Mahoney v. American Automobile Insurance

989 N.E.2d 503, 83 Mass. App. Ct. 677, 2013 WL 2364173, 2013 Mass. App. LEXIS 91

• Court: Massachusetts Appeals Court
• Decided: June 3, 2013
• Docket: No. 12-P-163
• Status: Published

Opinions

Fecteau, J.

On appeal from the allowance of the defendant American Automobile Insurance Company’s (AAIC) motion for summary judgment, the plaintiff, Wayne Mahoney, contends that a judge in the Superior Court erred in interpreting Part 5, the “Optional Bodily Injury to Others” provision (Part 5) of a standard Massachusetts automobile insurance policy (seventh edition). Mahoney’s complaint sought a declaration that AAIC is contractually obligated to indemnify Jennifer Hill, a household member of its insureds, Thomas and Sandra Joyce (the Joyces), in connection with a motor vehicle accident in which Mahoney’s vehicle was struck by a vehicle rented by Hill and operated by Ellen Teague, to whom Hill had negligently entrusted it.

Acting on cross motions for summary judgment, the judge concluded that AAIC had no contractual obligation to indemnify Hill, because the plain language of Part 5 unambiguously provides that “this Part does not pay for the benefit of anyone using an auto without the consent of the owner.” Relying on the reasoning in Vergato v. Commercial Union Ins. Co., 50 Mass. App. Ct. 824 (2001) (Vergato), the judge determined that Part 5 did not provide coverage to Hill because at the time of the accident, Teague was not operating the rental vehicle with the consent of the rental company, Hertz Rental Corporation (Hertz). We agree with the judge’s interpretation and affirm the judgment.

Background. The essential facts are not in dispute. On March 17, 2007, Teague, who was not licensed, was driving a car that Hill had rented from Hertz when Teague negligently crossed the center line and struck Mahoney’s vehicle, seriously injuring him. In renting the car from Hertz, Hill listed only herself as an operator, and only Hill was authorized by Hertz to operate the rental car.

After the accident, Mahoney sued Teague for negligent operation and Hill for negligent entrustment. Hertz assumed the defense of both Teague and Hill, and the suit was settled by an agreement that included the tender by Hertz of its insurance policy limits of $20,000 and Mahoney’s release of Hill and Teague from personal liability in the event of a judgment in excess of available insurance limits, including any available secondary liability insurance. In the settlement agreement Teague admitted, and Hill did not contest, liability for the accident. After an assessment of damages hearing, judgment entered in favor of Mahoney against Teague and Hill in the amount of $78,000.

At the time of the accident, Hill was a household member of the Joyces, the named insureds under a standard Massachusetts automobile insurance policy issued by AAIC. As part of their policy, the Joyces had selected additional coverage in the amount of $250,000 per person under Part 5, “Optional Bodily Injury to Others,” which states in pertinent part as follows:

“Under this Part, we will pay damages to people injured or killed in accidents if you or a household member is legally responsible for the accident. We will also pay damages if someone else using your auto with your consent is legally responsible for the accident. The damages we will pay are the amounts the injured person is entitled to collect for bodily injury through a court judgment or settlement.

“This Part is similar to Compulsory Bodily Injury to Others (Part 1). Like the Compulsory Part, this part pays for accidents, involving your auto in Massachusetts. Also like the Compulsory Part, this Part does not pay for the benefit of anyone using an auto without the consent of the owner” (emphasis supplied).¹

Discussion. “In review of a grant of summary judgment, we proceed de nova upon the same record as did the motion judge. . . . We must determine whether all material facts and questions of law are resolved.” Suffolk Constr. Co. v. Illinois Union Ins. Co., 80 Mass. App. Ct. 90, 93 (2011). “The interpretation of an insurance contract is no different from the interpretation of any other contract, and we must construe the words of the policy in their usual and ordinary sense.” Hakim v. Massachusetts Insurers’ Insolvency Fund, 424 Mass. 275, 280 (1997). “[W]e must ascertain ‘the fair meaning of the language used, as applied to the subject matter.’ ” Vergato, 50 Mass. App. Ct. at 826-827, quoting from Aetna Cas. & Sur. Co. v. Sullivan, 33 Mass. App. Ct. 154, 156 (1992). In addition, where the “standard form automobile liability insurance policy . . . was approved by the Commissioner of Insurance . . . [and] is . . . controlled by the Division of Insurance . . . the rule of construction resolving ambiguities in a policy against the insurer is inapplicable.” Id. at 826, quoting from Aetna Cas. & Sur. Co. v. Sullivan, supra.

AAIC argued below, and the judge agreed, that the outcome of this case is controlled by our decision in Vergato, supra. In Vergato, we considered the meaning of the same policy provision at issue in this case. There, the plaintiff owned a 1988 Ford Mustang, and her automobile insurance policy included Part 5 coverage for optional bodily injury to others. The plaintiff included her husband and three children as additional operators who were covered under the policy. When the plaintiff’s vehicle was stolen, she rented a temporary replacement vehicle. In the rental agreement, she designated herself as the operator of the rental car but did not identify any other operators. However, the plaintiff permitted her children to drive the rental car and, as there relevant, she allowed her son to borrow the rental car and drive to a party. The son consumed alcohol at the party and later asked a friend, who had not been drinking, to drive the car. The friend lost control of the vehicle and struck a tree, injuring the plaintiff’s son. The evidence was undisputed that neither the plaintiff’s son nor his friend had the permission of the vehicle owner, the rental company, to drive the vehicle. We held that the term “owner” in Part 5 of the policy referred to the actual title holder, i.e., the rental company, and that Vergato’s insurance company was under no obligation to indemnify the operator of the rental car since both the plaintiff’s son and his friend had used the car without the permission of the rental company owner. Id. at 828-829.²

Mahoney contends that because the coverage sought here is for the benefit of Hill, who had consent from Hertz to operate the vehicle, and not for Teague, Vergato is inapplicable. We fail to discern a meaningful distinction between Vergato and this case. While it is undisputed that Hill, unlike Vergato’s son and his friend, was authorized by Hertz, the owner, to operate the rental car, as in Vergato, any “use” of the rental car by Hill was circumscribed by her contract with Hertz. Had Hill been the owner of the vehicle and negligently entrusted it to Teague, we would view the question of the availability of Part 5 optional bodily injury insurance to indemnify Hill for her negligent entrustment of the vehicle to Teague quite differently. See Barnstable County Mut. Fire Ins. Co. v. Lally, 374 Mass. 602, 606 (1978) (“ ‘negligent entrustment’ as a distinct and specific cause of action is not exclusive of, but, rather, is derived from the more general concepts of ownership, operation, and use of a motor vehicle”). See also 6B Appleman & Appleman, Insurance Law and Practice § 4316, at 343 (rev. ed. 1979) (“A person clearly could be ‘using’ an automobile without operating it personally”). Here, Hill did not contest liability for negligent entrustment in the settlement agreement arising out of Ma-honey’s underlying personal injury suit defended by Hertz, and a judgment against her issued on that theory. Hill thus became “legally responsible for the accident” by way of her negligent entrustment, which under different circumstances could trigger the duty of AAIC under Part 5 to indemnify Hill, a household member of the Joyces. However, on the facts of this case, where Hill’s “use” of the rental vehicle, i.e., its entrustment to Teague, was without the consent of Hertz, and Teague’s “use” of the vehicle was also without the consent of Hertz, optional bodily injury coverage under Part 5 does not provide indemnity for the benefit of Hill, because the Part 5 coverage “does not pay for the benefit of anyone using an auto with the consent of the owner.”

Although not involving a rental car, Hanover Ins. Co. v. Locke, 35 Mass. App. Ct. 679 (1993), leads to the same interpretation of the scope of Part 5 coverage. There, a household member who operated the family automobile without the consent of his father, the owner and named insured, was at fault for a fatal accident. We held that the optional coverage under Part 5 of the policy was properly denied because the driver used the car without the owner’s consent. Id. at 681. Similarly, in Picard v. Thomas, 60 Mass. App. Ct. 362, 372 (2004), we held that neither compulsory nor optional bodily injury coverage was available under a vehicle owner’s policy for an accident in which the owner’s daughter, a household member, had given permission to another to operate the vehicle, when the daughter did not have the permission of her father, the owner, to allow another person to operate it. Because the operator did not have the owner’s permission, express or implied, to operate the vehicle, the owner’s policy was not required to provide coverage.

The factual posture here, involving Part 5 optional coverage and the unauthorized operation of a rental car, is unlike that in cases relied upon by Mahoney and the dissent interpreting the statutory duty of insurers, generally, to provide compulsory bodily injury coverage to persons “responsible for the operation of the insured’s motor vehicle with his express or implied consent.” G. L. c. 90, § 34A.³ For example, Hurley v. Flanagan, 313 Mass. 567, 572 (1943), in which the operator’s use of the insured’s vehicle was found to be with the insured’s implied consent, the Supreme Judicial Court explained the scope of this consent provision under the compulsory insurance provision of the statute as follows:

“The words ‘express or implied consent’ in the statute and the insurance policy conforming thereto primarily modify not the word ‘operation’ but the word ‘responsible.’ . . . They imply a possession of the motor vehicle with consent of the owner and responsibility to him. . . . Responsibility for operation of the motor vehicle accompanying possession conferred by the owner is the test, not whether the particular operation was with the express or implied consent of the owner. The statute requires only that the insured consent to responsibility on the part of the person, against whom judgment is obtained, for the operation of the automobile somewhere, and that the judgment be based upon an operation or use of the automobile ‘upon the ways of the commonwealth.’ ”

Id. at 571-572 (citations and quotations omitted). Cf. Guzenfield v. Liberty Mut. Ins. Co., 286 Mass. 133, 136 (1934) (“The statutory language is appropriate and sufficiently inclusive to mean that if [an insured’s] motor vehicle is present in use or operation on the ways of the Commonwealth with the owner’s consent by someone responsible to the owner, then, under the compulsory motor vehicle insurance law, the owner’s consent to the immediate conduct of the user at the moment of an accident is immaterial”).⁴ See Liberty Mut. Ins. Co. v. Tabor, 407 Mass. 354, 360 (1990) (phrase “while using with permission” refers to question whether insured has been given “authority to operate” or “the right to possession” of automobile for specific purpose).

However, that consent becomes material when considered under the optional coverage of Part 5. “Section B [optional coverage] does not provide, as does Section A, that the word ‘Assured’ shall include any person ‘responsible for’ the ‘operation’ of the automobile with the ‘express or implied consent’ of the owner. It provides, instead, that the word ‘Assured’ shall include any person ‘while legally using’ the automobile, provided ‘such use’ is with the permission of the owner.” Blair v. Travelers Ins. Co., 291 Mass. 432, 436 (1935). While not involving the specific issue presented here, the court in Flattery v. Gregory, 397 Mass. 143, 150 (1986), observed, nonetheless, that “[w]e have said many times that the primary purpose of compulsory automobile liability insurance is protection of travelers on the highway. . . . That recognition has led us to treat similar policy provisions differently depending on whether they pertain to compulsory or to optional insurance.” We see reason, therefore, for this difference in treatment of the term “consent” — there are public policy reasons to explain why compulsory insurance is required to cover the use of a vehicle on the roads by one permitted simply to possess it. On the other hand, we discern no such public policy concerns that compel such a broad view of “consent” when coverage is sought to indemnify an insured or household member for the “use” of a vehicle that is not owned by the insured when that “use” is without the consent of the owner. Therefore, we view the cases of Boudreau v. Maryland Cas. Co., 287 Mass. 423, 425 (1934); Dickinson v. Great Am. Indemn. Co., 296 Mass. 368, 372 (1937); and Buckley v. Aetna Life Ins. Co., 297 Mass. 395, 397 (1937), as inapposite.

Here, unlike the facts in Hurley v. Flanagan, supra, no view of the circumstances can demonstrate that Hertz consented to the operation of the rental car by anyone other than Hill, and Hill’s use, i.e., her entrustment to Teague, was clearly not permitted by Hertz. When Hill entrusted the rental car to Teague, negligently or otherwise, whose use of the car was without the consent of the owner, Hill’s use was thus also without the “consent of the owner,” and therefore Mahoney had no reasonable prospect of proving that the policy covered a claim against Hill for negligent entrustment. As a matter of law, AAIC was entitled to judgment and its motion for summary judgment was properly allowed.

Judgment affirmed.

1 There is no dispute that the rental car does not fall within the policy definition of “Your Auto,” as there is no suggestion that the rental car was a temporary substitute for either of the vehicles listed on the Joyces’ coverage selections page that was out of normal use, or an additional automobile, such as a recreational vehicle.

2 The fact that the rental vehicle in Vergato qualified as a substitute vehicle (under Part 5 coverage, as defined by Part 2[5][B]), and coverage was sought as “your auto,” and not for the liability of a household member, such as Hill in the case at bar, does not require a different result, since neither Vergato’s son nor his friend who operated the vehicle had the express or implied consent of the vehicle owner.

3 General Laws c. 90, § 34A, defines “motor vehicle liability policy” as “a policy of liability insurance which provides indemnity for or protection to the insured and any person responsible for the operation of the insured’s motor vehicle with his express or implied consent against loss by reason of the liability to pay damages to others for bodily injuries . . . .”

4 In Hanover Ins. Co. v. Fasching, 52 Mass. App. Ct. 519, 521 n.3 (2001), a case involving compulsory insurance, this court noted that the statutory “language has been construed to mean that the liability of the insurer runs with the car to which the policy refers, so long as the owner has sanctioned the presence of the car on the public ways,” quoting from Liberty Mut. Ins. Co. v. Merchants Car Leasing Corp., 27 Mass. App. Ct. 1146, 1147 (1989).