| Mass. | Apr 11, 1995
The principal issue in this case is whether the plaintiff, an unincorporated domestic reciprocal insurance exchange (Exchange), created pursuant to G. L. c. 175, §§ 94A-94M (1992 ed.), lawfully terminated its attorney-in-fact agreement (agreement) with the defendant (Propac). Under the agreement, Propac agreed to perform certain management service functions in providing workers’ compensation insurance to members of the Exchange. The Exchange was established under the auspices of the plaintiff Associated Industries of Massachusetts, Inc. A Superior Court judge ruled that the Exchange had lawfully terminated the agreement and that Propac had violated (a) the agreement’s implied covenant of good faith and fair dealing and (b) G. L. c. 93A, §§ 2 & 11 (1992 ed.). He also granted injunctive relief. We allowed Propac’s application for direct appellate review and now affirm the judgment.
The termination issue can be answered by deciding straight-forward questions of law without the need to understand the detail of the functions of a reciprocal insurance exchange
The Exchange had a board of advisors or advisory committee, as required by G. L. c. 175, § 94K (1992 ed.). By letter dated December 4, 1992, the advisory committee informed Propac that it was “terminating the Agreement on the completion of the five year term, ending December 31, 1993.”
The Exchange, an unincorporated association of hundreds of individual subscribers, as a party to the agreement, had to act through some person or persons in exercising its right. By agreement of the subscribers, the Exchange’s by-laws placed the direction of the business of the Exchange in the hands of its board of advisors.
The judge ruled that Propac had violated both G. L. c. 93A, § 11 (1992 ed.), and the agreement’s implied covenant of good faith and fair dealing. See Anthony’s Pier Four, Inc. v. HBC Assocs., 411 Mass. 451" court="Mass." date_filed="1991-12-30" href="https://app.midpage.ai/document/anthonys-pier-four-inc-v-hbc-associates-2172105?utm_source=webapp" opinion_id="2172105">411 Mass. 451, 471-472, 474 (1991). He found that following notice of termination Propac had refused and continued to refuse “to cooperate with the Exchange in an orderly transition to a new attorney-in-fact. Rather, Propac engages in a campaign to retain office in breach of a covenant, fairly read, that permits the Exchange, without cause, to terminate it.” The agreement provided that, on notice of termination, Propac “will cooperate with the Exchange toward the end that there will be an orderly transfer of management service functions, in respect to the Exchange’s business, from [Propac] to the Exchange or its designee.” The judge was fully warranted in concluding that Propac violated that provision.
The judge found that, while it was challenging the Exchange’s authority to terminate the agreement, Propac removed files to another location without notice to the Exchange; informed the Exchange on November 15, 1993, that it was vacating the Exchange’s principal office; told subscribers that their workers’ compensation insurance would be jeopardized if they signed a new power of attorney appointing a different attorney-in-fact; instructed subscribers to pay premiums to it instead of to the Exchange; and conducted a campaign to solicit subscribers for its own account.
Propac argues that it relied in good faith on its construction of the agreement and that its breach of contract cannot alone be an unfair act or practice under G. L. c. 93A, § 2. We view as uninstructive phrases such as “level of rascality” (Levings v. Forbes & Wallace, Inc., 8 Mass. App. Ct. 498" court="Mass. App. Ct." date_filed="1979-10-24" href="https://app.midpage.ai/document/levings-v-forbes--wallace-inc-2240417?utm_source=webapp" opinion_id="2240417">8 Mass. App. Ct. 498, 504 [1979]) and “rancid flavor of unfairness” (Atkinson v. Rosenthal, 33 Mass. App. Ct. 219" court="Mass. App. Ct." date_filed="1992-08-25" href="https://app.midpage.ai/document/atkinson-v-rosenthal-2118015?utm_source=webapp" opinion_id="2118015">33 Mass. App. Ct. 219, 226 [1992]), in deciding questions of unfairness under G. L. c. 93A. We focus on the nature of challenged conduct and on the purpose and effect of that conduct as the crucial factors in making a G. L.
Moreover, unilateral, self-serving conduct, as found by the judge, during the course of a dispute as to Propac’s right to continue as attorney-in-fact was not fair dealing in good faith. This is particularly so because Propac’s assertion that the attorney-in-fact agreement had not been terminated had no substantive merit. Propac points to no evidence that it proceeded on the advice of counsel. Moreover, by its conduct, Propac created unnecessary uncertainty among the Exchange’s subscribers concerning their workers’ compensation coverage.
The judge was warranted in ruling that Propac’s conduct constituted an unfair act or practice under G. L. c. 93A and a breach of the implied covenant of good faith and fair dealing. We have said that a breach of the implied covenant of good faith and fair dealing may constitute an unfair or deceptive act or practice for the purposes of G. L. c. 93A. That is true on the facts found by the judge. Anthony’s Pier Four, Inc. v. HBC Assocs., supra at 476.
Propac’s argument that the named plaintiffs had no right to prosecute this action on behalf of all the Exchange’s subscribers lacks merit. Rule 23.2 of the Massachusetts Rules of Civil Procedure, 365 Mass. 769 (1974), permits an action to be maintained by “members of an unincorporated association as a class by naming certain members as representative par
Judgment affirmed.
An “[e]xchange” is defined in G. L. c. 175, § 94A (1992 ed.), as follows: “an aggregation of individuals, partnerships or corporations, herein called subscribers, who or which, under a common name, exchange contracts of insurance on the reciprocal or inter-insurance plan through the office of an attorney in fact, being the place where contracts of insurance are issued.”
An “attorney in fact” is defined in G. L. c. 175, § 94A, as “an individual, partnership or corporation acting under power of attorney as the representative of the subscribers in the exchange of reciprocal or inter-insuronce contracts and matters incident thereto.”
“Subscribers” are defined in G. L. c. 175, § 94A, as “the participants or policyholders, who have given to an attorney in fact a power of attorney giving authority to obligate them separately and severally, as specified therein, in the exchange of reciprocal or inter-insurance contracts.”
General Laws c. 175, § 94K (1992 ed.), directs that the manner of election or appointment of an exchange’s advisory or similar committee and the committee’s authority and duties are those provided in the power of attorney. The attorney-in-fact agreement in this case contained no such provision. The Exchange’s members placed such provisions in the Exchange’s bylaws. Propac has no basis for relying on this omission, which was known to the then Commissioner of Insurance when he approved the Exchange. The commissioner had a copy of the bylaws at the time of that approval.
We are deeply unimpressed with Propac’s various arguments, which we shall not detail, based on (a) the use in various places in this agreement of the different words “Advisory Committee” (i.e., board of advisors), “Exchange,” or “parties,” and (b) changes made during the drafting of the attorney-in-fact agreement.