WEBVTT
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SJC 13563.
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Jeffrey Frank Coberly et al
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versus the Commerce Insurance Company.
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Okay, Attorney McCullough, whenever you're ready.
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Good morning, thank you Madam Chief Justice
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and Associate Justices.
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May it please the members of the court,
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I'm Kevin McCullough and I represent
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the appellants in this matter.
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This case is before this court on Direct Appellate review
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following the dismissal from the trial court
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and allowance of the appellee's motion to dismiss.
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The question in this case,
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and the issue in this case is whether part four
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of the standard 2016 Massachusetts Automobile Insurance
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policy provides coverage
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for inherent diminished value IDV damages
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for third party claimants.
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And the answer to that question is that it does.
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Part four of the 2016 policy as drafted
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and subsequently approved by the Commissioner of Insurance,
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does not exclude IDV damages.
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Moreover, if the Commissioner of Insurance attempted
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to exclude IDV coverage from part four of the policy-
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Is that really true though?
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Because this isn't the same as McGilloway
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because we have specific language in this
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standard form policy
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that specifically references tangible property.
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How could that necessarily not exclude IDV damages?
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There's two parts to the answer, your Honor.
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The first part is in considering the McGilloway
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and the track that McGilloway took to get to this court,
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it's important to consider the timeline of the 2016 policy.
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The insurance companies were fighting
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and disputing IDV as covered under part four
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under the 2008 policy.
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The 2016 policy was enacted while
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that same fight was still going on.
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And the changes that were made and authored, I'm sorry,
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and authorized by the commissioner of insurance
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were taking place in an effort to strengthen that fight
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by the insurance companies.
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But the 2016 policy was enacted four years
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prior to me standing before this court
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under the 2008 McGilloway case.
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And I'd submit to the court that the language in part four
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of the 2016 policy and specifically the otherwise required
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by law language is intentional.
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And that is, that answer had not
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yet been addressed when they drafted the 2016 policy.
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This is not a situation where the McGilloway case came down
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and then the changes were made
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to the 2016 policy subsequent to McGilloway.
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The track and the timeline
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of this issue is important here, your Honor.
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And that is when the 2016 policy-
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But if I could interrupt you, counsel,
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why isn't the language the importance?
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I understand the history maybe
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of some interest if the language were less than clear,
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but the language says that it only covers tangible property
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and then to be even clear,
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it says the amount we will pay does not include any
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decreased value or intangible loss.
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The language actually has three sentences
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in that paragraph, judge-
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Right but we're focusing on the ones that I just read,
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why isn't that the end of the story?
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Because of the words unless otherwise required by law.
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So what law requires inherent diminution
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and value to be covered.
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This policy could have been written the same way
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that it was with the exception
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otherwise required by law saying we're waiting to find out
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what the McGilloway court does.
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That's why that language is-
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McGilloway was dealing with
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a different version of the policy.
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McGilloway was dealing with first
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and foremost whether or not diminished value
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was a recognized and recoverable damage
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here in Massachusetts up until that time,
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that had never been considered and decided.
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Not as a general matter within the context
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of the standard policy at the time.
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So it it isn't apples to apples
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because it's very different language.
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I'd like to answer the question
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and that is the reason why there is coverage on the 2016
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policy is because the Commission of Insurance
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has exceeded its authority.
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There's no dispute from the appellants that the Commission
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of Insurance has authority to oversee the drafting
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and changing of a policy and allow exclusions.
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But that authority is not full autonomy.
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The Commissioner of Insurance must comply
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and make changes that are consistent with
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and don't conflict with current statutory law
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and common law.
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And in this situation, the Commissioner of Insurance
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did exceed that authority.
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And the reason for that is MGL chapter 90, section 34.0.
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Every policy of property damage liability insurance shall
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provide, the insurer will pay on behalf of the insured.
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All sums the insured shall become legally obligated to pay
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as damages because of injury to destruction of property.
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That can't mean you pay whatever,
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I mean you have all kind,
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I mean you have policy caps, right?
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We do judge. Yes.
We're only gonna
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pay damages up to this amount right?
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Absolutely.
That's not a violation
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of the stack.
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I mean, is that, can the insurance
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commissioner not allow that?
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That actually is within the following couple
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of sentences of what I was reading is that
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the insurance, there are caps and policy limits
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on the various sections of the policy.
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That is not an issue.
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But the insurance commissioner doesn't require every
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insurance company to pay all damages
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for everything, right?
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No, but the insurance commissioner does require
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for this case that the insurance company under part four
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pay for all damages that may be recoverable in tort
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up to the applicable policy limit.
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Does it say that?
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It says legally obligated to pay.
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I thought that traditionally that was construed
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to mean under the policy.
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It does not. Judge, no.
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I mean, and why not?
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What does an insurer have
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to pay other than what's specified under a policy?
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What an insurer has to pay is dependent upon which section
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of the policy we're evaluating here.
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And that's why there is-
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The parameters of the obligation
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are defined by the policy, correct?
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Correct.
Okay so why isn't that what
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legally obligated to pay means?
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Because the policy and the provisions flow
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from the statutory law,
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and 90-34.0 starts out with third party damages,
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which would be part four, and then it goes into collision
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and limited collision,
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which would be part seven.
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But it doesn't say anything about the types of damages
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you are seeking here, these IDF damages.
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Well, respectfully judge, it does, when it says
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legally obligated to pay as damages
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because of injury to a destruction, all sums
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the insured shall become legally obligated to,
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and if you look to the 2016 policy, the policy acknowledges
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that with the second sentence,
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the amount we will pay is the amount the owner
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of the property is legally entitled to collect
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through a court judgment or settlement
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for the damaged property.
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That by definition says we're gonna cover our policy holder
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for tort damages that they may cause.
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Now this very court in McGilloway has held-
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But are you claiming that these damages are tort damages?
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Absolutely your Honor.
Tort damages
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to the property?
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Yes, your Honor and that was decided
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by this court in McGilloway; the McGilloway court found
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and held that inherent diminished value is a tort damage.
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We previously have held
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that the term property damage can include intangible damage
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such as the diminution in value of tangible property.
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That was this court in the McGilloway decision.
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I see a distinction between diminution in value
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and tort damages.
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But it may be a distinction without a difference.
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Diminution in value is a component of tort damages.
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When I say tort damages
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and when the policy says they're gonna cover their insured
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for any damages legally entitled to be collected
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through judgment or settlement,
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inherent diminished value is a damage
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that would be pursued in court in recoverable.
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Putting aside whether or not this court decides
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that the part four
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of the 2016 policy covers diminished value,
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a tort victim in Massachusetts following the McGilloway
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decision has every right to file a lawsuit
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against an at fault driver
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and seek compensation
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for the diminished value lost in the car.
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That not what's happened here though.
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Your clients did not sue the insureds.
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Correct.
Right?
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Instead you're proceeding directly against
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the insurance company on a breach of contract theory.
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Correct.
Not a tort theory, a breach
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of contract theory claim.
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And the question I think is as a result,
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what are the contract damages
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to which you're entitled on that breach of contract claim?
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And that would be informed
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or not governed by the terms of the insurance policy? No?
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Absolutely. Absolutely.
Okay.
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We are suing the insurance company
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as a third party beneficiary for the insurance contract,
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the insurance policy.
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And we are subject to-
What is your legal authority
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for that proposition?
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That you are a third party beneficiary
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of the insurance policy.
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Why don't you have to go get a judgment against the insured
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first and then reach and apply the insurance, if any?
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Because in this situation, your Honor,
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the appellees have accepted liability for the collision
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and have already processed the claims.
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The appellees have made payments
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to the victims in this case, Coberly and Seaver,
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for the property damage to their vehicle.
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They've started their obligations under that contract
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owed to the third party beneficiaries
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Seaver and Coberly.
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There's partial performance on that contract in a situation
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where a third party beneficiary to a contract interacts
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with the contracting party and they start that contract
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and they evaluate the claim, they accept liability
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and they make payment.
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The only fight now is what are the damages
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that are recoverable?
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The question of whether or not there's a contract.
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Well, there would also be the amount right?
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Exactly.
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Right so why doesn't that though support the notion
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that you would need to go get all
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of those disputes resolved first in a contract
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against the insured, have it reduced to a judgment
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and then go take that judgment and seek to reach
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and apply the insurance proceeds to it.
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Because right now no one knows what they might be.
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The difference here is that the partial performance,
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and I would agree with the court under the hypothetical
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that if Mr. Coberly was in a car accident
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with a Commerce insured
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and Commerce denied liability
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or Commerce did not pay for Mr. Coberly's
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property damage, we would have
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to pursue the insurance company directly.
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But in this situation,
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the appellee accepted liability for the collision.
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They acknowledged that there was coverage,
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they made payment to Mr. Coberly for some of his damages,
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and now he's seeking recovery of additional damages.
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The fight here is not over who's at fault or liability.
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It's not a fight over the coverage for property damage.
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It's the components of property damage.
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Sure but we have said that a third party
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does not become a third party beneficiary
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to a contract until they hold the judgment.
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That's the Flattery case your honor
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and is not that case.
So how do we,
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how do we get around that here?
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The fact that there's partial performance
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on the contract, the fact that Commerce has already
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made payment.
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See, to me it seems that what you're really looking
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for is a declaratory judgment, not a breach
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of contract claim, a declaratory judgment as to the meaning
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or the scope of the insurance policy.
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00:12:58.470 --> 00:13:02.743
Whether the insurance policy covers these IDF damages.
271
00:13:04.170 --> 00:13:05.370
You're exactly right, your Honor.
272
00:13:05.370 --> 00:13:07.320
And that was exactly the issue
273
00:13:07.320 --> 00:13:12.210
before this court in May of 2021, under the same theory
274
00:13:12.210 --> 00:13:14.670
of a breach of contract.
275
00:13:14.670 --> 00:13:17.550
And the agreement was under the policy language
276
00:13:17.550 --> 00:13:20.280
of part four of the 2008 policy.
277
00:13:20.280 --> 00:13:22.140
This is that same exact case,
278
00:13:22.140 --> 00:13:26.130
except it's the language in the 2016 policy, which had been
279
00:13:26.130 --> 00:13:30.000
enacted four years prior to the McGilloway decision.
280
00:13:30.000 --> 00:13:32.700
So the mechanism that brings us here today
281
00:13:32.700 --> 00:13:33.810
is the same mechanism
282
00:13:33.810 --> 00:13:36.330
that brought us here in the McGilloway case.
283
00:13:36.330 --> 00:13:38.220
And it's the same claim
284
00:13:38.220 --> 00:13:40.560
and the same type of claim where there was acceptance
285
00:13:40.560 --> 00:13:43.740
of liability, there was a processing of a claim
286
00:13:43.740 --> 00:13:45.210
and partial payment of the claim.
287
00:13:45.210 --> 00:13:48.990
So let's just go to the end then, if you agree
288
00:13:48.990 --> 00:13:52.920
with me that what you're really seeking is in this suit
289
00:13:52.920 --> 00:13:57.920
is a form of declaration as opposed to contract damages,
290
00:13:59.730 --> 00:14:03.633
but a form of declaration as to meaning of the contract,
291
00:14:08.490 --> 00:14:13.490
then are you actually pursuing in this case your breach of,
292
00:14:13.680 --> 00:14:15.810
in this appeal, the breach of contract claim?
293
00:14:15.810 --> 00:14:19.320
Or are you pursuing the declaratory judgment claim?
294
00:14:19.320 --> 00:14:21.120
We are pursuing the breach of contract claim.
295
00:14:21.120 --> 00:14:22.950
We're not pursuing the declaratory judgment
296
00:14:22.950 --> 00:14:24.750
claim with this case.
297
00:14:24.750 --> 00:14:27.720
We're here because the language in part-
298
00:14:27.720 --> 00:14:30.390
So what would be the relief?
299
00:14:30.390 --> 00:14:34.170
The relief would be a ruling that the Commissioner
300
00:14:34.170 --> 00:14:37.200
of Insurance has exceeded his authority when he enacted
301
00:14:37.200 --> 00:14:40.800
and approved exclusions in the policy that were inconsistent
302
00:14:40.800 --> 00:14:44.970
and directly in conflict with MGL chapter 90-34.0
303
00:14:44.970 --> 00:14:47.340
and the McGilloway decision.
304
00:14:47.340 --> 00:14:52.200
Okay there would be no damages awarded in this case.
305
00:14:52.200 --> 00:14:54.690
If I win at this level, the case will be remanded
306
00:14:54.690 --> 00:14:57.565
and we will seek to prove those damages at the Trial Court.
307
00:14:57.565 --> 00:15:02.565
Okay. To my mind, you're only seeking a declaration.
308
00:15:02.610 --> 00:15:05.550
We're seeking the inherent diminished value damage,
309
00:15:05.550 --> 00:15:08.940
money damages that are being denied based upon a portion
310
00:15:08.940 --> 00:15:13.150
of the policy that the appellants believe
311
00:15:14.760 --> 00:15:17.070
has gone too far with the commissioner of insurance.
312
00:15:17.070 --> 00:15:21.790
The terms and wording that were added to the 2016 policy
313
00:15:23.100 --> 00:15:24.840
when they used terms like, we won't pay
314
00:15:24.840 --> 00:15:29.840
for intangible property, we won't pay for loss in value.
315
00:15:30.000 --> 00:15:33.450
Those intangible prop, intangible damage
316
00:15:33.450 --> 00:15:36.570
and inherent diminished value damages
317
00:15:36.570 --> 00:15:38.400
are recognized tort damages.
318
00:15:38.400 --> 00:15:39.870
This court held that.
319
00:15:39.870 --> 00:15:43.980
So the fact that chapter 90-34.0 requires the policy
320
00:15:43.980 --> 00:15:46.710
to cover and indemnify the insured
321
00:15:46.710 --> 00:15:49.593
and pay a tort victim's tort damages,
322
00:15:50.670 --> 00:15:51.720
that's why we're here, judge.
323
00:15:51.720 --> 00:15:54.570
It says up to 5,000.
324
00:15:54.570 --> 00:15:55.710
That's the compulsory limit.
So it's not gonna
325
00:15:55.710 --> 00:15:57.180
be everything.
326
00:15:57.180 --> 00:15:58.260
And then you acknowledge
327
00:15:58.260 --> 00:16:01.620
that the commissioner can include exclusions.
328
00:16:01.620 --> 00:16:04.120
Why can't the commissioner exclude
329
00:16:05.580 --> 00:16:07.473
inherent diminished value?
330
00:16:09.090 --> 00:16:10.980
Because of chapter 90-34.0?
331
00:16:10.980 --> 00:16:13.530
It says that you can't and it's up to 5,000,
332
00:16:13.530 --> 00:16:15.810
but that 5,000 is the compulsory limit.
333
00:16:15.810 --> 00:16:16.983
Is there a case?
334
00:16:17.850 --> 00:16:21.690
Can you cite one case where an insurance commissioner
335
00:16:21.690 --> 00:16:24.270
has granted a similar kind of exclusion
336
00:16:24.270 --> 00:16:26.400
and that was found to be
337
00:16:26.400 --> 00:16:27.903
violation of their authority?
338
00:16:29.280 --> 00:16:31.710
'cause there are no cases in your brief as far
339
00:16:31.710 --> 00:16:33.360
as I can tell, making that point.
340
00:16:35.100 --> 00:16:37.146
There actually are judge.
341
00:16:37.146 --> 00:16:38.500
Which one?
This court...
342
00:16:41.160 --> 00:16:43.830
'cause your brother's gonna stand up
343
00:16:43.830 --> 00:16:48.270
and argue that it's standard for the insurance commissioner
344
00:16:48.270 --> 00:16:50.070
to allow exclusions.
345
00:16:50.070 --> 00:16:51.300
That's what you bought.
346
00:16:51.300 --> 00:16:53.940
And you can, I mean there's,
347
00:16:53.940 --> 00:16:56.670
so I would just like a case that goes the other way
348
00:16:56.670 --> 00:17:00.337
that I can look at, so that I can say,
349
00:17:00.337 --> 00:17:04.407
"Oh, that was an ultra vires exclusion."
350
00:17:05.760 --> 00:17:07.860
I'm sure there are some but you don't cite any,
351
00:17:07.860 --> 00:17:08.920
so we're gonna have to go back and do it ourselves.
352
00:17:08.920 --> 00:17:11.670
Yeah, judge and and I don't have a case cite
353
00:17:11.670 --> 00:17:14.080
for that in front of me, but the issue of
354
00:17:15.380 --> 00:17:18.450
the insurance commissioner can enact exclusions
355
00:17:18.450 --> 00:17:20.190
and policy limitations
356
00:17:20.190 --> 00:17:22.440
that's not the fight that the appellants have.
357
00:17:22.440 --> 00:17:26.190
It's when those exclusions conflict
358
00:17:26.190 --> 00:17:30.060
with the statutes and the common law here in Massachusetts.
359
00:17:30.060 --> 00:17:34.530
You're just overreading that sentence there that says,
360
00:17:34.530 --> 00:17:36.273
you know, consistent with law.
361
00:17:37.648 --> 00:17:40.920
But there are permissible exclusions allowed all kinds
362
00:17:40.920 --> 00:17:42.300
of permissible exclusions.
363
00:17:42.300 --> 00:17:44.220
So I just don't get what you're arguing.
364
00:17:44.220 --> 00:17:47.610
There are permissible exclusions like authorized use,
365
00:17:47.610 --> 00:17:49.440
who's gonna use the vehicle
366
00:17:49.440 --> 00:17:51.510
and when will we provide coverage?
367
00:17:51.510 --> 00:17:53.010
What will the vehicle be used for?
368
00:17:53.010 --> 00:17:55.590
Exclusions on business or livery.
369
00:17:55.590 --> 00:17:56.910
Those are exclusions.
370
00:17:56.910 --> 00:18:01.500
But when there are exclusions that limit
371
00:18:01.500 --> 00:18:06.060
or reduce the statutory damages,
372
00:18:06.060 --> 00:18:09.173
I think it's very important that when the-
373
00:18:09.173 --> 00:18:12.657
Counsel you keep going back to the statutory part
374
00:18:12.657 --> 00:18:14.730
and I still struggle with this
375
00:18:14.730 --> 00:18:19.730
because the term in the McGilloway part four
376
00:18:20.820 --> 00:18:25.590
was broader than in part four of the 2016.
377
00:18:25.590 --> 00:18:30.590
In McGilloway the term just said property damage,
378
00:18:32.880 --> 00:18:37.590
and so it would subsume the IDV values,
379
00:18:37.590 --> 00:18:40.950
which is why we came out the way we came out.
380
00:18:40.950 --> 00:18:42.630
But this is different
381
00:18:42.630 --> 00:18:46.320
because the language you point to is sandwiched
382
00:18:46.320 --> 00:18:48.630
in the paragraph that starts off
383
00:18:48.630 --> 00:18:52.260
by saying we only cover tangible property,
384
00:18:52.260 --> 00:18:53.910
and it ends the paragraph
385
00:18:53.910 --> 00:18:58.260
by saying we don't cover intangible stuff like this.
386
00:18:58.260 --> 00:19:00.660
So, how do we get around that?
387
00:19:00.660 --> 00:19:03.003
If we go back to Justice Wolohojian's point,
388
00:19:04.080 --> 00:19:06.930
this is tethered to the terms
389
00:19:06.930 --> 00:19:10.680
in the recovery under the contract.
390
00:19:10.680 --> 00:19:13.770
So we're talking about very different contract language.
391
00:19:13.770 --> 00:19:16.249
I appreciate the question and I think judge,
392
00:19:16.249 --> 00:19:21.249
the ultimate question and language to be evaluated here is
393
00:19:23.580 --> 00:19:26.730
that second paragraph in chapter 90-34.0.
394
00:19:26.730 --> 00:19:30.270
And if this court finds that
395
00:19:30.270 --> 00:19:33.820
intangible damage is not by definition
396
00:19:35.010 --> 00:19:38.130
a recoverable damage under the policy, we lose.
397
00:19:38.130 --> 00:19:41.490
If this court finds that a decrease in value
398
00:19:41.490 --> 00:19:45.870
to a vehicle following a collision is not the type
399
00:19:45.870 --> 00:19:50.640
of damage as defined within the second paragraph of 34.0,
400
00:19:50.640 --> 00:19:53.880
we lose, what I'm saying to this court is
401
00:19:53.880 --> 00:19:58.320
the wording of the second paragraph in 34.0.
402
00:19:58.320 --> 00:20:01.890
And when it says all sums in insured shall become legally
403
00:20:01.890 --> 00:20:03.690
obligated to pay.
404
00:20:03.690 --> 00:20:05.490
If I go to court today on behalf
405
00:20:05.490 --> 00:20:07.950
of a client seeking intangible damage
406
00:20:07.950 --> 00:20:11.133
or diminished value damages, I can recover that.
407
00:20:12.030 --> 00:20:14.250
There's nothing stopping me from recovering that.
408
00:20:14.250 --> 00:20:16.980
So if this court finds that-
From the insured?
409
00:20:16.980 --> 00:20:18.420
From the insured.
Sure.
410
00:20:18.420 --> 00:20:21.030
But that's a different question from whether you can recover
411
00:20:21.030 --> 00:20:22.620
it from the insurer.
412
00:20:22.620 --> 00:20:24.930
Understood, I was making the first point to get
413
00:20:24.930 --> 00:20:29.190
to my second point, which is there's no case law
414
00:20:29.190 --> 00:20:32.550
in Massachusetts that defines an intangible damage
415
00:20:32.550 --> 00:20:35.638
or diminution in value as not covered
416
00:20:35.638 --> 00:20:37.710
under the language of 34.0.
417
00:20:38.880 --> 00:20:42.033
And with that I'm gonna say thank you.
418
00:20:44.580 --> 00:20:45.753
Okay Attorney Apjohn?
419
00:20:51.317 --> 00:20:53.280
May it please the court, Nelson Apjohn
420
00:20:53.280 --> 00:20:57.150
for the appellate, Commerce Insurance Company.
421
00:20:57.150 --> 00:20:59.650
With me this morning is my partner Eric Magnusson.
422
00:21:01.080 --> 00:21:03.000
I'm actually going to reverse things
423
00:21:03.000 --> 00:21:04.290
as to what I was going to start.
424
00:21:04.290 --> 00:21:05.490
I'm gonna start with 34.0.
425
00:21:05.490 --> 00:21:08.760
Because there was a fair amount of time spent on that
426
00:21:08.760 --> 00:21:12.240
and what was left out of that argument,
427
00:21:12.240 --> 00:21:15.120
plaintiff focused a lot with respect
428
00:21:15.120 --> 00:21:18.257
to the second paragraph of 34.0
429
00:21:19.199 --> 00:21:24.053
and 34.0 is set forth on page 25 of our brief.
430
00:21:27.300 --> 00:21:28.470
I direct the court's attention
431
00:21:28.470 --> 00:21:31.049
to the first paragraph at 34.0
432
00:21:31.049 --> 00:21:32.040
and the final sentence, which is not
433
00:21:32.040 --> 00:21:33.780
mentioned on oral argument.
434
00:21:33.780 --> 00:21:34.980
It's not mentioned in the briefing,
435
00:21:34.980 --> 00:21:36.780
but it's mentioned in our briefing.
436
00:21:36.780 --> 00:21:38.400
And the final sentence defines
437
00:21:38.400 --> 00:21:41.370
what property damage liability insurance is
438
00:21:41.370 --> 00:21:42.930
under the statute.
439
00:21:42.930 --> 00:21:45.360
And it says that property damage liability insurance is
440
00:21:45.360 --> 00:21:47.370
insurance containing provisions as prescribed
441
00:21:47.370 --> 00:21:49.620
by this section 34.0.
442
00:21:49.620 --> 00:21:52.500
Among such other provisions, including conditions,
443
00:21:52.500 --> 00:21:56.940
exclusions and limitations as the commissioner may approve.
444
00:21:56.940 --> 00:22:00.720
So by definition, property damage liability insurance
445
00:22:00.720 --> 00:22:02.433
includes the conditions,
446
00:22:03.450 --> 00:22:06.663
limitations and exclusions approved by the commissioner.
447
00:22:07.800 --> 00:22:12.090
There were three trial courts that looked at this language.
448
00:22:12.090 --> 00:22:16.860
Plus the First Circuit, Judge Kazanjian Bello,
449
00:22:16.860 --> 00:22:19.170
Judge Casper and Judge Burroughs in the Federal Court
450
00:22:19.170 --> 00:22:22.680
all decided that the language under 34.0 permitted
451
00:22:22.680 --> 00:22:25.140
the exclusion here as did the First Circuit.
452
00:22:25.140 --> 00:22:28.080
And the plaintiffs don't deal with that at at all.
453
00:22:28.080 --> 00:22:29.940
That gives explicit permission
454
00:22:29.940 --> 00:22:32.520
to define property damage liability insurance
455
00:22:32.520 --> 00:22:35.070
to include exclusions.
456
00:22:35.070 --> 00:22:38.790
And I note that there are at least eight other exclusions
457
00:22:38.790 --> 00:22:43.710
in part four in its entirety that are part of part four.
458
00:22:43.710 --> 00:22:45.930
So it's nothing unusual to have an exclusion
459
00:22:45.930 --> 00:22:48.330
by the commissioner with respect to
460
00:22:48.330 --> 00:22:50.370
the coverage of part four.
461
00:22:50.370 --> 00:22:53.182
And that brings me back to the first argument, which is-
462
00:22:53.182 --> 00:22:54.510
Before you leave 34.0,
463
00:22:54.510 --> 00:22:57.180
I take it there are times,
464
00:22:57.180 --> 00:22:59.280
although not cited in your brother's brief,
465
00:22:59.280 --> 00:23:02.373
where the exclusions are impermissible right?
466
00:23:03.277 --> 00:23:06.210
There are cases where certain exclusions
467
00:23:06.210 --> 00:23:07.350
are not allowed right?
468
00:23:07.350 --> 00:23:09.570
I'm not aware of it applying to exclusion.
469
00:23:09.570 --> 00:23:11.370
I know the general agency principle
470
00:23:11.370 --> 00:23:13.830
that if it's unreasonable or arbitrary,
471
00:23:13.830 --> 00:23:15.090
it will not be upheld.
472
00:23:15.090 --> 00:23:18.330
But of course with respect to the interpretations
473
00:23:18.330 --> 00:23:20.100
of the statute deference,
474
00:23:20.100 --> 00:23:22.470
although not, it's not controlling, it's typically given
475
00:23:22.470 --> 00:23:23.610
to the Commissioner of Insurance
476
00:23:23.610 --> 00:23:25.170
with respect to the relevant statutes.
477
00:23:25.170 --> 00:23:28.770
But I'm not aware of a specific exclusion being found
478
00:23:28.770 --> 00:23:30.810
to be unreasonable or arbitrary.
479
00:23:30.810 --> 00:23:33.490
Have we found, have we had any cases where we've
480
00:23:34.620 --> 00:23:38.890
concluded that the commissioner acted ultra vires
481
00:23:40.290 --> 00:23:45.270
as with respect to the last sentence of the first paragraph
482
00:23:45.270 --> 00:23:47.280
of section 34.0?
483
00:23:47.280 --> 00:23:49.030
I'm not aware of any, your Honor.
484
00:23:51.180 --> 00:23:54.660
But with respect to part four, I think there was,
485
00:23:54.660 --> 00:23:57.090
during the course of the argument there was an intermingling
486
00:23:57.090 --> 00:23:58.710
of the word damage and damages.
487
00:23:58.710 --> 00:24:00.873
And I think that words are important.
488
00:24:02.130 --> 00:24:06.240
Part four, the policy is quoted on page 18
489
00:24:06.240 --> 00:24:08.400
of our brief on page 22,
490
00:24:08.400 --> 00:24:11.790
there's a chart comparing the difference in language
491
00:24:11.790 --> 00:24:15.120
between 2016 and 2008.
492
00:24:15.120 --> 00:24:19.140
And the initial sentence was changed to we will pay
493
00:24:19.140 --> 00:24:22.800
for damage or destruction to tangible property.
494
00:24:22.800 --> 00:24:24.210
The trial court below focused on
495
00:24:24.210 --> 00:24:27.060
that language distinguished the 2016 policy
496
00:24:27.060 --> 00:24:29.580
from the 2008 policy.
497
00:24:29.580 --> 00:24:32.280
And as Justice Georges suggested, if we go
498
00:24:32.280 --> 00:24:35.160
to Judge Casper's opinion in the Morella case,
499
00:24:35.160 --> 00:24:39.420
which is in our addendum, she points that as well.
500
00:24:39.420 --> 00:24:41.850
She says the 2016 coverage is limited to damage
501
00:24:41.850 --> 00:24:44.460
or destruction of tangible property.
502
00:24:44.460 --> 00:24:48.000
Whereas the 2008 policy broadly states
503
00:24:48.000 --> 00:24:50.340
that third party coverage includes paying damages
504
00:24:50.340 --> 00:24:51.690
to someone else whose auto
505
00:24:51.690 --> 00:24:54.273
or property is damaged in an accident.
506
00:24:55.470 --> 00:24:58.890
Again, this point was ignored by the plaintiff with respect
507
00:24:58.890 --> 00:25:02.430
to the briefing and I think an oral argument as well.
508
00:25:02.430 --> 00:25:07.110
So part four clearly excludes recovery
509
00:25:07.110 --> 00:25:10.683
with respect to inherent diminished value claims.
510
00:25:12.060 --> 00:25:14.220
And that is termed to be an intangible loss
511
00:25:14.220 --> 00:25:15.603
in the McGilloway case,
512
00:25:17.820 --> 00:25:20.220
and unless otherwise required by law
513
00:25:20.220 --> 00:25:21.687
not argued in oral argument,
514
00:25:21.687 --> 00:25:23.070
the plaintiff in its,
515
00:25:23.070 --> 00:25:27.180
or the appellant in his brief suggests
516
00:25:27.180 --> 00:25:28.590
that applies to common law.
517
00:25:28.590 --> 00:25:31.800
It doesn't apply to common law, it applies to statutes
518
00:25:31.800 --> 00:25:33.000
and regulations that govern
519
00:25:33.000 --> 00:25:36.000
what an insurance policy has to contain.
520
00:25:36.000 --> 00:25:38.460
And the reason for that is if you say it applies
521
00:25:38.460 --> 00:25:42.300
to common laws was suggested the exclusion is meaningless
522
00:25:42.300 --> 00:25:45.720
because if the intangible loss is not
523
00:25:45.720 --> 00:25:47.910
recoverable at common law, there's no reason
524
00:25:47.910 --> 00:25:51.060
for an exclusion, the exclusion has to kick in
525
00:25:51.060 --> 00:25:53.010
where it's recoverable at common law
526
00:25:53.010 --> 00:25:55.470
but excluded under the policy.
527
00:25:55.470 --> 00:25:58.470
Of course there's a familiar contract interpretation rule
528
00:25:58.470 --> 00:25:59.580
that every word and phrase
529
00:25:59.580 --> 00:26:01.980
of a contract should be given meaning
530
00:26:01.980 --> 00:26:04.920
and none should be treated as surplusage
531
00:26:04.920 --> 00:26:08.130
if any other construction is rationally possible.
532
00:26:08.130 --> 00:26:10.020
The argument of Coberly and Seaver ignores
533
00:26:10.020 --> 00:26:11.523
that principle altogether.
534
00:26:12.990 --> 00:26:15.140
We talked about 34.0,
535
00:26:17.940 --> 00:26:20.250
and there was a statement during oral argument
536
00:26:20.250 --> 00:26:24.630
that Commerce admitted to liability that is incorrect.
537
00:26:24.630 --> 00:26:28.500
Commerce specifically denied liability in its 93 A response
538
00:26:28.500 --> 00:26:31.320
to the plaintiff or to the appellant.
539
00:26:31.320 --> 00:26:32.880
And that response letter was referred
540
00:26:32.880 --> 00:26:36.600
to in the second amended complaint in paragraph 104.
541
00:26:36.600 --> 00:26:38.760
And where the general conclusions
542
00:26:38.760 --> 00:26:42.030
of a complaint are contradicted or inconsistent
543
00:26:42.030 --> 00:26:45.030
with the document incorporated by reference in a complaint.
544
00:26:45.030 --> 00:26:47.220
It's the specific language of the document
545
00:26:47.220 --> 00:26:49.710
that controls not the general conclusions.
546
00:26:49.710 --> 00:26:53.790
And that's a Ninth Circuit case, Finjan Holdings.
547
00:26:53.790 --> 00:26:55.980
But of course the construction given
548
00:26:55.980 --> 00:26:58.710
to the Massachusetts rules will be the same
549
00:26:58.710 --> 00:27:01.740
as the federal rules absent a significant difference in
550
00:27:01.740 --> 00:27:05.403
content or significant reasons to the contrary.
551
00:27:06.870 --> 00:27:09.330
There's also an independent ground
552
00:27:09.330 --> 00:27:13.920
to uphold the dismissal of the complaint in this case.
553
00:27:13.920 --> 00:27:15.390
And the argument was raised below
554
00:27:15.390 --> 00:27:16.680
but not reached by the trial court
555
00:27:16.680 --> 00:27:18.600
given the contract interpretation.
556
00:27:18.600 --> 00:27:21.994
And that was, the point is that
557
00:27:21.994 --> 00:27:25.530
there is no judgment here against the insured
558
00:27:25.530 --> 00:27:27.450
and the motion to dismiss course can be upheld
559
00:27:27.450 --> 00:27:29.790
by this court on any ground, even if not considered
560
00:27:29.790 --> 00:27:31.470
by the trial court.
561
00:27:31.470 --> 00:27:33.690
Other than in Chapter 93 A,
562
00:27:33.690 --> 00:27:35.190
there is no direct right of action
563
00:27:35.190 --> 00:27:36.873
against the third party claimant.
564
00:27:38.400 --> 00:27:39.990
There is no direct right of action
565
00:27:39.990 --> 00:27:42.960
by a third party claimant against an insurance company
566
00:27:42.960 --> 00:27:45.840
absent a valid judgment against the insured.
567
00:27:45.840 --> 00:27:47.580
I'm sorry counsel, just remind me.
568
00:27:47.580 --> 00:27:50.193
Did you raise that issue in McGilloway?
569
00:27:51.450 --> 00:27:52.983
No, your Honor.
Okay.
570
00:27:54.090 --> 00:27:56.130
How how do you want us to deal with this now?
571
00:27:56.130 --> 00:27:58.890
So we've taken the case,
572
00:27:58.890 --> 00:28:03.460
there's an important issue out there, which is the legality
573
00:28:05.070 --> 00:28:08.310
of the Insurance commissioner's standard language.
574
00:28:08.310 --> 00:28:12.360
But we have no judgment. What do you want us to do?
575
00:28:12.360 --> 00:28:15.109
What I would like to do is win on appeal.
576
00:28:15.109 --> 00:28:17.678
(group laughing)
577
00:28:17.678 --> 00:28:18.511
On the merit.
Very bold.
578
00:28:18.511 --> 00:28:19.527
Put it straight.
579
00:28:19.527 --> 00:28:21.660
(Judge laughing)
580
00:28:21.660 --> 00:28:23.670
Okay.
That's very strange.
581
00:28:23.670 --> 00:28:25.110
Yes, I know.
Most people come here
582
00:28:25.110 --> 00:28:26.370
wanting to lose on appeal.
583
00:28:26.370 --> 00:28:28.560
Either ground I would be happy with,
584
00:28:28.560 --> 00:28:30.000
but there's no independent right
585
00:28:30.000 --> 00:28:31.612
of an action against the-
586
00:28:31.612 --> 00:28:33.600
You don't want, you don't care if this is
587
00:28:33.600 --> 00:28:34.983
clarified or not.
588
00:28:36.060 --> 00:28:39.060
As I said, either ground was supported dismissal.
589
00:28:39.060 --> 00:28:42.180
Would you need a prior judgment if,
590
00:28:42.180 --> 00:28:44.100
because there are a couple of different claims.
591
00:28:44.100 --> 00:28:46.470
There's the breach of contract claim.
592
00:28:46.470 --> 00:28:50.280
There's a chapter 93, chapter 176 D claim,
593
00:28:50.280 --> 00:28:51.870
although they're not raising any argument
594
00:28:51.870 --> 00:28:53.310
on appeal about those.
595
00:28:53.310 --> 00:28:54.420
That's correct.
And then there's
596
00:28:54.420 --> 00:28:56.313
the declaratory judgment claim.
597
00:29:00.373 --> 00:29:04.950
Do you have a view on whether a prior judgment is necessary
598
00:29:04.950 --> 00:29:09.603
to pursue the declaratory judgment claim?
599
00:29:10.650 --> 00:29:13.740
Yes because if a complaint fails to state
600
00:29:13.740 --> 00:29:15.570
of claim upon which relief can be granted,
601
00:29:15.570 --> 00:29:16.710
the trial court is in power
602
00:29:16.710 --> 00:29:19.620
to dismiss the declaratory judgment count as well.
603
00:29:19.620 --> 00:29:21.540
And of course there was no appeal from
604
00:29:21.540 --> 00:29:22.950
that dismissal in the lower court.
605
00:29:22.950 --> 00:29:25.410
So it's not even, it's been waived as I think under
606
00:29:25.410 --> 00:29:27.630
the rules of this court,
607
00:29:27.630 --> 00:29:30.750
if you don't raise it in your, and argue it in your brief.
608
00:29:30.750 --> 00:29:33.120
So that's been waived already with respect
609
00:29:33.120 --> 00:29:34.710
to the declaratory judgment.
610
00:29:34.710 --> 00:29:37.140
As the 93A, we are not contending
611
00:29:37.140 --> 00:29:39.360
that there's no direct right of action
612
00:29:39.360 --> 00:29:42.060
against the insurance company under 93 A
613
00:29:42.060 --> 00:29:43.380
there is by statutory.
614
00:29:43.380 --> 00:29:45.690
My argument only goes to contract.
615
00:29:45.690 --> 00:29:48.120
Right so then if it were 93 A,
616
00:29:48.120 --> 00:29:50.400
we could still, I don't know how this would work,
617
00:29:50.400 --> 00:29:53.490
I'm just spinning things out here,
618
00:29:53.490 --> 00:29:55.260
which maybe I shouldn't do right from the bench.
619
00:29:55.260 --> 00:30:00.260
But the issue under 93 A might be, might still require
620
00:30:05.130 --> 00:30:09.330
an interpretation of the policy language.
621
00:30:09.330 --> 00:30:11.670
It would because there would be no duty to settle a case
622
00:30:11.670 --> 00:30:12.750
where there was no underlying line.
623
00:30:12.750 --> 00:30:15.240
Exactly. So it could just come in through there.
624
00:30:15.240 --> 00:30:18.630
Yes and I would say the dismissal of the 93 A
625
00:30:18.630 --> 00:30:21.240
counts also were not appealed
626
00:30:21.240 --> 00:30:23.070
from the judgment below.
627
00:30:23.070 --> 00:30:23.940
So we're really only dealing
628
00:30:23.940 --> 00:30:25.830
with the contract claim here.
629
00:30:25.830 --> 00:30:29.550
And that does require a direct right of act
630
00:30:29.550 --> 00:30:32.430
or a judgment against the insured.
631
00:30:32.430 --> 00:30:35.340
And the court held that in the Rogan case in 1940,
632
00:30:35.340 --> 00:30:37.983
that's been termed to be Black Letter Law
633
00:30:37.983 --> 00:30:39.570
in Massachusetts since 1940.
634
00:30:39.570 --> 00:30:42.480
The court interpreted the two statutes,
635
00:30:42.480 --> 00:30:47.480
chapter 175 sections 112 and 113 as a legislative mechanism
636
00:30:47.730 --> 00:30:50.820
for pursuing a insurance company directly.
637
00:30:50.820 --> 00:30:55.140
And both statutes require a judgment against the insured.
638
00:30:55.140 --> 00:30:58.710
As to this third party beneficiary, the Flattery case,
639
00:30:58.710 --> 00:31:02.640
which was mentioned by the appellant.
640
00:31:02.640 --> 00:31:04.170
That case specifically said,
641
00:31:04.170 --> 00:31:07.380
apply to a third party judgment holder
642
00:31:07.380 --> 00:31:09.720
having a third party beneficiary right
643
00:31:09.720 --> 00:31:11.400
with respect to the contract.
644
00:31:11.400 --> 00:31:14.190
But again, that was a judgment holder in that case.
645
00:31:14.190 --> 00:31:15.570
And that's not the situation here.
646
00:31:15.570 --> 00:31:17.940
You still need a judgment even under the third
647
00:31:17.940 --> 00:31:19.893
party beneficiary rule.
648
00:31:25.920 --> 00:31:30.300
So just to clarify, the only claim that was appealed
649
00:31:30.300 --> 00:31:32.010
was the breach of contract?
650
00:31:32.010 --> 00:31:33.803
That's correct, your Honor.
Thank you.
651
00:31:35.160 --> 00:31:38.400
And I would say there's no reason to change that.
652
00:31:38.400 --> 00:31:41.979
And this was of course also looked at by the First Circuit
653
00:31:41.979 --> 00:31:46.320
and the judge, we heard about partial performance,
654
00:31:46.320 --> 00:31:50.850
but as Judge Sailor said in the Martins versus Mutual case,
655
00:31:50.850 --> 00:31:53.490
he said there's a big difference
656
00:31:53.490 --> 00:31:56.610
between an insurance company routinely paying a third party
657
00:31:56.610 --> 00:32:00.630
claim based on an assessment of their insured's liability
658
00:32:00.630 --> 00:32:02.760
as opposed to considering liability
659
00:32:02.760 --> 00:32:05.217
or conclusively establishing the insured's liability
660
00:32:05.217 --> 00:32:07.080
and the scope of that liability
661
00:32:07.080 --> 00:32:09.030
by simply making a settlement offer.
662
00:32:09.030 --> 00:32:11.970
Are you, I'm sorry to go back to this again.
663
00:32:11.970 --> 00:32:14.910
When you say the only thing they've appealed is the breach
664
00:32:14.910 --> 00:32:18.060
of contract claim, that's not based on the notice
665
00:32:18.060 --> 00:32:19.230
of appeal, is it?
666
00:32:19.230 --> 00:32:21.990
It's based on the fact of appellate waiver.
667
00:32:21.990 --> 00:32:22.830
The briefing, your Honor, yes.
668
00:32:22.830 --> 00:32:24.363
The Appellate Waiver. Okay.
669
00:32:26.520 --> 00:32:28.890
And going back again to that principle, with respect
670
00:32:28.890 --> 00:32:30.690
to paying a portion of a claim,
671
00:32:30.690 --> 00:32:32.910
that's not an admission of liability.
672
00:32:32.910 --> 00:32:35.040
The First Circuit recognizes there's obvious difference
673
00:32:35.040 --> 00:32:38.340
between being obligated to make a settlement payment
674
00:32:38.340 --> 00:32:39.870
or a settlement offer
675
00:32:39.870 --> 00:32:42.960
and somehow conceding that your insured is liable
676
00:32:42.960 --> 00:32:45.390
for everything with an unlimited scope.
677
00:32:45.390 --> 00:32:47.880
In fact, in Massachusetts it would put the insurance company
678
00:32:47.880 --> 00:32:52.033
really in an untenable position because between 93 A
679
00:32:52.033 --> 00:32:55.650
and 176 D, the insurance company has an obligation,
680
00:32:55.650 --> 00:32:59.610
reliability is reasonably clear to make a prompt, fair,
681
00:32:59.610 --> 00:33:02.070
and equitable settlement offer to the plaintiff.
682
00:33:02.070 --> 00:33:03.510
And by doing that, by complying
683
00:33:03.510 --> 00:33:05.670
with the statute doesn't mean you agree
684
00:33:05.670 --> 00:33:08.130
to every claim that arises out of an accident.
685
00:33:08.130 --> 00:33:09.480
Think of a slip and a fall case,
686
00:33:09.480 --> 00:33:11.400
you pay the medical expenses,
687
00:33:11.400 --> 00:33:12.870
there's no argument over that.
688
00:33:12.870 --> 00:33:14.340
And next thing you know, there's a claim
689
00:33:14.340 --> 00:33:15.960
for a permanent impairment.
690
00:33:15.960 --> 00:33:17.520
Those are two different things.
691
00:33:17.520 --> 00:33:18.900
You deal with one claim at a time.
692
00:33:18.900 --> 00:33:21.780
In fact, the 176 D really requires you to deal
693
00:33:21.780 --> 00:33:23.820
with one claim at a time in a sense.
694
00:33:23.820 --> 00:33:26.550
If something is reasonably clear liability-wise,
695
00:33:26.550 --> 00:33:28.350
it's something that needs to be paid
696
00:33:29.520 --> 00:33:32.373
or something least a settlement offer has to be made.
697
00:33:33.240 --> 00:33:35.220
Now, would you suggest that there's gonna be a change
698
00:33:35.220 --> 00:33:38.070
to Mass law And that is something given the statutes in
699
00:33:38.070 --> 00:33:42.120
Massachusetts under 175, 112 and Section 113,
700
00:33:42.120 --> 00:33:43.830
it really something that should be left
701
00:33:43.830 --> 00:33:44.823
to the legislature.
702
00:33:46.170 --> 00:33:49.890
As far as the 93 A claim and the declaratory judgment,
703
00:33:49.890 --> 00:33:52.020
I'll simply rest on our brief on that.
704
00:33:52.020 --> 00:33:53.580
They were not raised before this court,
705
00:33:53.580 --> 00:33:56.820
but there is also independent reasons why the 93 A
706
00:33:56.820 --> 00:33:59.280
claim would not survive 'cause I believe,
707
00:33:59.280 --> 00:34:01.050
as we suggested we're correct with respect
708
00:34:01.050 --> 00:34:02.880
to the contract interpretation.
709
00:34:02.880 --> 00:34:05.550
That certainly is a plausible interpretation.
710
00:34:05.550 --> 00:34:07.200
Three trial courts have upheld it.
711
00:34:07.200 --> 00:34:09.090
The First Circuit has upheld it.
712
00:34:09.090 --> 00:34:12.660
So what I'll do is conclude there and say,
713
00:34:12.660 --> 00:34:15.780
we ask that you enter an affirmance of the judgment below.
714
00:34:15.780 --> 00:34:17.280
And I thank you for your time.