Mills Construction Corporation et al v. Nautilus Insurance Company
Filing
44
Judge Indira Talwani: ORDER entered Defendant's Motion for Summary Judgment 21 is hereby GRANTED and Plaintiffs' Motion for Summary Judgment 25 is DENIED. (adminn, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
MILLS CONSTRUCTION
CORPORATION, INC., and
NEIL CROTHERS,
Plaintiffs,
v.
NAUTILUS INSURANCE COMPANY,
Defendant.
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1:18-cv-10549-IT
MEMORANDUM & ORDER
March 31, 2019
TALWANI, D.J.
The parties in this insurance coverage dispute have filed cross-motions for summary
judgment. For the reasons set forth below, Defendant’s Motion for Summary Judgment [#21] is
GRANTED and Plaintiffs’ Motion for Summary Judgment [#25] is DENIED.
I.
Factual Background
Plaintiffs Mills Construction Corporation, Inc., and its president, Neil Crothers,1
purchased commercial general liability (“CGL”) insurance from Defendant Nautilus Insurance
Company (“Nautilus”). Plaintiffs’ Statement of Material Facts (“Pls. SOF”) ¶ 31 [#27];
Defendant’s Statement of Material Facts (“Def. SOF”) ¶¶ 18-19 [#23] & Ex. C (Nautilus Policies
(“Policies”)) [#23-3].
In October 2017, Plaintiffs requested defense of a suit brought against them in Superior
Because there is no dispute here that requires the court to differentiate between the corporation
and its president, this Memorandum and Order uses “Mills” to refer both to the corporation alone
and to the Plaintiffs collectively.
1
1
Court by Collette Sychantha. Pls. SOF ¶ 39 [#27] & Ex. J (Letter to Kym Baldyga, Eastern Ins.
Grp. (Oct. 23, 2017)) [#27-5], refiled at Joint Mem., Att. 1 [#42-1] 2; Def. SOF ¶ 1 Ex. A
(Sychantha Amended Complaint (“Sychantha Compl.”)) [#23-1], refiled at Joint Mem., Att. 2
[#42-2]. In her complaint, Sychantha alleges that she hired Mills and Crother in June 2014 to
“perform construction work to rebuild the Premises” after a November 2013 fire damaged her
property. Sychantha Compl. ¶¶ 4-5 [#23-1]. The complaint alleges that Mills and Crother
undertook demolition of the “damaged Premises,” and that during demolition, they damaged the
foundation. Id. ¶ 7. The foundation damage allegedly led to delays and required relocating the
home. Id. ¶¶ 8-10. The complaint alleges further that once construction started, it “did not
proceed smoothly.” Id. ¶ 11. The “many problems with the construction of the home” allegedly
included improper construction of various parts of the house, the “exterior deck is not properly
supported,” the “foundation lacks rebar,” and Mills’ failure to complete work. Id. ¶¶ 1-17.
Sychantha claimed Breach of Contract, Negligence, Breach of Warranty of Habitability,
Negligent Misrepresentations, Negligent Supervision, and violation of Mass. Gen. L. c. 93A.
Id. ¶¶ 22-66.
In November 2017, Nautilus denied Plaintiffs’ request for coverage. Def. SOF ¶ 23 Ex. D
(Letter to Mills (Nov. 27, 2017)) [#23-4], refiled as Joint Mem., Att. 3 [#42-3]. Notwithstanding
the denial, Nautilus requested that Mills “provide for our consideration any additional
information or facts you currently have in your possession or may develop in the future that may
change our decision regarding coverage of this loss, thereby providing us the opportunity to
reconsider our position.” Id. at 13.
As the court directed, see Elec. Clerk’s Notes [#40], the parties filed a Joint Memorandum of
Correspondence Between the Parties and Documents Disclosures by the Plaintiffs (“Joint
Mem.”) [#42] setting forth a timeline and attaching (in the order set forth on the timeline) copies
of documents from the summary judgment record. Joint Mem. [#42].
2
2
The next month, Plaintiffs again contacted Nautilus requesting coverage. Pls. Reply to
Def. Opp. to Pls. Mot. Summ. Judg. (“Reply”) Ex. L (State Court Record, Letter to Kristian
Yates, Litigation Specialist, Nautilus Insurance (Dec. 21, 2017)) 63-67 [#34-2], refiled as Joint
Mem., Att. 4 [#42-4]. Mills asserted that the foundation damage alleged in Sychantha’s
complaint was accidental (because Sychantha did not allege intentional or willful conduct) and
was not subject to any exclusions (because Mills had not performed work on the foundation prior
to the damage, nor was any work intended). Id. at 63-64. Plaintiffs enclosed their original
contract with Sychantha, an estimate for repairs from Sychantha’s insurance company following
the fire, a subcontract between Mills and Assabet Construction Services (“Assabet”), and emails
between Sychantha and Crothers describing damage to the property.3 See Def. SOF Ex. B
(Contract with Sychantha (“Contract”)) [#23-2], refiled at Joint Mem., Att. 5 [#42-5]; Pls. SOF
Ex. F (Insurance Estimate) 28-60 [#27-1], refiled at Joint Mem., Att. 6 [#42-6]; Pls. SOF Ex. F
(Assabet Subcontractor Agreement) 62-63 [#27-1], refiled at Joint Mem., Att. 7 [#42-7].
Nautilus again disclaimed coverage. Pls. Reply Ex. L. (State Court Record, Letter to
Attorney Kennedy, December 28, 2017) 83-86 [#34-2], refiled at Joint Mem., Att. 8 [#42-8].
Plaintiffs wrote to Nautilus again in January 2018. This request sought to “bring to
[Nautilus’s] attention certain admissions by [Sychantha]” in the state court action. Pls. Reply Ex.
K (Letter to Kristian Yates, Litigation Specialist, Nautilus Insurance (Jan. 18, 2018)) 3 [#34-1],
refiled as Joint Mem., Att. 9 [#42-9]. Plaintiffs asserted that Sychantha had admitted in discovery
responses that: “[p]rior to the alleged damage to the foundation, [Mills and Crothers] had
performed no work on the foundation”; “at the time the foundation was damaged, [Mills and
Crothers] or their agents were not performing any actual work on the foundation. Rather, they
3
The emails have not been submitted by either party and are not part of the summary judgment
record.
3
were performing work and the excavator got too close to the foundation and caused irreparable
harm to the foundation[]”; and she “alleges that the alleged damage to the foundation was
accidental.” Id. at 3-4. Plaintiffs quoted, but did not enclose, the referenced responses.
In February 2018, Plaintiffs sent Nautilus a draft of their complaint for declaratory
judgment and violations of M.G.L. c. 93A. They enclosed with the draft complaint Sychantha’s
Responses to Mills’ Request for Admissions and Sychantha’s Answers to Mills’ First Set of
Interrogatories. See Def. SOF Ex. E (Req. for Admissions) [#23-5], refiled at Joint Mem., Att. 10
[#42-10]; Pls. SOF Ex. I (First Interr. Resp.) [#27-4], refiled at Joint Mem., Att. 11 [#42-11].
Plaintiffs formally served Nautilus with their complaint and the attached documents on March 1,
2018. Joint Mem. 2 [#42].
A few months later, Plaintiffs sent Nautilus the affidavit of Neil Crothers. Pls. SOF ¶ 4
[#37] & Ex. F (Affidavit of Neil Crothers) [#27-1], refiled at Joint Mem., Att. 12 [#42-12].
Attached to the affidavit were photographs of work being performed at the Property by
individuals who Crothers asserted were not affiliated with Mills Construction, and copies of the
previously provided contracts and insurance estimate. Id.
Finally, Plaintiffs sent Nautilus copies of Sychantha’s Supplemental Answers to Mills’
First Set of Interrogatories and receipts produced by Sychantha. See Pls. SOF Ex. G (Supp.
Interr. Resp.) [#27-2], refiled at Joint Mem., Att. 13 [#42-13]; Pls. SOF Ex. H (Receipts) [#27-3],
refiled at Joint Mem., Att. 14 [#42-14]. Sychantha’s Supplemental Answers contain her timeline
of the events at the Property, and responses to Mills and Crothers’ request for information
regarding expert witnesses and her Consumer Complaint against Mills.
II.
Standard of Review
Summary judgment is appropriate only if “there is no genuine dispute as to any material
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fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A dispute
is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in
the favor of the non-moving party. A fact is material if it has the potential of determining the
outcome of the litigation.” Patco Constr. Co. v. People's United Bank, 684 F.3d 197, 206-07 (1st
Cir. 2012) (internal quotation marks and citations omitted). In resolving a motion for summary
judgment, the court takes all properly supported evidence in the light most favorable to the nonmovant and draws all reasonable inferences in the non-movant's favor. Griggs-Ryan v. Smith,
904 F.2d 112, 115 (1st Cir. 1990). When presented with cross-motions for summary judgment,
the court “‘must view each motion, separately,’ in the light most favorable to the non-moving
party, and draw all reasonable inferences in that party’s favor.” OneBeacon Am. Ins. Co. v.
Commercial Union Assur. Co. of Canada, 684 F.3d 237, 241 (1st Cir. 2012) (quoting Estate of
Hevia v. Portrio Corp., 602 F.3d 34, 40 (1st Cir. 2010)).
Because this is a matter brought in diversity jurisdiction, the court applies applicable state
law to substantive rules of decision. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
III.
Duty to Defend
Plaintiffs seek a declaratory judgment that Nautilus is obligated to defend them against
Sychantha’s underlying action. Defendant, in turn, seeks declaratory judgment that it is not
obligated to defend Mills and Crothers.
A. The Policies
In Massachusetts, interpretation of an insurance policy is “a question of law” for the court
and therefore appropriate for summary judgment. Essex Ins. Co. v. BloomSouth Flooring Corp.,
562 F.3d 399, 403 (1st Cir. 2009). The scope of an insurer’s duty to defend is determined by the
policy, to which courts apply “familiar rules of contract interpretation.” Sanders v. Phoenix Ins.
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Co., 843 F.3d 37, 42 (1st Cir. 2016); see also B&T Masonry Constr. Co. v. Pub. Serv. Mut. Ins.
Co., 382 F.3d 36, 39 (1st Cir. 2004). Like other contracts, words in insurance policies are given
their usual and ordinary meaning, see Hakim v. Mass. Insurers’ Insolvency Fund, 424 Mass. 275,
280 (1997). However, any ambiguity in an insurance contract is “resolved against the insurance
company that employed them and in favor of the insured.” Cody v. Conn. Gen. Life Ins. Co., 387
Mass. 142, 146 (1982) (quoting August A. Busch & Co. of Mass. v. Liberty Mut. Ins. Co., 339
Mass. 239, 243 (1959)); see also B & T Masonry, 382 F.3d at 39 (“[A]ny ambiguity [that]
permeates a policy exclusion . . . must be construed strictly against the insurer.”).
In relevant part, the Policies cover “sums that the insured becomes legally obligated to
pay as damages because of . . . ‘property damage,”’ provided property damage is caused by an
“occurrence.” 4 “Property damage” includes “[p]hysical injury to tangible property” and “loss of
use” of tangible property.5 An “occurrence” is defined by the Policies as an “accident, including
4
The Policies provide that:
We will pay those sums that the insured becomes legally obligated
to pay as damages because of “bodily injury” or “property
damage” to which this insurance applies. We will have the right
and duty to defend the insured against any “suit”" seeking those
damages. However, we will have no duty to defend the insured
against any “suit” seeking damages for “bodily injury” or
“property damage” to which this insurance does not apply. We
may, at our discretion, investigate any “occurrence” and settle any
claim or “suit” that may result.
....
This insurance applies to “bodily injury” and “property damage”
only if: (1) The ‘bodily injury’ or ‘property damage’ is caused by
an ‘occurrence’ that takes place in the ‘coverage territory’[.]”
Nautilus Insurance Policies, Def. SOF Ex. C, 53 [#23-3].
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The Policies define “property damage” as:
a. Physical injury to tangible property, including all resulting loss
of use of that property. All such loss shall be deemed to occur at
the time of the physical injury that caused it; or
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continuous or repeated exposure to substantially the same general harmful conditions.” Nautilus
Insurance Policies, Def. SOF Ex. C, 66-67 [#23-3].
Courts interpreting similar commercial general liability policies understand an accident as
“an unexpected happening without intention or design.” See Friel Luxury Home Const., Inc. v.
ProBuilders Specialty Ins. Co. RRG, No. 09-CV-11036-DPW, 2009 WL 5227893, at *5 (D.
Mass. Dec. 22, 2009) (collecting cases).
“General liability coverage is not intended as a guarantee of the insured’s work, and for
that reason, general liability policies contain ‘business risk’ exclusions.” Dorchester Mut. Fire
Ins. Co. v. First Kostas Corp., 49 Mass. App. Ct. 651, 654 (2000), citing Sterilite Corp. v.
Continental Cas. Co., 17 Mass.App.Ct. 316, 321–322 (1983). Because the “consequence of not
performing properly is a part of every business enterprise,” business risk exclusions in
commercial general liability policies are intended to ensure that the cost of normal business risks
are borne by the insured contractor. Commerce Ins. Co. v. Betty Caplette Builders, Inc., 420
Mass. 87, 92 (1995). Such “business risks” have been described as those:
which management can and should control or reduce to
manageable proportions; risks which management cannot
effectively avoid because of the nature of the business operations;
and risks which relate to the repair or replacement of faulty work
or products. These risks are a normal, foreseeable and expected
incident of doing business and should be reflected in the price of
the product or service rather than as a cost of insurance to be
shared by others.
Sterilite Corp., supra at 322 n. 13, quoting from Tinker, Comprehensive General Liability
Insurance—Perspective and Overview, 25 Fed'n Ins. Couns. Q. 217, 224 (1975).
b. Loss of use of tangible property that is not physically injured.
All such loss of use shall be deemed to occur at the time of the
“occurrence” that caused it.
Nautilus Insurance Policies, Def. SOF Ex. C, 66-67 [#23-3].
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Exclusion 2(J)(5) precludes coverage of “[t]hat particular part of real property on which
you or any contractors or subcontractors working directly or indirectly on your behalf are
performing operations, if the property damage arises out of those operations.” Nautilus Insurance
Policies, Def. SOF Ex. C, 57 [#23-3]. Exclusion 2(J)(6) precludes coverage of “[t]hat particular
part of any property that must be restored, repaired or replaced because ‘your work’ was
incorrectly performed on it.” Policies, Def. SOF Ex. C, 57 [#23-3]. The term “your work,” as
used in Exclusion 2(J)(6) is defined in the Policy as: “(1) Work or operations performed by you
or on your behalf; and (2) Materials, parts or equipment furnished in connection with such work
or operations.” Policies, Def. SOF Ex. C, 67 [#23-3].
B. Review of the Underlying Claim
Under Massachusetts law, the duty to defend under an insurance policy arises when “the
allegations in a complaint are reasonably susceptible of an interpretation that states or roughly
sketches a claim covered by the policy terms.” Billings v. Commerce Ins. Co., 458 Mass. 194,
200 (2010). “If the allegations in the third-party complaint are reasonably susceptible of an
interpretation that they state or adumbrate a claim covered by the policy terms,” the insurer has a
duty to defend. Mt. Airy Ins. Co. v. Greenbaum, 127 F.3d 15, 19 (1st Cir. 1997) (noting that the
duty to defend may be triggered even if the allegations of the underlying complaint are baseless);
see also Cont'l Casualty Co. v. Gilbane Bldg. Co., 391 Mass. 143 (1984) (the “initial duty of a
liability insurer to defend third-party actions against the insured is decided by matching the thirdparty complaint with the policy provisions [. . . ].”). “The critical issue is whether the summary
judgment record alleges ‘a liability arising on the face of the complaint and policy.’” Herbert A.
Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass. 387, 394 (2003) (quoting Sterilite Corp. v.
Continental Cas. Co., 17 Mass. App. Ct. 316, 324 (1983)).
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Extrinsic facts may add “substance and meaning to skeletal claims only adumbrated in
the complaint.” Open Software Found., Inc. v. U.S. Fid. & Guar. Co., 307 F.3d 11, 16 (1st Cir.
2002). But an insured may not, “in the absence of a complaint that requires coverage, force its
insurer to defend the insured by simply telling the insurer facts which would create coverage.”
Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 15 (1989). Thus
“Massachusetts courts generally use extrinsic facts (such as those set forth in demand letters to
the insurer) to aid interpretation of the complaint and not as independent factual predicates for a
duty to defend.” Open Software Found., 307 F.3d at 15.
As the insured, Plaintiffs bears the burden of proving that at least one of the underlying
claims fall within the scope of coverage under the Policies. Highlands Ins. Co. v. Aerovox
Inc., 424 Mass. 226, 230 (1997); Liberty Mut. Ins. Co. v. Metro. Life Ins. Co., 260 F.3d 54, 63
(1st Cir. 2001). However, the insurer is relieved of its duty to defend “when the allegations in the
underlying complaint lie expressly outside the policy coverage and its purpose.” Herbert A.
Sullivan, 439 Mass. 387, 394-95 (citation and internal quotation marks omitted).
Even where the insured can demonstrate that claims fall under the scope of coverage, the
insurer may be relieved of any duty to defend if it proves “the applicability of one or more
separate and distinct exclusionary provisions.” Essex Ins. Co. v. BloomSouth Flooring Corp.,
562 F.3d 399, 404 (1st Cir. 2009) (quoting B & T Masonry Const. Co., 382 F.3d at 39 (citing
Highlands Ins. Co., 676 N.E.2d at 804)). The insurer bears the burden of showing that any
“occurrence” falls under an exclusion. Essex, 562 F.3d at 404 (internal citations omitted); see
also Dryden Oil Co. of New England, Inc. v. Travelers Indem. Co., 91 F.3d 278, 282 (1st Cir.
1996).
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C. Does Sychantha’s Complaint Sketch a Claim Covered by the Policy Terms,
and Is Any Such Claim Excluded?
Plaintiffs argue that Sychantha alleges four covered claims for damage: damage to the
foundation, damage to the paint job, damage to the hardwood floors and damage to the hearth.
Defendant asserts that Sychantha’s complaint does not claim any damages that are caused by
occurrences, and to the extent that any damage could be considered to have been caused by an
occurrence, such damage is precluded from coverage by either or both of the exclusions. The
court first addresses the damage to the foundation and then the remaining property damage
claims.
1. Damage to the Foundation
The parties do not dispute that the claim of a damaged foundation amounts to a claim for
“property damage” under the insurance contracts. They disagree, however, on whether
Sychantha’s complaint states or adumbrates a claim for damage to the foundation caused by an
occurrence. Her complaint describes no accidents leading to the foundation damage. Instead, it
simply states that “in or about August 2014, Mills undertook demolition of the damaged
Premises. During demolition, Mills damaged the foundation.” Sychantha Compl. ¶ 7 [#23-1].
Sychantha’s complaint asserts further that Mills breached its contract by “failing to demolish . . .
the Premises in conformity with building plans and specification,” id. ¶ 24, that Mills “breached
the duty of care by failing to act as a reasonable construction supervisor,” and that Mills failed to
properly supervise its subcontractors working at the Premises. Id. ¶¶ 37, 53. Because the
complaint describes no accidents related to the foundation, and thus no “occurrences,” the
complaint – when considered alone – does not support an interpretation that Sychantha’s claims
regarding the foundation damage trigger Nautilus’s duty under the Policies to defend Mills and
Crothers.
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Defendant argues further that even if the complaint could be interpreted as claiming
damages caused by an “occurrence,” thus triggering the duty to defend, such a claim is excluded
from coverage by the exclusions. Sychantha’s complaint asserts that the damage was caused by
Mills and Crother in connection with their overall work for her, a factor which implicates
exclusion (J)(5) 6. Sychantha alleges that she hired Mills to “perform construction work to rebuild
the Premises,” that Mills undertook demolishing the damaged premises, and that, in doing so,
damaged the foundation. Sychantha Compl. ¶¶, 24 5 [#23-1]. She alleges further that there were
“many problems with the construction of home,” naming various discrete issues. Id. ¶ 15 [#231]. The examples she provides, including that the rebuilt “foundation lacks rebar,” id. at ¶ 15, are
consistent with her claim that she contracted with Mills and Crothers for an overall project, from
home demolition to reconstruction.
In analyzing the applicability of the exclusions, Nautilus relies on Jet Line Servs. Inc. v.
American Employers Ins. Co., 404 Mass. 706 (1989). In Jet Line, the insured—a company
whose business was partly to clean large petroleum tanks—was hired to perform “cleaning and
repair services” on a tank that later exploded. Id. at 709-10. The Supreme Judicial Court, faced
with an exclusion similar to (J)(5),7 found that the term “on which operations were being
performed” referred to an entire tank and not just the discrete portion of the tank on which
operations were being performed at the moment of the damage. Id. at 711.
Plaintiffs argue that the controlling case is Frankel v. J. Watson Co, Inc., 21 Mass. App.
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Defendant argues that exclusions (J)(5) and (J)(6) both preclude coverage. Because the court
finds that coverage as to the foundation damage is precluded by (J)(5), it does not reach
exclusion (J)(6) as it relates to the foundation.
The language of the policy exclusion at issue excluded coverage for damage “to that particular
part of any property ... upon which operations are being performed” by the insured “at the time
of the property damage arising out of such operations.” Jet Line Servs., 404 Mass. at 711.
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Ct. 43 (Mass. App. Ct. 1985). In Frankel, homeowners hired the insured contractor to move their
farmhouse to an alternate site, to construct a roadway to the new side, to install underground
utilities and a new septic system, and to pour and construct a new concrete foundation. After the
farmhouse was moved, the superstructure began to sag, and the homeowners sought damages
from the insured. In an ensuing dispute with the insurance company, the judge held that the
damage to the superstructure was not excluded because the exclusion’s reference to the
“particular part” of the property referred to the area affected by faulty workmanship, which was
not the superstructure. Frankel, 21 Mass. App. Ct. at 44-46.
Several cases applying Massachusetts law have reconciled Frankel and Jetline by
focusing on the distinction “between damage to the work product of the insured and damage to
larger units of which the insured's work product is but a component.” Id. at 46. In E.H. Spencer
and Company LLC v. Essex Ins. Co., the Superior Court reconciled Frankel and Jet Line by
finding that “[c]overage under the exclusionary endorsement is dependent upon the factual
situation,” and that the case turned on what work the contractor was hired to perform. 25 Mass.
L. Rptr. 578 (Mass. Super. May 27, 2009) (citing Lusalon, Inc. v. Hartford Accident &
Indemnity Co., 400 Mass. 767, 771 (1987)). In that case, the insured submitted claims for two
incidents – water damage to a basement after a painting subcontractor left the basement windows
open, and a leak due to an accidentally punctured hearing system pipe. The insurance company
disclaimed coverage for both incidents under (J)(5) and (J)(6). Finding that “[c]overage under the
exclusionary endorsement is dependent on the factual situation,” the court determined that the
insured was “hired to build the dwelling in question” and that the “entire structure was under [the
insured’s] command.” Id. at *3. Likewise, in Mello Const., Inc. v. Acadia Ins. Co., the court
distinguished the insured’s arguments from Frankel and found a general contractor was not
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entitled to coverage regarding damage to a concrete flooring slab, because its “work product, as
general contractor, encompassed the entire elementary school” it was hired to construct. 70
Mass. App. Ct. 1104, 2007 WL 2908267 at *5 (2007) (unpublished table decision). Similarly
here, Sychantha claims that Mills was hired to rebuild the entire structure.
In contrast, in Gen. Cas. Co. of Wisconsin v. Five Star Bldg. Corp., the court found that a
contractor hired to update the HVAC system, whose work caused water damage to the entire
roof, was not subject to exclusions (J)(5) or (J)(6). No. CIV.A. 11-30254-DJC, 2013 WL
5297095, at *6 (D. Mass. Sept. 19, 2013). The court concluded that Five Star’s roof-work was
“merely incidental to the replacement of the [] ventilation system,” and that this is a situation
where the work “causes damages to other . . . property,” and not “to the product or the completed
work [i.e. the ventilation system] itself.” Id. (citing Commerce Ins. Co. v. Betty Caplette
Builders, Inc., 420 Mass. 87, 92 (1995)).
While Plaintiffs view themselves as the insured in Frankel, and assert they were not
“responsible for completing the entire house,” Pls. Mem. 17 [#26], Sychantha’s complaint leaves
them more akin to the insured parties in Mello and Spencer. Although Plaintiffs assert that they
were not working on the foundation at the time that the damage occurred, the scope of the work
under contract, as claimed by Sychantha, included rebuilding the entire home. These allegations
place the foundation damage within exclusion (J)(5) because it occurred during operations on the
“particular part of real property” on which the insured was performing operations. Although
Plaintiffs assert that they had not anticipated having to do work on the foundation (and
apparently had not done any work prior to the damage on the foundation), Sychantha’s complaint
reflects her claim that Mills was hired to complete the entire project. Accordingly, even if the
complaint could be construed to include a claim for damage to the foundation caused by an
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“occurrence,” coverage would be precluded under exclusion (J)(5).
Sychantha’s contentions in discovery in the underlying action give some additional
substance to the bare claims in the her complaint.8 Sychantha claims that the damage to the
foundation occurred when Mills and its contractor were performing work and “the excavator got
too close to the foundation and caused irreparable harm to the foundation,” and she characterizes
the damage to the foundation as “accidental.” Pls. Reply Ex. K Letter to Kristian Yates,
Litigation Specialist, Nautilus Insurance (Jan. 18, 2018)) [#34-1] (citing Req. for Admissions 1-3
[#23-5]). But while Sychantha acknowledged that Mills had not yet performed work on the
foundation prior to the damage occurring, and agreed they were not performing work on the
foundation at the time that it was damaged, she also elaborates on her contention that the original
scope of work included work on the building’s foundation, asserting that “[t]he work should
have included bracing or securing the foundation [s]o that it remained stable and undamaged
during the work.” Req. for Admissions 1, Def. SOF Ex. E [#23-5]. Thus while Sychantha’s
responses to the Requests for Admissions make her complaint susceptible of an interpretation of
a claim for damage caused by an occurrence, they also allow for Nautilus’s defense that any such
occurrence is barred by exclusion 2(J)(5) on the ground that the claim seeks damage that arose
out of operations on the “particular part of real property on which” Mills or its subcontractors
were performing operations.
The additional evidence – affidavit, contracts, subcontracts, insurance estimate,
interrogatory responses, and more – submitted by Plaintiffs does not mandate a different result.
For purposes of a determination of insurance coverage, it is the underlying claimant’s claims,
Although Mills initially forwarded only selected quotes from Sychantha’s responses to
Requests for Admissions, the court finds no authority that would require the insurance company
to accept Mills’ selective quotations from those documents. Accordingly, to the extent that
Sychantha’s responses are considered as extrinsic facts, they are considered in their entirety.
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and not the insured’s contrary version of events, or even the merits of the underlying claim, that
controls the issue of coverage at the duty to defend stage. See Bos. Symphony Orchestra, 406
Mass. 7, 13 (1989) (the duty to defend arises if the third-party claimant’s claims, “regardless of
its truth or soundness,” falls under the coverage provided by the policy); Open Software Found.,
307 F.3d at 15 (“Massachusetts courts generally use extrinsic facts . . . to aid interpretation of the
complaint and not as independent factual predicates for a duty to defend.”).
Nor would consideration of this additional material change the outcome. As Crothers
asserts, the “insurance estimate referenced in the contract between Mills and Sychantha did not
call for any alterations to the existing foundation” and Mills’ subcontract with Assabet did not
include any work on the foundation. Pls. SOF Ex. F (Aff. of Neil Crothers) (Contract) [#27-1].
But the subcontract between Mills and Assabet is irrelevant in determining the scope of work
agreed upon between Sychantha and Mills, and Sychantha and Mills’ contract was not limited to
work covered by the insurance estimate. Instead, the contract was for “reconstruction of a single
family home,” with the “Contract Documents” describing the work of the contract including not
only the insurance claim but also “Plans and specifications,” and “Owner provided plans.”
Contract [#23-2]. While Plaintiffs may well have assumed based on the insurance estimate that
they would not need to redo the foundation, the contract is not so limited. Sychantha’s complaint
and her responses to the Requests for Admission allege that the agreed-upon project was to
reconstruct a single family home, without any exclusion for the foundation.
Because Sychantha claims that she had contracted with Mills to reconstruct her home,
which is a “particular part of real property,” the damage to the foundation – whether an accident
or not – falls within Exclusion (2)(J)(5).
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2. Damage to the Exterior Paint Job and the Hardwood Floors
Plaintiffs contends that Sychantha alleges that “repairs are needed to the trim, soffits,
windows, doors, deck, and siding, and that these repairs will necessitate the house being
repainted.” Pls. Mem. 11 [#26]. Defendant argues that the needed repairs described by Plaintiffs
are not “elements of the ‘property damage’ alleged by Sychantha in her law suit.” See Def. Mem.
Opp. 5 [#30].
On review of Sychantha’s complaint, the court agrees with Defendant. The complaint
alleges that there were “many problems with the construction of the home” apart from the
foundation, including that the “finish trim work was not performed in a good and workmanlike
manner,” the “exterior trim was installed with interior finish nails which will rust over time and
fail,” and “the doors to the exterior leak.” Sychantha Compl. ¶¶ 15, 15(e), 15(f). The alleged
property damage claimed by Sychantha is the damage to the trim and exterior doors. And as to
the trim and doors, nothing in the complaint supports an interpretation that this damage was
caused by any accident, or “occurrence.”
Nor can Plaintiffs obtain coverage by arguing that repairs that may be needed because of
the alleged poor workmanship amount themselves to damage caused by an occurrence that is
covered by the policies. First, Plaintiffs’ extrinsic evidence proffered to support this argument9
appears to be “telling the insurer facts which would create coverage,” Boston Symphony
Orchestra, 406 Mass. at 15, rather than providing extrinsic information to add “substance and
See Pls. Mem. 10 [#26], citing Pls. SOF ¶ 25, Ex. I, First Interr. Resp. 10 (“Owner painted
exterior out-of-pocket. After repairs of trim, soffits, windows and doors, deck and replacement of
siding, entire exterior will need to be repainted.”) (emphasis added); Pls. Mem. 11 [#26], Pls.
SOF Ex. I, First Interr. Resp. [#27-4] (arguing that Sychantha seeks a claim for water damage
because her First Interrogatory Responses allege that the “left front door leaks,” and
extrapolating that “[s]uch a leak is problematic because water infiltration causes damage to
hardwood floors.”).
9
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meaning to [] claims only adumbrated” in the complaint. Open Software Found., 307 F.3d at 16.
Moreover, even if the alleged damage to the trim or the exterior door or the anticipated
repairs could somehow be considered to have been caused by an “occurrence,” they would be
subject to exclusions (J)(5) and (J)(6), as they stem from Plaintiffs’ work on the entire property,
and amount to a claim for poor workmanship.10
3. Damage to the Hearth
Plaintiffs’ claim concerning damage to the hearth fails for similar reasons. Sychantha’s
complaint includes no allegations at all concerning the hearth. Again, Plaintiffs’ assertion of a
claim by Sychantha relies entirely on her interrogatory responses, which allege that Mills “ran
over seven and a half foot hearthstone and crushed material which was supposed to be saved.”
See Pls. SOF Ex. I, First Interr. Resp. [#27-4]. Once again, this extrinsic evidence cannot create a
claim that is not even sketched in the complaint, and in any event, the damage falls under
exclusion (J)(5).
IV.
93A Allegations
Defendant’s Motion for Summary Judgment also seeks summary judgment with respect
to Plaintiff’s G.L. c. 93A claims. Def. Mem. 16–18 [#22]; see Def.’s Mem. Opp. 10 [#30].
Defendant argues it has not committed a violation of either M.G.L. 93A or G.L. c.176D because
it has advanced and argued a plausible interpretation of the insurance policy in good faith. Mills
contends that Nautilus violated G.L. c. 93A by failing to defend Mills against Sychantha’s suit.
Plaintiffs argue that they were not responsible for any “interior or exterior painting,” and
therefore that Sychantha’s allegations regarding painting do not implicate “their work,” or trigger
any exclusions. See Aff. of Neil Crothers (Pls. SOF Ex. F) ¶ 11 [#27-1]. Setting aside the issue
of whether Sychantha makes such an allegations, Plaintiffs’ evidence, which includes
photographs of individuals painting the property (who Crothers assert are not affiliated with
Mills) is not relevant, because Sychantha’s claim is not that Mills caused damage while painting
the home, but that in constructing the home, Mills allegedly used “interior finish nails [on the
exterior of the house,] which will rust over time and fail.” Sychantha Compl. ¶ 15(f).
10
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Plaintiff is entitled to relief under G.L. c. 93A only upon a showing that the Defendant engaged
in “unfair or deceptive acts or practices.” G.L. c. 93A, § 2. See Peabody Essex Museum, Inc. v.
U.S. Fire Ins. Co., 802 F.3d 39, 54 (1st Cir. 2015) (“[A] violation of Chapter 176D constitutes
only probative evidence, not per se proof, of egregious business misconduct for a Chapter 93A, §
11 business-to-business claim.”). “[W]hether a particular set of acts, in their factual setting, is
unfair or deceptive is a question of fact[.]” Boyle v. Zurich Am. Ins. Co., 472 Mass. 649, 661
(2015) (quoting Klairmont v. Gainsboro Restaurant, Inc., 465 Mass. 165, 171 (2013)).
For the reasons discussed above, the court finds that Defendant is not liable under 93A
because it has advanced and argued a “plausible interpretation” of the insurance policy in good
faith, offering along the way to reassess based on any new evidence that Mills wished to provide.
See, e.g., Def. SOF Ex. D Letter to Mills Construction (Nov. 27, 2017) [#23-4] (asking Mills to
provide any “additional information or facts . . . that may change our decision . . . thereby
providing us the opportunity to reconsider our position.”). “An insurance company which in
good faith denies a claim of coverage on the basis of a plausible interpretation of its insurance
policy is unlikely to have committed a violation of G.L. c. 93A.” Gulezian v. Lincoln Ins. Co.,
399 Mass. 606, 613 (1987). See also Premier Ins. Co. of Massachusetts v. Furtado, 428 Mass.
507, 510 (1998) (“[If] an insurance company has a reasonable and good faith belief that it is not
obliged to make a payment to a claimant who is asserting a violation of G.L. c. 93A and G.L. c.
176D, § 3(9), asserts the point, and offers to take active steps to resolve the dispute, the
company's action, even if ultimately held to be based on a misinterpretation of the law, would
not be an unfair settlement practice.”).
V.
Conclusion
For the reasons discussed above, Defendant’s Motion for Summary Judgment [#21] is
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hereby GRANTED and Plaintiffs’ Motion for Summary Judgment [#25] is DENIED.
IT IS SO ORDERED.
Date: March 31, 2019
/s/ Indira Talwani
United States District Judge
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