SAYLOR, District Judge.
This is a declaratory judgment action arising out of a personal umbrella insurance policy issued by plaintiff RLI Insurance Company to defendant Beli R. Lima. Lima's 17-year-old son, defendant Henrique Rocha Santos, was involved in an automobile collision with defendant Maria Lopes in October 2006. Lopes filed a claim with RLI under Lima's policy. RLI denied coverage, stating that the policy was void because Lima had made material misrepresentations about the number of drivers in her household when she renewed the policy.
On January 14, 2009, Lopes initiated a personal injury action against Santos. RLI filed this action on February 2, 2009, requesting a declaratory judgment that the policy does not cover the claims by Lopes against Santos.
The facts are not disputed except where noted otherwise.
On August 31, 2005, Beli Lima signed an application for a personal umbrella liability policy with RLI Insurance Company. (Edelstein Aff. Ex. 4).
RLI personal umbrella liability policies are self-underwriting, meaning that the information applicants provide in the application determines whether RLI will issue a policy and, if issued, what premium will be charged. (Dean Aff. ¶ 4). Lima's responses to the questions in the 2005 application thus determined whether she and members of her household were eligible for a policy from RLI and, if so, whether she qualified for a "Standard" or "Standard II" class policy. (Edelstein Aff. Ex. 4). According to RLI, several factors influenced Lima's premium for the 2005 policy, including whether any driver in her household was an "inexperienced operator." (Edelstein Aff. Ex. 8; Dean Aff. ¶ 6). RLI has determined that inexperienced operators have a higher risk of accidents, and therefore it charges a higher premium for policy holders who have an inexperienced operator living in their household. (Dean Aff. ¶ 7; Edelstein Aff. Ex. 8).
RLI accepted the application and issued a personal umbrella liability insurance policy to Lima, numbered PUP1026818. The policy term was from September 10, 2005, to September 10, 2006. (Dean Dep. 20, 50-51).
In July 2006, RLI advised Lima in writing that her personal umbrella policy would expire on September 10, 2006. It provided her with a Personal Umbrella
The first portion of the application included a list of ten questions, each of which was followed by two columns. (Id.). The first column, entitled "Information on File," indicated the information that Lima had provided on her August 2005 application. (Id.). The second column, entitled "Make Corrections Below," provided blank spaces to make corrections. (Id.).
Lima filled out the application at home without any assistance by Mancuso-Nowak. (Lima Dep. 22). She corrected the "Information on File" only as to Questions 8 and 9. (Def. Mem. Ex. 6).
Question 5 on the application asked for the number of drivers in the household. (Def. Mem. Ex. 6). It defined a "driver" as:
(Id.). The "Information on File" indicated that there were two drivers in the household. (Id.). Lima did not make any correction to that number. (Id.).
At the time, Lima's 17-year-old son, Santos, was living with her and her husband. Santos had his learner's permit. (Edelstein Aff. Ex. 10; Lima Dep. 53-54). He was not permitted to use Lima's car and only drove when at a "driver's school" where he was enrolled. (Lima Dep. 53-54). Lima testified at her deposition that she understood the language of Question 5 to mean that she did not need to count Santos as a driver in connection with the renewal policy. (Id).
As a follow-up to Question 5, Question 6 asked:
(Def. Mem. Ex. 6). The "Information on File" indicated that there were no drivers under the age of 22 living in the household. (Id.). Again, Lima did not make any correction.
Question 16 asked whether the applicant and members of her household agreed to maintain the minimum limits of liability coverage required by the umbrella policy. (Def. Mem. Ex. 6). Lima circled the letter "N."
The renewal application included the following "APPLICANT STATEMENT":
(Def. Mem. Ex. 6). Lima signed and dated the form on July 5. It is unclear how the form was sent to RLI.
On July 14, 2006, Santos received his driver's license. (Edelstein Aff. Ex. 22; Lima Dep. 24). RLI received the renewal application on the same day. (Id.; Dean Dep. 27).
RLI considered the application incomplete because Lima did not answer Question 12 and answered "no" to Question 16. As a result, RLI issued a notice of non-renewal to Lima.
In August 2006, RLI received a completed renewal application by fax. The August application had the same basic content and layout as the July application. (Hassett Mem. Ex. B). However, the August application did not contain any pre-printed information about the insured's name, the policy number, or the name of RLI's agents and did not have any numbers pre-printed in the "Information on File" column. (Id.).
Like the July application, the August application did not disclose the presence of a 17-year-old driver in Lima's household.
Exactly how the application was created is unclear. It appears that two different versions were faxed from Mancuso-Nowak at different times. (Edelstein Aff. Ex. 17; Hassett Mem. Ex. B). For present purposes, the differences between the two are not material.
Lima testified that she does not recall any events surrounding the August application. (Lima Dep. 25-27, 46-47). Specifically, she said that she does not recall ever seeing the form, completing it, or speaking to anyone at Mancuso-Nowak about it. (Id.). She does not recall signing it. (Id.). She also testified that the signature on the August application was not hers and that she did not recognize it. (Id. at 46-47).
Both the July and August application forms included the statement, "APPLICATION WILL NOT BE ACCEPTED WITHOUT APPLICANT'S ORIGINAL SIGNATURE." (Hassett Mem. Ex. B).
In any event, after receiving the August application, RLI considered Lima's application to be complete. It issued her a personal umbrella policy for the period from September 10, 2006, to September 10, 2007. (Def. Mem. Ex. 3; Edelstein Aff. Ex. 2; Dean Dep. 33). The annual premium was $224. (Edelstein Aff. Ex. 2).
On September 6, 2006, Santos applied for his own primary automobile insurance policy with Commerce Insurance Company. He named himself and Lima as authorized drivers on one vehicle. (Edelstein Aff. Ex. 23). He was also added as a deferred driver to Lima's primary automobile insurance policy with OneBeacon Insurance. (Id. Ex. 24).
Lima did not advise RLI that Santos had obtained his driver's license. On September 10, 2006, the renewed RLI policy came into effect.
On October 5, 2006, Santos and Lopes were involved in a serious motor vehicle accident in Shrewsbury, Massachusetts. (Hassett Aff. ¶ 6). The accident occurred when Santos crossed the center line into the westbound lane and struck Lopes's vehicle head-on. (Id. at ¶ 7). Lopes sustained serious and permanent injuries. (Id. at ¶ 8).
RLI received notice of the collision on November 28, 2006. (Edelstein Edelstein Aff. Exs. 25, 26; Dean Dep. 11-12). It assigned a claims examiner to conduct an investigation. (Edelstein Aff. Ex. 15; Dean Dep. 23, 24).
In a letter to Lima on April 20, 2007, RLI declined coverage. The letter stated that the basis for denial was that Lima had made material misrepresentations in her August renewal application on questions 5 and 6 by not including Santos as a driver under the age of 22. (Def. Mem. Ex. 12; Dean Dep. 57, 63-64). In a portion of the letter titled "General Reservation," RLI stated that "[the] letter [was] not an exhaustive listing of all of the terms, conditions, exclusions or limitations . . . which might bar or limit RLI's obligations in this matter. There may be other facts and circumstances . . . which would further serve to relieve RLI of any duty." (Edelstein Aff. Ex. 32).
Neither Lima nor Santos ever personally responded to RLI's March and April 2007 letters, though the letters each requested them to submit any additional factual information relevant to the coverage analysis. (Dean Aff. ¶ 11; Edelstein Aff. Exs. 31-32). On February 21, 2008, Lopes's counsel sent a letter of representation to RLI. (Edelstein Aff. Ex. 33). Lopes's counsel requested information concerning the RLI policy as well as RLI's coverage position by telephone. (Id. at Ex. 27). RLI responded by telephone on February 29, 2008 and requested that Lopes's counsel submit a written request for the information. (Id.).
On September 23, 2008, Lopes's counsel made a written request for information and submitted a written demand for coverage under the RLI policy. (Id. at Ex. 34). Attached to the demand for coverage were medical bills and records, information regarding Lopes's alleged lost wages, and the police report from the date of the collision. (Id.). On September 26, 2008, and October 3, 2008, RLI responded in writing to counsel for Lopes, disclosing information concerning the policy and explaining the basis for its denial of coverage. (Id. at Ex. 35).
On January 14, 2009, Lopes commenced a civil action against Santos in Worcester Superior Court. (Id. at Ex. 36; Hassett Aff. ¶ 4). Commerce, Santos's primary carrier, defended him in that action. (Hassett Aff. ¶¶ 9, 10).
On February 2, 2009, RLI filed its original complaint in this action.
On August 24, 2009, Santos and Lopes agreed to the entry of judgment against Santos on all counts of the civil action in the amount of $950,000 plus interest at the statutory rate from the date of entry of the action. (Amend. Compl. Ex. B). RLI was not provided with prior notice of this agreement. (Dean Aff. ¶ 12). Commerce ultimately tendered Santos's policy limit of $100,000 to Lopes. (Id. at ¶¶ 9, 10).
On November 30, 2009, Santos and Lopes made a written demand under
Summary judgment is appropriate when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). "Essentially, Rule 56(c) mandates the entry of summary judgment `against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Coll v. PB Diagnostic Sys., 50 F.3d 1115, 1121 (1st Cir.1995) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). In making this determination, the Court views "the record in the light most favorable to the nonmovant, drawing reasonable inferences in his favor." Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir.2009).
RLI has moved for summary judgment on its declaratory judgment claim on two alternate grounds. First, it contends that Lima's failure to disclose Santos' status as a driver under the age of 22—whether on the July application, the August application, or at any time after Santos received his driver's license and before the renewal policy became effective—was a material misrepresentation that voided the policy. Second, it contends that an applicant's signature on the renewal application is a condition precedent to receiving insurance coverage and that Lima is barred from recovering under the policy if she did not sign the August renewal application, as she alleges.
In Massachusetts, an insurer may void an insurance policy if the policyholder failed to disclose "material" facts when requested to do so in an application for the insurance. See Barnstable Cnty. Ins. Co. v. Gale, 425 Mass. 126, 127-28, 680 N.E.2d 42 (Mass.1997). There is, however, a limitation imposed by statute as to the insurer's ability to void the policy. Mass. Gen. Laws ch. 175, § 186(a) provides:
A fact is regarded as "material" if "the knowledge or ignorance of [it] would naturally influence the judgment of the underwriter in making the contract at all, or in estimating the degree and character of the risk, or in fixing the rate of the premium." Employers' Liab. Assur. Corp. v. Vella, 366 Mass. 651, 655, 321 N.E.2d 910 (Mass. 1975); see also Barnstable Cnty., 425 Mass. at 128, 680 N.E.2d 42; Daniels v. Hudson River Fire Ins. Co., 66 Mass. 416, 417 (Mass.1853). Thus, an insurer may void a policy even if the policyholder made an "innocent misrepresentation of a material fact" if the disclosure of the truth would have affected the insurer's decision in fixing the rate of premium. Northwestern Mut. Life Ins. Co. v. Iannacchino, 950 F.Supp. 28, 31 (D.Mass.1997); see also Barnstable Cnty., 425 Mass. at 128, 680 N.E.2d 42 ("for purposes of G.L. c. 175, § 186, a fact is deemed material if it influences the premium"); Hanover Ins. Co. v.
RLI first contends that Lima made a material misrepresentation on the July renewal application. Question 5 of the renewal application asked for the number of drivers in the household, and defined "driver" as "`you' and `members of your household' who operate motor vehicles licensed for road use...." At the time that Lima filled out the July renewal application, Santos was a holder of a learner's permit. Because he had such a permit, he was legally permitted to operate automobiles (and did so at the driver's school where he was enrolled). Lima did not, however, indicate on the application that Santos was a driver who was a member of her household. Santos fit within the definition of "driver" on Question 5, and Lima's response was thus incorrect.
Question 6 asked whether any drivers in the household were under the age of 22. It specifically instructed the applicant to "include drivers with a learner's permit." It added that, in Massachusetts, "only those drivers with six years or less driving experience" should be included, and that "driving with a permit is not considered driving experience and should therefore not be included within the six years as driving experience." Lima indicated that there were no drivers under 22 in her household. Santos was a driver under 22 with less than six years of driving experience, and thus Lima's response to Question 6 was also incorrect.
Defendants contend that Questions 5 and 6 on the July renewal application were ambiguous as a matter of law and, therefore, Lima's responses cannot be considered misrepresentations. As to Question 5, defendants note that the definition of "driver" did not explicitly refer to individuals, such as Santos, who had learner's permits. As to Question 6, defendants concede that the first sentence instructs the applicant to "include drivers with a learner's permit" in her answer. They contend, however, that the two sentences that follow make the question confusing and ambiguous. Specifically, they argue that a person could reasonably interpret the question to mean that an individual who holds a learner's permit does not have any "driving experience" (because this experience is not counted towards the six-year requirement) and therefore does not qualify as a "driver" under Questions 5 or 6.
It is well-settled that "where there is more than one rational interpretation of policy language, `the insured is entitled to the benefit of the one that is more favorable to it.'" See Hingham Mut. Fire Ins. Co. v. Mercurio, 71 Mass.App.Ct. 21, 24, 878 N.E.2d 946 (Mass.App.Ct.2008) (citing Hakim v. Massachusetts Insurers' Insolvency Fund, 424 Mass. 275, 281, 675 N.E.2d 1161 (Mass.1997)). However, even assuming that Question 5 is ambiguous—a question that the Court does not reach— Question 6 is not. Question 6 tells the applicant, clearly and directly, to "include drivers with a learners permit." That statement is not ambiguous as a matter of law.
It is true that Question 6 goes on to state that in Massachusetts, only those drivers with six years or less driving experience should be included, and that "driving with a permit is not considered driving
As noted, RLI did not accept the July application because it was incomplete. It then received a further application in August, well after Santos received his driver's license (on July 14). RLI then issued the policy in September. RLI contends that Lima did not provide truthful answers on the August application and that this provides an additional basis for voiding the policy.
Whether Lima actually signed or submitted the August application is a disputed issue of material fact. Drawing all inferences in the light most favorable to defendants, the Court must assume that Lima did not sign or submit the August application. If she did not sign or submit that application, she could not have made any misrepresentations on it.
According to defendants, the misrepresentation inquiry should end there: if RLI rejected the July application and issued the policy in reliance on the August application, and if Lima made no misrepresentation on the August application, the policy could not have been issued in reliance on any misrepresentation by Lima. That argument, however, raises a threshold question: if RLI rejected the July application, and Lima did not sign or submit the August application, how was an insurance contract formed between RLI and Lima?
RLI contends that defendants cannot collect under the policy because an applicant's signature on the renewal application is a condition precedent to receiving insurance coverage. In other words, RLI contends that if Lima's testimony that she did not sign the August application is true, then the contract was not formed, and she cannot recover under the policy.
Defendants contend that Mancuso-Nowak employees filled out the renewal application without Lima's assistance and that, because Mancuso-Nowak is an agent of RLI, RLI is estopped from voiding the policy. See Guerrier v. Commerce Ins. Co., 66 Mass.App.Ct. 351, 847 N.E.2d 1113 (Mass.App.Ct.2006) (insurer equitably estopped from voiding policy where agent was responsible for misstatement in application signed in blank by insured). They point to the July renewal application, which contained pre-printed information, including the language "RLI Agent: Mancuso-Nowak Ins."
Even assuming that Mancuso-Nowak was RLI's agent—a question the Court does not reach—defendants' version of events would nonetheless preclude recovery. It is true that an agency relationship would permit Mancuso-Nowak to bind RLI to a contract with Lima. But under any circumstances, Lima would still need
For this reason, defendants' reliance on Guerrier is misplaced. In Guerrier and its predecessors, the insurer was estopped from voiding its policy based on the errors of its agent only after the insured had met with the agent, assented to buying the policy, and had detrimentally relied on that agent's assurances. 66 Mass.App.Ct. at 357, 847 N.E.2d 1113 (finding estoppel where insured signed application in blank and "rel[ied] on oral assurances from ... [agent] to the effect that `everything was fine' and that ... [agent] would correctly complete the necessary forms for obtaining the insurance"); accord Sullivan v. John Hancock Mut. Life. Ins. Co., 342 Mass. 649, 650-51, 174 N.E.2d 771 (Mass.1961) (finding estoppel where insured had signed application and given truthful answers that had been incorrectly recorded by agent); John Hancock Mut. Life Ins. Co. v. Schwarzer, 354 Mass. 327, 328, 237 N.E.2d 50 (1968) (same). There is no evidence here that anyone at Mancuso-Nowak made any assurances to Lima, and likewise no evidence that Lima relied to her detriment on such assurances.
Furthermore, if the signature on the August application is not Lima's, the policy is voidable as a matter of law. In Massachusetts, "[i]f an insured fails to satisfy a condition precedent, the coverage is void regardless of whether there was proof of an intent to deceive or an increased risk of loss." Mass. Mut. Life Ins. Co. v. Fraidowitz, 443 F.3d 128, 131 (1st Cir.2006); accord Krause v. Equitable Life Ins. Co. of Iowa, 333 Mass. 200, 203, 129 N.E.2d 617 (Mass.1955) (stating that if "conditions ... were not satisfied[,] no contractual duty under the policy ever arose"). Whether a provision in an insurance policy application qualifies as a condition precedent is a question of law. Mass. Mut. Life Ins. Co., 443 F.3d at 131 (citing Kobico, Inc. v. Pipe, 44 Mass.App.Ct. 103, 105, 688 N.E.2d 1004 (Mass.App.Ct.1997)). A statement may become a condition of the policy if "(1) the statement made by the insured relates essentially to the insurer's intelligent decision to issue the policy; and (2) the statement is made a condition precedent to recovery under the policy, either by using the precise words `condition precedent' or their equivalent." Id. (citing Charles, Henry, & Crowley Co. v. Home Ins. Co., 349 Mass. 723, 726, 212 N.E.2d 240 (Mass.1965)). The first part of the test turns on "[whether the] matter [would] be considered of importance by a reasonable insurer." Drake Fishing, Inc. v. Clarendon American Ins. Co., 136 F.3d 851, 852 (1st Cir.1998). "Equivalent" language under the second part of the test includes provisions that state "in no uncertain terms that misrepresentation would
There is no question that a reasonable insurer would consider an applicant's original signature important to its intelligent decision to issue a policy. An original signature assures the insurer that the applicant has attested to the verity of her answers and that she consents to entering into the insurance contract. Thus, the first prong of the test is met. Furthermore, it is clear from RLI's documents that an original signature was a condition precedent to recovery. On RLI's renewal application, the words "APPLICATION WILL NOT BE ACCEPTED WITHOUT APPLICANT'S ORIGINAL SIGNATURE" appear in bold just above the signature line. (Edelstein Aff. Ex. 16). The application also states that "any ... misstatement of fact in the information given, which if known to ... [RLI] would have caused ... [it] to decline this application, is grounds for voiding the policy." (Id.). Together these statements clearly communicate that a false signature would result in a voiding of the policy, fulfilling the second prong of the test.
In short, there is no evidence that Lima assented to the creation of an insurance contract. Even if she were somehow involved in the submission of the August application, her failure to sign it constituted a breach of a condition precedent and would permit RLI to void the policy as a matter of law.
Even assuming that Lima submitted an application for the formation of an insurance contract, she nonetheless had a duty to advise RLI of the presence of a teenage driver in her household before the policy issued.
In Massachusetts, "[s]tatements made in an application for insurance are in the nature of continuing representations and speak from the time the application is accepted or the policy is issued." Hanover Ins. Co. v. Leeds, 42 Mass.App.Ct. 54, 57, 674 N.E.2d 1091 (Mass.App.Ct. 1997) (citing Ayers v. Massachusetts Blue Cross, Inc., 4 Mass.App.Ct. 530, 536, 352 N.E.2d 218 (Mass.App.Ct.1976)). Therefore, "an [insurance policy] applicant has a duty to inform the insurer of any known changes rendering his or her initial representations untrue until such time as the policy becomes `operative.'" Chicago Ins. Co. v. Lappin, 58 Mass.App.Ct. 769, 780, 792 N.E.2d 1018 (Mass.App.Ct.2003) (quoting Gabbett v. Connecticut Gen. Life Ins. Co., 303 Mass. 433, 435, 21 N.E.2d 950 (Mass.1939)).
Although she knew that Santos had received his driver's license on July 14, it is undisputed that Lima never made any attempt to advise RLI of that fact at any time before the policy became effective on September 10. Drawing all reasonable inferences in favor of defendants, the Court will assume that the omission was unintentional. Even a misunderstanding on the part of Lima, however, cannot prevent RLI from voiding the policy on those grounds.
Defendants assert that as a matter of law neither the policy itself nor the application required Lima to notify RLI of changes to the initial information that she provided. In support of that argument, defendants cite to Quincy Mutual Fire Insurance v. Quisset Properties, 69 Mass.App.Ct. 147, 153, 866 N.E.2d 966 (Mass. App.Ct.2007), in which the court held that "when neither a policy provision nor a renewal application requires the insured to provide updated information to the insurer, the insured's failure to do so is not a misrepresentation." In that case, the insurer
Defendants' reliance on Quincy Mutual is misplaced. Unlike the insurer in Quincy, RLI required the applicant to provide updated information in a renewal application as a condition of renewing the policy. See id. at 152-53, 866 N.E.2d 966. That application obliged Lima to answer honestly and accurately and activated her duty to "inform [RLI] of any material changes that occurred between the time of the application and inception of the policy." Id. (citing Lappin, 58 Mass.App.Ct. at 780, 792 N.E.2d 1018). Her failure to advise RLI that Santos had received his driver's license—even if she was not aware of her obligation to do so—was, under the circumstances, a misrepresentation.
The issue is, of course, complicated by Lima's contention that she did not sign or submit the August application. But under any reasonable interpretation of the facts, there must have been a period of time during which an application was pending— and during which Lima had a duty to update. It is undisputed that Lima signed and submitted the July application (which did not reveal the presence of a teenage driver). Taking the facts in the light most favorable to the defendants, there are only three plausible possibilities: (1) RLI reconsidered and accepted the July application on its own terms; (2) RLI accepted the July application after the problems were fixed by the submission of the omitted information in August; or (3) RLI rejected the July application permanently, after which a new application was submitted in August and later accepted. But the policy had to be based on some form of application by Lima. Surely it is unreasonable for her to believe that her insurance coverage had materialized out of thin air, without any application process.
Put simply, Lima cannot have it both ways: she cannot have an insurance policy without an application indicating her assent to enter into an insurance contract. And if she made an application—whether that application occurred in July or August or some combination of the two—she had an obligation to inform RLI of material changes that occurred after the time of the application.
In short, under any view of the undisputed facts, Lima reasonably should have known that RLI was proceeding in reliance on the statements she made in her application. Lima was obligated to inform RLI of any material changes that occurred between the time of her application and the inception of the renewal policy. Lappin, 58 Mass.App.Ct. at 780, 792 N.E.2d 1018. It is undisputed that she never advised RLI that Santos had received a driver's license. Her failure to do so gives RLI the right to void the policy.
Defendants further contend that RLI should be estopped from relying in any way on the July application. According to defendants, because RLI specifically identified misrepresentations on the August application (but not the July application) as the basis for its denial of coverage in its letter dated April 20, 2007, it is estopped from voiding the contract on the ground that the July application contained a misrepresentation. In support of that proposition, they cite Mass. Gen. Laws ch. 176D § 3(9)(n), which states that "failing to provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim" is an unfair claim settlement practice. That argument fails for several reasons.
Second, RLI explicitly reserved its right to present additional grounds for denying coverage in its letters. Both of its denial of coverage letters cautioned that "[t]here may be other facts and circumstances, as well as other provisions of the policy, which would serve to relieve RLI.... [T]his correspondence shall not be deemed or construed as a waiver of any of the rights and defenses available to RLI." (Edelstein Aff. Exs. 31-32).
Finally, defendants do not appear to have been prejudiced in any way by RLI's failure to raise some claims in its denial of coverage letters, or to have detrimentally relied on those statements. See Jimmy's Diner v. Liquor Liab. Joint Underwriting Ass'n of Mass., 410 Mass. 61, 64 n. 3, 571 N.E.2d 4 (Mass.1991) (insurer not estopped from asserting alternative grounds for denying coverage where insured not prejudiced by the delay).
Under Massachusetts law, a party seeking to void an insurance policy must not only show that there was a misrepresentation, but also that the misrepresentation was either intentional or material. Mass. G.L. c. 175 § 186. There is insufficient evidence to suggest that the misrepresentation (that is, Lima's failure to advise RLI of the presence of a young driver) was intentional, and thus the issue is whether it was material.
RLI contends that Lima's misrepresentation was material as a matter of law because it increased the risk of loss and affected the premium that she paid under her plan.
It is also undisputed that providing coverage for Santos would have materially raised the premium for Lima's policy. The RLI rate sheet defines "inexperienced operator" as "any driver with six years or less driving experience." There is no dispute that Santos met that definition at the relevant time. Furthermore, it is undisputed that Santos had obtained his driver's license by the time RLI renewed Lima's policy on September 10. At a minimum, therefore, Santos would have certainly fallen under the definition of "driver," and therefore "inexperienced operator," at the time Lima made the misrepresentation.
Defendants contend that under the policy language, RLI must show that the misrepresentations were intentional in order to void the policy. In support of their contention defendants point to the following provision of the policy:
(Defs.' Mem. Ex. 10). They also point to the following language in the renewal application:
(Id.).
Defendants interpret this language as stating that the only circumstances under which RLI can void a policy is if a misrepresentation was intentional. This is similar to defendants' earlier estoppel argument and fails as a matter of law for similar reasons. The language quoted merely states that intentional misrepresentations are grounds for voiding the policy; it does not state that unintentional misrepresentations are not grounds for voiding
In summary, even when viewing the facts in the light most favorable to defendants, RLI is not obligated to provide coverage under the policy. Either (1) the application for the policy contained a material misrepresentation, and the policy is therefore voidable; (2) no application or other document evidencing Lima's assent was ever submitted to RLI, and thus no insurance contract was ever formed; or (3) Lima failed to provide updated information to RLI after the application and before the issuance of the policy, and the policy is once again voidable. Summary judgment will therefore issue in favor of RLI on the declaratory judgment claim.
Because RLI had the power to void the insurance policy for the reasons stated above, it did not breach the contract when it denied coverage to Santos. RLI is thus entitled to judgment as a matter of law on Santos's claim for breach of contract.
The counterclaim of Santos and Lopes alleges that RLI violated Chapter 93A because it (1) misrepresented facts in its letter to Lima denying coverage; (2) failed to acknowledge and act reasonably in its communications with defendants; (3) did not conduct a sufficient investigation of the claims arising under Lima's policy; (4) did not provide a prompt and reasonable explanation for its denial of the claims; (5) submitted an inadequate offer of settlement; and (6) acted in bad faith. (Counterclaim ¶¶ 4-8, 18-21). However, in defendants' replies to RLI's interrogatories, in their Chapter 93A demand letter, and in their briefs, the only alleged violations identified by defendant are (1) a claim that RLI's denial of coverage based on material misrepresentations by Lima was improper; (2) a claim that, after discovering the misrepresentations in the renewal applications, RLI should have conducted interviews of defendants, Mancuso-Nowak employees, and Number One employees; and (3) a claim that RLI misrepresented facts when it stated that it had "confirmed" that Lima made misrepresentations in her August application, when in fact it had not interviewed Lima to find out if she had filled out the form. As a matter of law, defendants' assertions do not rise to the level of "unfairness" prohibited under Chapters 93A.
Defendants' first claim—that RLI wrongly denied insurance coverage—necessarily fails. Generally, claims under Chapters 93A and 176D "[fall] away by derivation" once a court determines that denial of coverage is proper. Aguiar v. Generali Assicurazioni Ins. Co., 47 Mass.App.Ct. 687, 692, 715 N.E.2d 1046 (Mass. App.Ct.1999) (affirming trial court determination that insurer properly denied coverage for fire loss and, therefore, claims asserting unfair settlement practices against insurer were unsustainable). Here, the Court has determined that RLI had the right to void the policy. RLI therefore had a reasonable foundation for denying coverage and was not acting in bad faith when it did so.
As to defendants' second claim, the Court does not find that the failure of RLI to interview defendants and other parties amounted to a violation of Chapter 93A. Insurers are bound to conduct investigations
Finally, defendants' third claim—that RLI acted improperly when it stated that it had "confirmed" Lima's misrepresentations—also fails. This statement does not rise to the level of a misrepresentation, much less a Chapter 93A violation. As stated above, RLI had ample reason to believe that Lima had made misrepresentations on her applications.
In sum, neither RLI's handling of the claim nor its coverage position rise to the level of unfair trade practices or otherwise constituted violations of Chapters 93A or 176D.
For all the foregoing reasons, the motion of plaintiff RLI Insurance Company for summary judgment is GRANTED and the motion of defendants for summary judgment is DENIED.