Rabassa v. Cerasuolo

97 Mass.App.Ct. 809

151 N.E.3d 447

Josh RABASSA¹

v.Margaret CERASUOLO, individually & as trustee,² & another;³ Northern Security Insurance Co., Inc., Third-Party Defendant.

No. 19-P-243

Appeals Court of Massachusetts, Middlesex..

Argued March 9, 2020

Decided July 6, 2020

Peter C. Kober, Boston, for Northern Security Insurance Company, Inc.

Michael B. Bogdanow (Peter J. Ainsworth also present), Boston, for Margaret Cerasuolo & another.

Present: Green, C.J., Hanlon, & Neyman, JJ.

GREEN, C.J.

Together with his wife, Margaret Cerasuolo, defendant John Cerasuolo acquired an apartment building in 1972, and rented apartment units to tenants in the years that followed.⁴ In 1992, concerned about the possibility of liability for lead poisoning, John took steps to obtain insurance coverage against the risk. After learning, in 2010, that the plaintiff, a young child, had sustained lead poisoning from residing in one of the apartment units, the Cerasuolos filed an insurance claim with the third-party defendant, Northern Security Insurance Company, Inc. (Northern), which Northern denied. In the lawsuit that followed, the Cerasuolos claimed that Northern was estopped to deny coverage, by virtue of its silence in the face of documentation showing that John believed that he had satisfied Northern's requirements to obtain coverage for lead poisoning claims. In each of two trials in Superior Court, juries agreed that Northern was estopped to deny coverage and awarded damages to the Cerasuolos.⁵ We conclude that the jury verdicts finding Northern liable find adequate support in law and fact, but that the first trial judge erred in allowing Northern's motion for a new trial. We accordingly vacate the judgment in the second trial, reverse the order granting a new trial, and direct reinstatement of the verdict in the first trial.

Background. We briefly summarize the evidence in the light most favorable to the Cerasuolos, reserving some facts for our discussion of the issues.⁶ See Evans v. Lorillard Tobacco Co., 465 Mass. 411, 417, 990 N.E.2d 997 (2013). In the early 1990s, John became concerned about the possibility of lead poisoning claims and reached out to Gus Doukakis at Doukakis Corsetti Insurance Agency, Inc. (DCIA),⁷ an authorized agent for Northern.⁸ John specifically inquired about obtaining coverage for lead poisoning claims arising out of the Cerasuolos' ownership of the apartment building. Doukakis advised John that the Cerasuolos would have to obtain letters of compliance in order to obtain such coverage.⁹ Doukakis did not further explain what a letter of compliance was, or how to obtain one.

In the meantime, John, who was a carpenter, attended a course to become a licensed deleader. During that course, John learned that he could not conduct a lead inspection of his own property and thus hired a third-party lead inspector. Following the inspection of the apartment building by a third-party lead inspector, John received several letters (deleading letters)—each one for a different unit—labeled "LETTER OF LEAD PAINT (RE)OCCUPANCY (RE)INSPECTION CERTIFICATON UNAUTHORIZED DELEADING." The deleading letters all stated as follows:

"This letter certifies that on 6-15-92, no violations of the Lead Law exist in the interior of the dwelling unit, relevant common areas and exterior. NO FINAL LETTER OF LEAD ABATEMENT COMPLIANCE WILL ISSUE ON THIS PROPERTY DUE TO UNAUTHORIZED DELEADING."

Believing that the deleading letters were letters of compliance, John submitted them to DCIA. DCIA then submitted them to Northern, which marked them as "pertinent underwriting information" and issued business owner's policies (policies) year after year without following up with the Cerasuolos.¹⁰ John believed that the policies all provided the requested coverage for lead poisoning claims. The policies, however, provided that Northern would provide coverage for liability arising out of an occurrence of lead poisoning only "for each ‘unit’ on [the] premises for which you have either a ‘Letter of Interim Control’ or a ‘Letter of Compliance.’ "¹¹ And it is undisputed that none of the deleading letters was a letter of compliance (or the alternative letter of interim control).

The plaintiff's family moved into the Cerasuolos' apartment building around 2007 and lived there until 2010. In 2010, the plaintiff's family informed John that the plaintiff had high levels of lead in his system. John notified DCIA, and DCIA in turn notified Northern of the plaintiff's potential lead poisoning claim. By a letter dated March 16, 2011, Northern informed the Cerasuolos that it would not defend or indemnify them with respect to the plaintiff's lead poisoning claim.

The plaintiff filed an action against the Cerasuolos, which the Cerasuolos settled for $250,000.¹² Following settlement of the plaintiff's claim, the Cerasuolos pursued their third-party claims against Northern. After an order for partial summary judgment determined that the policies unambiguously did not provide coverage for lead poisoning claims, only the Cerasuolos' claim against Northern for estoppel remained. As explained in our introduction, juries in two successive trials concluded that Northern was estopped to deny coverage.¹³ Before us are Northern's appeal from the judgment that it is liable, and the Cerasuolos' cross appeal claiming error in the allowance of Northern's motion for a new trial after the first jury verdict.

Discussion. 1. Northern's appeal. We begin by addressing Northern's contention that it was entitled to a judgment that it is not liable because estoppel cannot create coverage. In other words, Northern contends that it had no duty to speak and that the Cerasuolos' reliance on Northern's silence was not reasonable.

a. Can estoppel "create coverage?" Northern's argument relies on the general rule that "the doctrines of waiver and estoppel will not operate to change the risks covered or insurance extended by a policy so as to create, enlarge, or expand the coverage of the policy" (footnote omitted).¹⁴ 46 C.J.S. Insurance § 1155, at 28-29 (2018). The general rule, however, has exceptions. "One exception to the general rule that the doctrine of estoppel is not available to create or extend the scope of insurance coverage is when an insurer misrepresents the extent of coverage to an insured, thereby inducing the insured to purchase coverage which does not in fact cover the disputed risk." Id. at 30. See, e.g., Jet Line Servs., Inc. v. American Employers Ins. Co., 404 Mass. 706, 713, 537 N.E.2d 107 (1989) (defendant estopped to deny claim for explosion, which occurred after renewal, where manner in which defendant treated prior claim for explosion before renewal induced plaintiff to believe that such claims were covered).

The facts of this case, as found by the jury, fall comfortably within the exception to the general rule. John specifically requested coverage for lead poisoning claims. Northern, through its silence when (as explained below) it had a duty to speak, misrepresented that the policies provided the requested coverage. So induced, the Cerasuolos purchased the policies, only to find out years later that the policies did not provide the requested coverage. "These circumstances justify application of the traditional equitable principle of estoppel." Jet Line Servs., Inc., 404 Mass. at 713, 537 N.E.2d 107.

b. Northern's duty to speak. The evidence at trial supported a conclusion by the jury that, incident to his efforts to obtain an insurance policy from Northern, John expressed his desire to obtain coverage for lead poisoning risks and thereafter provided information in response to the requirement for such coverage communicated to him by Northern's agent. In such circumstances, the question is whether Northern had an obligation to inform John that the documentation he provided was inadequate to satisfy the requirement for the coverage he had expressed a desire to obtain. The scope of Northern's obligation to respond in such circumstances was a proper subject of expert testimony regarding standard practices in the industry.¹⁵ See, e.g., Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass. 387, 402, 788 N.E.2d 522 (2003). The Cerasuolos offered the expert testimony of Thomas E. Quinn, an insurance professional with extensive experience. He testified that the words "pertinent underwriting information" stamped on a document indicate that "an underwriter would use [the document] in making underwriting decisions." He also testified that when an underwriter receives such a document, the underwriter is "obligated to tell the insured through the agent or direct[ly] whether [the] document [is] sufficient or not."¹⁶ This testimony and the circumstances surrounding Northern's receipt of the Cerasuolos' application for insurance provided a sufficient basis for the jury to conclude that Northern had a duty to inform the Cerasuolos that the documents they submitted for the purposes of meeting the requirements for lead poisoning coverage were in fact inadequate to do so. See, e.g., Nota Constr. Corp. v. Keyes Assocs., Inc., 45 Mass. App. Ct. 15, 19, 694 N.E.2d 401 (1998).

c. Was the Cerasuolos' reliance reasonable? Whether the Cerasuolos reasonably relied on Northern's silence was a question of fact for the jury to decide. See Nova Assignments, Inc. v. Kunian, 77 Mass. App. Ct. 34, 39, 928 N.E.2d 364 (2010) (summary judgment should not have been entered where reasonableness of reliance was question of fact for jury to decide). We must uphold the jury verdict as long as "anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of the plaintiff" (citation omitted). Dobos v. Driscoll, 404 Mass. 634, 656, 537 N.E.2d 558, cert. denied, 493 U.S. 850, 110 S.Ct. 149, 107 L.Ed.2d 107 (1989).

Northern contends that it was unreasonable for the Cerasuolos to believe that they had coverage for lead...