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17-P-1625 Appeals Court

BUNKER HILL INSURANCE COMPANY1 vs. G.A. WILLIAMS & SONS, INC.2

No. 17-P-1625.

Norfolk. October 9, 2018. - December 13, 2018.

Present: Meade, Sullivan, & McDonough, JJ.

Damages, Mitigation, Remittitur. Insurance, Homeowner's 

insurance, Amount of recovery for loss, Subrogation.

Subrogation. Practice, Civil, Damages.

Civil action commenced in the Superior Court Department on 

August 12, 2013. 

The case was tried before Rosalind H. Miller, J.; 

postverdict motions to offset the jury award and for attorney's 

fees and costs were heard by her; and judgment was entered by 

her.

Scott E. Regan for the defendant.

Anna K. Bennett for the plaintiff.

MEADE, J. The defendant, G.A. Williams & Sons, Inc. 

(Williams), appeals from a judgment entered in Superior Court 

 

1 As subrogee of Shirley Gilbody.

2 Doing business as Williams Coal & Oil Co.
2

following the denial of its motion to offset the jury award in 

this tort action brought against it by Bunker Hill Insurance 

Company (Bunker Hill), as subrogee of Shirley Gilbody, with the 

remediation costs paid by its insurer to Bunker Hill pursuant to 

an earlier declaratory judgment action. The motion judge 

determined that the earlier payment was from a collateral source 

and, as such, was not required to be offset against the jury 

verdict. Judgment entered against the defendant in the full 

amount of the jury verdict. Because the source of the offset 

was not collateral to the defendant, we determine that the 

defendant's motion for offset of damages should have been 

allowed, and we modify the judgment accordingly.3

Background. This case arises from an oil spill on property 

owned by Shirley Gilbody and insured by a homeowner's insurance 

policy purchased by her and issued by Bunker Hill. Williams 

installed an oil tank in Gilbody's home in 2003 and, at all 

material times, was the oil service company for Gilbody. The 

oil spill occurred in April, 2012. Williams had purchased and 

paid the premiums for an insurance policy with International 

Insurance Company of Hannover, Ltd. (Hannover). The parties do 

 

3 The judge's order also determined that Bunker Hill was 

entitled to its attorney's fees and costs pursuant to G. L. 

c. 21E, and judgment entered accordingly. Because Bunker Hill 

was the prevailing party at trial, we do not disturb the 

judgment as it applies to the attorney's fees and costs. See 

G. L. c. 21E, § 4A (d).
3

not dispute that the policy was in effect at all times material 

to this case. The Hannover policy covered, as an insured 

location, the property owned by Gilbody. 

When the oil spill occurred, Gilbody notified her insurer, 

Bunker Hill. Bunker Hill paid for the full remediation of the 

property, $262,894.05, under a reservation of rights. Pursuant 

to a declaratory judgment action, Bunker Hill sought 

compensation from Hannover for damage to the insured location, 

Gilbody's property. In that declaratory judgment action, a 

Superior Court judge determined that both the Bunker Hill policy 

and the Hannover policy covered Gilbody's property, that each 

policy contained "other insurance clauses," and that these 

clauses were mutually repugnant. See Mission Ins. Co. v. United 

States Fire Ins. Co., 401 Mass. 492 (1988). The judge 

determined that each insurer would bear fifty percent of the 

cost of remediation of Gilbody's property. A declaratory 

judgment entered, and Hannover reimbursed Bunker Hill for fifty 

percent of the cost of remediation, $131,447.03.

In 2012, Bunker Hill, as subrogee to its insured, Gilbody, 

also filed the present action against Williams for negligence, 

breach of contract, and violation of G. L. c. 21E (negligence 

action).4 After trial, the jury rendered a negligence verdict in 

 

4 The breach of contract count was dismissed at the 

commencement of trial.
4

favor of Gilbody in the full amount of the cost of the 

remediation of the property, $262,894.05.5 Williams then filed 

its motion to offset the amount of damages in the negligence 

action by the amount that Bunker Hill had received pursuant to 

Williams's insurance policy with Hannover in the declaratory 

judgment action, $131,447.03. 

Bunker Hill sought entry of judgment for the full amount of 

the jury verdict arguing that the payment to it from Hannover on 

the declaratory judgment was made pursuant to the remediation 

coverage in Williams's insurance policy that insured Gilbody 

and, therefore, was a payment from a source collateral to the 

judgment in the negligence action against Williams. The judge 

agreed with Bunker Hill and determined that because the claims 

were "analytically different," the collateral source rule 

applied and precluded an offset. Judgment entered in the full 

amount of the jury verdict. 

Discussion. "The measure of damages is a question of law 

reviewed de novo on appeal, see Burke v. Rivo, 406 Mass. 764, 

764-765 (1990) (proper measure of damages recoverable in tort is 

question of law), but the amount of damages awarded is a factual 

issue reviewed on appeal under an abuse of discretion standard. 

See Bartley v. Phillips, 317 Mass. 35, 43 (1944)." Twin Fires 

 

5 The jury also found a violation of G. L. c. 21E. 
5

Inv., LLC v. Morgan Stanley Dean Witter & Co., 445 Mass. 411, 

424 (2005). Here, we determine that the damage award in this 

case is the result of an error of law; we order the modification 

of judgment to reflect the offset. See Brown v. Leighton, 385 

Mass. 757, 758 (1982) ("counsel agreed that whether the 

defendant was entitled to credit toward any verdict to the 

extent of the plaintiff's recovery against a third party was a 

question of law").

"When an insurer settles a claim and thereby acquires a 

subrogation right, whether by agreement or by operation of law, 

it succeeds to any right of action that the insured may have 

against a third person whose negligence or wrongdoing caused the 

loss, and may recover the loss from that person on a pro tanto 

(to the extent of its payment) basis." Apthorp v. OneBeacon 

Ins. Group, LLC, 78 Mass. App. Ct. 115, 119 (2010), citing New 

England Gas & Elec. Ass'n v. Ocean Acc. & Guar. Corp., 330 Mass. 

640, 659 (1953); Liberty Mut. Ins. Co. v. National Consol. 

Warehouses, Inc., 34 Mass. App. Ct. 293, 296-297 (1993). 

Because Bunker Hill paid for the remediation of its insured's 

damaged property, it is entitled to seek subrogation for the 

payments it made to Gilbody. Apthorp, supra. Bunker Hill

argues that because it paid the full amount of the remediation, 

$262,894.05, it is entitled in subrogation to that amount in the 
6

negligence action.6 Bunker Hill also asserts that no offset is 

required because the payment from Hannover was not in relation 

to any negligence on the part of Williams -- it was for property 

remediation under a section of the insurance policy that did not 

imply fault on the part of the insured; consequently, the 

collateral source rule precluded an offset in the present 

action. Although we agree that Bunker Hill is entitled to 

subrogate its claim, an offset is required under these facts. 

As a general rule, "a tortfeasor's liablity to an injured

person shall not be reduced by the amount of compensation 

received by the injured person pursuant to an insurance policy" 

(quotation omitted). Short v. Marinas USA Ltd. Partnership, 78 

Mass. App. Ct. 848, 857 (2011). "In terms of operation, the 

collateral source rule has both a substantive aspect that 

relates to the law of damages, and an evidentiary component that 

governs what types of evidence may be admitted in evidence at 

 

6 However, "the insurer is prevented from obtaining a 

windfall, because its recovery from the third party is pro 

tanto, with any additional recovery belonging to the insured" 

(emphasis supplied). Apthorp, supra. In the appellee's brief 

and at oral argument, counsel for Bunker Hill asserted that any 

excess recovery would remain with Bunker Hill, and not with 

Gilbody. In light of our conclusion, we need not reach the 

issue. We do note that payment of both the insured's negligence 

damages and Gilbody's remediation costs would require 

Hannover/Williams to pay 150 percent of the remediation costs, a 

counterintuitive result that is not required by the collateral 

source rule and would punish Williams for having the foresight 

to purchase a policy that covered not only its own negligence 

but the property of its customer, Gilbody.
7

trial." Law v. Griffith, 457 Mass. 349, 355 (2010).7 This case 

relates to the substantive aspect of the rule as it concerns 

whether the rule applies to an offset of insurance proceeds paid 

to Bunker Hill as Gilbody's homeowner insurer. "One line of 

cases applies the 'benefit of the bargain' rationale of the 

collateral source rule; that is, 'the plaintiff who contracts 

for insurance with his or her own funds should receive that 

benefit' without the other party using it to offset a claim for 

expenses" (citation omitted; footnote omitted). Brady v. 

Citizens Union Sav. Bank, 88 Mass. App. Ct. 416, 421 (2015). 

By claiming that the insurance payment for the property 

remediation pursuant to the declaratory judgment is collateral 

because it is based on the insurance contract that covered 

Gilbody as an insured, Bunker Hill argues that the nature of the 

payment is collateral to the damages award in the jury verdict 

that found Williams negligent. In support of this argument, 

Bunker Hill relies on Boyle v. Zurich Am. Ins. Co., 472 Mass. 

649 (2015); Law, 457 Mass. 349; Short, 78 Mass. App. Ct. 848; 

 

7 The judge here correctly kept the information regarding 

the payment from the jury. "The rationale behind this so-called 

'collateral source rule' is that receipt of such income does not 

lawfully reduce the plaintiffs' damages, 'yet jurors might be 

led by the irrelevancy to consider plaintiffs' claims 

unimportant or trivial or to refuse plaintiffs' verdicts or 

reduce them, believing that otherwise there would be unjust 

double recovery.'" Scott v. Garfield, 454 Mass. 790, 800-801 

(2009), quoting Corsetti v. Stone Co., 396 Mass. 1, 17 (1985). 
8

and Palochko v. Reis, 67 Mass. App. Ct. 103, 108 (2006). 

However, that reliance is misplaced. Because Williams, not 

Gilbody, procured the Hannover policy to cover Gilbody's 

property, there is no unfairness in allowing Williams to offset 

the damage award by the amounts paid by Hannover. As discussed 

below, the cases relied on by Bunker Hill are factually distinct 

from the facts of this case. 

In Boyle, the plaintiff sought damages for injuries 

sustained by the plaintiff when a tire exploded in a tire shop 

owned by C&N Corporation (C&N). The plaintiffs, Boyle and his 

wife, sued C&N, whose insurer, Zurich American Insurance Company 

(Zurich), refused to defend the lawsuit against its insured. 

Id. at 650. After C&N defaulted in the lawsuit and then 

negotiated a settlement of damages with the Boyles that included 

an assignment of rights against Zurich, the Boyles sued Zurich 

for a failure to settle their individual claims after liability 

had become reasonably clear, and for a breach of the duty to 

defend C&N. Id. The Boyles settled with Zurich on their 

individual claims against it and released Zurich from any claims 

they had in their individual capacities. Id. at 652. On the 

remaining claim for Zurich's breach of the duty to defend, the 

judge determined that Zurich breached its duty but also 

determined that the settlement amount the Boyles received 

pursuant to their release of the claims in their individual 
9

capacities would be deducted from the damages awarded for the 

breach of the duty to defend that Zurich owed C&N.8 Id. at 653. 

On appeal, the Supreme Judicial Court held that this offset was 

error because "[t]he crux of the Boyles' individual claims was 

that Zurich had wronged them as third-party beneficiaries of 

C&N's policy by failing to settle the Boyles' suit when 

liability had become reasonably clear. This wrong . . . is 

analytically independent of the wrong that supported C&N's claim 

against Zurich (assigned to the Boyles) -- i.e., Zurich did not 

provide C&N with a defense." Id. at 663. Thus, the claims 

asserted by the Boyles were two distinct claims, effectively by 

two distinct plaintiffs: the claims asserted by them 

individually for the injuries sustained that Zurich did not 

settle when liability was reasonably clear, and the claims 

asserted as assignees of C&N for Zurich's failure to defend it 

in the lawsuit filed by the Boyles. The holding in Boyle is 

inapt to our facts.

Bunker Hill's argument that Short, 78 Mass. App. Ct. 848, 

applies is also without merit. In Short, the plaintiff sued the 

marina where his boat was stored when a fire on an adjacent boat 

 

8 The Boyles also raised a claim for violation of G. L. 

c. 93A. The judge determined, and the Supreme Judicial Court 

agreed, that the Boyles were not entitled to c. 93A damages 

because, as the judge found, there was no evidence of an unfair 

or deceptive act on Zurich's part.
10

spread to his boat.9 Id. at 849. Short also sued the owner of 

the boat where the fire started and the insurance broker for 

that boat owner, Old Harbor Insurance Agency (Old Harbor), for 

failure to procure adequate liability insurance for the owner, 

"a negligent act which allegedly prevented Short, as a thirdparty beneficiary, from receiving compensation." Id. Short 

settled with Old Harbor. Id. In a similar claim, Short sued 

his own insurer and insurance broker for failure to obtain 

sufficient insurance on his own boat. He settled with his 

insurance broker and was successful in his coverage litigation 

against his insurer. His insurer reserved its subrogation 

rights against the other boat owner. Id. 

The marina sought to offset the amounts Short had received 

from his broker and from Old Harbor. This court held that the 

settlement from Short's broker was "to compensate Short for the 

expense incurred to establish coverage and obtain insurance 

proceeds; this is clearly a separate cause of action and seeks 

damages separate from those caused by the fire. The judge was 

correct in declining the request for offset." Id. at 858. The 

payment from Short's broker was based on his contract with the 

broker and his insurer, negotiated by and with the premiums paid 

by Short. 

 

9 Ultimately, Short obtained a judgment against the marina 

for $83,250 in damages. Short, 78 Mass. App. Ct. at 851.
11

The payment from Old Harbor was on a different footing as a 

payment from a noncollateral source. "[T]he purpose of [Old 

Harbor's] payment to Short was essentially compensation for the 

damage caused by the fire. Thus it was error to fail to offset 

the plaintiff's recovery by that portion of the . . . settlement 

attributable to such damages." Id. at 859. The payment from 

Old Harbor was required to be offset from the plaintiff's 

recovery because the payment was from the insurance broker of 

one of the tortfeasors, on behalf of that tortfeasor, in 

compensation for the damage its customer caused the plaintiff.10 

The rule discussed in Short does not assist Bunker Hill.

Bunker Hill's reliance on Palochko, 67 Mass. App. Ct. 103, 

is similarly misplaced. In Polochko, the defendant's workers 

caused an oil tank to fall over and seep oil onto the 

plaintiff's property. Id. at 104-105. The plaintiff received a 

payment toward the clean-up costs from his own insurer. Id. at 

108. The defendant sought to have the negligence damages 

assessed against him reduced by those payments. There, relying 

on Buckley Nursing Home, Inc. v. Massachusetts Comm'n Against 

 

10 Moreover, as noted in Short, "[w]hen evaluating whether a 

source is collateral, our determination depends upon 'the 

purpose and nature of the . . . [payments]' and not merely . . .

their source. Russo v. Matson Nav. Co., 486 F.2d 1018, 1020

(9th Cir. 1973), quoting from Gypsum Carrier, Inc. v. 

Handelsman, 307 F.2d 525, 534 (9th Cir. 1962)." Id. at 859 

n.12. 
12

Discrimination, 20 Mass. App. Ct. 172, 183 (1985), this court 

held that "[a]s a general rule, a tortfeasor's liability to an 

injured person shall not be reduced by the amount of 

compensation received by an injured person pursuant to an 

insurance policy." Polochko, supra, quoting Buckley, supra. 

Because the payment here was made pursuant to the coverage 

available as a result of Hannover's policy covering Gilbody's 

property, Bunker Hill maintains that the insurance payment it

received by way of the declaratory judgment does not reduce the 

damages assessed pursuant to the negligence judgment. This 

reasoning is faulty, however, because Gilbody did not contract 

for the remediation coverage provided by the Hannover policy, 

Williams did.

Furthermore, Bunker Hill's reliance on Law, 457 Mass. 349, 

does not assist its claim. As stated in Law, "The purpose of 

the collateral source rule is tort deterrence. The tortfeasor 

is required to compensate the injured party for the fair value 

of the harm caused, and is not to benefit from either 

contractual arrangements of the injured party with insurers or 

from any gifts from others intended for the injured party." Id. 

at 355. The Hannover policy was purchased by Williams and 

insured Gilbody's property. The Hannover policy paid a 

contribution to the remediation of Gilbody's property pursuant 

to the declaratory judgment, and Bunker Hill received the 
13

benefit of that payment. The benefit received by Bunker Hill on 

behalf of Gilbody was not from a policy purchased by her for her 

own protection. See id. (defendant is "not to benefit from 

. . . contractual arrangements of the injured party with 

insurers"). Rather, it came from a policy purchased by the 

tortfeasor, Williams.

In the final analysis, the payment from Hannover was a 

payment from the same source as the tortfeasor because the 

compensation received by Bunker Hill was from a source with 

which the wrongdoer, not the homeowner, contracted.11 Here, 

neither Gilbody nor Bunker Hill contracted for, or paid for, the 

property remediation coverage provided by Hannover to Gilbody's 

property. That coverage was extended through the Hannover 

policy purchased by and with premiums paid by Williams. See, 

e.g., Arthur v. Catour, 216 Ill. 2d 72, 79 (2005) (damages 

received by plaintiff from defendant not decreased by amount 

 

11 Compare, e.g., Reilly v. United States, 863 F.2d 149, 165 

n.13 (1st Cir. 1988) (the collateral source rule "generally 

allows recovery against a wrongdoer for the full amount of 

damages even though the injured party is also compensated for 

some or all of the same damages from a different source 

independent of the tortfeasor [and whose payment, therefore, is 

'collateral' to him]"). Compare also Overton v. United States, 

619 F.2d 1299, 1306 (8th Cir. 1980) ("The rule permits recovery 

against a wrongdoer for the full amount of damages even though 

the plaintiff is also compensated from a different source (such

as an insurance company) which is 'wholly independent' of the 

wrongdoer and whose payment is therefore collateral to his"); 

Helfend v. Southern Cal. Rapid Transit Dist., 2 Cal. 3d 1, 6 

(1970).
14

plaintiff received from insurance proceeds where defendant did 

not contribute to payment of insurance premiums); 22 Am. Jur. 2d 

Damages § 405 (2013) ("The 'collateral source rule' provides 

that a payment made to an injured party as compensation for 

injuries from a source wholly independent of the tortfeasor

should not be deducted from the damages that the plaintiff would 

otherwise collect from the tortfeasor" [emphasis added]). 

Similarly, "[a] payment made by one acting for a tortfeasor to 

someone whom the tortfeasor has injured is a credit against the 

tortfeasor's liability. Such payment may come under an 

insurance policy maintained by the defendant, whether made under 

a liability provision or without regard to liability" (emphasis 

added; footnote omitted). Id. at § 400.

Conclusion. Where Williams has established that it 

purchased an insurance policy from Hannover that provided 

coverage for Gilbody's premises as an insured location, and that 

policy paid to Bunker Hill on behalf of Gilbody the amount of 

$131,447.03 for remediation of the property after the oil spill, 

we hold that the source of the payment from Hannover for 

Gilbody's property remediation under the policy issued to 

Williams is from the same source as the negligence damages 

assessed against Williams and is not collateral to Williams. 

Williams is entitled to an offset in the amount of the payment 
15

from Hannover to Bunker Hill for the remediation of Gilbody's 

property. 

The judgment is to be modified by reducing the award of 

damages by $131,447.03 and by also reducing the award of 

prejudgment interest to correspond with the modified damage 

award. As so modified, the judgment is affirmed.

So ordered.