A United States District Court in Maine has voided eight personal auto policies issued to McCarthur Sullivan. Mr. Sullivan, a resident of Massachusetts, insured over twelve vehicles from the Town of Wales in Maine, a town of just over 1,600 inhabitants, representing to Dairyland Insurance Company (“Dairyland”) he was the principal operator and the vehicles were garaged in Maine.
After nine accidents in Massachusetts within 14 months involving Mr. Sullivan’s Maine insured vehicles, Dairyland figured out something was amiss. After six unlisted Massachusetts drivers of the insured vehicles refused to cooperate with Dairyland, Dairyland investigated. Its investigation found not only that Mr. Sullivan garaged his vehicles in Massachusetts but that Mr. Sullivan had the vehicles in Massachusetts to use as commercial rental vehicles.
First three vehicles insured for under $1,300.00
On April 3, 2013, Mr. Sullivan applied through his agent in Lewiston, Maine, the Mark Ameault Insurance Agency, to insure a 2000 Mercedes Benz SLK 230, a 2000 BMW 740IL and a 1991 Mercedes Benz 560SEL with Dairyland. On his application, Mr. Sullivan said he garaged the vehicles at his Maine address, 89 Bull Run Road, Wales, Maine. He also said there were no other drivers as he would be the only regular user of these vehicles.
Included in the application were representations that the vehicles Mr. Sullivan sought to insure were for his personal use and the vehicles’ principal place of garaging was in Wales, Maine. Also, as part of the application, Mr. Sullivan agreed through his signature of the same that the application became part of the policy and that it was his res
ponsibility to report any change of garaging location to Dairyland within fourteen (14) days of the change.
Based on Mr. Sullivan’s representations, Dairyland issued a single policy insuring the three vehicles with bodily injury, uninsured and underinsured motorist coverage with 50/100 limits, $25,000 property damage limit on all vehicles: Collision and comprehensive on the first two vehicles with a $500 deductible along with medical payments, towing, and rental coverage for a total premium of $1,277.00.
Additional vehicles for Mr. Sullivan’s personal use added on new policies
Dairyland had an underwriting policy that a personal automobile insurance policy could not have over four vehicles listed. Over the next year Mr. Sullivan added vehicles and removed vehicles from his policy but eventually exceeded the four-vehicle limit. As Mr. Sullivan continued to add vehicles, Dairyland issued six more policies to Mr. Sullivan covering his additional vehicles.
Each time he added a new vehicle to the policies he represented to Dairyland he garaged the vehicles in Maine and all, except one, were used by him personally.
Suspicions over unlisted operators driving Maine vehicles in Massachusetts accidents
Initially, Dairyland had no concerns about the number of vehicles it insured for Mr. Sullivan on his different policies. From the first policy application, on April 3, 2013 until July 2014, Dairyland acknowledged that Mr. Sullivan, “In the months and years following this initial application, [Mr. Sullivan] added and removed vehicles from his Maine personal automobile insurance policy.
Dairyland’s complacency about Mr. Sullivan adding and removing vehicles to his personal auto policies began to change in June 2014. In that month, Dairyland received the first accident report involving one of Mr. Sullivan’s vehicles in a Massachusetts accident. Over the next fourteen months Dairyland received eight more accident reports involving different vehicles owned by Mr. Sullivan.
These reported accidents showed a clear pattern to Dairyland:
- Brockton: On June 26, 2014, a 2002 Buick Century insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident on North Montello Street, Brockton, Massachusetts. At the time of the accident, the driver of the 2002 Buick Century was one Robert Burgo, a resident of Massachusetts, not listed as an operator on Dairyland’s policy.
- Brockton: On July 16, 2014, a 1998 Dodge Neon insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident on North Montello Street, Brockton, Massachusetts. At the time of the accident, the driver of the 1998 Dodge Neon was one Ann Marie Patrick, a resident of Massachusetts, not listed as an operator on Dairyland’s policy.
- Bridgewater: On July 27, 2014, a 1993 Toyota Corolla insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident on Plymouth St, Bridgewater, Massachusetts. At the time of the accident, the driver of the 1998 Dodge Neon was Ann Marie Patrick, a resident of Massachusetts, not listed as an operator on Dairyland’s policy and the same driver involved in the July 16, 2014 accident with a different vehicle insured by Mr. Sullivan with Dairyland.
- Brockton: On December 9, 2014, a 1999 Cadillac Seville insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident on Kennelworth Road, Brockton, Massachusetts. At the time of the accident, Mr. Sullivan was driving this vehicle.
- East Falmouth: On May 12, 2015, a 2002 Honda Accord insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident in East Falmouth, Massachusetts. At the time of the accident, the driver was one Julian M. Somers, a resident of Massachusetts and the son of Mr. Somers. Mr. Somers was listed as an operator on one of Mr. Sullivan’s policies but not the policy insuring the 2002 Honda.
- Brockton: On May 24, 2015, a 1996 Pontiac Bonneville insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident on Main St., Brockton, Massachusetts. At the time of the accident, the driver of the 1996 Pontiac Bonneville was one Humberto Barros, a resident of Massachusetts, not listed as an operator on Dairyland’s policy.
- Brockton: On June 27, 2015, a 1994 Chevrolet insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident on West Elm St., Brockton, Massachusetts.
- Bourne: On July 19, 2015, a 2004 Chrysler Sebring insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident on Old County Rd., Bourne, Massachusetts. At the time of the accident, the driver of the 1994 Chevrolet was one Kaylee Babb, a resident of Massachusetts, not listed as an operator on Dairyland’s policy.
- Falmouth: On or about August 13, 2015, the 2002 Honda Accord insured on a personal auto policy issued to Mr. Sullivan by Dairyland in Maine was involved in an accident in Falmouth, Massachusetts. At the time of the accident, the driver of the 2002 Honda Accord was Julian Somers, a resident of Massachusetts, who was listed as an operator on Dairyland’s policy as a resident of Maine.
Dairyland investigation finds vehicles in Massachusetts rented by Mr. Sullivan.
The Dairyland claim department in investigating each accident sent forms and inquiries to the operators of Mr. Sullivan’s vehicles in Massachusetts. These unlisted drivers did not cooperate and did not complete and return any forms or responses to Dairyland. The claim department tried to have conducted examinations under oath, as allowed by the policies, of the unlisted drivers, but without success.
Eventually, the Dairyland’s claim investigators verified that the majority, if not all, of the vehicles insured under Mr. Sullivan’s Maine personal automobile insurance policies had no garaging in Maine. Mr. Sullivan was garaging them in Massachusetts.
The investigation also resulted in Dairyland obtaining evidence that Mr. Sullivan was not using the insured vehicles for personal use, but instead was using them as rental vehicles for Massachusetts residents.
Dairyland Files Suit in federal court to have all Mr. Sullivan’s auto policies rescinded
On February 2, 2016, Dairyland filed in the United States District Court for the District of Maine in Portland a suit against Mr. Sullivan. The suit sought rescission of Mr. Sullivan’s policies for fraud and joined as necessary parties all unlisted drivers involved in the nine accidents and any claimants seeking indemnity under Mr. Sullivan’s policies.
Mr. Sullivan only filed a document in response to the suit entitled “Response to Dairyland’s Claims” which claimed:
Dairyland has systematically and deliberately diverted and omitted the facts in this matter. They as my paid representatives have failed to address all concerns and responsibilities relative to all previous policies.
Dairyland Insurance continually renewed policies at a time when they were empowered to cancel them causing great personal harm by abstaining from any action to deny or honor any loss for more than two and one half years (sic).
I am asking the court to accommodate us in settling these matters and request to do so.
There was no need for the court to accommodate Mr. Sullivan, as he eventually admitted his fraud on Dairyland.
Mr. Sullivan comes clean and files affidavit admitting his fraud
On December 2, 2016, admitted his fraud in a signed affidavit. Dairyland filed the affidavit to support rescinding Mr. Sullivan’s policies. In his affidavit Mr. Sullivan stated under oath:
I made the misrepresentation about where the vehicles were principally garaged at the time of the application for the purpose of securing an automobile policy of insurance at a lower premium rate than I would have been charged if I had represented that the vehicles were going to be principally garaged in the Commonwealth of Massachusetts.
* * *
Each time I added a new vehicle to the policies…I misrepresented where the vehicles were principally garaged for the purpose of securing insurance on the vehicles at a lower premium rate than I would have been charged if I had represented that the vehicles were going to be principally garaged in the Commonwealth of Massachusetts.
Court declares all policies void
Based upon Mr. Sullivan’s affidavit admitting his fraud, the court upon the motion of Dairyland for declaratory judgment found that the policies were void stating:
The undisputed facts contained in Dairyland’s Statement of Material Facts and in Sullivan’s own affidavit establish …that Sullivan made false representations of material facts—his residence and the location of the vehicles that he sought to insure—on his insurance application with knowledge of their falsity, and that Sullivan made the misrepresentations to induce Dairyland into issuing him Maine automobile insurance policies. These facts also establish that Dairyland in fact relied upon Sullivan’s misrepresentations…
Dairyland does not issue personal automobile insurance policies to individuals primarily residing in or principally garaging their vehicles in Massachusetts, and classifies as an “unacceptable risk” drivers who do not reside in the rating state at least ten months per year.
This undisputed evidence supports the conclusion that, without Sullivan’s admitted misrepresentations regarding his primary residence and the principal location of his vehicles, Dairyland would not have issued him a personal automobile insurance policy.
Consequently, the court ruled “Dairyland has satisfied both the fraudulent misrepresentation and materiality requirements [under Maine law] and, therefore, rescission of Sullivan’s individual automobile insurance policies is appropriate.”
Saving premiums by using a vehicle registered in another state could cost
Sometimes, there is a temptation for a Massachusetts resident, who owns vacation home in a state with lower auto insurance rates, to register and insure their vehicle in that state.
The situation in this article is an extreme example. But, under Massachusetts law, as the registered owner of the vehicles involved in any accidents s caused by his renters, Mr. Sullivan has statutory prima facie liability for the actions of his renters. Thus, the rescission of his policies for garaging and premium fraud subjects him to personal liability.
Any resident of Massachusetts who registers a vehicle used in Massachusetts in another state runs a small but finite risk that a serious accident in Massachusetts could cause the out-of-state insurer to sue to rescind the policy for garaging or premium fraud. In that case, the insured may have to defend at their own cost a lawsuit in another state under laws less stringent regarding rescission than Massachusetts laws.
The moral?
The risk-reward ratio for the dollars saved in using out-of-state garaging versus the potential cost of an out-of-state insurer disclaiming liability for an accident in Massachusetts makes just paying the Massachusetts premium the smart move, in the author’s opinion..
