On May 18, 2017, the Appeals Court decided that an insurer’s homeowner insurance application asking about a dog’s “bite history” and “any losses” were ambiguous. The decision, Edith Schultz v. Christopher Tilley et al. and Vermont Mutual, found, under the circumstances, that the insureds’ answers of “no biting incidents” and “No losses” were not material misrepresentations that voided the policy.
The Appeals Court decision arose out of Vermont Mutual rescinding a homeowner policy after receiving a personal injury claim brought against the insureds by a person injured trying to protect her dogs from an attack by the insureds’ American Bulldog. A Superior Court decision found that the failure of the insureds to disclose that their dog had twice bitten other dogs and that one bite had resulted in the payment of a $200 veterinary bill constituted material misrepresentations allowing Vermont Mutual to void the insureds’ homeowner policy.
Homeowner application questions and answers on biting and loss payments
On December 30, 2010, Christopher Tilley (“Mr. Tilley”) visited the Tarpey Insurance Group (“Tarpey Agency”) in Peabody to apply for homeowner’s insurance for himself and his wife Angela, on their home in Peabody. Elaine Faithful (“Ms. Faithful”), a customer service representative, employed by the Tarpey Agency, assisted Mr. Tilley in completing an application for coverage from Vermont Mutual.
The application asked: “Are there any animals or exotic pets kept on premises?”, Mr. Tilley responded “Yes” to the question. Mr. Tilley owned an American Bulldog named “Bocephus.”
As a follow-up to a “Yes” answer on dog ownership, the application requested that the applicant: “Note breed and bite history.” Under the “Remarks” section of the application, Ms. Faithful, based on Mr. Tilley’s answers, noted: “American bull dog–no biting incidents.”
Another section of the application entitled “Loss History” asked, “Any losses, whether or not paid by insurance, during the last 6 years, at this or at any other location?” Mr. Tilley responded: “No” and placed his initials next to his response.
Mr. Tilly later testified, he did not read the application word for word, but responded to the questions as asked by Ms. Faithful and he signed and dated the application under the statement:
“I have read the above application and any attachments. I declare that the information in them is true, complete and correct to the best of my knowledge and belief.”
Based on the application’s answers and a premium payment, Vermont Mutual issued a homeowner’s policy to Mr. and Mrs. Tilley.
Dog fight leads to lawsuit by person trying to break up the affray
On March 18, 2011, Edith Schultz (“Ms. Schultz”) was walking her two Yorkshire Terriers near the Tilleys’ home. Bocephus, the Tilleys’ American Bulldog, ran out and attacked Ms. Schultz’ dogs. Before Mrs. Tilley could restrain her dog, Bocephus had injured Ms. Shultz’ dogs. And Ms. Schultz trying to protect her dogs from Bocephus suffered a broken arm, a laceration to her face, and scrapes to her knees, elbows, and ankles.
On March 21, 2011, Mr. Tilley reported the incident to the Tarpey Agency and the agency notified Vermont Mutual of Ms. Schultz’ injury.
Investigation of claim leads Vermont Mutual to rescind policy.
Vermont Mutual concluded its investigation by notifying the Tilleys there was no coverage based upon Mr. Tilley having made material misrepresentations in his application for insurance relating to the bite history of Bocephus and the loss payment for the $200 veterinary bill.Upon receiving the Tarpey Agency’s notice of the Tilleys’ dog causing Ms. Schultz’ injuries, Vermont Mutual investigated the claim. The insurer quickly learned that Bocephus had bitten two other dogs prior to the Tilleys’ insurance application. In November 2009, Bocephus had bitten another dog being walked near the Tilleys’ house. That dog’s owner filed a police report and the Tilleys reimbursed the bitten dog’s owner for a $200 veterinarian bill. Then, in July 2010, Bocephus bit another dog being walked near the Tilleys’ house. After confirming that Bocephus was current on his shots, that dog’s owner took no further action.
Strict liability suit for insureds’ causing personal injury bite or no bite
On July 30, 2013, Ms. Schultz filed a Superior Court personal injury suit against the Tillys alleging they were strictly liable for the damages their dog, Bocephus, caused her to suffer.
By statue, the Tilleys as Bocephus’ owners had strict liability for any personal injury or property damage resulting from their dog’s actions. If there is no dispute about the dog’s ownership or about the injured person trespassing, tormenting, teasing or abusing the dog at the time of the injury, then the only open question is how much the dog’s owners must pay.
In the same lawsuit, Ms. Schultz sued Vermont Mutual for unfair claim settlement practices in disclaiming liability under the Tilleys’ homeowner policy. Vermont Mutual countersued seeking a declaration that the Tilleys’ homeowner policy was void because of material misrepresentations on Bocephus’ bite history and the $200 “loss payment” made by the Tilleys.
Superior Court finds “bite history” meant disclosure of dog “biting anything or anybody”
In July 2014, a Superior Court judge conducted a trial on Vermont Mutual’s policy rescission claim.
In his testimony, Mr. Tilley acknowledged that he was aware when he applied for insurance in December 2010 that Bocephus had bitten another dog in November 2009 and then had bitten a second dog in July 2010.
The judge hearing the case concluded the meaning of “bite history” as used in the application was unambiguous and that within the “general understanding of the word[s]” meant “biting anything or anybody.”
Because the language is ambiguous, we must afford the Tilleys, as the insureds, the benefit of the reasonable interpretation that is most favorable to them
Based on that meaning of “bite history,” The judge found that Mr. Tilley had failed “…to answer truthfully that his dog had a bite history” and his failure to disclose this information amounted to a material misrepresentation in his application of insurance allowing Vermont Mutual to void the policy.
Appeals Court parses application’s question for ambiguities in favor of insureds
The Tilley’s and Ms. Shultz appealed the Superior Court decision to the Appeals Court arguing the Superior Court judge erred in finding material misrepresentations as to the “bite history” and “Loss history” parts of the application.
The Appeals Court agreed with Vermont Mutual that if Mr. Tilley’s answers to the questions relating to “bite history” and “loss payments” were material misrepresentations, Vermont Mutual “may be able to deny coverage on that basis.”
In reviewing the Superior Court decision, however, the Appeals Court stated that it first had to “examine and interpret the relevant application language, particularly in relation to ambiguity.” Since “[i]n order to determine whether an answer is a misrepresentation, we [the Appeals Court] must identify the information sought by the question.”
The court noted that under Massachusetts law it construes any ambiguities in the language of the application against the insurer that drafted the application. “[If] a question on an application lends itself to more than one reasonable interpretation, an honest answer to one of those reasonable interpretations cannot be labeled a misrepresentation.”
More than one reasonable interpretation to questions on Vermont Mutual’s application
In reviewing whether the questions and answers that Vermont Mutual were material misrepresentations, the Appeals Court noted that in the Superior Court trial there were three different explanations of what the question about “breed and bite history” meant besides what the Superior Court found:
- Tilley testified that he understood the question, Ms. Faithful asked about “breed and bite history” to mean whether the animal has a history of biting humans, to which he responded correctly in the negative.
- Faithful, on the other hand, testified that her custom and practice was to inquire whether the animal was “aggressive” or had “had a biting incident” in responding to the question.
- Kathleen Parch, an underwriting manager at Vermont Mutual, testified that she interpreted the term to mean “bodily injury or property damage to someone else’s pet.”
The Superior Court judge adopted a fourth and broader meaning that the question should be read to mean a history of biting “anything or anybody.”
The Appeals Court found the three interpretations testified to as to the meaning of “bite history” were reasonable. Each afforded the insurer an assessment, at some level, of the risk associated with a given animal. However, the court then found that because each potential explanation of the meaning of “bite history” was reasonable that the question was ambiguous.
The Appeals Court then ruled:
Because the language is ambiguous, we must afford the Tilleys, as the insureds, the benefit of the reasonable interpretation that is most favorable to them; namely, the one that limits the bite history to humans only. Because Mr. Tilley answered that question honestly, as it is undisputed that Bocephus had only bitten other dogs, Mr. Tilley’s response cannot be labeled a misrepresentation by Vermont Mutual.
The meaning of “Loss history” question also ambiguous to the Appeals Court
Next the court addressed the second alleged misrepresentation claimed by Vermont Mutual.
At the Superior Court trial, Mr. Tilley testified that he did not consider the $200 veterinarian bill he paid for the dog Bocephus bit to be a “loss.” Rather, he stated that “a loss is [when] an insurance company pays a claim. It’s a loss…” Vermont Mutual’s representative, Ms. Parch testified that it was Vermont Mutual’s position that the $200 payment was a loss that should have been disclosed on the application.
The Appeals Court, however, found this question also was ambiguous, “at least as to the lower limit of a loss that must be disclosed in order to avoid a rescission of the policy for misrepresentation.” The court found that without specifying a threshold level the question was open to interpretation and, therefore, ambiguous.
The court applied essentially a de minimis standard stating that “Given that $200 is a small fraction of the Tilleys’ personal liability policy limit [$500,000], we conclude that Mr. Tilley’s view that such a payment would not be considered a loss for an insurance company is reasonable.”
Again, the court ruled that the Tilleys were legally entitled, if there were any ambiguity, to the interpretation that favors them stating: “…because it is undisputed that the $200 payment was the only disputed loss, Mr. Tilley’s response to the loss history question was not a misrepresentation.”
Vermont Mutual ordered to provide the Tilleys coverage for Ms. Schultz’ claim
After finding the answers to the two questions that Vermont Mutual had claimed were material misrepresentations were ambiguous, and therefore, answered correctly by Mr. Tilley, the Appeals Court reversed the Superior Court judgment and entered an order stating:
“…Vermont Mutual is contractually obligated to provide coverage to the insureds.”
Also, the Superior Court had dismissed Ms. Shultz’ unfair claim practice suit against Vermont Mutual. The Appeals Court ordered that case reinstated.