National Union Fire Insurance Company of Pittsburgh, PA v. Town of Norwood et al

Filing 38

Judge Richard G. Stearns: ORDER entered granting 28 Motion to Dismiss for Failure to State a Claim. Count Two of National Union's Amended Complaint is DISMISSED with prejudice. (RGS, law1)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 16-11978-RGS
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA
v.
TOWN OF NORWOOD ET AL.
MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION TO
DISMISS COUNT TWO OF THE AMENDED COMPLAINT
February 8, 2017
STEARNS, D.J.
Plaintiff National Union Fire Insurance Company of Pittsburgh
brought this action against the Town of Norwood and a host of affiliated
defendants1 seeking a declaratory judgment that National Union is not
required to provide a defense in an earlier-filed suit before this court.

The full roster of Norwood defendants is the Town of Norwood,
Norwood Memorial Airport, the Norwood Airport Commission, Francis T.
Maguire, Mark P. Ryan, Kevin J. Shaughnessy, Martin E. Odstrchel, Michael
Sheehan, Leslie W. LeBlanc, and Thomas J. Wynne (all current or former
Commission members or employees of the Airport or Commission). For
obvious reasons, this opinion will use “defendants” as a shorthand for the
entire cohort. The Complaint also names as a defendant Boston Executive
Helicopters, LLC (BEH), the plaintiff in the earlier-filed case, but BEH is not
a party to this motion to dismiss.
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Defendants have moved to dismiss Count Two of National Union’s Amended
Complaint for failure to state a claim. See Fed. R. Civ. P. 12(b)(6).
Defendants held two insurance policies with National Union which
together covered the period from July 1, 2014, to July 1, 2016. Am. Compl. ¶
16. Both policies required defendants to notify National Union of any suit,
claim, occurrence, or offense arising under the policies “as soon as
practicable.” Am. Compl. ¶ 26. National Union asserts that defendants failed
in this duty when threatened with a lawsuit by BEH. BEH, which offers flight
services from Norwood Memorial Airport, sought to expand its business by
obtaining a permit to become a fixed base operator (FBO) at the airport. Am.
Compl. ¶¶ 29-30. BEH’s pursuit of the permit led to a number of conflicts
with defendants, ranging from disputes over the ability of BEH to lease a
required ramp required to actions taken by defendants that BEH perceived
as favoring FlightLevel, an existing FBO at the airport. Am. Compl. ¶ 32.
In 2014, BEH sought an order in the Superior Court compelling
defendants to comply with its public records requests, and in February of
that year, BEH sought the intervention of the Federal Aviation
Administration (FAA). Am. Compl. ¶ 51. In March of 2015, BEH secured an
order in the Superior Court requiring that FlightLevel remove an obstruction
it had installed at the airport (supposedly with defendants’ approval). Id.
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Roughly a week later, BEH filed an administrative complaint with the FAA’s
Office of Chief Counsel. Id. On October 7, 2015, BEH filed suit against
defendants in the Superior Court, alleging breach of contract, antitrust
violations, and violations of both Massachusetts and federal civil rights
statutes.2 Am. Compl. ¶ 33. Defendants removed the lawsuit to the federal
district court shortly thereafter. Defendants tendered notice of the suit to
National Union on December 1, 2015. Am. Compl. ¶ 2.
National Union argues that the seeds of the 2015 suit had germinated
in 2014. Moreover, nearly two months elapsed from the time the suit was
filed and defendants’ tender of notice and request for a defense. For both
these reasons, it asserts that defendants failed to provide notice “as soon as
practicable.”
The hurdle facing National Union is that any breach of the duty of
notice is irrelevant, because in Massachusetts, “an insured’s failure to comply
with a notice obligation in an insurance policy does not relieve the insurer of
its duties under that policy unless the insurer demonstrates that it suffered
prejudice as a result of the breach.” Boyle v. Zurich Am. Ins. Co., 472 Mass.

This court dismissed all but one of BEH’s claims (for retaliation for
the exercise of First Amendment rights in violation of 42 U.S.C. § 1983)
against defendants in July of 2016. Bos. Exec. Helicopters v. Maguire, __ F.
Supp. 3d __, 2016 WL 3676120 (D. Mass. 2016).
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649, 651 (2015). An insurer bears the burden of demonstrating prejudice.
Darcy v. Hartford Ins. Co., 407 Mass. 481, 485 (1990). And, under Rule
12(b)(6), the insurer must plead sufficient factual matter to make out a
plausible entitlement to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
National Union’s Complaint is wholly lacking on this score. The only
mention of prejudice in the Complaint occurs in a single paragraph:
Upon information and belief, during the approximately year or more
that the dispute with BEH was ongoing before notice was provided to
National Union, developments occurred and the Norwood
Defendants engaged in conduct including, but not limited to,
engaging in settlement discussions as reported to the Court in the
BEH Action on November 23, 2015. Such developments and conduct
caused prejudice to National Union as a result of the Defendants’
breach of the Policies’ conditions to coverage concerning notice of a
claim.
Am. Compl. ¶ 54. The sole “development” alleged as prejudicial is an
unsuccessful attempt by defendants to negotiate a settlement with BEH.
This raises no plausible claim of prejudice, as BEH would be prohibited from
using any information obtained in settlement discussions for any relevant
purpose. See Fed. R. Evid. 408(a).
The only case National Union cites for the contrary proposition,
Steelcase, Inc. v. American Motorists Insurance Co., 907 F.2d 151, 1990 WL
92636 (6th Cir. 1990) (unpublished table decision), is not on point. In
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Steelcase, the insured had not only engaged in settlement discussions, but
had actually entered into a settlement agreement with a state agency
regarding a leak of paint solvent from an underground storage tank. Id. at
*1. The insured sought coverage for the cost of the cleanup, and the court
concluded that the advanced stage of the cleanup and the insured’s ongoing
obligations under the agreement meant that the insurer was denied its
opportunity to investigate the claim and to “participate in Steelcase’s
remedial efforts.” Id. at *2.
Nothing comparable occurred here. No settlement was reached in the
BEH action, and National Union does not allege that its ability to investigate
the claims or present a defense in the BEH action has been compromised in
any way. See Boyle, 472 Mass. at 656-657. Nor does defendants’ failed
settlement effort preclude future efforts to settle the remaining claim with
National Union’s participation.
ORDER
For the foregoing reasons, Count Two of National Union’s Amended
Complaint is DISMISSED with prejudice.
SO ORDERED.
/s/ Richard G. Stearns
__________________________
UNITED STATES DISTRICT JUDGE
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