Schultz v. Tilley

91 Mass.App.Ct. 539

76 N.E.3d 1051

Edith SCHULTZ

v.Christopher TILLEY & others.¹

No. 15-P-1706

Appeals Court of Massachusetts, Suffolk..

Argued December 15, 2016.

Decided May 18, 2017.

James T. Scamby, Boston, for the plaintiff.

Jeffrey T. Scuteri for Christopher Tilley & another.

Peter C. Kober, Boston, for Vermont Mutual Insurance Company.

Present: Cypher, Maldonado, & Blake, JJ.²

BLAKE, J.

The insureds, Angela Tilley and Christopher Tilley,³ owned a dog that caused property damage and injury to 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 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.

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 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

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 to deny coverage on that basis."⁵ Commerce Ins. Co. v. Gentile, 472 Mass. 1012, 1015, 36 N.E.3d 1243 (2015), citing Barnstable County Ins. Co. v. Gale, 425 Mass. 126, 128, 680 N.E.2d 42 (1997). See Hingham Mut. Fire Ins. Co. v. Mercurio, 71 Mass. App. Ct. 21, 23-24, 878 N.E.2d 946 (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, 878 N.E.2d 946. 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 applied to the subject matter.’ " Winbrook Communication Servs., Inc. v. United States Liab. Ins. Co., 89 Mass. App. Ct. 550, 556, 52 N.E.3d 195 (2016), quoting from Davis v. Allstate Ins. Co., 434 Mass. 174, 179, 747 N.E.2d 141 (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, 744 N.E.2d 1107 (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, 63 N.E.3d 40 (2016), quoting from Hazen Paper Co. v. United States Fid. & Guar. Co., 407 Mass. 689, 700, 555 N.E.2d 576 (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,...