National Union Fire Insurance Co. of Pittsburgh, PA v. Maritime Terminal, Inc.
Judge Denise J. Casper: ORDER entered. MEMORANDUM AND ORDER - The Court DENIES without prejudice National Union's motion for summary judgment, D. 50.(Hourihan, Lisa)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
NATIONAL UNION FIRE INSURANCE CO. )
OF PITTSBURGH, PA,
Civil No. 14-cv-14541-DJC
MARITIME TERMINAL, INC.,
MEMORANDUM AND ORDER
February 9, 2018
Plaintiff National Union Fire Insurance Co. of Pittsburgh, PA (“National Union”) has filed
this lawsuit against Defendant Maritime Terminal, Inc. (“Maritime”) seeking a declaratory
judgment that it is not obligated to defend and indemnify Maritime under Warehouse Legal
Liability Policy No. 051766034 (“the Policy”) in connection with two civil actions in Bristol
Superior Court (the “Underlying Actions”). D. 4; D. 50; D. 51 at 1 n.1; D. 54 at 1 n.1. National
Union has moved for summary judgment. D. 50. For the reasons discussed below, the Court
DENIES the motion without prejudice.
Standard of Review
The Court grants summary judgment where there is no genuine dispute as to any material
fact and the undisputed facts demonstrate that the moving party is entitled to judgment as a matter
of law. Fed. R. Civ. P. 56(a). Material facts are those that carry the potential “to affect the outcome
of the suit under the applicable law.” Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d
46, 52 (1st Cir. 2000) (quoting Sanchez v. Alvarado, 101 F.3d 223, 227 (1st Cir. 1996)). The
movant bears the burden of demonstrating the absence of a genuine issue of material fact.
Carmona v. Toledo, 215 F.3d 124, 132 (1st Cir. 2000); see Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). “If he does so, the burden shifts to the nonmovant to establish that a genuine material
dispute exists.” Harley-Davidson Credit Corp. v. Galvin, 807 F.3d 407, 411 (1st Cir. 2015). That
is, the nonmoving party “must, with respect to each issue on which she would bear the burden of
proof at trial, demonstrate that a trier of fact could reasonably resolve that issue in her favor.”
Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010). In conducting this inquiry,
the Court “constru[es] the record in the light most favorable to the non-movant and resolv[es] all
reasonable inferences in that party’s favor.” Prescott v. Higgins, 538 F.3d 32, 39 (1st Cir. 2008).
Factual Background and Procedural History
National Union issued the Policy to Maritime for the period of April 1, 2013 to April 1,
2014 via a renewal certificate of a previously issued insurance policy. D. 51-1 at 2, 23-24. The
Policy provides coverage from National Union to Maritime for liability resulting from “loss or
damage to personal property owned by customers in the care, custody or control of [Maritime] for
storage, under bills of lading, shipping or warehouse receipt” for specific locations operated by
Maritime including 276 MacArthur Drive, Whalers Wharf, New Bedford, MA. D. 51-1 at 4, 7.
Pursuant to the Policy, National Union agreed to “pay on behalf of [Maritime] all sums, not
exceeding the limit of liability . . . which [Maritime] shall become legally obligated to pay as
damages” as a result of the loss or damage to Maritime’s customers’ personal property. D. 51-1
at 5. As part of the Policy, National Union agreed to “[d]efend any suit against [Maritime] alleging
such damage or destruction and seeking damages on account thereof” as well as pay “all costs
taxed against [Maritime] in any such suit and all interest accruing after entry of judgment until
[National Union] has paid, tendered or deposited in court such part of such judgment as does not
exceed the limit of the Company’s liability thereon.” Id. That is to say, National Union agreed to
defend and indemnify National Union should Maritime incur liability for losses and damages
covered under the terms of the Policy.
The Policy also includes a number of exclusions from coverage. D. 51-1 at 5-6. Relevant
to this litigation, exclusion (e) provides that the Policy does not cover Maritime if the “[l]oss,
damage or expense” resulted “from insects, inherent vice, deterioration, dampness of atmosphere,
inadequate warehouse temperature due to overcapacity, [or] for wear and tear.” D. 51-1 at 17.
Pursuant to exclusion (s), the Policy also excludes coverage for liability or loss resulting from
“[b]reakdown of, failure or improper operating of any refrigeration machinery or equipment”
caused Maritime’s liability, unless the legal liability resulted from “sudden and accidental
breakdown of refrigeration equipment” or “incorrect or improper setting of temperature controls
by [Maritime] or [Maritime’s] employees.” D. 51-1 at 6, 18.
In 2014, Kyler Seafood Inc. (“Kyler”) and Hygrade Ocean Products, Inc. (“Hygrade”) filed
the Underlying Actions against Maritime, alleging that Kyler and Hygrade’s seafood product had
been compromised and spoiled in July and August of 2013 as a result of equipment breakdown at
Maritime’s warehouse. D. 51-2 at 6-7; D. 51-3 at 6-7. Each complaint additionally alleged that
Maritime had had difficulty in maintaining proper temperatures in the warehouse and the deep
freezer containers where the seafood product was stored. D. 51-2 at 7; D. 51-3 at 7. Accordingly,
both Kyler and Hygrade sought damages from Maritime for a number of state claims. D. 51-2 at
10, 12-13, 15, 17; D. 51-3 at 8-11.
Thereafter, on December 18, 2014, National Union instituted this action, requesting that
this Court determine whether National Union was obligated under the Policy to defend and
indemnify Maritime in connection with the Underlying Actions. D. 4 at 1. Maritime moved to
dismiss or stay the action on February 10, 2015. D. 12. The Court allowed the motion to stay until
December 15, 2016. D. 26; D. 34; D. 40. At a conference with the parties shortly thereafter, the
Court lifted the stay, required initial disclosures and set a summary judgment schedule at National
Union’s request. D. 44. National Union subsequently filed a motion for summary judgment. D.
50. The Court heard the parties on the pending motion and took the matter under advisement. D.
The Court Denies National Union’s Motion for Summary Judgment
The Court Denies National Union’s Motion for Summary Judgment with
Respect to its Duty to Defend Maritime Under the Policy
National Union first seeks a declaration stating that it is not obligated under the Policy to
defend Maritime in connection with the Underlying Actions. D. 51 at 1.
It is well-settled Massachusetts law that an insurer’s duty to defend is broader than its duty
to indemnify. See Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399, 403 (1st Cir. 2009).
To determine whether the insurer has a duty to defend, the Court must compare the facts alleged
in the underlying third-party complaint against the provisions of the insurance policy. Open
Software Found., Inc. v. U.S. Fid. & Guar. Co., 307 F.3d 11, 15 (1st Cir. 2002). “[I]f the
allegations of the [underlying] complaint are reasonably susceptible of an interpretation that they
state a claim covered by the terms of the insurance policy,” then the insurer has a duty to defend.
HDH Corp. v. Atl. Charter Ins. Co., 425 Mass. 433, 436 (1997) (citing Liberty Mut. Ins. Co. v.
SCA Servs., Inc., 412 Mass. 330, 331-32 (1992)). The “allegations in the underlying complaint
need only show ‘a possibility that the liability claim falls within the insurance coverage’ rather
than that the allegations ‘specifically and unequivocally make out a claim within the coverage.’”
Friel Luxury Home Constr., Inc. v. ProBuilders Specialty Ins. Co. RRG, No. 09-cv-11036-DPW,
2009 WL 5227893, at *2 (D. Mass. Dec. 22, 2009) (quoting Herbert A. Sullivan, Inc. v. Utica Mut.
Ins. Co., 439 Mass. 387, 394 (2003)).
Initially, the insured party bears the burden of showing that the allegations in the underlying
third-party complaint fit within the covered risks in the policy. Essex, 562 F.3d at 404. Once
satisfied, the burden shifts to the insurer to demonstrate that one or more of the exclusionary
provisions applies and there is no duty to defend. Id. Courts must abide by the “straightforward
meaning of policy language” when possible, Lexington Ins. Co. v. Gen. Acc. Ins. Co. of Am., 338
F.3d 42, 47 (1st Cir. 2003), but “[t]o the extent (if at all) that any ambiguity permeates a policy
exclusion, it must be construed strictly against the insurer.” B & T Masonry Constr. Co. v. Pub.
Serv. Mut. Ins. Co., 382 F.3d 36, 39 (1st Cir. 2004).
The Court denies National Union’s summary judgment motion as to its duty to defend.
The Policy provides that National Union must “[d]efend any suit against [Maritime] alleging such
damage or destruction and seeking damages on account thereof, even if such suit is groundless,
false or fraudulent” if afforded by the terms of the Policy. D. 51-1 at 5. The Policy covers liability
imposed because of “loss or damage to personal property owned by customers in the care, custody
or control of [Maritime] for storage.” D. 51-1 at 4. That is what is alleged here.
There are a number of exclusions alleged in the complaint, but National Union has not
shown, based on any record of undisputed facts here, that any exclusion bars coverage as a matter
of law. For one example, National Union relies upon exclusion (s), D. 51 at 1-3, 5-6, which
provides that the Policy does not cover Maritime’s liability against loss or damage caused by or
resulting from “breakdown of, failure or improper operating of any refrigeration machinery or
equipment,” D. 51-1 at 6. The Policy carves out an exception to Policy exclusions, however,
providing that “sudden and accidental breakdown[s] of refrigeration equipment” are still covered
by the insurance plan. D. 51-1 at 18. As a result, the Policy assigns National Union with a duty
to defend if the complaints in the Underlying Actions raise the possibility that the liability claim
is for loss or damages of property in Maritime’s care except in the case of a breakdown or failure
of the refrigeration that was not sudden and accidental.
Here, allegations in both complaints provide a basis for concluding that National Union
has a duty to defend. Both complaints assert that Maritime had “difficulties in maintaining
property temperatures in the Warehouse” “due to certain equipment breakdown” that caused the
plaintiff’s property to be compromised. D. 51-2 at 6-7; D. 51-3 at 6-7. That is, both complaints
allege that the plaintiff’s property was damaged while in Maritime’s storage and that a breakdown
in refrigeration caused the damage. D. 51-2 at 6-7; D. 51-3 at 6-7. Even though this could indicate
that exclusion (s) applied such that there was no duty to defend, it does not foreclose the possibility
that the refrigeration breakdown was due to sudden and accidental events such that National Union
must defend Maritime under the Policy. This is enough to demonstrate a duty to defend may exist.
See Friel, 2009 WL 5227893, at *2.
Maritime has thus carried its initial burden of showing that the allegations in the underlying
complaint fit within the covered risks of the Policy, such that the burden shifts to national Union
to show that the exclusionary provision applies. Essex, 562 F.3d at 404. National Union has failed
to do so here, where it has not indicated any basis in the Policy language itself or undisputed facts
that would preclude coverage as a matter of law. Cf. Lexington, 338 F.3d at 47 (holding insurer
had no duty to defend where the policy unambiguously excluded a duty to defend and no other
policy language otherwise obligated the insurer to assume responsibility for legal fees). Because
the allegations in the complaint need show a possibility that the liability claim falls within the
insurance coverage, Friel, 2009 WL 5227893, at *2, and all ambiguities related to a policy
exclusion are construed against the insurer, B & T Masonry, 382 F.3d at 39, the Court cannot
declare now that National Union does not have a duty to defend Maritime. Furthermore, although
discovery is now complete in the Underlying Actions, no discovery has been done in this case nor
has discovery in the Underlying Actions been cited here. There is no factual basis before this
Court presently, undisputed or otherwise, to rule in National Union’s favor at this time.
Accordingly, the Court denies National Union’s motion for summary judgment without
prejudice regarding National Union’s duty to defend Maritime in the Underlying Actions.
The Court Denies National Union’s Summary Judgment Motion with
Respect to Its Duty to Indemnify Maritime Under the Policy
National Union next argues that this Court should declare that it does not need to indemnify
Maritime for damages stemming from the Underlying Actions because the Policy precludes such
coverage under two separate exclusions. D. 51 at 5-8. The Court declines to make such a
declaration and denies National Union’s motion for summary judgment.
Where an insurer’s duty to defend is measured by the allegations in the third-party
complaint, the duty to indemnify “is determined by the facts as they unfold at trial or in a settlement
agreement, rather than simply the pleadings.” House of Clean, Inc. v. St. Paul Fire & Marine Ins.
Co., 775 F. Supp. 2d 302, 310 (D. Mass. 2011). “The dispositive issue in an indemnification
analysis is whether the third party plaintiff’s theory of litigation, and the eventual settlement or
result, ‘encompassed allegedly wrongful conduct by the [insured] in his insured capacity, as
defined in the [insurance] policy.’” Id. at 311 (quoting D’Amelio v. Fed. Ins. Co., No. 02-cv12174, 2004 WL 937328, at *7 (D. Mass. Apr. 28, 2004)) (alterations in original). Accordingly,
a declaratory judgment as to an insurer’s duty to indemnify is not ripe until the underlying action
has determined liability or adjudicated factual disputes. See Newell-Blais Post No. 443, Veterans
of Foreign Wars of U.S., Inc. v. Shelby Mut. Ins. Co., 396 Mass. 633, 638 (1986); see also
Narragansett Bay Ins. Co. v. Kaplan, 146 F. Supp. 3d 364, 372 (D. Mass. 2015), appeal dismissed
(Apr. 20, 2016); Scottsdale Ins. Co. v. United Rentals (N. Am.), Inc., 152 F. Supp. 3d 15, 19-20
(D. Mass. 2015). Here, as of the motion hearing, the parties agreed that the Underlying Actions
have not been adjudicated on the merits or settled. See D. 51 at 5 (explaining that “factual
discovery has recently been completed”); D. 54 at 1 (stating that the Underlying Actions are still
pending). Accordingly, National Union’s declaratory judgment as to its duty to indemnify is not
yet ripe for the Court’s consideration where, as here, the underlying action has not determined the
insured’s liability or resolved factual disputes.
Therefore, the Court denies summary judgment as to National Union’s duty to indemnify
also without prejudice.
The Court Denies Maritime’s Request for Additional Discovery Pursuant to
Fed. R. Civ. P. 56(d)
The Court is aware that Maritime has alternatively moved for discovery pursuant to Fed.
R. Civ. P. 56(d). D. 54 at 2, 11-16. In light of the Court’s denial of summary judgment, the Court
denies this request as moot. The Court will instead enter an order seeking counsel’s input about
setting a further schedule in this matter.
For the foregoing reasons, the Court DENIES without prejudice National Union’s motion
for summary judgment, D. 50.
/s/ Denise J. Casper
United States District Judge
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