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SJC-12019
MASSACHUSETTS INSURERS INSOLVENCY FUND vs. BERKSHIRE BANK.
Suffolk. September 8, 2016. - November 3, 2016.
Present: Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, &
Budd, JJ.
Massachusetts Insurers Insolvency Fund. Insurance, Workers'
compensation insurance, Insolvency of insurer. Workers'
Compensation Act, Insurer, Reimbursement of insurer.
Statute, Construction. Words, "On behalf of."
Civil action commenced in the Superior Court Department on
July 14, 2014.
The case was heard by Mitchell H. Kaplan, J., on motions
for summary judgment.
The Supreme Judicial Court granted applications for direct
appellate review.
Gregory P. Deschenes (Kurt Mullen with him) for the
plaintiff.
Owen Gallagher (Gordon Prescott with him) for the
defendant.
BOTSFORD, J. General Laws c. 175D, § 17 (§ 17), authorizes
the Massachusetts Insurers Insolvency Fund (Fund) to recover
2
from "high net worth insureds" certain amounts paid by the Fund
"on behalf of" such insureds. G. L. c. 175D, § 17 (3). The
Fund brought this action in the Superior Court pursuant to § 17,
seeking to recover from the defendant Berkshire Bank (Berkshire)
an entity that meets the definition of "high net worth insured,"
workers' compensation benefits it has paid to a Berkshire
employee. Ruling on cross motions for summary judgment, a judge
of that court interpreted § 17 (3) to preclude the Fund's
recovery. We conclude that the Fund is authorized to recoup the
amounts in question because they were paid by the Fund "on
behalf of" Berkshire within the meaning of § 17 (3).
Accordingly, we reverse the judgment of the Superior Court.
Background. Both parties agree that there are no material
facts in dispute. The memorandum of decision of the Superior
Court judge sets out the background facts succinctly, which we
quote here:
"In May 2003, [Donna] Poli, an assistant branch
manager for Woronoco Savings Bank (Woronoco), injured her
back while lifting coin-filled bags. Woronoco was then the
named insured under a workers' compensation/employer's
liability policy issued by Centennial [Insurance Company].
Woronoco notified Centennial of the injury and Centennial
began paying Poli weekly workers' compensation benefits
pursuant to G. L. c. 152, § 34 [providing temporary total
incapacity benefits for up to three years]. On June 16,
2005, Woronoco merged with and into Berkshire.
"In August 2006, Poli exhausted her entitlement to
benefits under G. L. c. 152, § 34, and Centennial
voluntarily commenced payments under G. L. c. 152, § 35
[providing for partial incapacity benefits]. Four years
3
later, in August 2010, Poli exhausted her entitlement to
benefits under G. L. c. 152, § 35, and Centennial ceased
making any payments. In response, Poli sought permanent
and total disability compensation under G. L. c. 152,
§ 34A. [I]n February 2011, the Department of Industrial
Accidents (DIA) denied her claim after a conference. Poli
appealed.
"In April 2011, the New York Supreme Court placed
Centennial, which is domiciled in New York, into
liquidation. Pursuant to the provisions of G. L. c. 175D,
the Fund assumed administration of Poli's claim. On
September 7, 2011, the Fund entered into a lump sum
agreement with Poli, under G. L. c. 152, § 48, pursuant to
which it agreed to pay her $85,000 and to pay all future
medical expenses arising from the injury. The DIA approved
the agreement a week later. Berkshire was not consulted by
the Fund with respect to its agreement with Poli.
"In January 2012, the Fund sent a demand to Berkshire
seeking to recoup the amounts paid to Poli on the grounds
that Berkshire was a high net worth insured and was thus
obligated to reimburse the Fund under G. L. c. 175D, § 17
(3). Berkshire refused to pay the Fund, prompting the Fund
to bring the present lawsuit in July 2014. The Fund's
amended complaint brings a claim for breach of statutory
duty to reimburse and seeks a declaratory judgment that
Berkshire is liable to reimburse the Fund for future
payments and incurred expenses associated with Poli's
workers' compensation claim. Both parties now move for
summary judgment. There is no dispute that Berkshire
qualifies as a high net worth insured."
The motion judge allowed Berkshire's motion for summary
judgment and denied the Fund's motion. Concluding that § 17
entitled the Fund to recover from high net worth insureds
amounts the Fund had paid only when the amounts in question had
been paid "on behalf of the insured," § 17 (3), the judge ruled
that the statutory scheme for workers' compensation in
Massachusetts effectively precluded such recoupment. He
4
reasoned that once an employer purchases a qualifying workers'
compensation insurance policy, the employer has no obligation to
pay workers' compensation benefits to any employee because the
responsibility to make such payments lies exclusively with the
insurer. As a result, any amounts paid by the Fund would not be
"on behalf of" the insured employer, and recoupment pursuant to
§ 17 would not be available. Final judgment entered for
Berkshire, and we granted both parties' applications for direct
appellate review.
Discussion. "Because this case was decided on cross
motions for summary judgment with no dispute as to material
facts, one of 'the moving part[ies] is entitled to judgment as a
matter of law.'" Massachusetts Care Self-Ins. Group, Inc. v.
Massachusetts Insurers Insolvency Fund, 458 Mass. 268, 270
(2010), quoting Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass.
117, 120 (1991). The single issue raised is one of statutory
interpretation, and we review the motion judge's decision de
novo. Massachusetts Care Self-Ins. Group, Inc., supra.
To provide context, we briefly discuss the Fund and its
enabling statute. The Fund is a nonprofit, unincorporated legal
entity established in 1970 to provide a limited form of
protection from insurer insolvencies. G. L. c. 175D, inserted
by St. 1970, c. 261. See Clark Equip. Co. v. Massachusetts
Insurers Insolvency Fund, 423 Mass. 165, 166-167 (1996). The
5
Fund stands in place of an insolvent insurer and is obligated to
pay all "covered" claims against that insurer, in most instances
up to a cap of $299,999 per claim. G. L. c. 175D, § 5 (1) (a).
Massachusetts Insurers Insolvency Fund v. Smith, 458 Mass. 561,
562 (2010) (Fund v. Smith). Patterned on the Post-Assessment
Insurance Guaranty Association Model Bill drafted by the
National Association of Insurance Commissioners, see Clark
Equip. Co., supra at 167 n.2, G. L. c. 175D aims to "minimiz[e]
financial loss to claimants or policyholders" resulting from an
insurer's insolvency (citation omitted). Fund v. Smith, supra.
Because member insurers may recover amounts paid into the Fund
by increasing their rates and premiums, G. L. c. 175D, § 13, the
"cost of paying claims against insolvent insurers is . . .
ultimately passed on to the insurance-buying public."
Massachusetts Motor Vehicle Reinsurance Facility v. Commissioner
of Ins., 379 Mass. 527, 530 (1980).
There are certain types of insurance that are expressly
excluded from coverage by the Fund. G. L. c. 175D, § 2.1
Although it was not always the case, since 1988, workers'
compensation insurance claims have qualified for Fund coverage,
1
General Laws c. 175D, § 2, currently provides: "This
chapter shall apply to all kinds of direct insurance, except
life, accident and health, title, surety, disability credit,
mortgage guaranty, financial guaranty or other forms of
insurance offering protection against investment risks,
insurance of warranties of any type of service contracts and
ocean marine insurance."
6
and since 1993, there has been no cap on the Fund's financial
responsibility for such claims. See G. L. c. 175D, § 2, as
amended by St. 1988, c. 302, § 1 (removing workers' compensation
from chapter's listed exceptions); G. L. c. 175D, § 5 (1) (a),
as amended by St. 1992, c. 318, § 1 (removing $300,000 cap for
workers' compensation claims).
Section 17, the high net worth insured provision at issue
here, was added to G. L. c. 175D in 2006. See St. 2006, c. 342,
§ 2. Section 17 provides in pertinent part:
"(1) For purposes of this section 'high net worth
insured' shall mean any insured whose net worth exceeds $25
million on December 31 of the year before the year in which
the insurer becomes an insolvent insurer; but, an insured's
net worth on that date shall be considered to include the
aggregate net worth of the insured and all of its
subsidiaries and affiliates as calculated on a consolidated
basis. 'High net worth insured' shall not include a
[F]ederal, [S]tate[,] or local government entity.
"(2) The [F]und shall not be obligated to pay a first
party claim by a high net worth insured.
"(3) The [F]und shall have the right to recover from a
high net worth insured amounts paid by the [F]und to or on
behalf of the insured, whether for indemnity, defense[,] or
otherwise.
"(4) The [F]und shall not be obligated to pay a claim
that would otherwise be a covered claim that is an
obligation to or on behalf of a person who has a net worth
greater than that allowed by the insurance guaranty
association law of the [S]tate of residence of the claimant
at the time specified by that [S]tate's applicable law, and
which fund has denied coverage to that claimant on that
basis.
"(5) The [F]und shall establish reasonable procedures
subject to the approval of the commissioner [of insurance]
7
for requesting financial information from insureds on a
confidential basis for purposes of applying this section .
. . ." (Emphasis added.)
Section 17 contains no language carving out any exceptions
for any particular types of insurance otherwise covered by the
Fund, and Berkshire indisputably qualifies as a high net worth
insured under the definition of the term in § 17 (1).
Accordingly, as the motion judge concluded, the question whether
the Fund may recover for the payments made to Poli depends on
the meaning of § 17 (3), and more specifically, on the meaning
of the phrase, "on behalf of the insured, whether for indemnity,
defense[,] or otherwise." In answering this question, we follow
the rule that a statute is to be interpreted "according to the
intent of the Legislature ascertained from all its words
construed by the ordinary and approved usage of the language,
considered in connection with the cause of its enactment, the
mischief or imperfection to be remedied and the main object to
be accomplished." Fund v. Smith, 458 Mass. at 565, quoting
Lowery v. Klemm, 446 Mass. 572, 576-577 (2006).
Berkshire argues, in agreement with the reasoning of the
motion judge, that the Fund's payments were not made on its
behalf because under the Commonwealth's workers' compensation
regime, once the employer purchases workers' compensation
insurance, the liability to pay compensation benefits is wholly
the insurer's, and the employer retains no further
8
responsibility. See G. L. c. 152, § 26 (requiring that injured
workers "be paid compensation by the insurer or self-insurer").2
Berkshire is correct that the insurer is directly liable
for paying workers' compensation benefits. See, e.g., Insurance
Co. of Penn. v. Great Northern Ins. Co., 473 Mass. 745, 750
(2016). But for purposes of interpreting "on behalf of the
insured" in § 17 (3), that fact is not dispositive. Berkshire
concedes, as it must, that employers are required to provide
their employees with workers' compensation benefits, see G. L.
c. 152, § 25A, or face severe penalties and common-law tort
liability. See G. L. c. 152, §§ 25C, 66, 67. See also, e.g.,
LaClair v. Silberline Mfg. Co., 379 Mass. 21, 26 (1979); O'Dea
v. J.A.L., Inc., 30 Mass. App. Ct. 449, 450 (1991). The
employer's obligation to provide coverage is a statutory one
that exists independently of the insurer. Thus, G. L. c. 152,
§ 25A, provides that an employer may satisfy the obligation by
purchasing an appropriate workers' compensation insurance policy
from a qualified insurer, see G. L. c. 152, § 25A (1), but there
are other options available that include becoming a member of a
2
Berkshire further asserts that G. L. 175D, § 17 (§ 17),
covers only third-party liability insurance, and that workers'
compensation insurance is not liability insurance. We find no
support in G. L. c. 175D for this limited view of the scope of
§ 17, given that the statute nowhere restricts the Fund's
coverage to third-party liability insurance or even references
the term.
9
workers' compensation self-insurance group, see id., or becoming
licensed as a self-insurer, see G. L. c. 152, § 25A (2).
"On behalf of" is not a defined term or phrase in § 17 (3),
but "[w]ords that are not defined in a statute . . . should be
given their usual and accepted meanings, derived from sources
presumably known to the statute's enactors, such as their use in
other legal contexts and dictionary definitions" (quotations and
citation omitted).3 See MacLaurin v. Holyoke, 475 Mass. 231, 239
(2016). The phrase "on behalf of" is generally defined to mean
"in the interest of; as the representative of; for the benefit
of." Webster's Third New International Dictionary 198 (1993).
See Black's Law Dictionary 184 (10th ed. 2014) (same). Using
this definition, it is clear, as the Fund argues, that in making
payments of workers' compensation benefits to an injured
employee, the insurer does so "in the interest of" or "for the
benefit of" the employer: the insurer is acting pursuant to an
insurance contract that the employer has entered into to satisfy
its statutory obligation to provide for workers' compensation
benefits.
Berkshire contends, however, that this interpretation of
"on behalf of" is fatally flawed because the phrase must be
3
The parties have not pointed to any legislative history
(and we have found none) to suggest that, in using the phrase
"on behalf of" in § 17 (3), the Legislature intended a meaning
diverging from the phrase's usual one.
10
considered in conjunction with the words that immediately follow
in § 17 (3) -- "for indemnity, defense[,] or otherwise" -- and
in Berkshire's view, the Fund's payments to Poli cannot
permissibly be characterized as being for any one of these
purposes. Berkshire argues that, in the insurance context,
"indemnity" and "defense" have each "acquired a technical
meaning as recognized by the Legislature" that refers
essentially to the insurer's obligation to indemnify (i.e., to
pay for the legal liability of) its insured or to defend its
insured against legal liability, but under the Massachusetts
workers' compensation system, the legal liability to pay
benefits rests solely with the insurer, and the insured employer
has none.4
This view is difficult to reconcile with the language of
the Centennial policy insuring Berkshire. That policy contains
provisions requiring the insurer to "pay promptly when due the
benefits required of you [Berkshire] by the workers compensation
law", and "to defend at our expense any claim, proceeding or
suit against you [Berkshire] for benefits payable by this
insurance." These provisions are identical to policy provisions
4
Berkshire argues further that "otherwise" refers only "to
the additional payments found in policy provisions that are
usually identified as 'supplementary payments' or 'additional
costs we will pay.'" There is no language in § 17 (3) or
elsewhere in the statute -- or, to our knowledge, in its
legislative history -- to support Berkshire's claim.
11
that this court previously has recognized as providing "defense
and indemnity of the employer to claims for benefits required by
the workers' compensation statute." See HDH Corp. v. Atlantic
Charter Ins. Co., 425 Mass. 433, 436 & n.7 (1997). The Fund
argues that in making the payments to Poli at issue here, it was
providing to Berkshire the contractual indemnity benefits to
which Berkshire was entitled under the Centennial policy that
Berkshire (through Woronoco) had purchased to satisfy its
statutory obligation as a Massachusetts employer to provide for
workers' compensation benefits. See G. L. c. 152, § 25A. We
agree, and conclude that the Fund's payments to Poli meet the
requirement of § 17 (3) that they be "amounts paid by the [F]und
to or on behalf of the insured, whether for indemnity,
defense[,] or otherwise."
As previously noted, § 17 contains no language expressly
exempting any type of insurance that is otherwise covered by the
Fund. Accordingly, Berkshire's proposed interpretation of
§ 17 (3) necessarily takes as its premise that the Legislature
implicitly intended to exempt workers' compensation insurance
and high net worth insured employers from the obligation to
reimburse the Fund for any workers' compensation amounts that
the Fund might be required to pay. The history of G. L.
c. 175D, however, reflects that where the Legislature has wished
to treat a particular type of insurance in a distinct way, it
12
has done so explicitly -- or at least it has done so with
respect to workers' compensation insurance. Thus, as enacted in
1970, G. L. c. 175D explicitly exempted workers' compensation
insurance from the statute's application. See G. L. c. 175D,
§ 2, inserted by St. 1970, c. 261, § 1. In 1988, the
Legislature explicitly removed this specific exemption. See St.
1988, c. 302, § 1. And in 1993, the Legislature explicitly
lifted the otherwise applicable cap on the Fund's individual
claim coverage obligation specifically for workers' compensation
insurance claims. See St. 1992, c. 318, § 1. In light of this
legislative history, we do not accept that in enacting the high
net worth insured recovery provision reflected in § 17, the
Legislature, without so stating, nonetheless intended to exclude
workers' compensation insurance and insureds from its reach.5
5
This conclusion finds support in a comment to § 11(B) of
the high net worth provision of the Post-Assessment Property and
Liability Insurance Guaranty Association Model Act (Model Act)
on which G. L. c. 175D is patterned. See Clark Equip. Co. v.
Massachusetts Insurers Insolvency Fund, 423 Mass. 165, 167 n.2
(1996). The comment in the Model Act states, "The reference to
'liability obligations' includes workers' compensation insurance
coverages." III National Association of Insurance
Commissioners, Model Laws, Regulations and Guidelines, at 540-12
(1996). According to the legislative history to § 11 (B), the
comment was added "to clarify the original drafter's intent that
the net worth provision apply to workers' compensation claims."
Id. at 540-31 (1997). Although Berkshire argues that the Model
Act contemplates only workers' compensation systems in which
employers are directly liable to employees, we find no support
in the Model Act for a distinction between such a scheme and one
in which, as in Massachusetts, the employer's responsibility is
to provide for workers' compensation coverage.
13
We construe statutory language so that the purpose of its
framers may be effectuated. See MacLaurin, 475 Mass. at 238,
and cases cited. The interpretation of § 17 (3) that we adopt
here is consonant with the purpose of the Fund statute, G. L.
c. 175D, to protect insureds when their insurers fail, but to do
so in a manner that acknowledges the need to limit the cost
ultimately borne by the insurance-buying public. See Fund v.
Smith, 458 Mass. at 563, and cases cited. The motion judge,
quoting Pilon's Case, 69 Mass. App. Ct. 167, 172 (2007), opined
that "[t]he net-worth provisions of [§] 17 (3) are clearly
intended to make certain insureds that are capable of absorbing
the loss that occurs when an insurer becomes insolvent bear that
loss instead of the Fund, which 'minimizes the financial burden
on the insurance-buying public and conserves the . . . Fund's
limited resources.'"6 We agree.
Moreover, to read in an exception for one of the most
costly types of insurance claims would be contrary to the public
policy behind the Fund's creation and evolution. See, e.g., HDH
6
The parties have included a number of documents in the
record that form part of the legislative history of § 17,
including comments of the Office of Consumer Affairs and
Business Regulation in support of the legislation. These
comments are consistent with the motion judge's, and our,
understanding of the intent of § 17: "The purpose of this
legislation is to limit guaranty fund [G. L. c. 175D] coverage
to individuals and entities, i.e., the so called 'mom and pop'
claimants, who, unlike high net worth insureds, are not
typically in a position to finance a loss if their insurer
becomes insolvent."
14
Corp., 425 Mass. at 440 (describing cost of mandatory workers'
compensation insurance as "significant aspect of the business
climate of the Commonwealth"). Where the Legislature has
recognized the expense of workers' compensation claims by
removing the statutory cap on recovery from the Fund for this
type of claim, see G. L. c. 175D, § 5 (1) (a), it is reasonable
to conclude that in enacting the high net worth insured
provision embodied in § 17, the Legislature did not intend to
preclude recovery from high net worth employers for this
expensive type of claim.7
Conclusion. The judgment of the Superior Court is
7
Berkshire's final argument is that the Fund's ability to
recover the value of workers' compensation claims from high net
worth insureds is prohibited by G. L. c. 175D, § 8 (1), which
provides that "[t]he Fund shall have no cause of action against
the insured of the insolvent insurer for any sums it has paid
out." But, as Berkshire recognizes, accepted principles of
statutory construction dictate that in the case of conflict, the
more specific and later-enacted statute governs. See, e.g.,
Commonwealth v. Houston, 430 Mass. 616, 625 (2000). Here, § 8
(1) is in direct conflict with the more recently enacted and
more specific high net worth insured provision set out in § 17.
If § 8 (1) were to apply, § 17 would be inapplicable to all
types of insurance purchased by high net worth insureds, not
only workers' compensation insurance -- a result that
contradicts the plain words and purpose of § 17. We interpret
legislation so as to render it "effective, consonant with reason
and common sense," and will not construe a statute in a manner
that achieves an illogical result (citation omitted). See,
e.g., Rotondi v. Contributory Retirement Appeal Bd., 463 Mass.
644, 648 (2012).
15
reversed, and the case is remanded to the Superior Court for
entry of judgment in favor of the Fund.
So ordered.