Suffolk. Civil action commenced in the Supreme Judicial Court for the county of Suffolk on August 20, 1974. The case was reserved and reported by Kaplan, J., on a statement of agreed facts.
Hennessey, C.j., Quirico, Braucher, Kaplan, & Wilkins, JJ.
Insurance, Commissioner of Insurance, Insolvency of insurer. Massachusetts Insurers Insolvency Fund. Unjust Enrichment.
The opinion of the court was delivered by: Wilkins
Under the provisions of G. L. c. 175D, the Massachusetts Insurers Insolvency Fund was not required to pay for goods and services furnished by adjusters, appraisers, attorneys, and others to an insurer prior to its insolvency, even though the Fund used those goods or the products of those services in settling the insolvent insurer's covered claims. [802-805]
Nothing in G. L. c. 175D imposed liability on the Massachusetts Insurers Insolvency Fund to pay for claim reports prepared at the direction of the Commissioner of Insurance, acting as a temporary receiver, nor did it authorize the Commissioner to commit the Fund to pay pre-insolvency obligations. [805-807]
On the central issue in this case, we hold that the Massachusetts Insurers Insolvency Fund (Fund) is not liable to adjusters, appraisers, attorneys, and others who furnished goods or services to Rockland Mutual Insurance Company (Rockland) prior to its insolvency, even if the Fund used those goods or the product of those services in settling Rockland's affairs.
On July 10, 1974, Rockland, a mutual insurance company incorporated under the laws of the Commonwealth, was adJudged to be insolvent, and the Commissioner of Insurance (Commissioner) was appointed permanent receiver. In early August, 1974, the Fund entered Rockland's premises and undertook to settle, investigate, negotiate, and defend claims by or against Rockland's policyholders pursuant to the Fund's statutory obligations under G. L. c. 175D. The Fund is a statutorily mandated, nonprofit, unincorporated association of all insurers writing certain kinds of direct insurance in the Commonwealth. See G. L. c. 175D, §§ 1 (5), 2, 3. *fn1 Chapter 175D prescribes a procedure for the formation and maintenance of the Fund in order that it will be available to settle certain unpaid claims which arise out of and are within the coverage of an insurance policy issued by an insolvent insurer. See G. L. c. 175D, §§ 3, 4, 5 (1) (a), 6. The Fund's obligations and expenses are assessed to the insurers belonging to the Fund. G. L. c. 175D, § 5 (1) (c). The net amounts which insurers must pay to the Fund, in response to assessments by the Fund, must be reflected in future rates. G. L. c. 175D, § 13. We are advised that this is the first insolvency of an insurer in which the Fund has been involved.
The Commissioner, as receiver, argues that the Fund must pay for its use of reports, estimates, appraisals, and other information prepared and delivered to Rockland prior to its insolvency by attorneys, independent claims adjusters, physical damage appraisers, and others. The Fund denies any such obligation. On August 20, 1974, the Commissioner filed a complaint seeking a determination of this issue. The receiver and the Fund stipulated that the Fund would use various documents in Rockland's claim files, without prejudice, while this case was being resolved. Thereafter, various organizations and individuals who had furnished services or had sold supplies to Rockland were permitted to intervene and to file complaints setting forth the nature of their claims and the amounts allegedly due. *fn2
The Fund filed a motion for summary judgment, supported by affidavits. The Commissioner and his counsel filed counteraffidavits. The motion for summary judgment was heard by a single Justice of this court, and he reported the case, without decision, to the full court on a statement of agreed facts. The statement of agreed facts purports to be an agreement as to all the material facts, but it is not. There are unresolved issues of fact which would prevent a final determination of each of the claims, if the Fund were liable to the several claimants. However, the agreement as to facts contains sufficient information to permit us to determine whether the Fund's motion for summary judgment should be allowed, the basic issue the single Justice reported to us.
In our Discussion of the Fund's obligation to certain of Rockland's pre-insolvency creditors, it is important to note what is not involved in this case. We are not concerned with whether these creditors have rights against the receiver or any assets held by him, nor with whether the receiver, with or without prior court approval, might properly allow payment of such creditors in full from the assets of Rockland. *fn3 Nor are we concerned with whether the Fund may look to the assets of the insolvent insurer, held by the receiver, for reimbursement for claims paid and for expenses incurred. *fn4 In addition, we need not decide whether the Fund has authority to pay claims of such creditors voluntarily, to bind its members to reimburse it for those expenditures, and to commit the Commissioner to permit recovery of such amounts in future rates. And, we are not presented with the question whether the Fund has a right to the claim files of insolvent insurers over the objection of the receiver. *fn5 By stipulation, the Fund and the receiver avoided an impasse over the Fund's right to Rockland's records. *fn6 The receiver's complaint seeks a declaratory judgment concerning the Fund's obligation to pay certain of Rockland's pre-insolvency creditors. That question is the principal one before us.
1. The receiver and the interveners advance several theories under which the Fund is said to be liable to Rockland's pre-insolvency creditors whose goods or services have been used by the Fund in fulfilling its statutory obligations. They assert that G. L. c. 175D requires the Fund to satisfy such creditors and that, in order to make the statutory scheme operate, the receiver must have authority to direct the Fund to pay such creditors. The receiver also argues, but most briefly, that the Fund is liable to the interveners on a theory of unjust enrichment.
Chapter 175D does not mandate that the Fund pay any pre-insolvency creditor of Rockland, apart from those having covered claims arising out of and within the coverage of an insurance policy issued by Rockland. Section 5 (1) (a) of G. L. c. 175D states that the Fund is "obligated to the extent of the covered claims against the insolvent insurer existing prior to the declaration of insolvency" and to the extent of certain post-insolvency covered claims. *fn7 See G. L. c. 175D, § 5 (1) (b), to the same effect. Chapter 175D places no other explicit obligation on the Fund.
The Fund is directed by § 5 (1) (c), as amended by St. 1975, c. 341, § 4, to assess its members "the amounts necessary to pay the obligations of the Fund and the expenses of handling covered claims subsequent to an insolvency. . . and other permissible expenses incurred under this chapter" (emphasis supplied). This language imposes no obligations on the Fund to pay pre-insolvency creditors of an insolvent insurer; it recites the scope of potential obligations of the Fund's member insurers to it. "Permissible expenses" refers to expenses which the Fund may incur in fulfilling its functions, but those words neither define what those expenses are nor designate any particular obligation as mandatory. *fn8 Similarly, the words "expenses of handling covered claims subsequent to an insolvency" refer only to expenses incurred by the Fund but do not ...