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15-P-1706 Appeals Court
EDITH SCHULTZ vs. CHRISTOPHER TILLEY & others.1
No. 15-P-1706.
Suffolk. December 15, 2016. - May 18, 2017.
Present: Cypher, Maldonado, & Blake, JJ.2
Dog. Insurance, Coverage, Homeowner's insurance,
Misrepresentation.
Civil action commenced in the Superior Court Department on
July 30, 2013.
The case was heard by Heidi E. Brieger, J., and entry of
separate and final judgment was ordered by her.
James T. Scamby for the plaintiff.
Jeffrey T. Scuteri for Christopher Tilley & another.
Peter C. Kober for Vermont Mutual Insurance Company.
BLAKE, J. The insureds, Angela Tilley and Christopher
Tilley,3 owned a dog that caused property damage and injury to
1
Angela Tilley and Vermont Mutual Insurance Company.
2
Justice Cypher participated in the deliberation of this
case while an Associate Justice of this court, prior to her
appointment as an Associate Justice of the Supreme Judicial
Court.
2
the plaintiff, Edith Schultz. Schultz filed suit against the
Tilleys and the defendant, Vermont Mutual Insurance Company
(Vermont Mutual). Vermont Mutual counterclaimed and
cross-claimed, seeking a declaration that the homeowner's policy
at issue was void as a result of the insureds' material
misrepresentations on their application for insurance as to the
dog's bite history and their history of loss. Following a bench
trial on the issue of coverage only, a judge of the Superior
Court agreed with Vermont Mutual on the bite history issue, and
accordingly dismissed Schultz's complaint against Vermont
Mutual. The Tilleys and Schultz (collectively, the appellants)
now jointly appeal.
Background. We summarize the facts as found by the judge,
supplemented by undisputed information from the record, with
certain facts reserved for later discussion. On December 30,
2010, Christopher visited the Tarpey Insurance Group (Tarpey) in
Peabody for the purpose of obtaining homeowner's insurance for
his residence in Peabody. With the assistance of Elaine
Faithful, one of Tarpey's customer service representatives,
Christopher completed an application for insurance with Vermont
Mutual. On the application, Christopher responded "Yes" to the
question, "Are there any animals or exotic pets kept on
3
For ease of reference, we shall refer to the Tilleys by
their first names.
3
premises?" As a follow-up, the application states, in
parentheses, "Note breed and bite history." Under the "Remarks"
section of the application, Faithful noted, "American bull dog
-- no biting incidents." Another section of the application was
entitled "Loss History" and asked, "Any losses, whether or not
paid by insurance, during the last 6 years, at this or at any
other location?" Christopher responded "No" and placed his
initials adjacent to his response. At the bottom of the
application, just above the signature line, it states: "I have
read the above application and any attachments. I declare that
the information in them is true, complete and correct to the
best of my knowledge and belief." Christopher signed and dated
the application. Vermont Mutual subsequently issued a
homeowner's policy to the Tilleys.
On March 18, 2011, Schultz was walking her two Yorkshire
Terriers on Harrison Avenue in Peabody. As she was walking near
the Tilleys' home, their American Bulldog, Bocephus, ran out and
attacked Schultz's dogs. Before Angela and other neighbors
could restrain Bocephus, he injured Shultz's dogs. In
attempting to protect her dogs from the attack, Schultz suffered
a broken arm, a laceration to her face, and scrapes to her
knees, elbows, and ankles. On March 21, 2011, Christopher
reported the incident to Tarpey, who in turn notified Vermont
Mutual.
4
Following notification of the claim, Vermont Mutual
commenced an investigation. During that process, it learned
that Bocephus had bitten two other dogs prior to the date of
Christopher's insurance application. In particular, Vermont
Mutual learned that on November 12, 2009, Bocephus bit a dog
named Buddy, who was walking near the Tilleys' house. Buddy's
owner filed a police report and spoke with Peabody's animal
control officer. Buddy's owner also incurred a $200
veterinarian bill as a result of the bite, which the Tilleys
voluntarily paid. In July, 2010, Bocephus bit another dog,
Bruno, who also was walking near the Tilleys' house. After
confirming that Bocephus was current on his shots, Bruno's owner
took no further action. At trial, Christopher acknowledged that
he was aware of both of these incidents at the time he applied
for insurance in December, 2010.
On July 30, 2013, Schultz filed a complaint in the Superior
Court alleging strict liability and negligence on the part of
the Tilleys (counts I-IV), and unfair claim settlement
practices, in violation of G. L. c. 176D, on the part of Vermont
Mutual (count V). On August 26, 2013, Vermont Mutual filed its
answer, cross claim, and counterclaim, seeking a declaration
against Schultz and the Tilleys that the policy is void and does
not afford coverage. In July, 2014, the case was tried on the
issue of coverage only. During the trial, the parties
5
stipulated to the dismissal of count V of Schultz's complaint
alleging unfair claims settlement practices against Vermont
Mutual, without prejudice.
In written findings of fact and rulings of law, on the
basis of the testimony presented and her interpretation of the
policy language, the judge concluded that the phrase "biting
history" is unambiguous, with the "general understanding of the
word [biting] read to mean biting anything or anybody" (emphasis
in original). Finding that Christopher had "neglected (either
deliberately or by virtue of wilful blindness to the veracity
requirement of the application) to answer truthfully that his
dog had a biting history," the judge concluded that he had made
a material misrepresentation on his application for insurance.
As a material misrepresentation is dispositive on the issue of
coverage, she ordered that judgment enter for Vermont Mutual on
its counterclaim for declaratory judgment. In addition, despite
the limited nature of the trial and the prior stipulation, the
judge also ordered that judgment enter in favor of Schultz on
counts I to IV of her complaint, and in favor of Vermont Mutual
on count V of the complaint despite the parties' agreement to
dismiss this count.4
4
The judge also erroneously found that a Vermont Mutual
employee had testified. The parties jointly moved to substitute
stipulated language concerning that employee; the judge endorsed
the motion as "[s]o noted."
6
By joint posttrial motion, the parties alerted the judge to
the error. As a proposed remedy, they moved for the entry of
separate and final judgment, Mass.R.Civ.P. 54(b), 365 Mass. 820
(1974), in favor of Vermont Mutual on its cross claim and
counterclaim, and requested a stay pending appeal on Schultz's
claims against the Tilleys. In spite of her written endorsement
of "[a]llowed" on the motion, the judge ordered the entry of
final judgment dismissing Schultz's complaint against Vermont
Mutual. This, as we have noted, was despite the prior
stipulation dismissing count V against Vermont Mutual without
prejudice.
Discussion. On appeal, the appellants argue that the judge
erred in finding a material misrepresentation as to the bite
history portion of the application. Likewise, they argue, no
material misrepresentation was made with respect to the loss
history portion of the application. Finally, they argue that
the judge erred in ordering the entry of final judgment
dismissing count V of Schultz's complaint as against Vermont
Mutual. We agree in all respects, addressing each point in
turn.
1. Material misrepresentation. In Massachusetts, "[u]nder
common-law principles and G. L. c. 175, § 186, when an insured
makes a material misrepresentation during the application or
renewal period for an insurance policy, the insurer may be able
7
to deny coverage on that basis."5 Commerce Ins. Co. v. Gentile,
472 Mass. 1012, 1015 (2015), citing Barnstable County Ins. Co.
v. Gale, 425 Mass. 126, 128 (1997). See Hingham Mut. Fire Ins.
Co. v. Mercurio, 71 Mass. App. Ct. 21, 23-24 (2008) (Mercurio).
Here, Vermont Mutual argued that the policy was voidable based
on two material misrepresentations made on the application.
Before reaching the misrepresentation issue, however, we must
examine and interpret the relevant application language,
particularly in relation to ambiguity. In other words, "[i]n
order to determine whether an answer is a misrepresentation, we
must identify the information sought by the question."
Mercurio, supra at 24. The analysis of policy language is a
matter of law, which we review de novo, applying those
principles equally to the language of insurance questionnaires
and applications. Ibid.
The "[t]erms of an insurance policy must be interpreted in
accordance with the 'fair meaning of the language used, as
5
General Laws c. 175, § 186(a), as amended by St. 2008,
c. 376, § 1, provides:
"No oral or written misrepresentation or warranty made
in the negotiation of a policy of insurance by the
insured or in his behalf shall be deemed material or
defeat or avoid the policy or prevent its attaching
unless such misrepresentation or warranty is made with
actual intent to deceive, or unless the matter
misrepresented or made a warranty increased the risk
of loss."
8
applied to the subject matter.'" Winbrook Communication Servs.,
Inc. v. United States Liab. Ins. Co., 89 Mass. App. Ct. 550, 556
(2016), quoting from Davis v. Allstate Ins. Co., 434 Mass. 174,
179 (2001). A term or policy provision is ambiguous "only if it
is susceptible of more than one meaning and reasonably
intelligent persons would differ as to which meaning is the
proper one." Barnstable v. American Financial Corp., 51 Mass.
App. Ct. 213, 215 (2001). "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." Rass
Corp. v. Travelers Cos., 90 Mass. App. Ct. 643, 654 (2016),
quoting from Hazen Paper Co. v. United States Fid. & Guar. Co.,
407 Mass. 689, 700 (1990). "The rationale behind this rule is
to encourage insurers, who typically draft the policy and are in
the best position to avoid future misunderstandings, to be as
clear and explicit as possible. . . . Where a question on an
application lends itself to more than one reasonable
interpretation, an honest answer to one of those reasonable
interpretations cannot be labeled a misrepresentation."
Mercurio, supra.
a. Bite history. As we have noted, the application asks
about "breed and bite history" as a subpart of the question
whether animals or exotic pets are kept on the premises. At
trial, Christopher testified that he understood the question, as
9
Faithful asked it, to mean whether the animal has a history of
biting humans, to which he responded in the negative.6 Faithful,
on the other hand, testified that her custom and practice was to
inquire whether the animal was "aggressive" or had "had a biting
incident" in responding to the question. Kathleen Parch, an
underwriting manager at Vermont Mutual, testified that she
interpreted the term to mean "bodily injury or property damage
to someone else's pet." In reaching her interpretation of the
term, the judge adopted a broad meaning advanced by none of the
witnesses at the trial, namely that it should be read to mean a
history of biting "anything or anybody."
Although we agree with the judge that a fair meaning of the
language could be read to mean, literally, anything the animal
has ever bitten, that view hardly seems reasonable in the
context of insurance given the strong propensity of dogs to chew
toys and other inanimate objects of little or no value. We
understand the judge to have meant any living thing. However,
we conclude that the language remains subject to multiple
reasonable interpretations, as the trial testimony demonstrates.
Even though our review is de novo, it is notable that each
witness who testified on the matter essentially offered a
different interpretation of the bite history question.
6
Christopher testified that he did not read the application
word for word, but responded to the questions as asked by
Faithful.
10
Moreover, in our view, all of those interpretations are
reasonable, in that they each would afford the insurer an
assessment, at some level, of the risk associated with a given
animal. While listing each and every time a dog has bitten
another animal, pet, or dog would certainly provide the insurer
with more complete information, such incidents might be common
or negligible enough, given the animal, for a reasonable
applicant to believe an insurance company would not be
interested in such information.7
Because the language is ambiguous, we must afford the
Tilleys, as the insureds, the benefit of the reasonable
interpretation that is most favorable to them; namely, the one
that limits the biting history to humans only. Because
Christopher answered that question honestly, as it is undisputed
that Bocephus had only bitten other dogs, Christopher's response
cannot be labeled a misrepresentation by Vermont Mutual. See
ibid.
b. Loss history. At trial, Christopher testified that he
did not consider the $200 veterinarian bill he paid for Buddy's
treatment to be a "loss." Rather, he stated that "a loss is
[when] an insurance company pays a claim. It's a loss. You
have [a] loss for an insurance company." Parch testified that
7
It is not difficult to imagine a dog that frequently hunts
and catches wildlife, playfully nips another dog, or gets into
an occasional scuffle with a neighboring dog.
11
it was Vermont Mutual's position that the $200 payment was a
loss that should have been disclosed on the application. As
with bite history, the appellants argue that the question --
"Loss History -- Any losses, whether or not paid by insurance,
during the last 6 years, at this or at any other location?" --
is ambiguous and that, for that reason, Christopher's answer
("No") was not a misrepresentation.
We agree with the appellants that the question is
ambiguous, at least as to the lower limit of a loss that must be
disclosed in order to avoid a rescission of the policy for
misrepresentation. Setting aside the matter of whether a "loss"
means only a "claimed loss" in this context,8 the question
reasonably could be read to mean losses at a threshold level at
which an insurance company would be interested in order to
accurately assess risk. See generally 1 New Appleman Law of
Liability Insurance § 2.02[1](a), at 2-3 (2d ed. 2010) ("An
application generally includes the various information that is
necessary for the underwriting of the contract, such as: . . .
the nature of the risk to be insured"). Where that threshold
8
Although we do not reach this question, we again observe
the principle that, as the drafter of the language, the burden
is on the insurer to tailor the application to elicit the
specific information it requires. See Mercurio, 71 Mass. App.
Ct. at 24. See also Frank vs. Nationwide Mut. Fire Ins. Co.,
U.S. Dist. Ct., No. 3:04cv0025 (M.D. Tenn. Mar. 28, 2006)
(examining whether loss history question in insurance
application was ambiguous).
12
level lies is open to interpretation, and is therefore
ambiguous.9 Given that $200 is a small fraction of the Tilleys'
personal liability policy limit,10 we conclude that Christopher's
view that such a payment would not be considered a loss for an
insurance company is reasonable. Because, as the insureds, the
Tilleys are entitled to the interpretation that favors them, and
because it is undisputed that the $200 payment was the only
disputed loss, Christopher's response to the loss history
question was not a misrepresentation.
2. Final judgment. The appellants correctly observe that
the final judgment dismissed count V of Schultz's complaint,
which alleged unfair claim settlement practices against Vermont
Mutual, despite the parties' earlier stipulation to dismiss that
count without prejudice. Because a final judgment on the matter
prevents Schultz from reviving this claim as contemplated by the
earlier stipulation, we reverse the judge's ruling as an abuse
of discretion. See Kobrin v. Board of Registration in Med., 444
Mass. 837, 843 (2005).
Conclusion. The order for judgment, entered November 19,
2014, is vacated, and a new judgment is to enter on Vermont
9
However, in our view, an interpretation that would require
disclosure of literally "any losses," however negligible, is not
reasonable.
10
The personal liability policy limit was $500,000 for each
occurrence.
13
Mutual's counterclaim and cross claim declaring that Vermont
Mutual is contractually obligated to provide coverage to the
insureds. The judgment entered August 3, 2015, pursuant to
Mass.R.Civ.P. 54(b) dismissing Schultz's claim against Vermont
Mutual is vacated.
So ordered.