A family paid an uncovered $750,000 claim settlement to keep their son out of jail for an assault and battery charge. Their homeowner carrier refused to contribute and successfully argued in Superior Court that its policy’s physical abuse exclusion applied. The Supreme Judicial Court (SJC) reversed the decision for the insurer, ruling that the exclusion was ambiguous and did not exclude coverage for a simple assault and battery absent “physically harmful treatment, often characterized by an imbalance of power.”
Summary of this SJC decision on the homeowner physical abuse exclusion
The unfortunate circumstances of this case literally arose out of a fish story. Christopher Haufler, a well-regarded personal injury lawyer from Marshfield, Massachusetts, suffered severe physical injuries when Timothy Krusell (Mr. Krusell) pushed him while Mr. Haufler was talking to a group about a record-breaking swordfish that he and his son had landed in August 2011. For some reason, Mr. Krusell took umbrage at a photo Mr. Haufler was trying to show him, believing, incorrectly, that Mr. Haufler was playing him for a fool about catching the fish. Eventually, Mr. Krusell pushed Mr. Haufler down and caused him a permanent injury to his left arm.
This incident took place in Newport in 2014, and the Newport police responded and investigated. Subsequently, Mr. Krusell was subject to an information for criminal assault on a person over 60 years of age, causing severe bodily injury. A felony in Rhode Island that carries, among other penalties, a minimum of 3 years in state prison.
When Mr. Haufler filed a civil suit, Dorchester Mutual that insured Mr. Krusell’s parents (parents) defended the case under a reservation of rights. However, Dorchester Mutual also filed a declaratory judgment seeking to deny coverage based upon the intentional acts exclusion and the physical abuse exclusion in the parents’ homeowner’s policy.
As their son’s criminal trial approached, the parents, through counsel, attempted to have Dorchester Mutual join in a potential settlement. Still, the company refused based upon the nature of the information it had and its belief in the viability of its policy exclusions. To keep their son out of prison, the parents settled with Attorney Haufler for $750,000.00, $250,000.00 over their homeowner liability limit of $500,000.00.
After the case settled, Dorchester Mutual moved for summary judgment, and a Superior Court judge found that the physical abuse exclusion applied. The Krusells appealed, and the Supreme Judicial Court took the case on its own initiative without either party filing for direct appellate review.
On appeal, the Supreme Judicial Court found that under the circumstances of this case, the term “physical abuse” was ambiguous and that a reasonable insured would interpret the term physical abuse as “not precluding coverage for Haufler’s claim [against the Krusells].”
The details of the altercation over a record swordfish
Mr. Haufler, besides practicing as a personal injury lawyer in Plymouth, was an avid sportsman who enjoyed deep-sea fishing.
On August 11, 2011, he and his son had rented a crewed boat and planned to deep-sea fish on a 24-hour excursion approximately 150 miles off the coast of Rhode Island. That morning they hooked and landed a 434-pound swordfish, which, when weighed and certified back in port, broke the existing record for a landed swordfish in Rhode Island by 120 pounds. Attorney Haufler was extremely proud of this catch and would talk about it with his friends and others who were interested in fishing.
On September 12, 2014, Mr. Haufler, who was 62, and a friend, Bradford White, were leaving a bar located on Thames Street in Newport, Rhode Island, at about 12:30 AM. At the same time, Mr. Krusell, who was 23 years old, was also walking with some friends on Thames Street. One of his friends called out to Mr. White. He knew Mr. White from his employment at a bait and fishing equipment store that Mr. White had frequently patronized. The parties exchanged “some pleasantries,” and Mr. White and the friend began to talk about a boat show and fishing.
As the parties stood about talking, Mr. Haufler shared with the former bait and fishing equipment store employee that he was a co-holder with his son of the record for a swordfish taken by rod and reel in Rhode Island.
As these parties were speaking, Mr. Krusell sat on a wall along the side of the sidewalk. Mr. Haufler, while speaking, had a picture of the fish he caught on his cell phone, which he held up.
At this point, Mr. Krusell loudly interjected twice, “that’s not your fish.” When Mr. Haufler moved approximately 1 to 2 feet closer to show Mr. Krusell the picture and said, “Yes, that is my fish.” Mr. Krusell, for the third time, stated that “that’s not your fish,” jumped off the wall where he was sitting, took three long, fast paces at Mr. Haufler with his outstretched arms, and pushed him.
The force of the push put Mr. Haufler off his feet and into a parked car, hitting his head on the left front fender of the car, and then falling on his left arm, before hitting his head on the street’s cobblestones and knocking himself out. The fall broke his left arm in two places with a so-called butterfly fracture that left his humerus in three pieces and his left wrist broken in fourteen places. As a result, of the assault, Mr. Haufler had to be hospitalized and suffered permanent impairments to his left arm.
After he pushed Mr. Haufler, neither Mr. Krusell nor his friends gave Mr. Haufler any aid, but instead immediately ran from the scene.
The Rhode Island felony assault charge against Mr. Krusell
The Newport Police responded with the EMTs to the scene on Thames Street for a 911 call about Mr. Haufler’s injuries. They took statements from witnesses, and eventually, Mr. Haufler filed a complaint, which resulted in the Attorney General’s Office (Rhode Island has no district attorneys) filing a criminal information in the Newport County Superior Court against Mr. Krusell.
The information alleged a violation of Section 11-5-10.1 of the Rhode Island Criminal Code by Mr. Krusell committing “an assault and battery upon a person 60 years of age or older, causing serious bodily injury: to wit, Mr. Haufler.”
This statute charged a felony, which upon conviction, carried a mandatory minimum term of imprisonment for not less than three years, and not more than twenty tears, and a fine not more than $10,000.00 or both. Also, this statute required mandatory restitution to the victim of the offense, performance of up to 500 hours of public community restitution work, violence counseling, or substance abuse counseling.
Under the statute’s definitions, “serious bodily injury included an assault and battery that causes protracted loss or impairment of the function of any bodily part.” The loss of function to Mr. Haufler’s left arm made Mr. Krusell subject to this type of felony charge.
Mr. Haufler’s civil action and Dorchester Mutual’s defense of this suit under a reservation of rights
While the criminal case against Mr. Krusell was pending in Rhode Island, Mr. Haufler commenced a personal injury action in Massachusetts in the Plymouth County Superior Court against Mr. Krusells and his parents. The parents were joined in the suit as trustees of a real estate trust in which Mr. Krusell had a beneficial interest involving the family home.
The parents had a homeowners policy with Dorchester Mutual, a part of the Norfolk & Dedham Group, for the policy period March 20, 2014, to March 20, 2015. The policy contained a bodily injury liability limit of $500,000.
Since Mr. Krusell lived with his parents, he claimed coverage, as did his parents, under their policy with Dorchester Mutual.
The parents’ policy provided as to its personal liability coverage an exclusion for “Expected or Intended Injury” stating there was no coverage for
“Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage is of a different kind, quality or degree than initially expected or intended; or is sustained by a different person, entity, real or personal property than initially expected or intended.”
Additionally, the policy has a separate exclusion for any bodily injury or personal injury claims
“arising out of sexual molestation, corporal punishment, or physical or mental abuse.”
Dorchester Mutual issued to the Krusells a reservation of rights agreeing to defend the claim brought by Mr. Haufler, however subject to Dorchester Mutual’s right to bring a declaratory judgment to determine coverage. Initially, the reservation of rights letter Dorchester Mutual issued did not identify the physical abuse exclusion as a coverage exclusion in question for the potential declaratory judgment. While the Krusells claimed that this omission estopped Dorchester Mutual from using the exclusion, this argument ultimately had no success.
The $750,000 settlement and the dismissal of the felony charge against Mr. Krusell
As the Plymouth county civil action progressed in Massachusetts between Mr. Haufler and the Krusells, the criminal information against Mr. Krusell also proceeded.
During the pendency of their son’s criminal charges, the Krusells attempted to have Dorchester Mutual enter settlement discussions with them and Mr. Haufler on numerous occasions. Initially, Mr. Haufler had sought $800,000.00 or, if less, the maximum allowed under the Krusells’ policy. Dorchester Mutual declined to engage in any settlement discussions because of a lack of any statement from Mr. Krusell, who declined, through his criminal defense counsel, to give a statement based upon his exercising his Fifth Amendment rights against self-incrimination.
On June 24, 2015, at a pretrial conference in the Newport Superior Court, the presiding judge scheduled the criminal trial against Mr. Krusell for August 5, 2015.
Counsel for Mr. Haufler, who appeared at this hearing, advised the judge that Mr. Haufler had made a settlement demand in the amount of Dorchester Mutual’s policy limit of $500,000.00 plus $250,000.00 from the Krusells’ real estate trust.
The judge advised the attendees that if they reached a settlement and the prosecutor and Mr. Haufler agreed, he would consider reducing the felony charge to simple assault and battery, which would avoid the mandatory prison, restitution, and community service penalties of the felony statute. Correspondingly, Mr. Krusell’s criminal defense lawyer advised the parents that if Mr. Krusell were convicted, as was likely in a jury trial, he would receive a sentence of multiple years in the Rhode Island State Prison.
As Mr. Krusell’s criminal trial date approached, his parents again requested Dorchester Mutual to join in settlement discussions. When Dorchester Mutual refused, stating that it had insufficient information to decide whether its policy had coverage, the Krusells settled with Attorney Haufler for $750,000.00, with $600,000 payable in thirty days, and the remaining $150,000 paid in installments.
When the settlement was reported to the Rhode Island Superior Court, the judge assigned to Mr. Krusell’s case reduced the felony charge to simple assault, and then placed the charge on file for one year without a change of plea. The judge further ordered that if Mr. Krusell did not commit any crimes during the next year, the case would be expunged, leaving Mr. Krusell with no criminal record.
Superior Court rules Dorchester Mutual’s “physical abuse” exclusion bars coverage
After the settlement of Mr. Haufler’s civil action, Dorchester Mutual moved for summary judgment, alleging that Mr. Krusell’s acts were intentional and also adding that there was no coverage because his assault and battery on Mr. Haufler constituted “physical abuse,” triggering that exclusion in the policy.
The Krusells, for their part, opposed the summary judgment and cross-moved for summary judgment claiming that Dorchester Mutual had engaged in unfair claim practices by refusing to participate in the settlement. They also argued that the reservation of rights letter had not identified the physical abuse exclusion. Therefore, by this omission, Dorchester Mutual had waived the exclusion or was estopped to apply it to this case.
The Superior Court judge found that the physical abuse exclusion applied and entered judgment against the Krusells finding no coverage. The Krusells appealed to the Appeals Court.
The SJC Takes the Krusells’ Appeal Directly
The Krusells’ appeal proceeded in the Appeals Court up to the final briefing of the issues. However, before a panel of the Appeals Court had heard the appeal, the Supreme Judicial Court ordered the case transferred directly to it for hearing and a decision.
The direct transfer of cases from the Appeals Court to the Supreme Judicial Court, while not wholly uncommon, often is a tell that a case has legal facets that the Supreme Judicial Court believes should be resolved by their seven justices as opposed to a three-judge appellate panel in the Appeals Court.
Before the Supreme Judicial Court, the Krusells argued that the physical abuse exclusion did not apply and that, as they had argued in the Superior Court, Dorchester Mutual was estopped from asserting the exclusion because it had not included that exclusion as part of its reservation of rights letter. The SJC summarily ruled against the estoppel argument. It cited its prior rulings that held a reservation of rights letters did not waive substantive policy terms and that estoppel could only occur if the Krusells had detrimentally relied, of which they had not, on the reservation of rights letter.
Court Analyzes the Physical Abuse Exclusion for Ambiguity
Since the Krusells’ appeal turned on a policy exclusion, the SJC started by analyzing the exclusion for ambiguity and stating the legal principle upon which it tests the validity of an insurance policy exclusion:
- The insurer bears the burden of proving to the Court that a particular exclusion is applicable.
- If the terms of the exclusion in question have no ambiguities, the Court then applies the terms of the exclusion ‘in their usual and ordinary sense.’
- Any ambiguities in the language of an insurance contract, however, “are interpreted against the insurer who used them and in favor of the insured,” and this contra-insurer rule against ambiguities “applies with particular force to exclusionary provisions.”
- If there is a doubt as to the proper meaning of a term in an insurance policy, the Court will “consider what an objectively reasonable insured, reading the relevant term in the policy, would expect to be covered.”
Applying the above rules of decision, the Court first analyzed whether the term “physical abuse” as used in Dorchester Mutual’s coverage exclusion was unambiguous.
SJC finds differing court decisions over what “abuse” means
The Court parsed the two words in the exclusion and looked first at the standard meaning of the word “physical.” The Court decided quickly, citing Websters Dictionary, that “the term ‘physical,’ in context [of the exclusion], is not ambiguous; it reasonably is understood to mean “of or pertaining to the body.” However, the Court reached a different conclusion concerning the meaning of the policy term “abuse.”
Dorchester Mutual argued to the Court that the term “abuse” in its broadest meaning meant “any form of physically harmful treatment.” The meaning of the term, as advanced by Dorchester Mutual, the Court noted, comported with sub-meanings found in different dictionaries. E.g., “bad or improper treatment” or “physical maltreatment.” However, other meanings of the word “abuse” contained an added element.
The Court pointed out that the ordinary meaning of the term “abuse” implies conduct that is qualitatively different than merely physically harmful treatment. The Court cited to a leading legal dictionary, Black’s Law Dictionary, that defined “abuse” as “[c]ruel or violent treatment of someone; [specifically] physical or mental maltreatment, often resulting in mental, emotional, sexual, or physical injury” (Emphasis in original).
The SJC judges observed that courts from different jurisdictions in deciding whether an abuse and molestation exclusion applies to conduct like Mr. Krusell’s had followed two divergent paths.
Some courts interpreted the term “abuse,” just as the Superior Court had in this case, broadly interpreting the term “physical abuse” as including any harmful physical treatment, whether intended or not. While other courts found that physical abuse conduct entails more than an assault and battery and requires the act of a person who is in control, dominance, or authority who misuses their position to harm or mistreat the person or persons over whom they have control.
The SJC decided that based on the dictionary definitions and the differing interpretations by courts, the term “abuse” had different meanings, and “reasonably intelligent persons could differ as to which meaning is the proper one.” Thus, the Court ruled, “Hence, the term is ambiguous.”
The SJC applies the “objectively reasonable insured” test to the exclusion
The next phase of the Court’s analysis posed the question of “What would an objectively reasonable insured, reading the relevant policy language, expect to be covered?”
In its lead up to determining what the representative reasonable insured would read as the meaning of the physical abuse exclusion, the judges covered a lot of legal ground.
First, the justices noted that if one reads the policy with the broad definition urged by Dorchester Mutual, any insurer with a similar exclusion could argue that there was no coverage for an accident. The Court gave the example of an insured homeowner spilling coffee accidentally on a guest, stating: “If any physically harmful treatment constituted physical abuse, the exclusion almost certainly would preclude coverage for such an accident.” Thus, the exclusion would negate, in large part, the primary liability agreement in the policy indemnifying insureds for personal injuries they caused by accident.
Second, the Court explained in detail that this abuse and molestation exclusion originated in the 1980s to avoid indirect liability arising out of molestation and sexual abuse claims where liability arose from the negligent conduct of insureds in hiring or supervising an abuser who had authority and control over children or adolescents.
Third, the Court looked to the existing Massachusetts laws and regulations that define “abuse” and found that in these laws, “one hallmark of physically abusive—as opposed to physically harmful—conduct is an imbalance, or misuse, of power.”
The conclusion of the Court was, in their words:
“…the mere fact that the conduct at issue was physically harmful does not suffice to render it “physical abuse”…a reasonable insured could, and likely would, understand the “abusive” quality of physical abuse to apply to a limited subset of physically harmful treatment, often characterized by an imbalance of power.
Summary judgment for Dorchester Mutual reversed
Based on this analysis finding Dorchester Mutual’s physical abuse exclusion did not apply to Mr. Krusell’s alleged assault and battery, the Court entered an order reversing the Superior Court decision finding that Dorchester Mutual had no duty to indemnify under its policy.
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of his legal career, Owen has argued a number of cases in the Massachusetts Supreme Judicial Court and has helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
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