In Chow v. Merrimack Mut. Fire Ins. Co. 2013 Mass. App. LEXIS 84 (Mass. App. Ct. May 15, 2013), the insured purchased a house to serve as living quarters for employees of his restaurant. The restaurant’s general manager also resided at the house and served as a caretaker. Eventually, the restaurant closed and the employees moved out. While the insured was winding up the restaurant’s business affairs, he instructed the caretaker to continue to maintain heat in the house. Despite the insured’s instruction, the house was damaged when pipes froze and burst, thereby releasing a large amount of water into the structure. At the time of the property damage, the thermostats were discovered to be in the off position.  

Thereafter, the insured submitted a claim to the defendant insurer, which denied coverage based on a policy exclusion that precluded coverage for damage caused by frozen pipes if:

(1) the house was unoccupied at the time of the loss; and

(2) the insured failed to use reasonable care to maintain heat in the building. 

In response to the coverage denial, the insured brought suit for breach of contract and declaratory relief. After trial, a jury returned a verdict for the insurer. In reaching its decision, the jury essentially concluded that the house was “unoccupied” at the time of the damage, and that the insured failed to use reasonable care to maintain heat in the building.

On appeal, the insured argued that the trial court improperly instructed the jury regarding whether the negligence of the caretaker should be imputed to the insured for purposes of determining whether the insured failed to use reasonable care to maintain heat in the building. The judge instructed the jury as follows:

Now I also must tell you that a person who is an agent for another person and performs duties at that person’s directions, takes on essentially the place of the person for whom he’s acting. By that I mean, a principal is liable for the acts of his agent in carrying out that principal’s directions or in accomplishing the principal’s business. . . . . Generally the principal is liable if the acts of the agent or the principal is responsible for those acts, if the acts of the agent are done in the course of doing a principal’s business and for the purpose of accomplishing it. . . . In considering whether reasonable care was used in this case, if Mr. Chow, the owner of the house, allowed someone else to act on his behalf in taking care of the house, then you may consider the reasonableness of the care used by that caretaker and the reasonableness of Mr. Chow in directing the individual.

The Massachusetts Appeals Court explained that the question of whether a party to a contract satisfied a contractually imposed duty to use reasonable care is tested by reference to ordinary principles of negligence. The Appeals Court further explained that the question of whether a principal may be held vicariously liable for the failure of his agent to use reasonable care depends on the nature of the relationship between the principal and the agent. For instance, where a master-servant relationship exists, the principal may be held liable for the acts of his agent under the doctrine of respondeat superior. By contrast, the employer of an independent contract is generally not liable for harm caused to another by the independent contractor’s negligence, except where the employer retained control over the manner in which the work was performed. With these principles in mind, the Appeals Court concluded that the trial judge’s charge was improper because it failed to ask the jury to determine the relationship between the insured and the caretaker and simply imputed to the insured any negligence on the part of the caretaker, without regard to the degree of control the insured retained over the caretaker. The Appeals Court reversed and remanded on these grounds.

The Appeals Court also considered whether the trial court erred in its instruction regarding the meaning of the term “unoccupied” as used in the policy. The insured argued that the trial judge failed to: (1) construe the term as a matter of law, instead leaving to the jury to interpret its meaning and (2) instruct the jury to construe ambiguous terms against the insurer. The trial court’s instruction explained to the jury that “‘unoccupied’ means that no person is presently utilizing the premises as a dwelling.” The trial court further explained that a building may be unoccupied for “short periods of time, even where the occupant intends to return, as in the case of a vacation home,” and that “[e]very time you leave your house you are not leaving it in a state that the law would say is unoccupied every time you walk out the door. Instead you should evaluate in this case whether the house was being used as a dwelling place at the time of the loss, and whether it was occupied as such.” While the Appeals Court criticized the trial court’s instruction for suggesting to the jurors that they had greater latitude to interpret the contract language than they did, it concluded that “unoccupied” is not an ambiguous term and the trial court’s instruction accurately conveyed its meaning.