. Third, Maccabees
attacks the evidentiary basis for the negligent misrepresentation
verdict, claiming that there is no support for the jury's finding
that Healy was Maccabees' agent and that Foisy reasonably relied on
Healy's statements.
Maccabees bears a heavy burden in seeking relief from the
judgment below. In reviewing a denial of judgment as a matter of
law, we examine the evidence in favor of Foisy, the non-moving
party. Marrero v. Goya of Puerto Rico, Inc., 304 F.3d 7, 14 (1st
Cir. 2002). Although our review of the court's decision is
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plenary, our scrutiny of the jury verdict is tightly circumscribed;
we will reverse only "if a reasonable person could not have reached
the conclusion of the jury." White v. New Hampshire Dep't of
Corrections, 221 F.3d 254, 259 (1st Cir. 2000).
We review denial of a motion for new trial for abuse of
discretion, a similarly stringent standard which recognizes that a
district court should grant such a motion "only if the verdict is
against the demonstrable weight of the credible evidence or results
in a blatant miscarriage of justice." Sanchez v. Puerto Rico Oil
Co., 37 F.3d 712, 717 (1st Cir. 1994).
II. Statute of Limitations
Maccabees asserts that the statute of limitations began to run
on both claims when Foisy purchased the policy in April 1994.
According to the company, the six-year limitations period for
contract claims and three-year limitations period for negligent
misrepresentation claims had passed by the time Foisy filed suit in
March 2001.
Under Massachusetts law, which applies in this diversity case,
contract claims generally accrue at breach. Saenger Org. v.
Nationwide Ins. Licensing Assocs., 119 F.3d 55, 64 (1st Cir. 1997).
Similarly, tort claims accrue at the time of injury. Tagliente v.
Himmer, 949 F.2d 1, 4 (1st Cir. 1991). Under the Massachusetts
discovery rule, however, a claim will not accrue until the
plaintiff "knows of the cause of action or . . . should have known
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of the cause of action." Riley v. Presnell, 409 Mass. 239, 244,
565 N.E.2d 780, 785 (1991).
We are unpersuaded by Maccabees' argument that our decision in
Loguidice v. Metro. Life Ins. Co., 336 F.3d 1 (1st Cir. 2003),
requires us to find that Foisy had knowledge of her claims as far
back as 1994. In Loguidice, despite a sympathetic factual
background in which an unsavory insurance agent misled the
plaintiff into believing she purchased a retirement plan when in
fact she purchased life insurance, we held that the claims were
barred because the language of the policy clearly indicated it was
life insurance, thus putting the plaintiff on inquiry notice of her
claim. See id. at 7. Here, however, because the language in
Maccabees' policy is ambiguous, see infra at 12, Foisy could not be
expected to have had knowledge of a particular construction of the
policy.
For the same reason, Maccabees' reliance on Quigley v. Unum
Life Ins. Co., 688 F. Supp. 80 (D. Mass. 1988), is misplaced. The
Quigley plaintiffs' contract and negligent misrepresentation claims
were barred because the contract's coverage was ascertainable had
the plaintiffs performed annuity calculations. Maccabees suggests
that, a fortiori, the relative simplicity of the six-page Maccabees
policy requires a finding that Foisy should have known that she
purchased a policy different from what she intended. Maccabees,
however, confuses brevity with clarity. It is the policy's
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ambiguity - unmitigated by the relatively short length - that made
Foisy's claim unknowable until 1999.
Even absent a favorable ruling on its motion for judgment as
a matter of law, Maccabees contends that, at the very least, the
question of accrual was for the jury to decide. See Taygeta Corp.
v. Varian Assoc., 436 Mass. 217, 229, 763 N.E.2d 1053, 1063 (2002)
("In most instances, the question when a plaintiff knew or should
have known of its cause of action is one of fact that will be
decided by the trier of fact."). Having been deprived of jury
consideration on a material issue, Maccabees argues it is entitled
to a new trial. Acknowledging that the court's decision to rule on
the issue as a matter of law was a close call, we nevertheless
affirm. In light of the jury's verdict, that decision was at worst
harmless error.
Since the jury found that the contract was a life annuity - a
verdict which we uphold, see infra at 14 - there could be no
breach, and therefore no accrual of the contract claim, until after
May 1999, when Maccabees stopped making monthly payments. The
contract action, filed two years later, was thus timely. Although
the negligent misrepresentation claim deserves slightly more
attention, in the end Foisy prevails here as well.
Under the Massachusetts discovery rule, the limitations period
on a tort claim will not commence until a plaintiff is able to
recognize some causal connection between the defendant's actions
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and her injury. See, e.g., Szymanski v. Boston Mut. Life Ins. Co.,
56 Mass. App. Ct. 367, 370-71, 778 N.E.2d 16, 20 (2002). In other
words, Foisy's claim for negligent misrepresentation could not have
accrued if the factual basis for it was "inherently unknowable."
Collins v. Nuzzo, 244 F.3d 246, 253 (1st Cir. 2001).
We assume for purposes of analyzing this issue that the
contract did not provide a lifetime annuity, and that Healy's
statements to that effect thus were false.6 Foisy argues that she
could not have known that her understanding was incorrect because
the contract's ambiguous language reasonably supported her
interpretation. We agree.
The district court's threshold finding that the policy was
ambiguous means that she could not be held to knowledge of her
claim until 1999, when the payments stopped. We agree with the
district court that no other circumstances existed to put her on
notice that the company's interpretation differed substantially
from her own.7
6
The jury's verdict in favor of Foisy on both claims rests on
the contradictory factual predicate that the contract was - for
purposes of the contract claim - a certain and continuous policy,
but that - for purposes of the negligent misrepresentation claim -
it was a certain only policy. We see no grounds, however, for
disturbing the verdict on the basis of that inconsistency.
See infra at 14 n.8.
7
Contrary to Maccabees' contention at oral argument, the
ambiguity itself did not put Foisy on notice. As discussed infra,
the ambiguity here yielded two different, plausible
interpretations. If that were sufficient to put a plaintiff on
notice, an insurer could too easily wield ambiguity to avoid
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We affirm the district court's denial of Maccabees' motion for
judgment as a matter of law based on the statute of limitations, as
well as the motion for new trial.
III. Contract Claim
Maccabees contends that interpretation of the annuity policy
was a question of law for the trial judge and, furthermore, that
the evidence fails to support the jury verdict.
Maccabees correctly notes that construction of an insurance
contract is generally a question of law. See Ruggerio Ambulance
Serv. v. Nat'l Grange Mut. Ins. Co., 430 Mass. 794, 797, 724 N.E.2d
295, 298 (2000). Acknowledging in passing that disputed facts
bearing on interpretation may be submitted to the jury, see Vergato
v. Commercial Union Ins. Co., 50 Mass. App. Ct. 824, 826, 741
N.E.2d 486, 488 (2001), Maccabees continues to rely on its
assertion that the contract unambiguously provides a "certain only"
annuity, and should have been interpreted as such by the court as
a matter of law. Foisy's contradictory reading of the contract is
of no consequence under Maccabees' argument because a mere
controversy over interpretation is not, by itself, enough to create
ambiguity. See Center for Blood Research v. Coregis Ins. Co., 305
litigating the merits under the much less favorable rule that
ambiguities are construed in favor of the insured. See Utica Mut.
Ins. Co. v. Weathermark Investments, Inc., 292 F.3d 77, 80 (1st
Cir. 2002); Cody v. Connecticut Gen. Life Ins. Co., 387 Mass. 142,
146, 439 N.E.2d 234, 237 (1982). We do not decide under what
circumstances a patent or flagrant ambiguity would put a plaintiff
on notice.
-10-
F.3d 38, 41 (1st Cir. 2002)(citing County of Barnstable v. Am. Fin.
Corp., 51 Mass. App. Ct. 213, 215, 744 N.E.2d 1107, 1109 (2001)).
The rule of interpretation, however, has more nuance than
Maccabees suggests. If, upon "application of pertinent rules of
construction," the district court makes a threshold determination
of ambiguity, and thus also finds that extrinsic evidence is
necessary to resolve the dispute, then a question of fact arises to
be resolved by the jury. 2 Couch on Insurance § 21:13 (3d ed.
1999); see also Utica Mut. Ins. Co. v. Weathermark Investments,
Inc., 292 F.3d 77, 80 (1st Cir. 2002)("Only where a contractual
term is ambiguous does its interpretation pose a question of fact
. . . [and] the parties may adduce extrinsic evidence of their
respective intendments."). A court may make such a threshold
finding of ambiguity if the contractual language is "susceptible of
more than one meaning and reasonably intelligent persons [could]
differ as to which meaning is the proper one." Center for Blood
Research, 305 F.3d at 41.
Contrary to Maccabees' allegations, the district court
undertook an appropriate preliminary analysis of the contract prior
to sending it to the jury. Upon Maccabees' motion for summary
judgment based on expiration of the limitations period, the court
carefully considered the substance of the policy. Construing
disputed provisions in the contract, the judge determined that both
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Maccabees and Foisy offered reasonable interpretations. As
Maccabees stressed, the annuity benefits schedule listed total
annuity benefits of $42,659.40 and annuity payments certain lasting
60 months. Conversely, Foisy highlighted language in the contract
specifying that "[e]xcept as stated under Death of Owner, the
Annuity Payments will end with the death of the owner."
Significantly, the court observed that the "Death of Owner"
provision did not address the situation at hand, in which the
annuitant outlived the payments certain. The controversy between
Foisy and Maccabees arose from a genuine ambiguity in the contract,
and the district court properly determined that the intent of the
parties was therefore a question of fact suitable for trial. See
Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 779, 761 N.E.2d 946, 951
(2002).
Maccabees also seeks to overturn the jury verdict, contending
that the evidence at trial supported only the conclusion that the
policy provided 60 months of payments and nothing further. Each
party, however, presented expert testimony supporting a different
interpretation of the policy. John Stiefel, Foisy's expert,
offered his opinion that, based on a review of the document, Foisy
purchased a continuous and certain annuity providing lifetime
benefits. Stiefel supported his opinion with cogent and pertinent
observations about the document, including use of the phrase "life
annuity" in the title and the lack of any reference to an end date
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for payments. He also suggested that retired individuals like
Foisy usually elect lifetime, rather than certain only, annuities
because the primary motivation for purchase of the policy is to
ensure that the retiree does not outlive his or her income.
Buttressing the expert's opinion, Foisy and Healy each testified
that they intended to apply for a policy providing a lifetime
annuity. In short, there was substantial evidence on which the
jury could have based its verdict.
None of Maccabees' contradictory evidence compelled the jurors
to reject Foisy's position. Other than an annuity expert to rebut
Foisy's expert, the only witness presented by Maccabees was a
former marketing employee, Nancy Pietrowski, who, although well-
versed in the company's usual procedure in providing illustrations
to agents, had no particular recollection of the transaction with
Foisy. With respect to expert opinion, Maccabees' expert testified
that he interpreted the contract as a "certain only" annuity. But
neither party's expert was impeached, and it is well within the
jury's prerogative to accept the testimony of Foisy's expert over
that of the company's.
Although we cannot precisely ascertain each individual juror's
rationale for finding one expert's testimony more credible than
that of another, the record reveals Maccabees' somewhat strained
attempt to convince a jury to favor its proffered interpretation -
pieced together through multiple cross references - over the more
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straightforward argument that a document which says "life annuity"
on the cover is in fact just that. Particularly in light of the
rule - recited in the jury instructions - that "if there are two
rational interpretations of policy language, the insured is
entitled to the benefit of the one that is more favorable to it,"
Hazen Paper Co. v. U.S. Fid. and Guar. Co., 407 Mass. 689, 700, 555
N.E.2d 576, 583 (1990), we see no cause to find fault with the jury
verdict on the contract claim.
The district court properly denied Maccabees' motion for
judgment as a matter of law on the contract claim.
IV. Negligent Misrepresentation
Maccabees' final ground of appeal is that the negligent
misrepresentation claim fails because the evidence does not
demonstrate that Healy was Maccabees' agent and that Foisy
reasonably relied on Healy's representations about the policy.8
8
The foundation for the negligent misrepresentation claim is
that Maccabees, through Healy, represented that the policy provided
lifetime benefits when, in fact, it did not. We note that, in
determining that Maccabees breached the contract, the jury had to
find that the policy was a certain and continuous life annuity. It
would therefore seem that any statement by Healy to that effect
could not be false, meaning that an essential element of the
negligent misrepresentation claim was lacking. Counsel for
Maccabees objected to giving any instruction at all on negligent
misrepresentation, based on alleged lack of evidence, but did not
object - either before the instructions were submitted to the jury
or prior to the jury's discharge after rendering a verdict - on the
basis of inconsistency. See Howard v. Antilla, 294 F.3d 244, 247
n.6, 250 (1st Cir. 2002)(barring objection to inconsistent verdict
when not raised before discharge of the jury and noting further
that appellant failed to object to use of the jury form permitting
such inconsistency). We thus proceed with discussion of the
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The jury was asked to make a threshold finding on agency by
evaluating four factors: who called Healy to the transaction, who
controlled his actions, who paid him, and whose interests he
attempted to protect. The judge further explained that although
this initial agency question was important, it was not
determinative of the claim. Foisy could still prevail if she
demonstrated that she relied on false statements in the annuity
documents themselves. Because there is insufficient evidence in
the record suggesting that Foisy relied primarily on the documents
- rather than on Healy's statements - in forming her opinion of the
policy's content,9 we consider the negligent misrepresentation
claim only by way of Healy's alleged agency.
Whether an individual has acted as an agent is a question of
fact. Pedersen v. Leahy, 397 Mass. 689, 691, 493 N.E.2d 486, 487
(1986). Maccabees contends that under Hudson v. Mass. Prop. Ins.
Underwriting Assoc., 386 Mass. 450, 455, 436 N.E.2d 155, 158
(1982)(citations omitted), a broker "is ordinarily the agent of the
insured" while an insurance agent usually is deemed to represent
the insurer.10 See also Couch, supra, at § 45:5 ("Absent some
negligent misrepresentation claim as if it did not conflict with
the jury's finding on the contract claim.
9
The only testimony on whether Foisy read the policy was her
own somewhat equivocal statement, "Well, I don't know - there's so
much on those policies, you don't read all the fine print."
10
The industry distinction between "broker" and "agent" has the
potential to engender confusion with the legal principle of agency.
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special condition or circumstance in the particular case, a broker
is not an agent of the insurer . . . ."). By Massachusetts
statute, a broker "acts or aids in any manner in negotiating
policies of insurance or annuity . . . for a person other than
himself," while an agent "solicits insurance on behalf of any
company, or transmits for a person other than himself an
application for . . . an annuity . . . to or from such company."
Mass. Gen. L. ch. 175 § 162. At the most rudimentary level, this
distinction means that a broker acts as the "middleman" between
insured and insurer, and will not be under the employ of any
particular insurance company. Michelson v. Franklin Fire Ins. Co.
of Philadelphia, 252 Mass. 336, 359, 147 N.E. 851, 852 (1925); see
also Couch, supra, at § 45:1.
As the statutory definitions indicate, however, the title of
broker or agent will not always identify the principal. An
individual may be considered a broker in the general sense, for
example, but nevertheless with respect to a specific transaction be
the agent of the insurer. See Am. Country Ins. v. Bernhard
Woodwork, 412 Mass. 734, 740, 592 N.E.2d 1319, 1323 (1992)
(applying Illinois law, but utilizing the same agency factors
considered by the jury in the current case). When evaluating the
role of an individual who assumes the characteristics of both agent
With respect to representative capacity, both a broker and an agent
may be vested with agency authority; the question is whether the
insured or the insurer is the principal.
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and broker, we must "look to the agent's conduct in the relevant
transaction to determine the nature of the various relationships."
Id. at 740.
Healy testified to having three relevant conversations with
Foisy over the course of the transaction. The first occurred when
Foisy approached him about securing an income stream. The second
happened in April 1994, after Maccabees submitted the three
different annuity options available for a $40,000 premium. At this
meeting, Healy explained the differences between the policies and
advocated in favor of purchasing a lifetime annuity with no
guaranteed minimum (resulting in a higher monthly payment). Foisy,
however, opted for what she and Healy understood to be the five-
year certain and continuous plan. The third conversation took
place soon after May 16, 1994, the date the policy was issued. At
this point, Healy had filled out the portion of Foisy's policy
application reserved for the agent, as well as submitted the
necessary information to Maccabees to become licensed with the
company (necessary for him to serve as the writing agent on Foisy's
policy and receive a commission). Healy's testimony indicates that
this third conversation happened when the policy was still under a
30-day "free look" period during which Foisy had the option of
returning the contract in exchange for a refund of her premium.
At the time of the first two conversations, Healy was
undoubtedly acting in his capacity as a broker; he had no prior
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relationship with Maccabees and advocated solely on Foisy's behalf.
If this were all, the negligent misrepresentation claim would fail
because the necessary agency relationship would not have existed at
the time the statements were made. The third conversation,
however, deserves closer inspection. Healy testified that during
this conversation, he continued to advise Foisy to elect the
lifetime annuity option. Foisy, still believing she purchased a
certain and continuous life annuity, elected to hold the contract
because she wanted a beneficiary.
The submission of Healy's licensing information did not
automatically render him Maccabees' agent; at most, we believe he
was a "special agent for a single purpose." See Couch, supra, at
§ 45:1. But it does give the jury's agency finding reasonable
grounds. By this third conversation, Healy had initiated his
relationship with Maccabees, acting at least in part on its behalf
in securing Foisy's business. During this third conversation,
Foisy continued to rely - to her detriment - on Healy's assurances
that she purchased a certain and continuous lifetime annuity.
Furthermore, at the time of the third conversation, the four
factors considered by the jury yield an inference more favorable to
the verdict than was the case earlier. Although Foisy called Healy
into the transaction, Healy now stood to gain from Foisy's
purchase. In addition to the commission - paid by Maccabees -
Healy would be able to offer Maccabees' products to other clients
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(subject to terms controlled by the company). And, while he may
have counseled Foisy to opt for a different Maccabees policy, he
did not steer her towards the products of another insurer.
Certainly, the jury could have determined otherwise. The
evidence reasonably would have supported a finding that Healy was
Foisy's agent, preventing a finding in her favor on the negligent
misrepresentation claim. Such a result would have been factually
consistent with the verdict on the contract claim. But because we
reverse "only if a reasonable person could not have reached the
conclusion of the jury," White, 221 F.3d at 259, and lacking any
objection to inconsistency by Maccabees, see Babcock v. Gen. Motors
Corp., 299 F.3d 60, 63-64 (1st Cir. 2002), we do not find that
Maccabees was entitled to judgment as a matter of law. The
district court thus properly denied Maccabees' motion.
Affirmed.
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