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16-P-861 Appeals Court
HEATHER CHAMBERLAND vs. ARBELLA MUTUAL INSURANCE COMPANY.
No. 16-P-861.
Bristol. February 1, 2017. - June 9, 2017.
Present: Carhart, Massing, & Henry, JJ.1
Insurance, Underinsured motorist, Arbitration. Contract,
Insurance, Arbitration. Waiver. Collateral Estoppel.
Judgment, Preclusive effect. Arbitration. Practice,
Civil, Summary judgment, Waiver.
Civil action commenced in the Superior Court Department on
March 4, 2015.
The case was heard by Robert J. Kane, J., on motions for
summary judgment.
Peter E. Heppner (Andrew Hart Lynch also present) for the
defendant.
Ronald J. Resmini for the plaintiff.
HENRY, J. This case highlights the intricacies of the
framework for underinsured motorist claims in Massachusetts,
which provides that the insured and the insurer must either
1
Justice Carhart participated in the deliberation on this
case prior to his retirement.
2
agree on the resolution of the claim or arbitrate. The
plaintiff, Heather Chamberland, pursued a lengthy civil action
against the other driver involved in the underlying accident and
obtained a large judgment and eventually a settlement in the
amount of that driver's policy limits. Her underinsurance
carrier, Arbella Mutual Insurance Company, was not a party to
that action, though it consented to the settlement. Chamberland
then sought underinsured motorist coverage from Arbella, which
invoked arbitration. On cross motions for summary judgment, a
Superior Court judge held that Arbella's invocation of
arbitration was untimely, and thus Arbella had waived its right
to arbitrate. The motion judge further held that, as a result
of the damages award that Chamberland had secured against the
other driver at trial, Arbella was collaterally estopped from
contesting issues of liability and damages in connection with
Chamberland's underinsurance claim. Arbella appealed. We
reverse because, notwithstanding the significant amount of time
that passed before Arbella's demand for arbitration, Arbella did
not act inconsistently with its statutory and policy-based right
to arbitrate. As such, there is no basis for a finding of
waiver of that right.
Background. The following undisputed facts are drawn from
the summary judgment record. On July 16, 2007, Chamberland was
injured in an accident while operating a motor vehicle insured
3
under a policy issued by Arbella. The other vehicle involved in
the accident was operated by Dylon Maiorano and insured under a
policy issued by Liberty Mutual Insurance Company. Arbella was
notified of the accident, and by October 3, 2007, confirmed in
writing that Chamberland's underinsurance (part 12) coverage
limits under the Arbella policy were $250,000 per person and
$500,000 per accident.
Chamberland sued Maiorano in a case that ultimately
involved two jury trials and multiple appeals. Chamberland
prevailed in the second trial; the jury concluded that the
accident was caused solely by Maiorano's negligence and that
Chamberland was entitled to $231,565 in damages.2 With statutory
interest, Chamberland's judgment totaled $340,557.02. Maiorano
appealed. Arbella was not a party to this action.
While the appeal was pending, Chamberland, with Arbella's
consent, reached a settlement with Maiorano and Liberty Mutual,
pursuant to which Liberty Mutual agreed to pay her the full
$100,000 in bodily injury coverage available under Maiorano's
policy. In exchange, Chamberland released Maiorano and Liberty
Mutual from all claims arising out of the accident. She further
2
The first jury returned a verdict finding that
Chamberland's damages amounted to $5,280. However, the jury
also found that Chamberland was fifty percent negligent, and the
award was reduced accordingly. After adjustment for the PIP
setoff, the damage award was reduced to $0. Chamberland then
successfully pursued a motion for a new trial, however, and the
matter proceeded to trial for a second time.
4
acknowledged that Maiorano, by entering into the settlement, did
not admit liability for the accident, and, in fact, continued to
deny the same. On May 2, 2014, Chamberland and Maiorano filed a
stipulation of dismissal of the case with prejudice.
During the course of Chamberland's action against Maiorano,
Arbella requested that it be kept apprised of the matter so it
could determine if an underinsurance claim was forthcoming. The
parties did not correspond again until more than three years
later when, on December 31, 2013, Chamberland's attorney
notified Arbella of the $340,557.02 judgment against Maiorano.
Chamberland claimed that the issues of liability and damages had
been resolved by that judgment and demanded payment of the
balance of the judgment, $240,557.02, pursuant to the
underinsurance coverage provision in the Arbella policy.
Arbella refused, stating that it was not bound by the judgment
against Maiorano and asserting that it was entitled to resolve
issues of liability and damages through arbitration.
Chamberland subsequently initiated this action (1) seeking
a declaration that she is entitled to the "remaining"
underinsurance coverage limits of the Arbella policy, and
(2) asserting that Arbella had engaged in unfair settlement
practices in violation of G. L. c. 93A and G. L. c. 176D.
Arbella denied Chamberland's claims and asserted a counterclaim
for court appointment of an arbitrator. The parties immediately
5
proceeded to summary judgment. The motion judge dismissed
Arbella's counterclaim, granted a required offset of $100,000
for the bodily injury coverage that Chamberland recovered under
Maiorano's automobile insurance policy, and declared Arbella
liable to Chamberland for $131,565 in underinsurance coverage,
the balance (after the offset) of the jury's damages award in
the second trial.3 Arbella appealed.
Discussion. Massachusetts automobile insurance policies
must comply with all applicable statutory provisions and be in a
form approved by the Commissioner of Insurance (Commissioner).
See G. L. c. 175, §§ 2B, 113A. Statutorily, resolution of a
claim for uninsured motorist benefits -- both liability and
damages -- "shall be made by agreement between the insured . . .
and the insurer or, if they fail to agree, by arbitration."
G. L. c. 175, § 111D. The underinsurance section of the Arbella
policy, part 12,4 closely tracks the statute.5
3
The judge made no explicit ruling on Chamberland's unfair
settlement practices claim under G. L. c. 93A and G. L. c. 176D.
The docket shows that after the summary judgment entered,
Chamberland filed a request for postjudgment interest "and in
[c]onsideration with" G. L. c. 93A and G. L. c. 176D, which the
judge indorsed as "No Action Taken. The Court defers until
appeal is resolved." See G. L. c. 251, § 18(a)(1) (order
denying motion to compel arbitration is immediately appealable).
4
The Arbella policy provides:
"The determination as to whether an injured person is
legally entitled to recover damages from the legally
responsible owner or operator will be by agreement between
6
To begin, we briefly review how an insured may make a claim
for underinsurance coverage. The insured can pursue the alleged
tortfeasor for a judgment or, with the consent of her insurance
company, a settlement, and then seek payment from the insurer
providing underinsured motorist coverage.6 Furukawa v. Arbella
Mut. Ins. Co., 59 Mass. App. Ct. 142, 143-146 (2003). The
insurer's consent to the settlement does not preclude it from
contesting the liability of an alleged tortfeasor or the amount
of damages. Ibid. By the same token, the insured can lose her
claim against the alleged tortfeasor and still pursue
underinsured motorist coverage from her own insurer because the
policy language provides for agreement or arbitration rather
us and the injured person. The amount of damages, if any,
will be determined in the same way. Arbitration will be
used if no agreement can be reached."
5
The Arbella policy at issue here was in a form consistent
with the seventh edition of the Massachusetts automobile
insurance policy approved by the Commissioner.
6
Part 12 of the Arbella policy includes the following
provision:
"If an injured person settles a claim as a result of an
accident covered under this Part, we will pay that person
only if the claim was settled with our consent."
See MacInnis v. Aetna Life & Cas. Co., 403 Mass. 220, 222-223
(1988) (a consent-to-settlement clause in the underinsurance
section of a policy is valid, although the insurer must prove
that it suffered material prejudice to deny coverage on that
basis).
7
than judicial determination of coverage. Allstate Ins. Co. v.
MacNeil, 32 Mass. App. Ct. 227, 228 & n.2, 230 (1992).
Alternatively, the insured can proceed on parallel tracks,
pursuing the alleged tortfeasor while simultaneously demanding
underinsurance coverage from her own carrier. See Aetna Cas. &
Sur. Co. v. Faris, 27 Mass. App. Ct. 194, 196-197 (1989) ("There
is nothing in the underinsurance statute or the policy terms
expressly requiring exhaustion of claims against alleged
tortfeasors prior to arbitration"; such a parallel option
protects insureds "from the possibility of unreasonably delayed
insurance settlements"); Gilbert v. Hanover Ins. Co., 35 Mass.
App. Ct. 683, 687 (1993) (applying Faris to a subsequent edition
automobile insurance policy approved by the Commissioner). With
this background, we address Arbella's claims on appeal.
1. Waiver of arbitration. "An appellate court, reviewing
a judge's finding that a party has waived arbitration, must
determine whether . . . the judge abused his discretion."
Martin v. Norwood, 395 Mass. 159, 162 (1985). This requires us
to determine whether the motion judge's decision resulted from
"a clear error of judgment in weighing the factors relevant to
the decision . . . such that the decision falls outside the
range of reasonable alternatives." L.L. v. Commonwealth, 470
Mass. 169, 185 n.27 (2014).
8
Here, it is undisputed that Arbella did not explicitly
waive its right to arbitrate Chamberland's underinsurance claim.
Accordingly, "[t]he essential question is whether, under the
totality of the circumstances, [Arbella] acted inconsistently
with the arbitration right." Martin, 395 Mass. at 162
(quotation omitted). Upon review of the undisputed facts in the
record, we conclude that the motion judge's determination that
Arbella waived its arbitration right amounted to an abuse of
discretion.
As the motion judge noted in his decision, Arbella and
Chamberland each had the option of demanding arbitration at any
time, assuming they were unable to reach agreement on liability
and/or damages, and did not need to wait to do so until
Chamberland had exhausted her rights against Maiorano. Faris,
27 Mass. App. Ct. at 197. The motion judge took Faris one step
further, however, concluding that, because "both [Arbella] and
[Chamberland] agreeably waited until the passage of two jury
trials, [they both] forfeited the arbitration remedy and must by
their omissions be deemed to have consented to resolution by the
judicial determinations arrived at in the second trial." There
is nothing in Faris, however, to suggest that an insurer (or
insured) acts untimely by waiting until the conclusion of an
insured's action against the alleged tortfeasor to demand
arbitration on such a claim. Quite the contrary. Absent other
9
acts inconsistent with its arbitration right, therefore, Arbella
did not waive that right merely by waiting to assert it until
Chamberland's action against Maiorano came to a conclusion.
The motion judge here placed great reliance on the decision
in Home Gas Corp. of Mass., Inc. v. Walter's of Hadley, Inc.,
403 Mass. 772 (1989), where the defendant was held to have
waived a contractual arbitration right by not asserting it until
after the defendant had engaged in litigation with the plaintiff
for two and one-half years, including a hearing before a master,
thus "wast[ing] scarce judicial time and effort and hamper[ing]
judges' authority to control the course of proceedings before
them." Id. at 778 (quotation omitted). The motion judge here
was of the opinion that Arbella had similarly wasted judicial
time and effort by taking a "wait and see" approach while
Chamberland's action against Maiorano played out, only to demand
arbitration when the second jury trial ended favorably for
Chamberland on the issues of liability and damages.
However, unlike the insurer in Home Gas Corp., Arbella was
not a party to the litigation between Chamberland and Maiorano.
As it was a stranger to that action, Arbella cannot fairly be
charged with wasting judicial time and effort merely because it
waited for Chamberland's action against Maiorano to conclude.7
7
The motion judge noted that Arbella could have moved to
intervene in the action against Maiorano, pursuant to
10
As soon as Chamberland finalized her settlement with Maiorano
and Liberty Mutual and made a demand for the underinsurance
limits of the Arbella policy, Arbella demanded arbitration.
When Chamberland responded by filing this action, Arbella
immediately moved, by way of counterclaim, for the appointment
of an arbitrator. In short, Arbella's actions were anything but
inconsistent with its arbitration right. As the Faris decision
makes clear, Arbella was within its contractual rights to follow
the course that it did. As such, Arbella did not act with undue
delay and cannot be penalized for doing what it was entitled to
do. Nor can Chamberland claim to have been prejudiced. Indeed,
as noted above, she herself could have demanded arbitration at
any time.
2. Collateral estoppel. The motion judge also held that
Arbella was precluded by the judgment against Maiorano from
contesting issues of liability and damages in connection with
Chamberland's underinsurance claim. Where, as here, there is a
specific provision in the policy requiring arbitration to
resolve disputed issues of liability and damages for purposes of
underinsurance, preclusion does not lie. See Allstate Ins. Co.
v. MacNeil, 32 Mass. App. Ct. at 228 n.2. In MacNeil, it was
Mass.R.Civ.P. 24(b), 365 Mass. 769 (1974). Even if that is
true, which we need not decide, Arbella was not obligated to do
so. As already noted, Arbella had a contractual right to
arbitrate disputes of liability and damages with respect to
Chamberland's underinsurance claim.
11
the insurer, Allstate, that sought to preclude its insured,
MacNeil, from pursuing arbitration of his underinsurance claim
after judgment entered against MacNeil finding that the alleged
tortfeasor was not liable for the accident. Id. at 228. The
court held that, "[w]ere it not for the specific provisions of
the policy [requiring arbitration to resolve disputed issues of
liability and damages for purposes of underinsurance], we would
agree with the conclusion that the principles of (issue
preclusion) apply and that MacNeil is bound, even though
Allstate was not a party in the first action.[8] . . .
[However,] [s]ince the [policy] called for agreement of the
parties as to whether MacNeil was legally entitled to recover
from [the alleged tortfeasor], and, failing agreement,
arbitration, Allstate is required to arbitrate." Id. at 228,
230. The analysis in MacNeil applies equally to the facts of
this case. It was thus error to deny Arbella's cross motion for
summary judgment on its counterclaim seeking appointment of an
arbitrator.
Conclusion. The summary judgment entered in favor of
Chamberland is reversed, and an order shall enter allowing
8
Notably, Allstate had rejected MacNeil's request that it
assent to being bound by any decision reached in the action
against the alleged tortfeasor. MacNeil, 32 Mass. App. Ct. at
229. If Allstate had assented, issue preclusion would have
applied because the policy, like the Arbella policy here, allows
the insurer and insured to agree to resolve issues without
resorting to arbitration. Id. at 230.
12
Arbella's cross motion for summary judgment on its counterclaim
requesting appointment of an arbitrator. The matter is remanded
to the trial court for appointment of an arbitrator and for
further proceedings on Chamberland's claim that Arbella engaged
in unfair settlement practices in violation of G. L. c. 176D and
G. L. c. 93A, which we do not read as being based solely on the
theories of waiver and estoppel.
So ordered.