Williams & Son installed and serviced an oil tank in Shirley Gilbody’s house. After an oil spill, Bunker Hill Insurance Company, Gilbody’s homeowner’s insurer, paid for full remediation of the property.
Bunker Hill then sought reimbursement for the loss twice. First, it sought reimbursement directly from International Insurance Company of Hannover. Hannover was Williams’ insurer, and its policy listed Gilbody’s house as an insured location. Because Gilbody’s house was an insured location, Gilbody was essentially entitled to bring a first party claim for property damage under the policy regardless of whether Williams was negligent. Since the house was an insured location under both the Bunker Hill policy and the Hannover policy, a court applied an “other insurance” analysis and determined that the loss must be split equally between the two insurers. Hannover reimbursed Bunker Hill for fifty percent of what Bunker Hill had had paid.
Bunker Hill then sought reimbursement a second time by bringing a subrogation action against Williams. That means that Bunker Hill exercised its right under the policy it issued to Gilbody to stand in her shoes and sue Williams for damages caused by its negligence, up to the amount Bunker Hill had paid Gilbody. In other words, it brought a third party claim against Williams.
A jury rendered a verdict in the full amount that Bunker Hill had originally paid Gilbody. Williams moved to offset the amount that Bunker Hill had already been reimbursed by Hannover. The Massachusetts Superior Court denied the motion, holding that the payment Hannover had made was from a source collateral to the judgment in the negligence action, because the payment had been pursuant to coverage in the Hannover policy under which Gilbody’s house was an insured location (first party coverage), not under negligence coverage for Williams (third party coverage).
In Bunker Hill Ins. Co. v. G.A. Williams & Sons, __ N.E.3d __, 2018 WL 6544124 (Mass. App. Ct.), the Massachusetts Appeals Court overturned the Superior Court decision and held that an offset was required. Although the court used a fairly complicated analysis, the ruling boiled down to the common sense idea that Hannover should not have to pay the same loss twice (or one and one half times), and Bunker Hill should not get a windfall, simply because Williams had had the foresight and business sense to list Gilbody’s house as an insured location on the Hannover policy. In more technical terms, the first payment from Hannover was not a collateral source payment with respect to the tort judgment against Williams; it was from the same source as the tort payment would come from.
See the comments section on this post for a different take on this case.