Chamberland v. Arbella Mutual Insurance Co.

• Court: Massachusetts Appeals Court
• Decided: June 9, 2017
• Docket: AC 16-P-861
• Status: Published

Opinion

NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557- 1030; SJCReporter@sjc.state.ma.us

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.