Safety Insurance Company v. Chau, et al. (Lawyers Weekly No. 09-005-17)

Plaintiff Safety Insurance Company (Safety) filed this action to determine its coverage obligations with respect to a motor vehicle accident which is the subject of separate litigation. The defendant Laura Chau was allegedly injured in that accident and in that separate lawsuit, seeks to recover against Nakouzi Enterprises, Inc. d/b/a Union Automotive (Nakouzi), which is Safety’s insured. The Complaint seeks a declaration both as to Safety’s duty to defend Nakouzi and its duty to indemnify. The matter is now before this Court on Safety’s Motion for Summary Judgment. This Court concludes that Safety does have a duty to defend, but that the obligation to indemnify cannot be decided at this juncture because of fact disputes as to what caused the accident.
The summary judgment record contains the following relevant facts. In June 2015, Chau filed a lawsuit against David Lam and Nakouzi in Plymouth Superior Court seeking to recover for injuries she suffered in an accident that occurred while she was driving Lam’s car. See Chau v. Lam et al., Civ. No. 2015-00589 (the Plymouth Action). The complaint filed in the
Plymouth Action alleges that, prior to the accident, Nakouzi had issued a Certificate of Inspection for the vehicle despite the fact that its tires had heavily worn treads that did not comply with the state’s safety requirements for tire tread depth. As a result of Nakouzi’s negligence, Chau mistakenly believed that Lam’s vehicle was safe to drive and that the accident occurred because the worn tire treads led her to lose control of the car and collide with oncoming traffic. The Plymouth Action is still pending.
At the time of the accident, Nakouzi was the named insured on a Massachusetts garage insurance policy issued by Safety (the Policy). The Policy provided two types of liability coverage for injuries resulting from “garage operations” — specifically, a) coverage for injuries from garage operations involving the ownership, maintenance and use of covered “autos,” and b) coverage for injuries from garage operations other than the ownership, maintenance, and use of covered “autos.” The parties agree that Lam’s car was not a covered auto, so it is the second type of liability coverage that is relevant here. As to both types of liability coverage, Safety was required to pay all sums its insured was legally required to pay as damages for bodily injury or property damage provided that such injury or damage was “caused by an ‘accident’ and resulting from ‘garage operations.’” Garage Operations was defined to include “all operations necessary or incidental to a garage business.” See Section IX.H, page 23 of Policy. If suit was filed against Nakouzi seeking damage for bodily injury or property damage, Safety acknowledged that it had a duty to defend, provided that such injury or damage was covered by the Policy. See Section IV.A, page 5 of Policy (“We have the right and duty to define any ‘insured’ against a ‘suit’ asking for these damages even if it is without merit”).
After Chau filed the Plymouth Action, Nakouzi sought coverage from Safety under the Policy. Safety agreed to defend Nakouzi in Chau’s suit under a reservation of rights, then filed the instant action.
It is well established that the duty to defend and the duty to indemnify are distinct and independent obligations. See A.W. Chesterton Co. v. Massachusetts Insurers Insolvency Fund, 445 Mass. 502, 527 (2005). The duty to defend arises at the outset of litigation against the insured. It is triggered as long as the allegations in the complaint brought in the underlying action “are reasonably susceptible of an interpretation that states or roughly sketches a claim covered by the policy terms.” Billings v. Commerce Ins. Co., 458 Mass. 194, 200 (2010). “There is no requirement that the facts alleged in the complaint specifically and unequivocally make out a claim within the coverage.” Id. at 201, quoting Sterilite Corp. v. Continental Cas. Co., 17 Mass. App. Ct. 316, 319 (1983). The duty to indemnify, in contrast, arises at the close of litigation. It is triggered “when a judgment within the policy coverage is rendered against the insured.” Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 10 (1989). Whether the duty exists is determined based on the actual facts proven at trial, rather than what may have been suggested by the general allegations in the complaint. See id. at 10-11. The duty to indemnify is thus narrower than the duty to defend. See Transamerica Ins. Co. v. KMS Patriots, 52 Mass. App. Ct. 189, 196 (2001). Accordingly, “[a]n obligation to indemnify does not automatically follow from the existence of a duty to defend.” Polaroid Corp. v. The Travelers Indem. Co., 414 Mass. 747, 762 n.19 (1993). That is, an insurer may have a duty to defend but ultimately have no duty to indemnify
As noted above, the Policy provides liability coverage for injuries “caused by an ‘accident’ and resulting from ‘garage operations.’” “Garage operations” is defined to include, among other things, “all operations necessary or incidental to a garage business.” Safety argues that it has no duty to defend because Nakouzi’s inspection was not a “garage operation.” If there is no duty to defend, then it necessarily follows that there can be no duty to indemnify.
There are no Massachusetts appellate decisions interpreting the relevant provisions. Although the parties cite cases from the Massachusetts federal district court and other jurisdictions, they are not particularly helpful in that they involve different policy language or arise from different circumstances. Thus, to determine whether Safety’s reading of the Policy is correct, this Court relies on the general rules that govern the interpretation of insurance contracts.
When interpreting an insurance policy, the Court construes the policy’s words in “their usual and ordinary sense.” Hakim v. Massachusetts Insurers’ Insolvency Fund, 424 Mass. 275, 280 (1997). Each word “must be presumed to have been employed with a purpose and must be given meaning and effect whenever practicable . . . without according undue emphasis to any particular part over another.” Boston Gas Co. v. Century Indem. Co, 454 Mass. 337, 355 (2009). (internal citations and quotations). If the meaning of the policy language is unclear, the Court considers “what an objectively reasonable insured, reading the relevant policy language, would expect to be covered.” Metropolitan Life Ins. Co. v. Cotter, 464 Mass. 623, 635 (2013), quoting Hazen Paper Co. v. United States Fid. & Guar. Co., 407 Mass. 689, 700 (1990). Applying these principles, the Court concludes that the Policy requires Safety to defend Nakouzi against the claims Chau asserts against it because the inspection constituted a “garage operation” as defined by the Policy.
The Policy defines “garage operations” expansively to include not just activities “necessary” to a garage business but also “all” activities that are “incidental” to the business, i.e., ones that play a small or even insignificant role. See Black’s Law Dictionary (10th ed. 2014) (defining incidental as “[s]subordinate to something of greater importance; having a minor role”); The American Heritage Dictionary of the English Language (5th ed. 2017) (defining incidental as “of a minor, casual, or subordinate nature”). In this Court’s view, inspections are clearly incidental to a garage’s operations. Certainly, it is not at all unusual for motor vehicle service stations and automobile repair shops to conduct vehicle inspections. An insured in Nakouzi’s position, reading the relevant Policy language, would reasonably expect that accidents arising from inspections conducted at his garage would be covered. Since Chau in the Plymouth Action alleges that her accident was caused by Nakouzi’s negligent inspection, Safety is therefore required to defend Nakouzi.
As Safety acknowledged at the hearing on this motion, its assertion that it has no duty to indemnify is based on its contention that it has no duty to defend. It conceded that, if the Court finds that it has a duty to defend Nakouzi, the Court cannot make a summary determination on whether Safety has a duty to indemnify because Chau’s lawsuit against Nakouzi remains pending. Summary judgment regarding Safety’s indemnification obligations is therefore inappropriate.
For all of the foregoing reasons, Safety’s Motion for Summary Judgment that is has no duty to defend is DENIED. Because there are no material facts in dispute regarding that duty, it is further ORDERED, however, that judgment enter in favor of Nakouzi declaring that Safety does have a duty to defend in the Plymouth Action. Because the duty to indemnify cannot be
determined until the Plymouth Action is resolved, this Court schedules this matter for December 5, 2017 at 2:00 p.m. so that it may be apprised of the status of that action. If the parties wish to have a Rule 16 conference before that date, they may request an earlier date from the court clerk.
Janet L. Sanders
Dated: September 15, 2017 Justice of the Superior Court

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