Supreme Judicial Court of Massachusetts, Worcester
Heard: March 7, 2019.
action commenced in the Superior Court Department on January
motion to deposit money with the court or in an
interest-bearing account was heard by Richard T. Tucker, J.
application for leave to prosecute an interlocutory appeal
was allowed by Ariane D. Vuono, J., in the Appeals Court, and
the appeal was reported by her to a panel of that court. The
Supreme Judicial Court on its own initiative transferred the
case from the Appeals Court.
action commenced in the Superior Court Department on August
to stay were heard by David Ricciardone, J., and the case was
heard by him.
Supreme Judicial Court on its own initiative transferred the
case from the Appeals Court.
P. Graceffa (Lawrence M. Slotnick also present) for Commerce
R. Bikofsky & Michael K. Gillis (Joseph I. Rogers also
present) for Justina M. Szafarowicz & others.
Stephanie V. Corrao & Laura A. Foggan, of the District of
Columbia, Richard J. Riley, & Peter C. Kober, for Complex
Insurance Claims Litigation Association & another, amici
curiae, submitted a brief.
Marrkand & Mathilda S. McGee-Tubb, for Massachusetts
Insurance and Reinsurance Bar Association, amicus curiae,
submitted a brief.
Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher,
& Kafker, JJ.
appeals present three issues that arise where a motor vehicle
insurer recognizes its duty to defend its insureds in a
wrongful death action, but does so under a reservation of
rights, and then brings a separate action seeking a
declaratory judgment that it owes no duty to indemnify its
insureds for damages arising from the wrongful death action
under the "Optional Bodily Injury To Others"
provision of the insurance policy.
these three issues, we conclude, first, that there was no
abuse of discretion in the judge's denial of the
insurer's motions to stay trial in the wrongful death
action until the question of coverage had been determined in
the declaratory judgment action.
over the insurer's objection, the parties settled the
wrongful death action before trial through agreements in
which the defendants admitted to negligence, agreed that the
amount of damages would be determined through a damages
assessment hearing, and assigned all their rights under the
insurance policy to the plaintiff. In return, the plaintiff
agreed to release the defendants from liability and seek
damages only from the insurer. Because of the amount of
damages assessed (more than $5 million, plus prejudgment
interest) and because the policy obligated the insurer to pay
postjudgment interest, the insurer moved to deposit with the
court the policy limits and the accrued postjudgment interest
under Mass. R. Civ. P. 67, 365 Mass. 835 (1974), in an
attempt to prevent the continued accrual of postjudgment
interest pending resolution of the declaratory judgment
action and the insurer's appeal in the wrongful death
action. We conclude that the judge did not abuse his
discretion in denying the insurer's motion to deposit
we conclude that, where the insurer timely objected to the
settlement/assignment agreements, and where it is obligated
to pay the accrued postjudgment interest on the wrongful
death judgment, the insurer may be bound by the amount of
that judgment only where a judge determines that the
settlement/assignment agreements were reasonable under the
circumstances. Here, the settlements were executed with no
determination of reasonableness. We therefore vacate the
wrongful death judgment and remand the case to the Superior
Court for a hearing on the reasonableness of the
relevant factual and procedural background is not materially
in dispute. On August 3, 2013, shortly after a verbal
altercation at a bar in Leominster, David M. Szafarowicz was
struck and killed by a vehicle operated by Matthew Padovano,
who later pleaded guilty to voluntary manslaughter in
connection with the fatal incident. The vehicle was owned by
Matthew's father, Stephen Padovano, who had purchased an
automobile insurance policy from Commerce Insurance Company
M. Szafarowicz, David's mother, in her capacity as
special representative of David's estate (estate),
brought a wrongful death action against the Padovanos in the
Superior Court, claiming that David's death was caused by
Matthew's gross negligence in operating a motor vehicle
that was negligently entrusted to him by Stephen. Under the
Commerce insurance policy, Stephen was covered for bodily
injury to others by compulsory insurance in the amount of
$20,000 per person, and by optional insurance in the
additional amount of $480,000 per person.
acknowledged its duty to defend the Padovanos in the wrongful
death action under its policy. See Metropolitan
Prop. & Cas. Ins. Co. v.
Morrison, 460 Mass. 352, 357 (2011)
(Morrison), quoting Billings v.
Commerce Ins. Co., 458 Mass. 194, 200-201 (2010)
("An insurer has a duty to defend an insured when the
allegations in a complaint are reasonably susceptible of an
interpretation that states or roughly sketches a claim
covered by the policy terms").
its duty to indemnify for damages, Commerce acknowledged its
duty to pay the $20,000 in compulsory insurance (and
ultimately paid the estate this amount) but issued a
reservation of rights regarding the $480,000 in optional
insurance. By doing so, Commerce effectively reserved its
right to refuse to indemnify the Padovanos beyond $20,000 for
damages arising from the wrongful death action if it were
determined that David's death was caused by Matthew's
intentional act, and was therefore not an
"accident" covered by the terms of the
policy. See Morrison, 460 Mass.
at 357, quoting A.W. Chesterton Co. v.
Massachusetts Insurers Insolvency Fund, 445 Mass.
502, 527 (2005) (duty to defend "is independent from,
and broader than, [the] duty to indemnify"); Three
Sons, Inc. v. Phoenix Ins. Co., 357
Mass. 271, 276 (1970) ("A reservation of rights . . .
notifies the insured that the insurer's [defense] is
subject to the later right to disclaim liability").
January 21, 2014, approximately five months after the estate
initiated the wrongful death action, Commerce brought a
separate declaratory judgment action against the Padovanos
and the estate, seeking a declaration from the court that
Commerce had no obligation under its optional insurance
coverage to indemnify the Padovanos for the damages arising
from the fatal incident. The wrongful death action and the
declaratory judgment action were consolidated for discovery
April 21, 2016, less than three weeks before the trial in the
wrongful death case was scheduled to begin, Commerce filed an
emergency motion to intervene and participate in that case
pursuant to Mass. R. Civ. P. 24, 365 Mass. 769 (1974) .
Commerce noted that, based on the summary of evidence
proffered by the prosecutor at Matthew's plea hearing, on
the night of David's death, Matthew and his girlfriend
got into a dispute with David at a bar and the staff asked
the three to leave. Matthew and his girlfriend went out the
back door, where Matthew's vehicle was parked, and David
left through the front door and walked into the bar's
parking lot. Rather than depart, Matthew returned in his
vehicle to the bar's parking lot, where he saw David and
drove near him. David gestured toward Matthew, who then
accelerated his vehicle and ran over David, dragging him for
forty to fifty feet, killing him.
noted that, in the wrongful death action, the estate's
attorneys had presented a quite different description of
events that was consistent with their theory of negligence.
The estate's attorneys contend that when Matthew returned
in his vehicle to the bar's parking lot, he was
frightened by unknown persons who came from the bar with
knives, and did not see David when he ran over him.
argued that it should be permitted to intervene because
neither the estate nor the Padovanos had any incentive to
offer evidence tending to show that the incident was not an
accident, because all parties to the action "would
prefer that insurance coverage exist for this loss."
Commerce wished to ensure that, if a judgment were to issue
in the wrongful death action premised on the finding that
David's death was caused by Matthew's negligence
rather than by his intentional conduct, it would not be
procedurally foreclosed in the declaratory judgment action
from litigating the dispositive issue whether David's
death arose from an accident.
judge ordered that the wrongful death trial be continued, and
conducted a hearing on Commerce's motion to intervene on
May 4, 2016. In his decision denying the motion to intervene,
issued on August 22, 2016, the judge acknowledged that
Commerce had reason to be concerned about the risk of
"underlitigation" in the wrongful death suit
-– which he defined, quoting Pryor, W. Page Keeton
Symposium on Tort Law, The Stories We Tell: Intentional Harm
and the Quest for Insurance Funding, 75 Tex. L. Rev. 1721,
1722 (1997), as "a plaintiff's choice to plead and
prove negligence rather than or in addition to intentional
tort theories when, absent insurance considerations, the
plaintiff would either frame the case solely as an
intentional tort claim or emphasize the intentional tort
claim." The judge noted the "legitimate
interest" of a liability insurer in preventing improper
underlitigation of tort claims, and recognized that it would
be "patently unfair" to require Commerce to be
bound by a jury's negligence finding in the wrongful
death action if it were denied the means to challenge the
validity of that finding.
judge also recognized the need to balance the rights of the
insurer with those of the insured. He noted, first, that the
Padovanos would be "severely compromised" in their
ability to defend themselves if their insurer were permitted
to actively participate in the trial and offer evidence that
Matthew intentionally struck David. Second, citing concerns
raised in Goldstein v. Gontarz,
364 Mass. 800 (1974), the judge noted that Commerce's
participation would alert the jury to the possible existence
of insurance coverage for the automobile that caused
David's death, and to the possibility that an insurer may
therefore be responsible to pay some or all of the damages if
liability were found. Id. at 808 ("Exposing
juries to [evidence of insurance coverage] is condemned
because it is not itself probative of any relevant
proposition and is taken to lead to undeserved verdicts for
plaintiffs and exaggerated awards which jurors will readily
load on faceless insurance companies supposedly paid for
taking the risk") .
to balance these considerations, the judge chose to adopt a
"carefully balanced procedural solution" crafted by
the Court of Appeals of Maryland in Allstate Ins.
Co. v. Atwood, 319 Md. 247 (1990)
(Atwood). The Atwood court concluded that,
where there is a risk of underlitigation, it is not
appropriate to allow the "insurer to intervene in the
trial of the tort suit against its insured,"
id., at 258, but leaving an insurer with no legal
avenue to challenge a potentially collusive damages award
would be contrary to "considerations of public policy
and fairness." Id. at 262. Therefore, the court
ruled that "the insurer should be able to bring a
post-tort trial declaratory judgment action" where the
judge "would first determine, as a legal matter, whether
the issue, which was resolved in the tort trial and which
determines insurance coverage, was fairly litigated in the
tort trial." Id. If the judge were to determine
that it was fairly litigated, then there would be no
relitigation of the issue in the declaratory judgment action.
However, if the judge were to determine that it was not
fairly litigated, "then the insurer should be permitted
to relitigate the matter in the declaratory judgment
action." Id. The motion judge declared that
this procedure would be consistent with our holding in
Blais v. Quincy Mut. Fire Ins.
Co., 361 Mass. 68, 70-71 (1972) -- that an insurer is
bound by an underlying judgment as to insurance coverage, so
long as there is no "fraud or collusion" -- with
the declaratory judgment action determining whether the tort
action was indeed tainted by fraud or collusion.
the denial of its motion to intervene, Commerce moved to stay
the wrongful death trial until after the question of
insurance coverage was resolved in the declaratory judgment
action. Another judge denied the motion.
before the wrongful death trial was scheduled to begin, the
estate and the Padovanos entered into agreements to settle
the wrongful death suit. Under the agreements, Matthew agreed
that he "grossly negligently" caused David's
injuries, and Stephen admitted liability for negligent
entrustment of the vehicle. The parties agreed that damages
would be determined in a jury-waived proceeding. The estate
agreed that it would not seek to collect or enforce any
judgment against the Padovanos beyond the amount payable
under their insurance policy, and the Padovanos agreed both