Witkowski v. Richard W. Endlar Ins. Agency, Inc.
(Massachusetts Court of Appeals, May 29, 2012)
In this coverage dispute, the policyholder appealed an adverse summary judgment ruling dismissing its claims arising from a flood of the Shawsheen River that destroyed multiple basement residential condominium units. After the flood, a trustee of the condominium association told the four basement unit owners that their units were excluded from coverage under the association’s master policy. Also, applicable building codes prohibited units at basement level in a special flood hazard zone from being rebuilt for the purpose of human occupancy. The plaintiff filed suit against the agency and title insurance company that originally provided coverage.
At issue was the propriety of summary judgment entered in favor of the defendants. As to Endlar, the plaintiff contended that he relied to his detriment on a certificate Endlar furnished prior to the plaintiff’s purchase of the unit, falsely representing that the unit was covered by flood insurance. As to First American, the plaintiff contended that his inability to rebuild his unit renders title to his unit unmarketable, within the meaning of the policy of title insurance he purchased incident to his purchase of the unit.
The record revealed that it was communicated to Endlar, on the plaintiff’s behalf, the need for a certificate verifying flood insurance coverage for the plaintiff’s unit. In response, Endlar furnished a certificate stating that the plaintiff, as owner of unit 4, “is insured” under the master policies issued to the condominium trust including, flood insurance. Though the certificate made clear that it is not a contract of insurance, it stated clearly that the listed policies had been issued.
The court noted that contrary to the defendant’s assertions, the certificate did not contain any express statement that the policies listed thereon are subject to any other conditions or limitations, or that the recipient should review the policies themselves in order to ascertain the scope or existence of coverage. Moreover, though the policies may have contained certain implicit qualifications or limitations, the exclusion of the plaintiff’s unit from coverage entirely was a particularly dramatic limitation under the circumstances.
Further, the court held that the disclaimer that the certificate is not a contract of insurance did not derogate, by its terms or in its context, from the fact that the recipient of the certificate should be entitled to rely on its accuracy, at least concerning the issuance and existence of the policies listed thereon. Particularly in the circumstances attending the request for the certificate, Endlar was aware that the plaintiff (and his mortgage lender) required proof of flood insurance coverage on his unit, and that they would rely on the insurance certificate Endlar furnished to constitute that proof. The court noted that plaintiff’s claim did not rest on a claim of contract, based on the certificate; instead it rested on the contention that the plaintiff relied to his detriment on materially false information furnished by Endlar.
As such, the court reversed summary judgment concluding that there are triable questions of fact concerning whether the certificate falsely represented that the plaintiff’s unit was covered under the master condominium policies of flood insurance, and whether the plaintiff reasonably relied to his detriment on that representation.
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