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Innocent Co-Insured Can Collect Under Fire Policy

In Aquino v. United Property & Cas. Co., the SJC held, in a case of first impression, that an innocent co-insured may collect on a standard fire insurance policy when another co-insured intentionally sets fire to the insured premises.  By way of analysis, the Court states in pertinent part:  “… the fact that an insurance contract has more than one named insured is the beginning, and not the end, of the analysis in determining whether insurance rights and obligations are joint and several.  … Recovery depends on the policy language itself and the contract law applicable to that language, and cannot be based on dated conceptions of the marital relationship.”  Rather, the Court states the focus is on the statutory language and the insurance policy considerations.  As such, the Court holds:  “the insureds’ rights and obligations are several and under the reformed policy [pursuant to G.L., c. 175, Sec. 99] the innocent co-insured is entitled to recover notwithstanding the co-insured’s intentional act of arson.”

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The Court also concludes that at least in the circumstances presented, i.e., where the property is held by tenants in common with no rights of survivorship, the innocent co-insured’s recovery is limited to his or her pro-rata share of the fire insurance proceeds – 50%.  The Court states:  “[u]nder the standard form contract prescribed by statute, the co-insured … had no right to recover his interest in the property as he was responsible for the fire and the damage it caused.  When he intentionally set fire to the dwelling, he completely lost his right to recover his insured interest.  The standard form contract prescribed by statute, as well as the public policy it represents, is designed to prevent the guilty co-insured interest he has lost due to his wrongdoing.  …  The insurer has no obligation under the statute to compensate the guilty co-insured for the loss, and the plaintiff’s interest in the insured property as tenant in common means the plaintiff is only entitled to recover 50%.”

The Court expressly states, however:  “… a different set of considerations are implicated when the innocent insured has survivorship rights in the property. … We need not and do not decide today the more difficult question presented when the innocent co-insured with survivorship rights seeks to recover 100% of the proceeds when the guilty co-insured dies in the fire he or she sets.”   Given the Court’s stated rationale for finding that a 50% recovery was appropriate in Aquino, it is not at all clear Massachusetts’ appellate-level courts would reach the same result in a case where the insureds have rights of survivorship and the arsonist dies in the subject fire.

The case overturns Kosior v. Continental Insurance Co., 299 Mass. 601 (1938), which denied equitable relief for an innocent co-insured spouse whose husband deliberately set fire in the house to recover insurance proceeds.  Aquino is significant as the Court expressly holds that the insurer’s reliance on Kosior was reasonable.  The Court noted that Kosior “… was at best cryptic and confusing … and could be interpreted in good faith to support the insurer’s … construction, [thus] the insurer’s denying the plaintiff coverage and drawing the plaintiff into litigation was not … unfair [ ]or deceptive [ ] for the purposes of G.L., c. 93A or c. 176D.”

Appeals Court Upholds Ruling – Bar Patron Not a Trespasser as a Matter of Law

On March 11, 2010, the decedent, Ronald J. Leger, went into Smitty’s Sports Pub and instead of walking into the men’s room, mistakenly opened a door marked “Employees Only”.  He fell down a darkened staircase, and later died of his injuries.  The resulting wrongful death case was tried to a jury, and, at trial, defendant took the position the bar patron was a trespasser as to that portion of the premises where the fall occurred.  

Defendant contended the decedent “had no right to open the door marked ‘Employees Only’ and enter the basement area”.  Even if he was on the premises lawfully, the defendant maintained he was a trespasser when he entered the basement area.  At the least, they suggested, the issue was a question of fact for the jury.

Superior Court Judge Richard Moses disagreed, and ruled as a matter of law that the decedent was not a trespasser, and in Bernier, et al v Smitty’s Sports Pub, Inc., the Appeals Court upheld the judge’s ruling “as a matter of law, …[that the decedent]… was not a trespasser …[and that]… the decedent’s status was not a factual question to be submitted to the jury”. The Appeals Court, therefore, affirmed the judgment upon jury verdict for plaintiff in the net amount of $276,953.57, after deducting 20% for the decedent’s comparative negligence.​

Sports and Torts

After a jury-waived trial, Federal District Court Judge George O’Toole awarded $1M to a 13 year-old participant in a pickup softball game held during a U.S. Army National Guard family day.  The evidence was undisputed that the child had been invited to play, and did so with the consent of his parents, who were in attendance.  The errant throw, by a catcher toward third base, struck minor plaintiff in the head.  He immediately dropped to the ground, and was later diagnosed with a traumatic brain injury with permanent cognitive and physical impairment, seizures, and post-traumatic stress disorder.

Applying Massachusetts law, Judge O’Toole found liability was foreclosed against the player who threw the ball.  He relied upon Gauvin and other appellate-level state court cases which require a showing of recklessness, rather than mere negligence, in order to recover for personal injuries while participating in sports or leisure activities.  The judge found, however, that the negligence standard applied to the person in charge of the day’s events, a First Sergeant, who was not actively participating in the game.  

The judgment in favor of minor plaintiff seems inconsistent with common sense, but the judge likely acted within his discretion.  Though not cited in the judge’s 18-page decision, in Judge v. Carrai, 77 Mass. App. 803 (2010),  another case concerning an alleged traumatic brain injury caused by an errant softball, the Appeals Court ruled a homeowner and organizer of an informal softball game at a social gathering owed a duty of care, as risk of injury was foreseeable to guests.  In that case, the Appeals Court adopted and relied upon §318 of the Restatement, Second, of Torts.  Generally, that section imposes upon a social host a duty of care where:  (1) the host is present; and (2) he knows or should know that a third person is using either his realty or personalty unreasonably such that an injury is foreseeable.  In her dissenting opinion in Carrai, Justice Berry stated:  “I respectfully dissent because the majority opinion does not accord with Massachusetts tort law and is adrift from common real life happenings, including, in particular, the playing of baseball, day upon day, at parties, barbeques, and other social gatherings in homeowner backyards across the Commonwealth, indeed across the nation.”

Nonetheless, as “reasonableness”, as an element of negligence, is usually for the fact-finder – in this case Judge O’Toole – the judgment for the minor against the U.S. Army National Guard will likely withstand any scrutiny by the First Circuit.

Insurer Has No Duty to File Appeal on Insured’s Behalf Against Long Odds

In another trial court opinion, Superior Court Judge Mitchell Kaplan recently ruled that Liberty Mutual Insurance Company was not obligated by the terms of a “high deductible policy” to appeal a judgment against its policyholder when the insurer was advised by independent outside counsel the appeal had an estimated 5-10% chance of success.  P. Gioioso & Sons, Inc. v. Liberty Mutual Insurance Company, Aug. 24, 2016.

The case arose after defendant, Liberty Mutual Insurance Company, had paid a $112,997 tort judgment against the policyholder, a construction company, instead of pursuing an appeal as the policyholder demanded.  The policyholder then refused to pay a premium in the amount of the judgment, which became due as a result of a retrospectively rated policy.  In response to Liberty’s contention that the insured breached its contract, the policyholder maintained that Liberty’s refusal to appeal the judgment constituted a breach of its duty to defend. The trial court judge disagreed, and allowed the insurer’s summary judgment motion.

The policyholder took the position that under long-established appellate-level caselaw, an insurer owes a duty to appeal in all instances where it appears that substantial interests of the insured may be served, and further claimed that an insurer owed a duty to appeal if there is any likelihood that an appeal would result in a judgment for the policyholder.  

Liberty asserted that its policy provided that it “may at [its] discretion…settle any claim or suit”, and further relied upon GL c. 176D sec. 3(9)(f), which provides a statutory obligation to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.  

While agreeing that the duty to defend is not easily cast off, the judge opined the insured “cannot reasonably compel Liberty to pursue any appeal that has any conceivable chance of being successful.”  Judge Kaplan found no dispute regarding the merits of an appeal in the matter, and disagreed that a duty to appeal arises if there is only a 5%-10% chance of success.  At a minimum, the insured “must point to a particular appellate issue and explain why the trial court weigh in committed error and why this error was sufficiently prejudicial that judgment for the plaintiff must be reversed."