As the holiday season approaches, it is worth remembering that while we cannot choose our parents and siblings, we can choose our business partners. Anyone familiar with the court system knows that nasty disputes are common among family members in business together. This is especially true if one family member happens to be an arsonist with an ax to grind.
Last summer the Massachusetts Appeals Court decided USF Insurance Company v. Langlois, rejecting three brothers’ insurance claim after a fourth brother burned down their tavern in Haverhill. The four Langlois brothers – Richard, Robert, David and Bruce – owned the tavern’s real estate in the Langlois Family Realty Trust. Robert and David were trustees, and Richard was first successor trustee. Bruce, the second successor trustee, could become a trustee only upon the death of all original trustees. The four brothers were beneficiaries of the family trust, owning their interests jointly with rights of survivorship.
The family trust leased its real estate to Smith’s Tavern Inc. of Haverhill, an affiliated corporation that operated the tavern. The four brothers were directors of the corporation, with David as president, treasurer and secretary. David and Robert managed the tavern. Bruce tended bar. USF Insurance Co. issued a casualty insurance policy naming both the family trust and the corporation as insureds. The policy excluded from coverage damages caused by dishonest or criminal acts of the insureds or their “partners, members, officers, managers, employees … directors, trustees … or anyone [entrusted with] the property for any purpose.”
Apparently dissatisfied with his position in the Langlois family hierarchy, Bruce set the tavern on fire in 2010. He later pleaded guilty to arson, confessing his hostility toward his brothers. When the brothers reported the loss to USF Insurance Co., it filed suit in Superior Court claiming that losses resulting from Bruce’s arson were excluded from coverage. The Superior Court entered judgment in favor of the insurance company.
Interests Were Intertwined
The Langlois brothers presented two arguments on appeal: first, the insurance policy was ambiguous; and second, the family trust was an innocent coinsured that should not lose insurance coverage because of Bruce’s crime. Addressing the ambiguity argument, the Appeals Court noted that interpretations of insurance policies are not questions of fact for juries, and such ambiguities are resolved against insurance companies and in favor of insureds. However, when policy language is unambiguous, courts interpret policy terms according to their plain meaning. The Appeals Court found no ambiguity in the policy’s language and rejected the brothers’ argument.
The court then turned to the brothers’ argument that the family trust was an innocent coinsured that should not be barred from collecting insurance proceeds from the fire. Under this argument, the brothers conceded that the corporation should not recover because Bruce was a director; however, the family trust should keep its insurance claim because Bruce was not a trustee. The court disagreed, observing that the trust’s and corporation’s interests were “inextricably intertwined,” since the four brothers (including Bruce) were directors of the corporation and beneficiaries of the trust, and the trust had entrusted the corporation with the care of the building. The court upheld the lower court’s ruling, concluding that despite the family trust’s innocence, Bruce’s intentional arson released the insurance company from any obligation to pay for the loss.
Soon family members across America will gather to celebrate holidays and share their love for one another. However, it would not be surprising if during this year’s holiday season, one brother is missing from the Langlois family’s gatherings.
Christopher R. Vaccaro, Esq., is a partner at Looney & Grossman LLP in Boston. His email address is cvaccaro@lgllp.com.
