The last eight months in the Appeals Court have been a tough time for Edward Holzberg, a Massachusetts attorney.
In October last year, the Appeals Court affirmed a judgment ultimately totaling $315,000 against Attorney Holzberg in a harassment suit brought by a former employee, and then in the last week of April this year, the same court affirmed a judgment in favor of Metropolitan Property and Casualty Insurance Company (“Metropolitan”) denying him collision coverage for the total loss of the Cadillac limousine he had bought to ferry clients to his office.
In the suit against Metropolitan, the Appeals Court found that Attorney Holzberg had failed to disclose, in applying for the Cadillac’s insurance with Metropolitan, a customary user of the vehicle. According to Metropolitan, if this customary user had been disclosed, Attorney Holzberg’s premium would have been $1,500 higher.
In the breach of contract and unfair claim practice suit against Metropolitan over the loss of his Cadillac, Attorney Holzberg claimed that the term “customary user” was ambiguous and, therefore should be construed against the insurer. However, the Appeals Court found that this legal rule about construing terms in an insurance policy did not apply to the standard automobile policy as this policy form is one that is approved by the commissioner of insurance.
Facts concerning the policy application and Metropolitan’s denial of a collision loss
Attorney Holzberg is a Massachusetts attorney who practices personal injury law. In July 2014, he purchased a Cadillac Fleetwood to use in his law practice as a vehicle to have present and potential clients transported to his law office. Although Attorney Holzberg contemplated using the Cadillac to transport clients, he had no intention of driving clients himself. Instead, he had arranged to pay Jonathan Wood (“Mr. Wood” or “Wood”) to drive the Cadillac as needed in connection with Attorney Holzberg’s law practice.
In August 2014, Attorney Holzberg applied for a standard Massachusetts automobile insurance policy with Metropolitan by submitting a signed Massachusetts Automobile Insurance Form Application.
The insurance application’s instructions stated that the applicant should, “Furnish information for the applicant and each individual who customarily operates the auto, whether or not a household member.” The application also warned that the failure to list “any individual who customarily operates your auto may have serious consequences,” including the company’s refusal to pay claims under any or all of the Optional Insurance Parts and cancellation of the policy.
Although Mr. Wood had already operated the vehicle and despite Attorney Holzberg’s intention to use Mr. Wood’s services to operate the vehicle on an ongoing basis, only Attorney Holzberg’s name appeared on Metropolitan’s application as an identified operator.
Although Attorney Holzberg claimed he advised his insurance agent, who represented Metropolitan, that others would drive his vehicle, he never provided Mr. Wood’s name as a customary operator.
Based on Attorney Holzberg’s Safe Driver Insurance Plan Merit Rating of “99,” Metropolitan wrote the Cadillac’s policy, along with another vehicle Attorney Holzberg owned, with an annual premium of $1,097.00.
The use of the Cadillac and its total loss
Between August and December, Attorney Holzberg never drove the Cadillac, However, he continued to have Wood drive the Cadillac, as a paid chauffer, eight times in connection with his law firm operations during this time period without advising Metropolitan or its agents that Mr. Wood was a customary operator of the insured vehicle.
On December 24, 2014, Mr. Wood was involved in a motor vehicle accident while driving the Cadillac. The vehicle was a total loss. Attorney Holzberg submitted a claim for collision coverage under the optional coverage provisions of Metropolitan’s policy.
When Metropolitan questioned Attorney Holzberg about how Mr. Wood came to be operating the Cadillac, Attorney Holzberg allegedly provided Metropolitan with information that Mr. Wood was a “friend” who “seldom” operated the Cadillac.
Under the standard provision of the Massachusetts automobile policy, insurers have the right to conduct examinations under oath concerning any claims. The policy states in the provision entitled “Cooperate with Us” that:
“After an accident or loss, you, or anyone else covered under this policy, must cooperate with us in the investigation… of any claim…”
We may also require you and any person seeking payment under any part of this policy to submit to an examination under oath at a place designated by us, within a reasonable time after we are notified of the claim.
Further investigation determined that Mr. Wood’s driving record gave him a merit rating of “8” in comparison with Attorney Holzberg’s 99 rating. Because Metropolitan had questions about the reason someone with driving record like Mr. Wood’s would be driving the insured vehicle, Metropolitan required Attorney Holzberg to sit for an examination under oath where he admitted that he had hired Mr. Wood to drive the vehicle for his business.
Metropolitan concluded that had Attorney Holzberg disclosed Mr. Wood as an additional operator, it would have charged an additional premium of $1,514 to insure the Cadillac.
As a result, Metropolitan issued a denial of coverage citing the provisions of the policy concerning the obligation of Attorney Holzberg to have disclosed that Mr. Wood was a “customary user” if not the exclusive operator of the insured vehicle.
The Superior Court lawsuit
In April 2017, Attorney Holzberg served a 93A demand letter alleging unfair claim practices in violation of Mass. Gen. L. c. 93A, for denying his collision claim. When Metropolitan maintained its denial of coverage, Attorney Holzberg filed a complaint in the Superior Court alleging Metropolitan had breached its insurance contract, breached its covenant of good faith and fair dealing, and violated G.L. c. 93A by committing unfair claim practices.
Metropolitan answered the complaint and filed a counterclaim for a declaratory judgment seeking to establish that Attorney Holzberg was not entitled to recovery as a matter of law for failing to comply with the policy requirements that required the listing of Mr. Wood as a “customary operator.”
During the discovery phase of the litigation, Metropolitan deposed Attorney Holzberg. At this deposition, Attorney Holzberg admitted that he did not disclose Mr. Wood on his application and that he may have operated the vehicle in his law firm’s parking lot but that otherwise Mr. Wood was the exclusive operator of the Cadillac when it had left his law firm’s property. Based on this statement, an underwriter’s affidavit, and additional documentary evidence about Mr. Wood’s driving record, Metropolitan moved for summary judgment asserting the absence of any material question of fact.
Attorney Holzberg opposed Metropolitan’s summary judgment motion claiming, in part, that the term “customary user’ was an ambiguous term that the Superior Court judge should construe against Metropolitan.
The judge noted that that argument that Metropolitan’s application’s request to identify who would “customarily” operate the Cadillac could possibly be ambiguous where the term has no absolute demarcation of the established number of uses, between a customary and a non-customary operator. However, the judge found that based on the facts of this case, a definitive dividing line between customary and non-customary operators was irrelevant. In this case, based on the undisputed evidence, “Wood was the Cadillac’s only operator and, thus, by default, the Cadillac’s customary operator.”
As a result, the judge ruled that “The court need not address this [ambiguity] argument, since, as discussed above, it concludes Holzberg made material misrepresentations entitling Metropolitan to void the Policy.”
After the Superior Court entered judgment for Metropolitan, Attorney Holzberg filed a timely appeal to the Appeals Court.
The Appeals Court rules the contra-insurer ambiguity rule does not apply to the Mass. auto policy.
On appeal, Attorney Holzberg again argued that any failure to identify Mr. Wood on the insurance application was not a misrepresentation because meaning of the term “customarily uses” is too ambiguous to deny coverage. Attorney Holzberg claimed as an insured he was entitled to the benefit of an inference drawn against the insurer on the meaning of “customarily use” as that term appeared in Metropolitan’s application. He further argued that the term “customarily use” is a term that is undefined in the policy, and thus without some definite specification as to the frequency of the use was ambiguous as a matter of law.
However, the Appeals Court disagreed, stating an ambiguity in an insurance policy “is not created simply because a controversy exists between the parties, each favoring an interpretation contrary to the other.” In particular, the Appeals Court panel found that the rule cited by Attorney Holzberg about ambiguous terms in a policy being construed in favor of the insured did not apply.
Instead, the Appellate Court pointed to the exception concerning the Massachusetts automobile policy as a contact where the language used is interpreted by the courts in ordinary terms:
“Because ‘customary operator’ appears in the standard automobile insurance policy issued by the Commissioner of Insurance, we construe the term ‘in its usual and ordinary sense.””
Applying this rule of construction, the judges pointed to the dictionary’s ordinary meaning of “customary” a “[c]ommonly . . . used as a matter of course; usual.” Then in applying that definition to Attorney Holzberg’s claim, the judges found, “Wood was a ‘customary operator’ of the Cadillac because he was the usual — indeed, the only — person who drove it on the road.” Also, it was undisputed that Attorney Holzberg had hired Mr. Wood for the sole purpose of driving the Cadillac in support of Attorney Holzberg’s law practice.
The Court concluded:
“In these circumstances, Holzberg cannot plausibly argue that a reasonably intelligent person would not have understood that Wood needed to be identified as a ‘customary operator’ on the insurance application. Holzberg’s failure to do so was therefore a material misrepresentation, entitling Metropolitan to void the policy.”
Twenty days to apply for further appellate review to the Supreme Judicial Court
The Massachusetts Appeals Court is an intermediate appellate court. The ultimate judicial authority resides with the Supreme Judicial Court. Parties dissatisfied with an Appeal Court’s decision may apply for further appellate review. However, the allowance of any further appeal is discretionary with the Supreme Judicial Court.
Under the Massachusetts Rules of Appellate Procedure, Attorney Holzberg will have until May 18, 2021, to apply for further appellate review.
Agency Checklists will keep its readers informed if this case proceeds beyond the Appeals Court.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
To get in touch with me, email or schedule a call via the links below:
