Title: Commerce Ins. Co., Inc. v. Gentile

State: massachusetts

Issuer: Massachusetts Supreme Court

Document:

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SJC-11706 
 
COMMERCE INSURANCE CO., INC.  vs.  VITTORIO GENTILE & others.1 
 
 
September 16, 2015. 
 
Insurance, Motor vehicle insurance, Coverage, Misrepresentation.  
Motor Vehicle, Insurance, Permission to operate.  Contract, 
Insurance.  Practice, Civil, Summary judgment. 
 
 
 
 
This case concerns the obligation of Commerce Insurance 
Company (Commerce) to pay optional bodily injury benefits under 
a standard Massachusetts automobile insurance policy.  The 
defendants Vittorio and Lydia Gentile (Gentiles) were the 
policyholders, and their grandson Vittorio Gentile, Jr. 
(Junior), was an "excluded operator" under the policy.  While 
operating one of the Gentiles' vehicles covered by the policy, 
Junior caused an accident that seriously injured Douglas and 
Joseph Homsi (Homsis).2,3  Commerce sought a judgment declaring 
that the Gentiles' violation of the operator exclusion form 
                                                 
 
1 Lydia Gentile; Vittorio C. Gentile, Jr. (Junior); Janice 
Silverio, as temporary guardian of Douglas Homsi; and Joseph 
Homsi. 
   
 
2 In a separate criminal case arising from the same events, 
Junior pleaded guilty to negligent operation of a motor vehicle. 
  
 
3 In a separate negligence action also arising from these 
events, the Homsis obtained a favorable judgment against 
Vittorio and Lydia Gentile (Gentiles), which was modified and 
affirmed by the Appeals Court in an unpublished opinion issued 
pursuant to its rule 1:28.  See Silverio v. Gentile, 86 Mass. 
App. Ct. 1121 (2014). 
       
2 
 
relieved it of any duty to pay the Homsis under the optional 
bodily injury provisions of the insurance contract.4  A Superior 
Court judge ruled that the Gentiles had violated their duty of 
"continuing representation" (as to whether Junior was in fact 
operating their vehicles), and therefore, Commerce was relieved 
of its duty to pay the optional coverage for the Homsis' 
injuries.  The Appeals Court affirmed the judgment on that basis 
and on the basis that the Gentiles had committed a breach of the 
insurance contract.  Commerce Ins. Co. v. Gentile, 85 Mass. App. 
Ct. 67 (2014).  We granted further appellate review.   
 
 
 
Facts.  The Gentiles purchased through Commerce the 
standard Massachusetts automobile insurance policy, seventh 
edition, which was approved by the Commissioner of Insurance 
(commissioner).  The policy insured both the Gentiles and their 
vehicles.  A section of the policy titled "Our Agreement" 
provided that "[t]his policy is a legal contract under 
Massachusetts law."  It stated further that "[o]ur contract 
consists of this policy, the Coverage Selections Page, any 
endorsements agreed upon, and your application for insurance."  
The policy included a separate operator exclusion form, which 
also was approved by the commissioner.   
 
 
In 2004, after receiving advice from the insurance agent 
that their premium would be significantly higher if Junior 
operated their vehicles, Lydia, as the "[p]olicyholder", and 
Junior as the "[e]xcluded [o]perator" both executed the operator 
exclusion form.  The form stated that Junior would not operate 
the Gentiles' insured vehicles:  "It is agreed that the person 
named below [i.e., Junior] will not operate the vehicle(s) 
described below, or any replacement thereof, under any 
circumstances whatsoever."  Another provision of the form 
allowed that if the policyholder, or anyone acting on the 
policyholder's behalf, provided any "false, deceptive, 
misleading or incomplete information in any application or 
policy change request," Commerce "may refuse to pay claims under 
any or all of the Optional Insurance Parts of this policy."  
Essentially identical language was included in the general 
policy provisions.   
 
                                                 
 
4 Commerce Insurance Company (Commerce) paid the compulsory 
coverage for bodily injury but denied the optional bodily injury 
coverage.   
 
3 
 
 
With the subsequent renewals of the policy, including the 
renewal in 2006, which was in effect when the accident occurred, 
the declarations page identified Junior as having a status of 
"E" for excluded.  By excluding Junior based on his prior 
driving experience and record, Commerce decreased its risk of 
loss, and the Gentiles, in exchange, paid lower premiums for the 
policy and its successive renewals.5   
 
 
Discussion.  An insurance policy is a contractual agreement 
between the insurer and insured.  G. L. c. 175, § 2.  In 
addition to the policy itself, an insurance contract also 
includes commissioner-approved forms, such as the operator 
exclusion form that is at issue in the present case.  See G. L. 
c. 175, § 192 ("All provisions of law relative to the filing of 
policy forms with, and the approval of such forms by, the 
commissioner shall also apply to all forms of riders, 
endorsements and applications designed to be attached to such 
policy forms and when so attached to constitute a part of the 
contract").   
 
 
In interpreting exclusionary language in an insurance 
policy, the reviewing court typically considers whether the 
exclusion is contrary to any statutory language or legislative 
policy.  Heinrich-Grundy v. Allstate Ins. Co., 402 Mass. 810, 
811 (1988).  At issue here is the relationship between the 
exclusionary language and the terms and conditions of the 
optional bodily injury coverage; that relationship is entirely a 
matter of contract.  See id. at 811 n.3 (collecting cases).  
Where we are interpreting language in a standard Massachusetts 
automobile insurance policy approved by the commissioner, we 
construe the language in "its usual and ordinary sense" and 
relinquish the rule of construction that requires ambiguities to 
be resolved against the insurer.  See Chenard v. Commerce Ins. 
Co., 440 Mass. 444, 445-446 (2003).   
 
 
By executing the operator exclusion form, the Gentiles 
specifically agreed that Junior would not operate the insured 
motor vehicle "under any circumstances whatsoever."  By allowing 
Junior to operate their vehicle, or by not preventing him from 
doing so, the Gentiles committed a breach of this material term 
of their insurance contract with Commerce.  As a result of this 
breach, the Gentiles relieved Commerce of a duty to pay the 
                                                 
 
5 According to Commerce's underwriter, the Gentiles' premium 
would have increased by $929 for the policy that was in effect 
at the time of the accident.  
4 
 
optional coverage for bodily injury.  On this basis, the 
judgment of the Superior Court is affirmed. 
 
 
The Homsis did not raise timely, and therefore waived, 
various claims that the operator's exclusion was not a valid 
term of Commerce's insurance contract with the Gentiles.  They 
claim, for example, that the operator's exclusion was not part 
of the initial insurance policy where one, and not both 
insureds, executed the form;6 was immaterial to the insurer's 
calculation of the risk of loss and rate of premium;7 and that it 
was not part of the renewed policy that was in effect at the 
time of the accident.8  We do not decide these issues.   
 
 
The Homsis also argue that the operator's exclusion does 
not limit coverage for optional bodily injury, although they 
accept that it limits other forms of optional insurance 
                                                 
 
6 On this point, the Appeals Court reasonably concluded that 
the operator exclusion would not be invalid in circumstances 
where Lydia signed the operator exclusion form, but Vittorio 
Gentile did not, given that the Gentiles jointly owned the 
vehicle that was involved in the accident and insured it through 
Commerce, and both were identified as policyholders:  Vittorio 
was the named insured on the policy, and Lydia was the 
"[p]olicyholder" on the operator exclusion form.  See Commerce 
Ins. Co. v. Gentile, 85 Mass. App. Ct. 67, 71 n.6 (2014).     
 
 
7 In addition to not preserving this claim, the Homsis 
agreed with Commerce's assertion that, if the Gentiles did not 
exclude Junior, it would have calculated significantly higher 
premiums for the Gentiles.    
 
 
8 There is support in the record that Commerce and the 
Gentiles agreed to exclude Junior as an operator when it renewed 
the policy that was in effect at the time of the accident.  
Commerce automatically renewed the policy and operator exclusion 
form without any changes to the exclusion of Junior.  It 
provided notice to the Gentiles on the declarations page that 
Junior was an excluded operator, and charged them a lower 
premium for his exclusion.  When the policy was renewed, the 
Gentiles did not object to the exclusion of Junior.  See Epstein 
v. Northwestern Nat'l Ins. Co., 267 Mass. 571, 574–575 (1929) 
("[I]nsured is presumed to have assented to the terms of [a] new 
policy if it is retained without reading or read without 
complaint and rejection").   
 
5 
 
coverage, i.e., collision and limited collision.  The Homsis, 
however, have failed to demonstrate that the operator's 
exclusion did not apply to optional bodily injury coverage.  The 
form does not contain any express provisions that limit the 
operator's exclusion to particular types of optional coverage.  
It unequivocally states:  "It is agreed that the person named 
below [i.e., Junior] will not operate the vehicle(s) described 
below, or any replacement thereof, under any circumstances 
whatsoever."  By approving the supplemental operator exclusion 
form, the commissioner appears to have allowed insurers to 
exclude named operators from being covered under the standard 
automobile insurance policy.  See Chenard v. Commerce Ins. Co., 
supra at 449 n.6.   
 
 
As stated previously, we affirm the judgment in this case 
on the ground that the Gentiles committed a breach of a material 
term of the insurance contract.  It is therefore unnecessary for 
us to decide whether the Gentiles also committed a breach of a 
duty of "continuing representation," as the Appeals Court held.  
Gentile, 85 Mass. App. Ct. at 72-73.  Under common-law 
principles and G. L. c. 175, § 186,9 when an insured makes a 
material misrepresentation during the application or renewal 
period for an insurance policy, the insurer may be able to deny 
coverage on that basis.  See Barnstable County Ins. Co. v. Gale, 
425 Mass. 126, 128 (1997) (recognizing that § 186 "is 
declaratory of long-standing common law principles defining the 
sort of false representations that can serve to avoid an 
insurance policy"); Hanover Ins. Co. v. Leeds, 42 Mass. App. Ct. 
54, 57 (1997) ("Statements made in an application for insurance 
are in the nature of continuing representations and speak from 
the time the application is accepted or the policy is issued" 
[citations omitted]).   
 
 
Here, the Appeals Court appears to have concluded that this 
duty extends into the coverage period.  See Gentile, 85 Mass. 
                                                 
 
9 General Laws c. 175, § 186 (a), provides:   
 
 
"No oral or written misrepresentation or warranty made 
in the negotiation of a policy of insurance by the insured 
or in his behalf shall be deemed material or defeat or 
avoid the policy or prevent its attaching unless such 
misrepresentation or warranty is made with actual intent to 
deceive, or unless the matter misrepresented or made a 
warranty increased the risk of loss."   
 
6 
 
App. Ct. at 72 ("[A]n insured, at a minimum, has a duty to 
inform the company of a material change during the application 
period.  It does not relieve the policyholder of a duty to do 
the same during the coverage period").  Such an application of 
the duty would seem to impose on an insured the responsibility 
to identify any changes occurring during the coverage period 
that are material to the insurer's risk of loss, and to notify 
the insurer accordingly.  We leave for another day the issue 
whether the duty of continuing representation applies within the 
coverage period.  In this highly regulated area, any expansion 
of the insured's duties under a standard automobile insurance 
policy might be better left to the Division of Insurance.10 
 
 
 
 
 
 
 
 
Judgment affirmed. 
 
 
 
Brian P. Burke for the defendants. 
 
Richard R. Eurich (John P. Graceffa with him) for the 
plaintiff. 
 
Charlotte E. Glinka, J. Michael Conley, & Thomas R. Murphy 
for Massachusetts Academy of Trial Attorneys, amicus curiae, 
submitted a brief. 
 
E. Michael Sloman, for Automobile Insurers Bureau, amicus 
curiae, submitted a brief. 
                                                 
 
10 Although inapplicable to present case, it appears that a 
later version of the Massachusetts automobile insurance policy 
approved by the Commissioner of Insurance includes a provision 
requiring an insured to notify the insurer of certain material 
changes during the policy period:  "You must inform us of any 
changes which may have a material effect on your insurance 
coverage or premium charges, including the . . . individuals who 
customarily operate your auto."