At the time of the accident, an operator exclusion form, drafted by Commerce Insurance Company and signed by Ms. Gentile and Junior, provided that Junior would not drive any vehicle covered by the Gentiles' policy. Junior, however, did operate his grandparents' vehicle and, according to the verdicts in the separate personal injury litigation, negligently caused injuries to the Homsi brothers.

Commerce sought a judgment declaring that the Gentiles' violation of the operator exclusion form relieved it of any duty of indemnification of them under the policy clause for optional bodily injury coverage of $500,000.

The trial court concluded that Junior had violated the operator exclusion form as a material representation underlying the issuance of the policy and that Commerce, therefore, was relieved of its duty of optional coverage for bodily injury caused by their vehicle.

The Homsi parties appealed.

The Operator Exclusion Form

The operator exclusion form provided:

It is agreed that the person named below will not operate the vehicle(s) described below, or any replacement thereof, under any circumstances whatsoever.

The exclusion form also provided:

I am aware that under the terms of my Massachusetts [a]utomobile [i]nsurance [p]olicy, if I or someone on my behalf provides false, deceptive, misleading or incomplete information in any application or policy change request, and if such false, deceptive, misleading or incomplete information increases the company's risk of loss, the company may refuse to pay claims under any or all of the [o]ptional [i]nsurance [p]arts of this policy.

(Emphasis supplied.)

The policy

The policy provided:

If you or someone on your behalf gives us false, deceptive, misleading or incomplete information in any application or policy change request and if such false, deceptive, misleading or incomplete information increases our risk of loss, we may refuse to pay claims under any or all of the [o]ptional [i]nsurance [p]arts of this policy. Such information includes the description and the place of garaging of the vehicles to be insured, the names of all household members and customary operators required to be listed and the answers given for all listed operators.”

(Emphasis supplied.)

The appellate court's decision

The appellate court affirmed.

In its decision, it explained that the exclusion of Junior was a “continuous material term of the policy,” noting that the Gentiles had received “substantially reduced premiums as a result of the exclusion of Junior from the policy.” The appellate court explained that although no intent to deceive may have existed at the formation of the exclusion, “the Gentiles were unable to keep their promise to exclude Junior 'in all circumstances whatsoever.' That failure ripened into a misrepresentation affecting the degree of risk and the level of the premium.”

The appellate court then declared that “Junior, by intention, and [the Gentiles] by adjudicated negligence, breached the promise of exclusion,” an “essential and inducing feature” of the policy. Accordingly, it concluded:

that breach of a material term of the policy, as a matter of elemental contract law, excused Commerce from performance of its duty of coverage.

The case is Commerce Ins. Co., Inc. v. Gentile, No. 12–P–1169 (Mass. Ct.App. March 13, 2014). Attorneys involved include: Brian P. Burke for Janice Silverio & another; Richard R. Eurich (John F. Hurley, Jr., with him) for the plaintiff.

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