Source: http://masscases.com/cases/app/55/55massappct715.html
Timestamp: 2019-04-26 01:40:24+00:00

Document:
LIQUOR LIABILITY JOINT UNDERWRITING ASSOCIATION OF MASSACHUSETTS vs. AIM INSURANCE AGENCY.
Insurance, Liquor liability insurance, Misrepresentation, Broker. Broker, Insurance. Consumer Protection Act, Insurance.
CIVIL ACTION commenced in the Superior Court Department on March 31, 1992.
The case was heard by Elizabeth Butler, J.
Steven L. Schreckinger for the plaintiff.
Jerry E. Benezra for the defendant.
BROWN, J. This appeal concerns a liquor liability insurance policy written by the Liquor Liability Joint Underwriting Association of Massachusetts (LLJUA) for its insured, Quincy Motel Corporation (QMC). That policy provided the maximum amount of liquor liability coverage -- $500,000 per claimant/$1 million per occurrence -- and insured QMC's Aquarius Lounge located in Quincy.
After a jury-waived trial, a Superior Court judge made detailed findings of fact and concluded that AIM had neither made any false statement nor acted in violation of c. 93A. We affirm the Superior Court judgment.
64 (1991). Applicants for LLJUA insurance are required to complete its application form.
"You [i.e., applicant] may not purchase liquor liability insurance from the [LLJUA] with policy limits greater than your general liability limits (including applicable umbrella and excess coverage) for the premises sought to be insured, except that if your general liability policy limits fall below or between the limits offered by the [LLJUA], you may purchase the next highest liquor liability limits (i.e., if you have $200,000 per person/$400,000 per occurrence general liability limits, you may purchase $250,000/$500,000 liquor liability limits; if you have no general liability coverage or less than $100,000/$200,000 per occurrence, you may still purchase the $100,000/$200,000 liquor liability limits.)"
"$_____ aggregate $_____ umbrella or excess"
Here, QMC's application, as submitted by AIM, did not furnish any response whatsoever to question 3.B.1; it was simply left blank.
QMC and AIM furnished a binder [Note 5] for a general liability insurance policy that had been issued to QMC. The binder, which consists of a single page, disclosed that the general liability policy had been written by "United National Company"
(United) with a liability limit of $1 million, and that the "insured" was "Quincy Bay Inn DBA, Quincy House Corp., Quincy Motel Corp., Aquarius Lounge, Emerald City Realty Trust, 29 Hancock Street, Quincy, MA 02171."
"LIMIT OF LIABILITY -- $1,000,000. CSL -- OWNERS, LANDLORDS AND TENANTS 1973 OCCURRENCE FORM -- DEDUCTIBLE $5,000. EXCLUDE -- ASBESTOS, POLLUTION, PUNITIVE DAMAGES, ANIMALS, WATER DAMAGE, LEAD PAINT POISON, ASSAULT AND BATTERY, SEXUAL ASSAULT, LOUNGE & NIGHTCLUB.
The premium calculation performed by AIM was based on a rate applicable only to a policy with $500,000/$1 million coverage. The LLJUA was free to change the premium if it determined the applicant did not qualify for the requested coverage.
"There was no testimony or exhibits [sic] offered by the LLJUA to warrant a finding that Jackie Cournoyer, or anyone else at AIM, made that misrepresentation. The only evidence of what Quincy Motel represented the coverage to be in its application is in the binder Quincy Motel provided. That binder makes no such statement. It states that the nightclub and lounge are excluded."
The present case is unlike St. Paul Surplus Lines Ins. Co. v. Feingold & Feingold Ins. Agency, Inc., 427 Mass. 372 (1998), where an independent insurance broker, acting on behalf of an insured, was held liable, on theories of misrepresentation and violation of c. 93A, for placing material misinformation on an insurance application. There, a jury had found that the broker knowingly made false representations of a factual nature to the insurer, with the intention or expectation that the insurer would rely on the representations. Id. at 374. Based on the jury's findings, the court ruled it was appropriate to impose liability on the broker, who "knew, or reasonably should have known, that disclosure of the truth would have led the insurer to reject the application." Id. at 377.
failing even to read the binder itself, the LLJUA cannot now complain it was misled by the binder's terms. Compare Gishen v. Dura Corp., 362 Mass. 177 , 179 (1972) ("request for clarification" by plaintiff as to commission computation made it incumbent upon defendant to disclose all material facts), with Nei v. Burley, 388 Mass. 307 , 311 (1983) (buyer did not avail himself of opportunity to inquire, and, thus, seller's silence was not actionable). At worst, the binder required some care in reading its terms; on no account, however, can it be said that the binder contained a falsehood, or a half truth, which standing uncorrected by a fuller disclosure, warranted the imposition of liability. Accordingly, dismissal of the LLJUA's misrepresentation claim was not error.
4. Requests for costs. AIM's request for double costs and damages pursuant to Mass.R.A.P. 25, as appearing in 376 Mass. 949 (1979), is denied.
[Note 1] Among its other allegations, the LLJUA asserted that QMC had knowingly misrepresented its general liability coverage in the application.
[Note 2] Those claims, in essence, reduced to whether AIM had represented, expressly or impliedly, to the LLJUA that there was in place, in 1989, general liability insurance coverage (with a $1 million limit) on the Aquarius Lounge.
[Note 3] Though they stipulated to many of the underlying material facts, the parties diverged sharply as to the conclusions to be drawn from those facts.
[Note 4] "It is a specific risk policy, designed by the Legislature to provide such establishments with coverage against liability imposed because alcohol was negligently given to an individual with resulting injury for which damages are sought." Jimmy's Diner, Inc. v. Liquor Liab. Joint Underwriting Assn. of Mass., 410 Mass. 61 , 65 (1991).
[Note 5] Though the application form does not refer to a binder, the parties stipulated that an insurance binder was an acceptable substitute for a declarations page.
[Note 6] The judge found that "there is a custom and practice that the agent [i.e., AIM] assists the insured if there are questions concerning items in the section requiring information from the applicant; that the agent fills out the information in the Agent or Brokers Section of the application; and that the agent fills in the information relating to premium calculations which appears on the page after the Agent or Brokers section." The application was submitted by AIM, on behalf of QMC, to the LLJUA in January of 1989. On QMC's behalf, Kenan Nacar, a company vice-president, also signed the application.
[Note 7] Although it figures prominently in the events at issue, Alexsis was not named as a party to this lawsuit.
[Note 8] There was evidence to the effect that it is common for an insurance agent or broker to field inquiries from either the LLJUA or other insurance company underwriters.
[Note 9] In defense of those claims, the LLJUA initially took the position that it would only provide coverage of $100,000 per person and $200,000 per occurrence. The LLJUA subsequently changed course, reserving its rights, by paying monies in excess of the $100,000/$200,000 limits, which, in the end, totaled $550,000, the amount (exclusive of attorney's fees) that the LLJUA claimed as damages in this action.
[Note 10] The judge found the "only 'statement' concerning general liability coverage was the general liability binder and that 'statement' was made only by Quincy Motel, not by AIM." The LLJUA says that AIM, not QMC, was the one who spoke. In the end, the proffered distinction is immaterial given the truth of the binder.
Similarly, the judge determined that the certification provision, immediately prior to the premium calculation, was connected solely to the applicant who signs the application; her finding on this point, while debatable, is not clearly erroneous.
[Note 11] "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." Ayers v. Massachusetts Blue Cross, Inc., 4 Mass. App. Ct. 530 , 536 (1976), and cases cited therein.
[Note 12] It cannot be said, as AIM would have us believe, that there was simply an opinion, estimate, or judgment by AIM that QMC was entitled to the maximum limits.
[Note 13] For the proof necessary to show a negligent misrepresentation, see Golber v. BayBank Valley Trust Co., 46 Mass. App. Ct. 256 , 257 (1999). See also Restatement (Second) of Torts § 552(1) comment a (1977).
[Note 14] Section 186 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." For interpretation, see Barnstable County Ins. Co. v. Gale, 425 Mass. 126 (1997).
[Note 15] Our opinion, however, should not be construed as endorsing a broker's submission of an incomplete application with the hope that the application might slip through a crack within the LLJUA's review process. Cf. Bernal v. Weitz, 54 Mass. App. Ct. 394 , 396 (2002).

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