WORKER’S COMPENSATION
OUT-OF-STATE EMPLOYEE, CHOICE OF LAW

Murphy’s Case

53 Massachusetts App. Ct. 424 (2001)

The employee, Michelle Murphy, lived in Massachusetts. She was hired at the Boston Headquarters of Patriots’ Trail Girl Scout Council to be a camp counselor in New Hampshire. She was injured at the camp. The Girl Scouts had two insurers and a question arose as to which one was responsible to pay Ms. Murphy’s claim. Liberty Mutual Insurance Company provided worker’s compensation benefits in New Hampshire and several other states, but its policy specifically excluded coverage for claims made under Massachusetts law. Massachusetts Bay Self-Insurance Group, Inc. provided the Girl Scout Council with coverage for Massachusetts claims.

When Ms. Murphy originally made her claim, Liberty Mutual paid her medical bills. Her claim for weekly benefits was denied based on a lack of medical proof of the employee’s disability.

Sometime later, the employee made a claim in Massachusetts. Liberty Mutual denied the claim on the basis that it did not provide coverage for claims made under Massachusetts law. The employee then filed a claim against Massachusetts Bay Self-Insurance Group.

At a conference, an administrative judge ordered Liberty Mutual to pay weekly benefits to the employee. Liberty Mutual did not make the payments, but filed a Motion for Reconsideration. The employee requested a status conference during which Massachusetts Bay accepted an order to pay her benefits.

At an evidentiary hearing, the administrative judge found Liberty Mutual had waived the defense that it was not an insurer under Massachusetts law by paying the employee’s medical bills and denying her claim for weekly benefits on a factual basis. The judge considered it relevant that the amount of the premium charged by Liberty Mutual was calculated based on the amount of the camp payroll, which included wages paid to Ms. Murphy.

The administrative judge ordered Liberty Mutual to pay: (1) weekly benefits to the employee; (2) a ten thousand dollar ($10,000.00) penalty to her for failing to comply with the conference order; (3) a penalty to the

Division of Industrial Accidents for raising a frivolous defense; and (4) attorney’s fees and costs to both the attorney for the employee and the attorney for Massachusetts Bay, which the judge doubled because of the

complexity of the issues involved. Liberty Mutual was also ordered reimburse Massachusetts Bay for the money that it had paid the employee when it accepted the order at the time of the status conference.

The matter was appealed to a reviewing board. The board reversed each and every order issued by the administrative judge as being contrary to law. Massachusetts Bay was ordered to pay the employee for all amounts due to her.

Liberty Mutual then filed a Motion to Amend the Reviewing Board’s Order. It sought clarification concerning the employee’s obligation to repay the ten thousand dollar ($10,000.00) penalty and duplicate payments made to her as a result of the hearing decision. The board denied the motion for clarification, stating that the decision was sufficiently clear. Liberty Mutual filed an appeal.

In the Appeals Court, Liberty Mutual argued that it should have received a clear directive from the Division that it was entitled to a return of the duplicate benefits paid to the employee, which the review board had determined should have been paid by Massachusetts Bay, and the ten thousand dollars ($10,000.00) penalty paid to her. Massachusetts Bay argued that Liberty Mutual’s premium was calculated based on wages paid by the camp, which included Ms. Murphy’s salary, and, therefore, Liberty Mutual should be responsible for her worker’s compensation benefits. The employee argued that the review board was incorrect when it reversed the administrative judge’s decision and, therefore, she should be entitled to keep the penalty and the duplicate payment of benefits.

The Appeals Court decided that there was no question that Massachusetts Law applied to Ms. Murphy’s claim, since her contract of employment was entered into in Massachusetts. The Court said further that it was bound to accept the decision of the reviewing board as long as it did not commit error under G.L. c. 30A, which governs administrative hearings. The Court found that the reviewing board correctly decided that Liberty Mutual was not in an insurer as defined in G.L. c. 152, sec. 1(7), since its insurance policy specifically excluded coverage for claims made in accordance with Massachusetts law.

The Court cited cases which had decided that even when the policy premium is based on the amount of an employer’s payroll, which includes the salary of the employee making the claim, this fact does not infer coverage for the employee where coverage would not otherwise be provided. The Court further said that since Liberty Mutual is

not an insurer under Massachusetts law, it could not have violated an order issued under G.L. c. 152. Therefore, it was not subject to a penalty for a violation of the administrative judge’s order.

As to recovery of the duplicate payments and the penalty paid to the employee, the Court said that recovery is allowed under the worker’s compensation law, but an order of re-payment is a matter of discretion, unless the employee is still receiving benefits. The Court said that neither it, nor the reviewing board had the authority to exercise this discretion. Liberty Mutual’s remedy is to file a Complaint pursuant to G.L. c. 152, sec. 10 or to bring an action against the employee in the Superior Court.

ALL-TERRAIN VEHICLE COVERAGE FOR INJURY

Farm Family Mutual Ins. Co. v. Whelpley

54 Mass. App. Ct. 743

A 12-year-old boy hit a tree and was injured while operating an ATV (all-terrain vehicle) owned by the defendant, Whelpley on a public road. The boy was a guest of the defendant and was using the ATV with his permission. Suit was filed against Whelpley alleging that he was negligent in that he allowed the boy to use the ATV without a helmet and without any warnings or instructions as to its operation.

Whelpley notified Farm Family Mutual of the suit and demanded that it assume the defense. Farm Family Mutual agreed to defend with a reservation of rights, based upon an exclusion in the policy, which stated that it would not provide coverage for bodily injury, medical expenses or property damage which resulted from the “ownership, maintenance, use, loaning, renting, entrustment, supervision, occupancy, loading or unloading of the following:…owned recreational vehicles, if the bodily injury occurs away from the premises.”

Farm Family Mutual conducted an investigation which revealed that the injury had occurred on a public road and advised Whelpley that it was disclaiming coverage and would not provide a defense to the suit. It then filed this action in the Superior Court to obtain an adjudication as to its duty to defend and indemnify Whelpley. A motion for summary judgment was filed and allowed, based on the judge’s finding that the exclusion in the policy was applicable to the facts of the claim against Whelpley.

On appeal the defendant, Whelpley, argued that his ATV was not “a recreational vehicle” as defined in the policy, as he had purchased it for farm use. Alternatively, he said that the policy definition was ambiguous and should be construed against the Farm Family Mutual, as it had drafted the policy. The Court looked at the definition of a recreational vehicle in the policy which was “ any motorized vehicle designed for recreation, principally used off roads, and whether licensed for road use or not.” The Court agreed with the motion judge that this was not ambiguous. The Court also looked at the definition of an ATV contained in the dictionary, which was “ a small, open motor vehicle having one seat and three or more wheels fitted with large tires. It is chiefly designed for recreational use over roadless, rugged terrain.” American Heritage Dictionary of the English Language 50 (3rd ed. 1992). In dismissing this argument, the Court cited cases from other jurisdictions

with definitions of an ATV which were similar to the definition contained in the policy, and also pointed out that Whelpley’s vehicle was being used for a recreational purpose at the time of the alleged accident.

Defendant argued that the accident did not occur away from his premises, which were defined in the policy as “Residences, buildings and their private approaches, cemetery plots and burial vaults” it also included “all farm locations you own, rent or operate.” Defendant said that since the ATV was garaged on his farm, the “farm” should be construed broadly, to provide coverage for a claim against him arising out of the use of the ATV. The Court disagreed, stating that the evidence presented was that the accident did not occur on a farm that Whelpley owned, rented or operated, but had occurred on a public road which was clearly outside the definition of “premises” contained in the policy.

The defendant then argued that his alleged failure to supervise, instruct and provide a helmet to the injured boy should be considered separately from the use and operation of the vehicle, so as to bring those acts or omissions outside the scope of exclusion. The Court ruled that those claims are “derivative of the defendant’s ownership” of the vehicle, so that the exclusion would apply to them as well.

Whelpley argued that Farm Family Mutual had a duty to defend him against the lawsuit brought by the injured boy and his mother, which was independent from its duty to indemnify him. The complaint made no mention of the fact that the accident had occurred off of Whelpley’s premises. The general rule, that an insurer is obligated to defend an action if the complaint, on its face, states a claim which falls within the terms

of its coverage should apply. Farm Family Mutual should be required to provide a defense.

The Court said that the insurer, had through its investigation, learned of the “existence of an undisputed extrinsic fact” which would bring the claim outside its coverage and this “extrinsic fact” fact would not be litigated in the lawsuit brought against Whelpley by the injured boy and his mother. The Court said that this situation is one of the few exceptions to the rule requiring defense of a claim, which on the face of the complaint would be within the terms of the insurer’s coverage. The Court determined that Farm Family Mutual had taken the correct approach by filing an action for declaratory judgment to determine its obligation to its insured and a judgment was entered that it had no duty to defend or indemnify him.

DUTY TO DEFEND INTERPRETATION OF LIQUOR LIABILITY POLIC

Peters et al V. United National Insurance Company

53 Mass. App. Ct. 775 (2002)

Plaintiffs were injured as a result of being attacked outside a sports bar. Plaintiffs filed suit against the corporate owner of the bar, C.C.P. Company, Inc., alleging negligent failure to provide adequate security and negligently selling alcoholic beverages to intoxicated patrons and minors which led to the attack on them. C.C.P. had purchased liquor liability insurance from United National Insurance Company. United National refused to defend or indemnify C.C.P. based on exclusion in its policy for claims based on assault and battery and the failure to provide adequate security. C.C.P. did not respond to the plaintiffs’ complaint and was defaulted. Damages were assessed and judgment entered in favor of the plaintiffs.

C.C.P. assigned its rights under the insurance policy to the plaintiffs. They filed a declaratory judgment in the Superior Court against United National alleging that it was liable to them in the amount of the judgment, based on the counts in their complaint which alleged negligent service of alcoholic beverages. United National filed a counter claim seeking a declaration that it was not liable to the plaintiffs for the judgment.

The judge in the Trial Court denied the plaintiffs’ motion for summary judgment and allowed the defendant’s. The judge found that United National had a right to assert its defense of lack of coverage at this stage, even though it had chosen not to defend its insured, C.C.P. Furthermore, the judge agreed with United National’s position that its policy excluded coverage for assault and battery and that the statute governing the sale of liquor liability insurance in Massachusetts, G.L. c 175 sec. 112A did not prevent an insurer from issuing a policy with this exclusion. The plaintiffs appealed the judgment for the defendant.

In the Appeals Court, plaintiffs argued that the burden was on United National to prove that the award to them was based on their claim of negligent failure to provide security, which they agreed was not covered by the policy, or that United National should at least be required to provide evidence which would apportion the damages between the cause of action for negligent service of alcoholic beverages which plaintiffs argued was covered by the policy, and the claim which was not covered. The Court found that United National had

correctly interpreted its policy and there was no coverage under either of the plaintiffs’ theories of recovery. There was, therefore, no need to distinguish or apportion between the plaintiffs’ two theories of recovery.

The policy issued to C.C.P. provided for United National to defend and indemnify the insured for claims for injuries which result from “selling, serving or giving any alcoholic beverage at or from the insured’s premises.” There were a number of exclusions. The one at issue here was for any claim which “arises out of an assault and/or battery, whether caused by, or at the instigation of , or at the direction of, or omission by the insured and/or his employees”. United National’s position was that even though the assault and battery on the plaintiffs arose out of the negligent service of alcoholic beverages, their claim falls within the exclusion. The plaintiffs argued that although this might be an appropriate position in a case dealing with a general liability policy, since this policy was specifically aimed at providing recovery for negligent service of alcoholic beverages, it is that negligent service that the Court should focus on, and not apply the assault and battery exclusion. The Court said that the language of the policy was clear and unambiguous. The words “omission by the insured and and/or his employees” clearly encompass the “failure to comply with an applicable standard of care”, in other words negligence. Therefore, although plaintiffs allege negligent service of alcoholic beverages as the precipitating factor to the assault and battery, their claim falls within the exclusion to coverage. Regardless of the plaintiffs theory of recovery, it was the assault and battery that caused the plaintiffs’ injuries.

Plaintiffs also argued that G.L. c.175, sec. 112A requires United National to provide coverage which protects its insured against any “loss, damage or expense incident to a claim arising out of death or injury to any person as a result of negligence in the distribution, sale or serving of alcohol.” Plaintiffs argued that United National’s exclusion was against public policy, citing Cardin v. Royal Ins. Co. of America 394 Mass 450, 453 (1985), as it contradicted the express language of the statute. The Court, they said, should rule that the exclusion is unenforceable.

The Court looked at the legislative intent behind the statute for assistance with its interpretation. The Court found that G.L. c.175, sec. 112A was part of the legislature’s response to the difficulty that businesses

had obtaining liquor liability insurance. A joint underwriting association, a non-profit organization, was created by the statute to sell insurance to those establishments which could not otherwise purchase coverage, as long as they met certain criteria established by the commissioner of insurance. When the Court examined the statute in

this context, the Court decided that it was the intent of legislature to define what could be offered by insurers, including the joint underwriting association, not to mandate what they must offer to insureds. Looking at the legislative scheme in its entirety, the Court found that the coverage described in the statute was not a standardized coverage, such as that which is mandated in the Massachusetts motor vehicle insurance policy, to which the Cardin case referred. The Court found that the language used by the legislature was not specific enough to create the type of mandatory coverage which would have precluded an insurer from establishing those exclusions which were necessary to effectively and economically provide liquor liability insurance. The Appeals Court amended the decision of the trial court, since the action was one for declaratory relief, to enter judgment declaring that the assault and battery exclusion contained in the policy was lawful and that plaintiffs were not entitled to recovery.

SUMMARY JUDGMENT, RELEASE OF ALL CLAIMS KNOWN AND UNKNOWN

Diane J. Leblanc et al v. Andrew J Friedman

53 Mass. App. Ct. 697 (2002)

In March 1992, the defendant performed a laparoscopy on Leblanc for the treatment of endometriosis on her right ovary. He failed to observe her left ovary, which an ultrasound, performed in June 1991, had identified as also having endometriosis. Additionally, defendant left an instrument inside the plaintiff. In June 1992 defendant performed a hysterectomy during which he failed to remove Leblanc’s left ovary.

In August 1992 a settlement was entered into between plaintiff and the defendant physician, the manufacturer of the instrument, a doctor who assisted with the laparoscopy and the hospital “for all claims for injuries arriving out of the care and treatment rendered to Leblanc on or about March 16, 1992, by the defendant.” The release was for “all claims for injuries and/or damages of whatever nature, known or unknown including future developments thereof in anyway growing out of or connected with or which may hereafter in any way grow out of or be connected with said care and treatment of its result.” Leblanc’s claim and that of her husband, for his loss of consortium, were settled for seven thousand dollars ($7,000.00), without their consulting an attorney.

In the spring of 1994 plaintiff began to experience severe pain. Testing revealed the presence of the left ovary, which was removed in September 1994. Plaintiffs filed a medical malpractice case against the surgeon in Superior Court in 1997, based on the treatment in March and June 1992. The defendant filed a motion for summary judgment based on the release which had been entered into by the parties. The motion was allowed and plaintiffs appealed the judgment that was entered for the defendant.

The plaintiff’s argued in the Appeals Court that the allowance of the motion for summary judgment was not appropriate in this case. A genuine issue of material fact existed as to whether the plaintiffs had intended to release the defendant for an “existing but unknown injury”. The Court said that even though the release implied that it was for “known and unknown injuries” it would not bar the plaintiffs’ action, if it were obtained through a mutual mistake.

The Court said it is necessary to look at the intent of the parties to determine if this was a case of mutual mistake. Facts to be considered are: 1) the language of the agreement; 2) the circumstances of its negotiation

and execution; 3) the amount of the consideration paid; 4) the seriousness of the unknown injury; and 5) the likelihood that the release would have been signed if the injury had been known.

In this light, the Court reviewed the case and found that evidence had been presented which tended to establish that plaintiffs had believed that the release was given to the defendant only for his failure to remove the surgical instrument on March 16, 1992. This included representations made to plaintiffs by the insurance adjuster and the language of the release, which referred to the March 16, 1992 incident, releasing not only the defendant doctor, but the manufacturer of the instrument, the hospital and the doctor who assisted the defendant at the time of the laparoscopy. In addition, the evidence that plaintiffs and the defendant were now aware of the existence of the left ovary which caused Leblanc serious future problems and the fact the plaintiffs had, without legal advice, accepted seven thousand dollars ($7,000.00) for the release, presented a genuine factual issue as to whether the parties had intended the release to cover defendant’s failure to detect and remove her left ovary in June 1992. The summary judgment for the defendant was reversed and the case was remanded to the Superior Court for trial.

EXAMINATION UNDER OATH

I. What are examinations under oath?

Generally speaking, examinations under oath are examinations of claimants (not necessarily insureds), which are conducted pre-suit. The Massachusetts Automobile Insurance Policy (6th ed.) states, We may also require you and any person seeking payment under any part of this policy to submit to an examination under oath at a place designated by us, within a reasonable time after we are notified of the claim." "[T]he purpose of the inclusion of an examination under oath provision in the policy [is] as an aid to the insurer’s investigation of a claim . . ." Morales v. Pilgrim Ins. Co., 58 Mass. App. Ct. 722, 725 (2003)"It is the law in most jurisdictions[, including Massachusetts,] that the submission to an examination, if the request is reasonable, is strictly construed as a condition precedent to the insurer’s liability Mello v. Hingham Mut. Fire Ins. Co., 421Mass. 333, 337 (1995).

It should be noted that a "recorded statement differs from a statement or examination under oath. A recorded statement is an oral statement given by an insured to the insurer’s representative who records it on a tape recorder. A statement or examination under oath is an examination conducted by the insurer of the insured who is placed under oath and whose answers are transcribed by a stenographer." Lorenzo-Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 365 n.5 (2003) (internalcitations omitted).

"In exercising its right, the insurer must notify the insured of its intent to examine him or her under oath. Such notice must contain, at a bare minimum, a designation of the person to be examined, the place at which the examination will occur, and a reasonable time for the examination. 13 Couch on Insurance 3rd, §196:8 (2003)"An insured may have an attorney present at the time of the under, but such attorney cannot take part.” Couch on Insurance 3rd, § 196:10 (2003)

"The insurer is entitled to conduct a searching examination, though all questions should be confined to matters relevant and material to the loss. For example, it has been held that an examination under provision was not limited to examination as to extent of claimed loss and was broad enough to encompass investigation into possible motives for suspected arson, such as the insured’s correct name, and the financial condition of the insured. Similarly, in investigating theft claims, an insurer is entitled to ask questions relating to possible motives for fraud, such as prior loss or claim history, and financial circumstances of the insureds. However, the insured need not answer immaterial questions. Of course, the materiality of a question is determined in the context of the insured’s claim and the insurer’s investigation. . . . Accordingly, questions have been held immaterial where the questions addressed losses not covered by the policy, the purchase price where amounts expended in repairs exceeded policy limits, amounts for which the insured settled with other insurers, and the insured’s police record and the whereabouts of unrelated personal papers. As a practical matter, courts will generally approve a more expansive examination in situations where the insurer can show the possibility of fraud.” 13 Couch on Insurance 3rd, § 196:11 (2003).

The locus of the examination under oath must be reasonable with respect to the burden placed on the person to be examined. In Labonte v. Commercial Union Ins. Co. , 2000 WL 550053, 2 (Mass. App. Div.2000), an automobile insurer violated the consumer protection statute, where among other things, it requested an insured to travel considerable distance in order to submit to examination under oath and then refused to pay insured’s claim based upon her failure to submit to examination under oath.

An examinee may not assert his right against self-incrimination, under the Fifth Amendment or art. XII. In MetLife Auto & Home v. Cunningham, Mass. App. Ct. 583, 588 (2003), an insured “manifestly and persistently failed” to provide requested information. The court held that “[h]is assertion of rights under the Fifth Amendment to the United States Constitution and under art. 12 of the Declaration of Rights of the Massachusetts Constitution afforded him no sanctuary from his obligation to cooperate, for it is not by the Commonwealth or by [the insurer] that [insured] is compelled to . . . furnish evidence against himself, but by his own contractual undertaking.” (emphasis added).

“Disputes have also arisen where the insured is an organization.. . . In the case of corporations, the insurer generally chooses among corporate officers. When dealing with closely held corporations, partnerships, associations, and similar business-related insureds, the insurer should attempt, prior to the service of the notice for the examination under oath, to identify the names of the key representatives to be examined and specify the same in the notice. Absent the ability to identify the appropriate individuals, the insurer should designate the target individuals by title or position.” 13 Couch on Insurance 3rd, § 196:7 (2003).

II. When are examinations under oath used?

Although examinations under oath are integral investigation tools, insurers must be “mindful that an insurer has a reciprocal duty to exercise good faith] and diligence in seeking cooperation from its insured . . .”Lorenzo-Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 366 (2003)."And as to this ‘reciprocal obligation’ of the insurer, the [Lorenzo-Martinez] court ruled that an insured is relieved of his obligation to submit to an examination under oath if the request for the examination is not made within a reasonable time after the insurer receives notice of the insured’s claim.” Knight v. CNA Ins. Co.WL 22962439, 3 (Mass. App. Div. 2003).

As the policy dictates, the insurer is obligated to request an examination under oath in a “reasonable time” after receiving notice of the claim. “Determining what is a reasonable time involves examining ‘the nature of the contract, the probable intention of the parties, and the attendant circumstances.’” Lorenzo-Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 364-365 (2003), quoting, Plymouth Port, Inc. v. Smith, 26 Mass. App. Ct. 572, 575 (1988). Compare Lorenzo-Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 365 (2003) (nine months after receiving notice of claim, claimants’ refusal to submit to examination under oath was unjustified where insurer made seven attempts to obtain statements) with Lorenzo-Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 366 (2003) (claimants’ refusal to submit to examination under oath thirteen months after notice of claim was justified because the insured failed to attempt to make any contact). See also Knight v. CNA Ins. Co., WL 22962439 5 (Mass. App. Div. 2003) (delay of 4½ months before requesting examination under oath was deemed unreasonable where the insurer failed to offer a reasonable justification for its delay).

III. How are examinations under oath used to combat fraud?

“The purpose of the examination under oath provision ‘ostensibly [is] to weed out fraud by providing [the] insurer with a mechanism for obtaining formal corroboration of a claim. This mechanism is particularly important in situations like [a] hit-and-run accident . . ., where information about the claim is primarily or exclusively within the possession of the insured.' "Morales v. Pilgrim Ins. Co., 58 Mass. App. Ct. 722, 724 (2003), quoting, Lorenzo-Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 364 (2003).In cases where there are multiple claimants, “the use of separate examinations under oath of claimants involved in the same accident allows insurers to ascertain the legitimacy of their claims by determining whether the claimants’ versions of the same accident are consistent.” Morales v. Pilgrim Ins. Co., 58 Mass. App. Ct. 722, 724-725 (2003).

IV. How do examinations under oath impact policy coverage?

"The submission to an examination under oath is a condition precedent to coverage under a Massachusetts motor vehicle insurance policy. A wilful, unexcused failure to submit to an examination under oath constitutes a material breach of the insurance contract without proof of actual prejudice to the insurer’s interests, discharging the insurer’s liability under the contract.” Morales v. Pilgrim Ins. Co., 58 Mass. App. Ct. 722, 724 (2003) (emphasis added). See Ellis v. Safety Ins. Co., 41 Mass. App. Ct. 630, 638-639 (1996).See also Lorenzo-Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 362, 363 (2003).

            Additionally, when dealing specifically with PIP cases, the statute states that “noncooperation of an injured party shall be a defense to an insurer in any suit for benefits authorized by this section . . .” G.L. c. 90, § 34M (emphasis added).  Noncooperation in the context of PIP cases usually arises from a claimant’s failure to attend scheduled independent medical examinations or examinations under oath.  Action Physical Therapy and Rehabilitation v. Amica Mut. Ins. Co., 2003 WL 22048201, 2 (Mass. App. Div. 2003).