SKRZAT v. CONNEARNEY (2019)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

In June 2015, Philip J. Skrzat was severely injured while working on a residential construction project in Hopkinton. At the time, he was employed by Gary Gaffney and Ken Fagnant, an informal partnership doing business as Shoreline Builders (collectively, Shoreline).³ Shoreline was engaged as a subcontractor to Mikals Construction Corporation, Inc. (Mikals Construction), a company owned and operated by Michael Connearney. The house site in Hopkinton was owned by Michael Connearney's wife, Elaine Connearney. After receiving workers' compensation benefits through Shoreline, Skrzat brought a negligence action against the Connearneys, alleging that they had “carelessly and negligently operated, managed, maintained and/or controlled [the] construction site.” That action eventually settled.

At issue in the current appeal is the Connearneys' unsuccessful effort to implead Shoreline in the action brought by Skrzat. A Superior Court judge denied the Connearneys' motion to amend their answer to add third-party claims against Shoreline, ruling that, as a matter of law, such claims were barred by the exclusivity provision of the Workers' Compensation Act, G. L. c. 152, § 23. For the reasons explained below, we vacate the order.

Background. The factual recitation that follows is principally drawn from the allegations of the Connearneys' proposed third-party complaint. Where it is based on other materials submitted with, or in opposition to, the motion to amend, this is noted.⁴

1. The relationship between Shoreline and the Connearneys. Michael Connearney's company, Mikals Construction, hired Shoreline to perform the framing of the Hopkinton house. The two entities previously had worked on at least one other construction project, with Mikals Construction providing the materials and Shoreline the labor. After the parties agreed that Shoreline would do the Hopkinton job, they executed a one page “BID MEMO” memorializing this. The bid memo contained a brief description of the work to be performed and the agreed-upon price. It made no mention of indemnification or insurance coverage. Nevertheless, the Connearneys have alleged that Shoreline agreed to certain terms not set forth in the bid memo. Most notably, the proposed third-party complaint alleges that Shoreline had “represented to Mikals Construction that it had general liability coverage that would provide coverage for ․ and designate Mikals Construction as [an] additionally named insured.” It also alleges that Shoreline had promised to provide Mikals Construction with “healthy, competent, and quality laborers.”

2. Shoreline hires Skrzat. Although Skrzat worked for Shoreline as a regular employee, he was paid in cash without any taxes withheld (an arrangement commonly known as being paid “under the table”). This allegedly was done at Skrzat's request so that he could continue receiving Social Security disability benefits for a shoulder injury. Shoreline did not reveal to the Connearneys that Skrzat may have suffered from a disability.

3. The accident. On June 19, 2015, Skrzat and others were working to install the flooring on the second story of the Hopkinton home. At that point, the joists were “open,” and there was a large hole where the stairs from the first story would be installed. For reasons not well developed on the record before us, Skrzat apparently fell through the hole -- dropping some twenty feet -- and was seriously injured as a result. It is uncontested that Skrzat received workers' compensation benefits from Shoreline's insurer.

4. The litigation. Approximately seven months after they filed their answer to Skrzat's complaint, the Connearneys filed a motion for leave to amend their answer in order to lodge a third-party complaint against Gaffney and Fagnant (doing business as Shoreline).⁵ The complaint asserted four claims: (1) breach of contract, (2) common law indemnification, (3) negligent misrepresentation, and (4) negligence. After receiving notice of the Connearneys' motion to amend,⁶ Gaffney (doing business as Shoreline) -- although not formally a party -- filed an opposition. Following a hearing, the judge denied the Connearneys' motion on the grounds that the third-party claims failed as a matter of law. In a concise docket entry, the judge explained that because Skrzat had received workers' compensation from Shoreline (the putative third-party defendant), the Connearneys' claims against Shoreline were barred by the exclusivity provision of the Workers' Compensation Act, G. L. c. 152, § 23.⁷ Eventually, Skrzat and the Connearneys reached a confidential settlement, and they executed a stipulation of dismissal terminating the litigation between them.⁸ Then, twenty-one days later, the Connearneys filed a notice of appeal seeking to challenge the denial of their motion to amend.

Discussion.⁹ 1. Standard of review. An order denying a motion to amend pleadings is reviewed for an abuse of discretion. Castellucci v. United States Fid. & Guar. Co., 372 Mass. 288, 292 (1977).¹⁰ Here, the judge's ruling turned on whether -- in the face of the uncontested fact that Shoreline had paid Skrzat workers' compensation benefits -- the proposed third-party complaint failed as a matter of law. In this context, it is appropriate that we accept as true the allegations set forth in the proposed complaint. See Juarez v. Select Portfolio Servicing, Inc., 708 F.3d 269, 276 (1st Cir. 2013) (“A request for leave to amend filed before discovery is complete ․ is gauged by reference to the liberal criteria of Federal Rule of Civil Procedure 12[b][6]” [quotation omitted] ).¹¹ To the extent that the proposed third-party complaint is legally deficient, we need not consider the additional factual materials that the parties submitted.

2. Merits. The exclusivity provision of the Workers' Compensation Act states as follows:

“If an employee accepts payment of compensation under this chapter on account of personal injury or makes an agreement under section forty-eight, such action shall constitute a release to the insured of all claims or demands at common law, if any, arising from the injury.”

G. L. c. 152, § 23. As a result of this provision, once an employer has paid out workers' compensation to an employee who has been injured on the job, the employer is “release[d]” from, and thereby no longer liable for, any claims “arising from the injury.” G. L. c. 152, § 23. A rich body of case law has developed that spells out how the provision applies to various types of claims. We proceed to address that case law in the context of reviewing the individual third-party claims that the Connearneys had sought to bring. We begin by addressing the Connearneys' negligence claim, because the application of the exclusivity provision to that claim is the most straightforward.

a. Negligence. The Connearneys argue that Shoreline was solely at fault for the injuries to Skrzat. Because they cannot vicariously be liable for claims for which Shoreline has been released from liability (pursuant to the exclusivity provision), their negligence claim against Shoreline fails as a matter of law. See Larkin v. Ralph O. Porter, Inc., 405 Mass 179, 185 (1989), citing Vertentes v. Barletta Co., 392 Mass. 165, 168-171 (1984). Even if the Connearneys were alleging that Shoreline -- as a joint tortfeasor -- was liable to them in contribution, see G. L. c. 231B, § 1 (a), their negligence claim would fare no better. That is because the cases long have established that the exclusivity provision bars contribution claims against insured employers. See Liberty Mut. Ins. Co. v. Westerlind, 374 Mass. 524, 526-527 (1978). See also Decker v. Black & Decker Mfg. Co., 389 Mass. 35, 44 (1983) (“The purpose of [the exclusivity provision] ․ is to provide a benefit to the insured employer by releasing it from liability in return for imposing a statutory liability without regard to fault”). The judge correctly ruled that the Connearneys' negligence claim against Shoreline would fail as a matter of law.

b. Indemnification. The judge also correctly ruled that the Connearneys' indemnification claim would fail as a matter of law. The exclusivity provision of the Workers' Compensation Act serves to protect insured employers from common-law claims of indemnity. See Decker, 389 Mass. at 45 (characterizing exclusivity provision as “the legislative abrogation of the common law right of indemnity”). At the same time, the Supreme Judicial Court has interpreted § 23 as not precluding insured employers from entering into contractual obligations to indemnify others, at least so long as the contracts are express. See Whittle v. Pagani Bros. Constr. Co., 383 Mass. 796, 800 (1981) (adopting so-called “majority rule”). See also Larkin, 405 Mass. at 181-182. We need not consider whether the Connearneys' proposed indemnification claim falls within this exception, because their complaint does not allege that Shoreline agreed to indemnify them. In fact, the indemnification count speaks only of Shoreline's having violated a “duty of common law indemnity,” not any express or implied contracts of indemnity. Since such a claim has been abrogated, it necessarily fails as a matter of law. See Decker, supra.¹²

c. Breach of contract. The Connearneys' contract claim stands on a different footing. In their proposed third-party complaint, they specifically allege that Shoreline orally agreed to add Mikals Construction as an additional insured on its comprehensive general liability policy. Just as an insured employer can enter into an express agreement to indemnify a third party with regard to claims brought by injured employees, so too can it agree to obtain insurance coverage with regard to such claims (at least if it does so expressly).¹³ See Spellman v. Shawmut Woodworking & Supply, Inc., 445 Mass. 675, 677 n.5, 679-680 (2006) (despite exclusivity provision, general contractor may bring breach of contract claims against subcontractor, including claim based on promise to add general contractor as an additional insured). See also RCS Group, Inc. v. Lamonica Constr. Co., 75 Mass. App. Ct. 613, 621 (2009), citing 9 Couch, Insurance § 126:7 (3d ed. 1997) (general contractor “expressly could have required that [a subcontractor] include it as an additional insured, as is commonly done”). Of course, it remains to be seen whether the Connearneys can prove their allegation that Shoreline committed to add Mikals Construction as an additional insured. In fact, the factual materials that the parties submitted provide some reason to doubt the Connearneys' ability to make such a showing.¹⁴ However, there remains a factual dispute over this issue that cannot be resolved at the pleading stage. We conclude that the judge erred in ruling that the Connearneys' contract claim was barred by the exclusivity provision.¹⁵

d. Negligent misrepresentation. The Connearneys also allege that Shoreline “negligently made false representations” that it would designate Mikals Construction as an additional insured party.¹⁶ Although this claim appears to sound in tort, “the key to whether the Work[ers'] Compensation Act precludes a common law right of action lies in the nature of the injury for which plaintiff makes claim” (quotation omitted). Foley v. Polaroid Corp., 381 Mass. 545, 553 (1980). See Estate of Moulton v. Puopolo, 467 Mass. 478, 482-483 (2014). Because this claim is premised on the same alleged representations as the breach of contract claim, we find that it similarly arose out of the business relationship between Shoreline and the Connearneys, rather than “from the injury” suffered by Skrzat, and therefore falls outside the purview of the § 23 exclusivity provision. G. L. c. 152, § 23. The Connearneys have adequately stated a claim for negligent misrepresentation that involves a factual dispute which cannot be resolved at the pleadings stage.¹⁷

Conclusion. The order entered November 21, 2016, denying the Connearneys' motion for leave to amend their answer and file a third-party complaint is vacated, and the matter is remanded to the Superior Court for further proceedings consistent with this memorandum and order.

So ordered.

Vacated and remanded

FOOTNOTES

3.   The partnership between Gaffney and Fagnant was formed “on a handshake.” It since has been dissolved. For convenience, we employ the term “Shoreline” to refer to Gaffney, Fagnant, and their former partnership, except where reference to the specific individuals is necessary.

4.   The Connearneys submitted two deposition transcripts -- both of Gaffney -- with their motion. Shoreline submitted with its opposition documentation that Skrzat had been paid workers' compensation benefits and a copy of the “BID MEMO” discussed infra. The authenticity of these documents does not appear to be in dispute.

5.   The motion to amend also sought to join Mikals Construction as a third-party plaintiff.

6.   Consistent with “[t]he preferable practice” we identified in Srebnick v. Lo-Law Transit Mgt., Inc., 29 Mass. App. Ct. 45, 51 (1990), a different Superior Court judge from the motion judge compelled the Connearneys to notify Shoreline.

7.   The docket entry read as follows:“After hearing, and review of the parties' submissions[,] the Defendant's Motion is DENIED due to the exclusivity provision of the Workers Comp. Statute because plaintiff was employed by the purported third[-]party Defendant and did receive workers comp. [b]enefits as a result of the injuries claimed in this complaint. Accordingly G. L. c. 152[, §] 23 bars defendant from impleading the plaintiff's employe[r] on these common law claims set forth in the proposed amended complaint.”

8.   The body of the stipulation of dismissal in its entirety stated as follows: “Pursuant to [Mass. R. Civ. P.] 41(1)(ii), the parties to the above-captioned matter hereby stipulate that it be dismissed as to all claims and counter-claims with prejudice and without costs.”

9.   Following oral argument, we asked for supplemental briefing on whether this appeal is properly before us. We conclude that it is. As is true under the analogous Federal rules, once the stipulation of dismissal brought the litigation between the existing parties to a close, the Connearneys could seek appellate review of the adverse interlocutory ruling on their proposed third-party claims (despite the anomaly that all litigation between existing parties had been resolved). See 6 C.A. Wright, A.R. Miller, & M.K. Kane, Federal Practice and Procedure § 1463, at 550 (2010) (“denial of impleader may be included as one of the grounds for appeal should defendant subsequently be held liable to plaintiff”). It certainly would have been better practice for the Connearneys to have insisted that the stipulation of dismissal specifically reserve their right to appeal the interlocutory ruling as to their third-party claims. This would have provided helpful clarity for all concerned, including the Superior Court clerk staff who, quite understandably, added a docket entry noting that the case was “[d]isposed for statistical purposes.” However, on its face, the stipulation of dismissal here addressed only dismissal of the claims between Skrzat and the Connearneys (“the parties to the above-captioned matter”); it did not state that -– as a condition of settling with Skrzat –- the Connearneys agreed to forgo pursuing third-party claims against Shoreline. At least in the absence of evidence to the contrary, we interpret it as effecting a dismissal only of the claims between Skrzat and the Connearneys, not of the third-party claims that the Connearneys had sought to bring. See Fleming v. Shaheen Bros., 71 Mass. App. Ct. 223, 225 (2008) (determining, after reviewing record, that stipulation of dismissal signed by two parties “settled the dispute between those two parties only, despite its broad language”).

10.   On appeal, Shoreline argues that instead of filing a motion to amend pursuant to Mass. R. Civ. P. 15 (a), 365 Mass. 761 (1974), the Connearneys should have filed a motion pursuant to Mass. R. Civ. P. 14 (a), as amended, 385 Mass. 1216 (1982), under which a defending party may “cause a summons and complaint to be served upon a person who is or may be liable to him for all or part of the plaintiff's claim against him.” In their reply brief, the Connearneys stated that they chose to proceed as they did because two of their claims -- namely, breach of contract and negligent misrepresentation -- “seek damages based upon the conduct of Shoreline,” unrelated to the plaintiff's claims, and thus are outside the scope of rule 14 (a). We need not determine which motion was appropriate because nothing appears to turn on this.

11.   See Strom v. American Honda Motor Co., 423 Mass. 330, 335 (1996) (“ ‘Because the Massachusetts Rules of Civil Procedure are patterned after the Federal rules, we interpret our rules consistently with the construction given their Federal counterparts,’ absent compelling reasons to the contrary or significant differences in content” [citation and quotation omitted] ).

12.   On appeal, the Connearneys suggest that their indemnification claim can survive as an implied agreement. They waived this argument by not raising it in Superior Court. See Trapp v. Roden, 473 Mass. 210, 220 n.12 (2015) (“Issues not raised in the trial court are considered waived on appeal”). In addition, the argument is at odds with how the Connearneys pleaded the indemnification count in their proposed third-party complaint.

13.   As a general matter, an express agreement can be oral or in writing. See Vasconcellos v. Arbella Mut. Ins. Co., 67 Mass. App. Ct 277, 280 (2006); H.J. Alperin, Summary of Basic Law § 5:3, at 926 (5th ed. 2014) (“[a]n oral contract may be an express contract, so long as there is, like any other contract, an offer, acceptance, consideration, and terms setting forth the rights and obligations of the parties”). Nothing in the case law interpreting the exclusivity provision or the statute of frauds appears to require that a contractual commitment to provide insurance coverage be in writing. See G. L. c. 259, § 1; RCS Group, Inc. v. Lamonica Constr. Co., 75 Mass. App. Ct. 613, 621 (2009).

14.   The Connearneys' claim that Shoreline specifically agreed to name Mikals Construction as an additional insured on its comprehensive general liability policy lies in some tension with the seeming informality of the parties' relationship and the barebones nature of the bid memo (apparently the only written agreement between them). See Bowser v. Chalifour, 334 Mass. 348, 352 (1956) (“Contracts should be construed in accordance with justice and common sense and the probable intention of the parties”).

15.   In their proposed third-party complaint, the Connearneys also sought to assert a breach of contract based on an alternative theory. Specifically, they alleged that by hiring Skrzat –- who was receiving disability payments –- Shoreline breached an implied duty to provide able-bodied employees for the construction project. We need not consider whether such a claim could go forward in the face of the exclusivity provision, because the Connearneys have not alleged, much less pointed to any evidence, that any disability that Skrzat did or did not have, in fact caused the accident. See Bulwer v. Mount Auburn Hosp., 473 Mass. 672, 690 (2016) (one element in breach of contract claim is plaintiff having suffered harm as result of breach).

16.   To prove negligent misrepresentation, the Connearneys would have to show that Shoreline, “(1) in the course of [its] business, (2) supplie[d] false information for the guidance of others[,] (3) in their business transactions, (4) causing and resulting in pecuniary loss to those others[,] (5) by their justifiable reliance upon the information, and (6) with failure to exercise reasonable care or competence in obtaining or communicating the information.” Nota Constr. Corp. v. Keyes Assocs., Inc., 45 Mass. App. Ct. 15, 19-20 (1998).

17.   The Connearneys also seek to base their negligent misrepresentation claim on alleged representations by Shoreline that it would provide “healthy, competent, and quality labor” to the Connearneys, and “control and maintain the jobsite at all times during the [p]roject.” These allegations may well equate to allegations of negligence that are barred by § 23. We need not decide that issue, however, because the Connearneys have not alleged in their complaint that such representations “caus[ed]” the accident or “result[ed] in” any damages to them. Nota Constr. Corp., 45 Mass. App. Ct. at 19-20.