Devaney v. Affiliated Insurance Managers, Inc.

30 Mass. L. Rptr. 21
CourtMassachusetts Superior Court
DecidedJune 30, 2012
DocketNo. MICV200804452F
StatusPublished

This text of 30 Mass. L. Rptr. 21 (Devaney v. Affiliated Insurance Managers, Inc.) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Devaney v. Affiliated Insurance Managers, Inc., 30 Mass. L. Rptr. 21 (Mass. Ct. App. 2012).

Opinion

Curran, Dennis J., J.

After a fire destroyed their real and personal property (“property”), the plaintiffs Robert and Judith Devaney commenced this action against their insurance broker, defendant Affiliated Insurance Managers, Inc., alleging that their property was underinsured as a result of Affiliated’s negligence and breach of contract in increasing the limits under their homeowners insurance policy from Cambridge Mutual Fire Insurance Co. Affiliated filed a third-party complaint against insurer Cambridge Mutual seeking indemnification and contribution to the extent of Affiliated’s liability. This case is before the court on Affiliated’s motion for summary judgment on the Devaneys’ direct claims against it, on its own third-party claims against Cambridge Mutual, and on Cambridge Mutual’s cross motion for summary judgment on Affiliated’s third-party claims. For the following reasons, Affiliated’s motion is DENIED and Cambridge Mutual’s cross motion is ALLOWED.

I. BACKGROUND

The following facts are undisputed and, where disputed, viewed in the light most favorable to the non-moving party. See Nelson v. Salem State Coll., 446 Mass. 525, 535 (2006).

1. Affiliated and Cambridge Mutual

In July 2000, Affiliated entered into an Agency Agreement with Cambridge Mutual. The Agency Agreement characterized Affiliated as Cambridge Mutual’s “agent,” and Cambridge Mutual agreed to make its “underwriting facilities” available to Affiliated in its capacity as agent. Exhibit B. Cambridge Mutual also “grantfed] authority to [Affiliated as its agent] to receive and accept proposals for such contracts of insurance covering risks on properties located in [specific areas] . . .” Id. This authority was “subject, however, to restrictions placed upon such Agent by [Cambridge Mutual] and by the laws of the states in which such Agent is authorized to write insurance business and to the terms and conditions . .. set out” in the Agency Agreement itself. Id. Among these terms and conditions is the agreement that

Agent has full power and authority to receive and accept proposals for insurance covering such classes of risks as [Cambridge Mutual] may, from time to time, authorize to be insured, subject to the limitations and restrictions as set forth in this [Agency] Agreement, and as set forth in the Underwriting Guide to be furnished to the Agent by [Cambridge Mutual] which is to be made a part of this [Agency] Agreement; to collect, receive and receipt for premiums on insurance, tendered by the Agent to and accepted by [Cambridge Mutual] and to retain out of premiums so collected, as full compensation on business so placed with [Cambridge Mutual], commissions under such terms and limitations as may be mutually agreed upon.

Id. Subject to these restrictions, Affiliated’s authority extended to binding homeowners’ insurance with dwelling coverage up to $850,000, and to insuring houses to 80% of replacement cost. Exhibit A, at 34-35.1

The Agency Agreement also provided that Cambridge Mutual “shall not be responsible for Agent expenses such as rentals, transportation facilities, clerk hire, solicitors’ fees, postage, advertising, exchange, personal local license fees, or any other Agency expenses whatsoever.” Exhibit B. Affiliated and Cambridge Mutual agreed that the Agency Agreement “supersedes all previous agreements, whether oral or written, between [Cambridge Mutual] and Agent and may be terminated by either party at any time upon written notice to the other.” Id.

Cambridge Mutual made a “cost estimator” program available on its website to assist its agents, such as Affiliated, in estimating the replacement cost of dwellings. Marshall Swift manufactured the cost estimator program that Cambridge Mutual made available on its website. The information this program yielded would, in turn, determine the amount of insurance coverage for a particular dwelling. David Winn, an underwriter for Cambridge Mutual, states in his affidavit that “[a]gencies like Affiliated, operating under agreements with Cambridge Mutual. . . are expected to insure houses for the proper amounts. So they are supposed to go and make an evaluation of the house. They can use the cost estimator system available on our website ... [as long as they] make an evaluation that the property complies with the 80 percent insurance to replacement costs provision.” Exhibit Q, par. 7. Additionally, “Cambridge Mutual relies upon the independent agencies, like Affiliated to ensure that the [22]*22underwriting guidelines are in fact being complied with and that the appropriate level of insurance is being issued.” Exhibit Q, par. 8; Exhibit A, at 58 (testifying that Cambridge Mutual relies on agency representation that, e.g., “it was standard construction versus pre-1930”).

Winn testified in his deposition as to Cambridge Mutual’s general procedure upon receiving an insurance application accompanied by a cost estimator, stating that the underwriting department reviews the cost estimator “to make sure that it was reasonable, if the agency [e.g., Affiliated] submitted a cost estimator and it said the house had 4,000 square feet and the cost estimator requested [$]200,000 coverage .. . then [Cambridge Mutual] would probably do an inspection to verify what the replacement cost or to get a better handle on what the replacement cost was.” Exhibit A, at 36. He agreed that if the underwriting department “[saw] that there’s some kind of red flag or that a value appeared] to be off, then Cambridge [Mutual] would take steps to find out why or to do it’s [sic] own inspection!.]” Exhibit A, at 37. He further testified that the Cambridge Mutual underwriter would typically “make sure that the cost estimator said [the requested coverage amount] or that it was within the 90 percent criteria. We would not necessarily review the accuracy of each item on the estimator . . . [W]e would not go and research the file to make sure that the information was identical.” Exhibit A, at 56; see supra n.1.

2. Affiliated and the Devaneys

The property, consisting of the Devaneys’ home and its contents, is located at 52 Bancroft Avenue, Reading, Massachusetts. The dwelling went through two notable renovations in the 1980s, one being the addition of a family room to the first floor, and another being the conversion of the attic into the master bedroom and bath.

Shaun Kelly was a long-time friend of Mr. Devaney. At all times relevant to this action, Kelly had a Massachusetts insurance broker’s license and was an account executive at Affiliated. Affiliated did not pay Kelly a salary; rather Kelly worked on commission, receiving 50% of all new business and renewals he generated.2 Kelly had been acquiring insurance for the Devaneys since at least 1999 and chose the insurance company with which to place their policy.3 Mr. Devaney testified throughout his deposition that he considered Kelly to be an insurance expert, and that he agreed to and accepted whatever Kelly gave him.

In April 2002, Kelly obtained a homeowner’s insurance policy for the property from Cambridge Mutual for the period of April 5, 2002 through April 5, 2003. At that time, the dwelling coverage was $217,500 and personal property coverage, always 50% of the dwelling coverage, was $108,750. The original homeowners’ insurance policy application that Affiliated submitted to Cambridge in 2002 indicates that the dwelling was built in 1901.4 Exhibit N.

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Bluebook (online)
30 Mass. L. Rptr. 21, Counsel Stack Legal Research, https://law.counselstack.com/opinion/devaney-v-affiliated-insurance-managers-inc-masssuperct-2012.