USF Insurance Co. v. Langlois

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13-P-1387 Appeals Court
USF INSURANCE COMPANY vs. DAVID LANGLOIS & others, 1 trustees, 2
& others. 3
No. 13-P-1387.
Essex. May 6, 2014. - July 22, 2014.
Present: Rapoza, C.J., Brown, & Berry, JJ.
Insurance, Fire, Business owner's policy, Construction of
policy, Insured, Illegal acts exclusion. Contract,
Insurance, Construction of contract.
Civil action commenced in the Superior Court Department on
December 23, 2010.
The case was heard by James F. Lang, J., on motions for
summary judgment.
Mark I. Zarrow for the defendants.
Thomas M. Tang for the plaintiff.
1
Robert Langlois, Bruce Langlois, and Richard J. Langlois.
2
Of the Langlois Family Realty Trust, also known as the
Langlois Family Trust.
3
Smith's Tavern, Inc. of Haverhill, also known as Smith's
Tavern of Haverhill, Inc.; and David Langlois, Robert Langlois,
Bruce Langlois, and Richard J. Langlois in their capacities as
directors of Smith's Tavern, Inc. of Haverhill.
2
BROWN, J. The defendants appeal the declaratory judgment
allowing the plaintiff's motion for summary judgment. We
affirm.
1. Background. The facts giving rise to this action are
undisputed. In 1983, the Langlois Family Realty Trust (trust)
was formed to hold legal title to real estate in Haverhill.
Richard A., Robert, and David Langlois were the original
trustees, and Richard J. and Bruce Langlois were, respectively,
first and second successor trustees. 4 Richard A. passed away in
1988; however, the trust provided that David and Robert would
continue as trustees and that Bruce would only serve as trustee
upon the deaths of the original three. Robert, David, Richard
J., and Bruce were named the beneficiaries, as joint tenants
with rights of survivorship. 5
Smith's Tavern, Inc. of Haverhill (corporation) leased a
building owned by the trust. Robert, David, Richard J., and
Bruce all served as directors of the corporation. 6 The
4
Richard A. is the father of Robert, David, Richard J., and
Bruce.
5
We note that on April 4, 2012, the trust was modified,
removing Bruce as a successor trustee and as a beneficiary.
6
We note that as of March 1, 2011, Bruce was removed as a
director of the corporation and that in or about April, 2012,
Bruce transferred his shares of stock to the corporation.
3
corporation operated as a bar and restaurant. David and Robert
managed the restaurant; Bruce worked as a bartender.
In July, 2010, the plaintiff, USF Insurance Company, issued
an insurance policy with the "Named Insured" listed as "LANGLOIS
FAMILY TRUST AND SMITH'S TAVERN OF HAVERHILL, INC." The policy
provided a coverage limit of $20,000 for loss of business
personal property and a coverage limit of $150,000 for loss of
the building. The policy also contained an exclusions
provision, explaining that the plaintiff would not pay for loss
or damage caused by "[d]ishonest or criminal act[s] by you, any
of your partners, members, officers, managers, employees . . . ,
directors, trustees, . . . or anyone to whom you entrust the
property for any purpose."
On November 12, 2010, Bruce set fire to the building leased
by the corporation and was charged with arson. He pleaded
guilty, confessing that he acted with animus towards his
estranged brothers. The loss was reported to the plaintiff,
which then brought this declaratory judgment action to determine
its coverage obligations under the policy. 7 On cross motions for
summary judgment, the judge ruled in favor of the plaintiff,
concluding that due to Bruce's act, both the corporation's and
7
The complaint named as defendants the trust, the
corporation, and Robert, David, Richard J., and Bruce in their
capacities as trustees of the trust and directors of the
corporation.
4
the trust's interests were subject to the exclusions provision
of the policy. This appeal ensued.
2. Discussion. a. The policy. As "[t]he interpretation
of an insurance contract is not a question of fact for the
jury," summary judgment is appropriate. Cody v. Connecticut
Gen. Life Ins. Co., 387 Mass. 142, 146 (1982). Therefore, we
review the matter de novo to determine "whether the evidence,
viewed in the light most favorable to the nonmoving party, shows
that the moving party is entitled to judgment as a matter of
law." Albahari v. Zoning Bd. of Appeals of Brewster, 76 Mass.
App. Ct. 245, 248 (2010) (footnote omitted).
On appeal, the defendants allege various ambiguities in the
insurance policy. As a threshold matter, we note that
ambiguities in an insurance policy are resolved against the
insurer, in favor of the insured. Chow v. Merrimack Mut. Fire
Ins. Co., 83 Mass. App. Ct. 622, 630 (2013). Alternatively, if
the language in the policy is unambiguous, its terms will be
construed according to their plain meaning. Sullivan v.
Southland Life Ins. Co., 67 Mass. App. Ct. 439, 442 (2006).
When they executed the policy, the defendants understood
that the trust's building and the corporation's personal
property were being insured. See Hazen Paper Co. v. United
States Fid. & Guar. Co., 407 Mass. 689, 700 (1990) (when
construing insurance policy, we consider "what an objectively
5
reasonable insured . . . would expect to be covered").
Accordingly, the defendants understood that both the trust and
the corporation were named insureds under the policy. See
Jacobs v. United States Fid. & Guar. Co., 417 Mass. 75, 78
(1994) ("'Named insured' has a clear and explicit meaning. It
is the individual or entity who is listed on the declarations
page"). The fact that "Named Insured" is listed in singular
form on the declarations page is not material and does not
present an ambiguity.
Likewise, the policy's "BUILDING AND PERSONAL PROPERTY
COVERAGE FORM" defines the terms "you" and "your" throughout the
policy to mean the "Named Insured shown in the Declarations."
Applying this definition, the policy excludes coverage to the
named insured whose dishonest or criminal act causes loss or
damage to the insured property. The defendants understand this,
evidenced by the fact they concede that the corporation is
barred from recovering for damages to its personal property, as
Bruce was a director of the corporation at the time he committed
the arson.
b. Innocent coinsured. The defendants' principal argument
on appeal is that the trust, the innocent coinsured, should not
be barred from recovering insurance proceeds for the loss of the
building. This issue is controlled in material respects by the
reasoning in Kosior v. Continental Ins. Co. 299 Mass. 6016
(1938). There the court held that if the coinsureds' interests
in an insurance policy are joint and nonseverable, the innocent
coinsured may not recover fire insurance after the blamable
coinsured intentionally burned the covered property. See id. at
604 ("Cases dealing with policies which by their express terms
permit of a severance of interest of the insured are not in
point"). See also Yerardi v. Pacific Indem. Co., 436 F. Supp.
2d 223, 248 (D. Mass. 2006) ("Kosior may not apply to cases
where the insureds' interests and obligations under the relevant
policy are severable").
We think the judge properly determined that there was no
genuine dispute that the trust's and the corporation's interests
were "inextricably intertwined" and thus nonseverable. At the
time of the fire, all four brothers were directors of the
corporation, each sharing a twenty-five percent ownership
interest, and two of the four brothers (Robert and David) were
named trustees of the trust with the other two brothers (Richard
J. and Bruce) listed as successor trustees. In addition, all
four brothers were named beneficiaries of the trust, each
holding joint interests with rights of survivorship. Moreover,
the policy goes further and excludes recovery for loss or damage
caused by "anyone to whom you entrust the property for any
purpose." Though the Langlois family attempted to cover their
bases by listing the trust and the corporation as separate
7
entities in the policy, it still follows that the trust
entrusted the corporation with the care of the building.
Consequently, despite the trust's innocence, Bruce's intentional
arson left the entire insurance policy subject to the
exclusionary provision. See Kosior v. Continental Ins. Co.,
supra at 604 (husband unilaterally "burning the insured
buildings was an act of the 'insured,' . . . which rendered the
policies void in accordance with their terms").
c. Standard form policy. We do not address the
defendants' argument regarding the Massachusetts standard form
policy because this issue was raised for the first time on
appeal and therefore is deemed waived. See Martins v.
University of Mass. Medical School, 75 Mass. App. Ct. 623, 634
n.17 (2009).
Judgment affirmed.