Schultz v. Tilley
AC 15-P-1706
| Mass. App. Ct. | May 18, 2017Background
- Christopher Tilley completed a Vermont Mutual homeowner insurance application in Dec. 2010, identifying an American Bulldog on the premises and answering “No” to a loss-history question; agent Faithful wrote “American bull dog -- no biting incidents.”
- Vermont Mutual issued the policy. On Mar. 18, 2011, the dog (Bocephus) attacked plaintiff Edith Schultz’s dogs, and Schultz was injured.
- Vermont Mutual’s investigation revealed two prior incidents (Nov. 2009 and July 2010) in which Bocephus bit other dogs; Christopher acknowledged knowing about those incidents when he applied.
- Vermont Mutual sought a declaratory judgment that the policy was void for material misrepresentations as to (a) bite history and (b) loss history; the Superior Court conducted a bench trial on coverage only.
- The Superior Court found the bite-history answer was a material misrepresentation (reading “bite history” broadly), rescinded coverage, and (erroneously) entered final judgment dismissing Schultz’s claim against Vermont Mutual.
- On appeal the Appeals Court reviewed ambiguity of the application questions, concluded both the bite-history and loss-history questions were reasonably susceptible to interpretations favorable to the insureds, reversed rescission, and vacated the final judgment dismissing Schultz’s count against Vermont Mutual.
Issues
| Issue | Plaintiff's Argument (Schultz/Tilleys) | Defendant's Argument (Vermont Mutual) | Held |
|---|---|---|---|
| Whether answering "no" to the application "bite history" question was a material misrepresentation | Christopher answered honestly as he understood the question (referring to bites on humans), so no misrepresentation | "Bite history" reasonably meant any past biting incidents (including bites of other animals); nondisclosure was material | Reversed: "bite history" ambiguous; reasonable interpretation limiting to humans favored insureds, so no misrepresentation |
| Whether failing to disclose a $200 vet payment was a material misrepresentation in the "loss history" question | $200 payment not reasonably a "loss" requiring disclosure; insured’s interpretation reasonable | Any payment made by insured for a prior incident is a loss that must be disclosed | Reversed: "loss history" ambiguous as to de minimis threshold; $200 disclosure not required for rescission |
| Whether insurer may rescind policy for misrepresentations absent actual intent to deceive or increased risk | Insureds: no actionable misrepresentation occurred; thus no basis for rescission | Insurer: misrepresentations were material and justified voiding the policy | Court: no material misrepresentation proved because of ambiguity; rescission improper |
| Whether the Superior Court properly entered final judgment dismissing Schultz’s unfair-claim-practices count (count V) despite prior stipulation to dismiss without prejudice | Stipulation intended dismissal without prejudice; final judgment improper | (No substantial opposing position preserved) | Reversed: entering final judgment was an abuse of discretion; vacated |
Key Cases Cited
- Commerce Ins. Co. v. Gentile, 472 Mass. 1012 (discussing insurer's right to deny coverage for material misrepresentations)
- Barnstable County Ins. Co. v. Gale, 425 Mass. 126 (material misrepresentation principles in insurance context)
- Hingham Mut. Fire Ins. Co. v. Mercurio, 71 Mass. App. Ct. 21 (analysis of ambiguity in application questions and reasonable interpretations)
- Winbrook Communication Servs., Inc. v. United States Liab. Ins. Co., 89 Mass. App. Ct. 550 (contracts interpreted by their fair meaning)
- Davis v. Allstate Ins. Co., 434 Mass. 174 (principles for interpreting insurance policy language)
- Barnstable v. American Financial Corp., 51 Mass. App. Ct. 213 (definition of ambiguity in policy language)
- Rass Corp. v. Travelers Cos., 90 Mass. App. Ct. 643 (insured entitled to most favorable reasonable interpretation)
- Hazen Paper Co. v. United States Fid. & Guar. Co., 407 Mass. 689 (interpretive rule favoring insured when policy language is ambiguous)
- Kobrin v. Board of Registration in Med., 444 Mass. 837 (abuse of discretion standard for erroneous final judgment entries)