Knowles et al v. Nova Casualty Company

Filing 39

Magistrate Judge Timothy S. Hillman: ORDER entered. FINDINGS OF FACT AND ORDER ON MOTION FOR SUMMARY JUDGMENT OF DEFENDANT NOVA CASUALTY COMPANY (Docket No. 26) and FIDELITY COOPERATIVE BANKS MOTION FOR SUMMARY JUDGMENT (Docket No. 27).(Burgos, Sandra)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

__________________________________________
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v.
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NOVA CASUALTY COMPANY,
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Defendant.
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__________________________________________)
FIDELITY CO-OPERATIVE BANK,
Individually and as assignee of
MATTHEW KNOWLES and
SONDRA KNOWLES,
Plaintiffs

C.A. NO. 10-10519-TSH

FINDINGS AND ORDER ON MOTION FOR SUMMARY JUDGMENT OF
DEFENDANT NOVA CASUALTY COMPANY (Docket No. 26) and FIDELITY
COOPERATIVE BANK’S MOTION FOR SUMMARY JUDGMENT (Docket No. 27)
April 11, 2012

HILLMAN, M.J.
Introduction
Fidelity Cooperative Bank (“Fidelity”) has made claims to Nova Casualty Company
(“Nova”) for payment of property damage and business interruption losses that they claim their
assignor sustained. Nova has denied that the losses were covered by their insurance policy.1
Both parties have moved for summary judgment on the issue of whether the insurance contract
provides coverage for the losses. For the reasons set forth below, Nova’s motion for summary
judgment is allowed and Fidelity’s motion for summary judgment is denied.
Findings of Fact

1

A copy of the Nova Casualty Company Commercial Capitol Assets Program Policy in effect at the time of the
losses is attached to the Mot. For Sum. J. Of Def. Nova Casualty Co. (Docket No. 26), at Ex. B (Docket No. 266)(“Nova Policy”) .

Damages and Losses
On September 6, 2008, a severe tropical rainstorm deposited a large amount of water
onto the roof of a building owned by Matthew and Sandra Knowles at 46-50 High Street in
Clinton, Massachusetts. The building was a five story, mixed commercial and residential use
with two storefronts at street level and sixteen residential rental units above. The volume of the
rain was so great that the roof drain was unable to remove the water, which pooled on the flat
roof and entered the building through aged and porous metal and glass skylights. That water
caused over $500,000.00 in damage to the interior of the building and was so catastrophic that
the Town of Clinton ordered the building closed to tenants. The building was fully rented and
the loss of tenant income led the Knowles to default on their mortgage to Fidelity who, in turn
took title to the property through a deed in lieu of foreclosure. Three months after the water loss
the vacant property sustained damages from theft and vandalism.
Nova’s Denial Of Coverage2
Nova denied the claim for reimbursement for the interior water damage citing to D.
Limitation 1.c. (“Limitation D.1.c.” , or the “rain limitation”) and C. Exclusion 3.c (“Exclusion
C.3.c., or the “faulty workmanship exclusion”) of the Nova Policy. Boiled down to its essential
parts, the rain limitation states that there is no coverage for damage to the interior of: “the
building or structure, caused by or resulting from rain . . .unless . . . the building or structure first
sustains damage by a Covered Cause of Loss to its roof or walls through which the rain…
enters”. Nova denied coverage based upon the rain limitation claiming that the rain water

2

The text of the relevant Nova Policy provisions are set forth in Appendix A attached hereto.

2

entered the interior of the premises because of the backed up roof drain and not from damaged
roof or walls. See Nova Policy, at p. 36.
Nova also denied coverage based on the faulty workmanship exclusion which,
essentially, excludes coverage for: “loss or damage caused by ... [f]aulty, inadequate or defective
... workmanship, repair, construction, renovation or remodeling ... [m]aterials used in repair,
construction, renovation or remodeling; or ... [m]aintenance of part or all of any property on or
off your ‘covered locations’”. Id., at p. 36. In support of its contention that the faulty
workmanship exclusion applies, Nova maintains that the roof drain “was covered by a crudely
fashioned strainer made from a section of lead flashing” which, coupled with the single 2.5 inch
roof drain, were inadequate to handle the water deposited from the rain storm.
Finally, because the building had been vacant for more than sixty days, Nova denied
coverage under H. Loss Conditions 6.b., Id., at pp. 42-43, for the theft and vandalism that
allegedly occurred on December 4, 2008.
Discussion
Fidelity’s five count complaint seeks a declaration that the physical losses suffered by the
property were “covered cause(s) of loss” as that term is used in the insurance policy (Count 1),
and that the loss of business income was similarly covered under the policy (Count 2). Fidelity
also seeks monetary damage from Nova for breach of contract (Count 3), negligence (Count 4),
and violations of Mass.Gen.L, ch. 93A (“Chapter 93A”), the Massachusetts consumer protection
statute (Count 5). Fidelity has moved for summary judgment on Counts 1 and 2 only. Nova has
moved for summary judgment on all counts.

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Standard of Review
Summary Judgment is appropriate where, “the pleadings, depositions, answers to
interrogatories and admissions on file, together with affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a matter
of law.” Carroll v. Xerox Corp., 294 F.3d 231, 236 (1st Cir. 2002) (citing Fed. R. Civ. P. 56(c)).
“‘A “genuine” issue is one that could be resolved in favor of either party, and a ‘material fact’ is
one that has the potential of affecting the outcome of the case.’” Sensing v. Outback Steakhouse
of Florida, LLC, 575 F.3d 145, 152 (1st Cir. 2009) (quoting Calero-Cerezo v. U.S. Dep’t. of
Justice, 355 F.3d 6, 19 (1st Cir. 2004) (internal citation omitted).
The moving party bears the burden to demonstrate the absence of a genuine issue of
material fact within the record. Sensing, 575 F.3d at 153. “Once the moving party has pointed
to the absence of adequate evidence supporting the nonmoving party’s case, the nonmoving
party must come forward with facts that show a genuine issue for trial.” Id. (citing Carroll, 294
F.3d at 236). These facts must not be merely allegations or denials of the moving party’s
pleadings. Id. Both “[c]onclusory allegations [and] improbable inferences” are insufficient to
overcome summary judgment. Sensing, 575 F.3d at 153 (citing Carroll, 294 F. 3d at 236-37
(internal quotations omitted). “The test is whether, as to each essential element, there is
‘sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.’”
Sensing 575 F.3d at 153 (citations omitted).
Interpretation of Insurance Policy
Massachusetts law provides that interpretation of an insurance policy is a question of law
for the court. The court applies general rules of contract interpretation, and looks first to the

4

actual policy language, which is “‘given its plain and ordinary meaning.’” Valley Forge Ins. Co.
v. Field, 670 F.3d 93, 2012 (1st Cir. 2012). Like all contracts, an insurance policy is to be
construed according to the fair and reasonable meaning of its words. Exclusionary clauses must
be strictly construed against the insurer so as not to defeat any intended coverage or diminish the
protection purchased by the insured. See Vappi & Co., 348 Mass. at 431-432, 204 N.E.2d at 276
(1965). Thus, where “the relevant policy provisions are plainly expressed, those provisions
must be enforced according to their terms and interpreted in a manner consistent with what an
objectively reasonable ensured would expect to be covered. Vicor Corp. v. Vigilant Ins. Co., -F.3d--, 2012 WL 883198, at *6 (1st Cir. 2012)(internal citation omitted).
“The insurer bears the burden of demonstrating that an exclusion exists that precludes
coverage, and ‘any ambiguities in the exclusion provision are strictly construed against the
insurer’. Ambiguity does not exist simply because the parties disagree about the proper
interpretation of a policy provision; rather, ‘[a]mbiguity exists when the policy language is
susceptible to more than one rationale interpretation’” Valley Forge, 670 F.3d at -- (internal
citations and citation to quoted case omitted).

Doubts created by any ambiguous words or

provisions are to be resolved against the insurer. August A. Busch & Co. of Mass., Inc. v. Liberty
Mut. Ins. Co., 339 Mass. 239, 243, 158 N.E.2d 351,354 (1959). Finally, absent Massachusetts
precedent, [the court] may also seek guidance from other courts’ interpretations of standard
policy provisions”. Vicor Corp., -- F.3d--, 2012 WL 883198, at *6.
Coverage Under the Nova Policy
The Nova Policy was written in an “all risk” format which, in general, means that all
direct physical damage or loss to insured property are covered so long as such damage or loss

5

were caused by a peril within the policy’s coverage. Fireman’s Fund Ins. Co. v. Tropical
Shipping and Const. Co. Ltd., 254 F.3d 987, 1008 (11th Cir. 2001). At the same time, an “all
risk” policy is not an “all loss” policy“. Thus, “all risk policies often contain express written
exclusions and implied exceptions that have been developed by the courts over the years”, which
serve to bar coverage. Yale University v. Cigna Ins. Co., 224 F.Supp.2d 402, 411(D.Conn 2002).
The issue before me is whether or not the rain limitation and/or faulty workmanship exclusion
apply to the loss described above.
Whether Limitation D.1.c. Excluded Coverage For Property Damage Because Of The “rain
limitation”
Fidelity argues that Limitation D.1.c does not preclude coverage for the property damage
because: Nova voluntarily removed the applicable exclusion from the policy; the rain limitation
does not preclude coverage; cases dealing with similar rain limitations have not applied in facts
similar to this case; the rain limitation is ambiguous and must be construed against Nova; and the
rain limitation defeats the reasonable expectations of the policy holder. Because Fidelity’s claim
falls within the coverage grant and it is relying on the above mentioned policy exclusions to deny
coverage, the burden is on Nova to prove that the loss is plainly excluded by one of the
provisions of the policy.
Fidelity cites to a line of cases which hold that when rain water collects on the ground or
pools behind some obstruction, it ceases to be “rain” within the meaning of the insurance policy
and becomes ‘water’. This definitional distinction they argue, removes the loss from the rain
limitation. They cite to the case of Wider v. Heritage Maintenance, Inc., 827 N.Y.S.2d 837
(N.Y.Sup. 2007) in which the court construed language identical to that at issue in this case. In
their brief, Fidelity argues that: “[t]he New York trial court ruled that the rain limitation did not
6

preclude coverage because the water pooling on the tarp was no longer rain.” Fidelity Coop.
Bank’s Mem. Of L. In Sup. Of Its Mot. For Sum.J. (Docket No. 27-2), at p. 10. In actuality the
court ruled that there was coverage for damage to the exterior of the building because the
limitation only applied to damage to the interior and not because the interior damage was caused
by rain water. In Wider, rainwater collected on several tarps which were tied to limestone finials
on the exterior of the building. The weight of the rainwater on the tarps caused the finials to
break sending the accumulated rainwater into the building. The insurance company denied
coverage for exterior and interior damage to the building relying on the “rain limitation.” The
New York court discussed the difference between “rain” and “surface water” and came to the
conclusion that the interior damage was caused by rain water as opposed to surface water (and
thus excluded from coverage) based in part on two factors: first, the rain water that had
accumulated on the tarps had not reached ground or surface, thus still retaining its rain water
character; and second, the rain limitation excludes coverage for damage “. . . caused by or
resulting from rain.” The New York Court placed great emphasis on the term “resulting from
rain” and rationalized that “if the finials broke as a result of rain, the rain limitation applies.”
(emphasis in original).
Fidelity’s reliance on Thorell v. Union Ins. Co., 242 Neb. 57 (1992) is similarly
misplaced. In Thorell rainwater pooled behind a berm on the ground and entered the plaintiff's
house through the cellar. In discussing the distinction between “rain” and “surface water” the
Nebraska court, drawing on a decision from the Wyoming Supreme Court, held that: “We are
persuaded by the Wyoming Supreme Court’s reasoning that [i]f the water which accumulated on
the ground and entered the basement window was still ‘rain,’ then there is either no such thing as

7

‘surface water,’ or ‘rain’ and ‘surface water’ are synonymous. Obviously, there is such a thing as
‘surface water’-at least in the minds of the parties to the contract in which they used the term.
And if the two terms are synonymous, then the exclusion provision of the policy for ‘surface
water’ also applies to ‘rain,’ and there is no coverage. Thorell, 242 Neb. at 63, citing from State
Farm Fire and Cas. Co. v. Paulson, 756 P.2d 764, 767-68 (Wyo. 1988).3
Fidelity also argues that the language of the rain limitation is ambiguous and since
“exclusionary clauses must be strictly construed against the insurer so as not to defeat any
intended coverage,” such ambiguity must be construed against Nova. Vappi & Co. v. Aetna Cas.
& Sur.Co., 348 Mass. 427, 431-432, 204 N.E.2d 273, 276 (1965). In support of this position,
they point out that the Nova Policy includes a specific exclusion for claims for water damage
caused when a drain backs up. Nova refers to this exclusion in their papers as the “sewer/drain
exclusion.” That exclusion is found in section C.1.f(3) of the policy and excludes coverage for
losses caused by “water or water-borne material, that backs up or overflows from a sewer, drain
or sump.” Nova Policy, at p. 33. At some point, the timing of which is unclear, that exclusion
was removed from the policy by Nova through an endorsement and was not in effect at the time
of the loss. See Id., at p. 16. The combination of the rain limitation, and the amendatory
endorsement deleting the sewer/drain exclusion creates such an ambiguity according to Fidelity.
I disagree. The circumstances surrounding the exclusion of the sewer/drain exclusion are
unclear. Nonetheless, that losses caused by clogged drains may be covered under the Nova
Policy is irrelevant in this case. The fact remains that the water pooled on the roof, thus

3

The instructive benefit of these cases is mitigated by the fact that in both cases the court was dealing with insurance
policies which excluded damage caused by “surface water,” but which covered damage caused by “rain.”

8

becoming surface water which entered the building through the eroded metal and glass skylights.
That the water pooled due to a faulty or inadequate drain does not trump the surface water
exclusion which bars coverage. See B&W Heat Treating Co. v. Hartford Fire Ins. Co., 803
N.Y.S.2d 870 (N.Y.App.Div. 2005); Hirschfield v. Continental Cas. Co., 405 S.E.2d 737
(Ga.Ct.App. 1991)(policy provides coverage for water which backs up through sewers or drains,
except flood and surface waters).
The case of Horizon v. Hartford Fire Ins. Co., 186 F.Supp. 1000 (2002), is instructive on
the issue of ambiguity in construing language identical to the limitation language at issue here.
In Horizon, a severe rainstorm caused extensive damage to the interior of the Plaintiff's property.
Holding that the damage was caused by, or resulted from the rain storm, the court held that
“under the unambiguous language of the insurance policy, the damage is excluded . . .”
(emphasis supplied).

The unambiguous language of an insurance exclusionary clause must be

given its usual and ordinary meaning. See Hakim v. Massachusetts Insurers’ Insolvency Fund,
424 Mass. 275, 281, 675 N.E.2d 1161, 1165 (1997). While there are no Massachusetts cases
deciding the issue, decisions from other jurisdictions have interpreted this language as meaning
that the policy will only cover interior damage due to rain where it is shown that there is damage
to the building’s roof or walls. See Aginsky v. Farmers Ins. Exchange, 409 F.Supp.2d 1230, 1235
(D.Or. 2005) ("the policy only covers losses if the building? first sustains damage to its roof or
walls"); Victory Peach Group, Inc. v. Greater New York Mut. Ins. Co., 707 A.2d 1383,
(N.J.Super.A.D. 1998) (resulting damage caused by entry of rain is covered where building
sustains damage by “Covered Cause of Loss” to its roof). Here, there is no evidence that there
was any damage to the roof through which rain entered the building. Indeed, it is undisputed that

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rain entered the building through the skylights on the roof. I cannot find that the rain limitation
language is ambiguous.
Finally, Fidelity argues that the rain limitation defeats the reasonable expectation of the
policyholder. In support of this position, Fidelity again points to the deletion of the sewer/drain
exclusion in the policy for losses sustained from a backed up drain. Since the loss was caused by
circumstances contemplated by the removed exclusion, Fidelity maintains that it would be
reasonable for the insured to believe that the risk was covered. “When construing language in
an insurance policy, we ‘consider what an objectively reasonable insured, reading the relevant
policy language, would expect to be covered.’” Atlantic Mut. Ins. Co. v. McFadden, 413 Mass.
90, 92 (1992). Courts look to the policy as written and neither revise it or change the order of
the words. Continental Cas. Co. v. Gilbane, Bldg. Co., 391 Mass. 143, 147 (1984). If there is
doubt, the courts are to “consider what an objectively reasonable insured, reading the relevant
policy language, would expect to be covered.”
While I understand that an argument can be made that the inadequate roof drain was
within the original exclusion, this is not an analysis that needs be undertaken. The mere absence
of specific exclusions, standing alone, does not create coverage where it otherwise does not exist
under the express terms of the policy. See Commercial Union Ins. Co. v. Flagship Marine
Services, Inc., 190 F.3d 26, 33 (2d Cir.1999) (after finding that marine insurance policy’s “Tow
Endorsement” was unambiguous, the Second Circuit overruled the District Court's holding that
the “endorsement’s silence as to non-yachts creates coverage”) (citing Advance Watch Co. v.
Kemper Nat'l Ins. Co., 99 F.3d 795, 805 (6th Cir.1996) (“[T]he absence of an exclusion cannot
create coverage; the words used in the policy must themselves express an intention to provide

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coverage for liability for the kind of occurrence or injury alleged by the claimant.”); and
Continental Cas. Co. v. Pittsburgh Corning Corp., 917 F.2d 297, 300 (7th Cir.1990) (“[A]n
exclusion from insurance coverage cannot create coverage.”)). The clear and unambiguous
language of the rain limitation was in full force and effect. The removal of another potentially
relevant exclusion does not automatically disqualify other applicable exclusions or limitations.
It is not unreasonable that other exclusions and limitations would contemplate causes of loss that
would overlap.

Certainly water loss can take many forms and the policy deals with those

eventualities. The contract clearly and unambiguously limits any losses resulting from rain to
those situations where there is damage to exterior roof or walls through which the rain enters.
Whether Limitation C.3.c. excluded coverage for property damage because of the “faulty
workmanship” exclusion.
Whether Exclusion C.3.c., the Faulty Workmanship Exclusion, Bars Coverage
Nova’s second basis for denying coverage is that the interior water damage resulted from
the negligent or inadequate design and/or construction or maintenance of the roof drain and is
thus excluded from coverage under the above quoted “faulty workmanship” exclusion. More
specifically, Nova maintains that:
Based on Nova's investigation of the September 6, 2008, incident, Nova
determined that the roof at the property at 50 High Street in Clinton,
Massachusetts was served by a single drain with an internal diameter of
approximately 2.5 inches which was covered by a crudely fashioned strainer
made from a section of lead flashing. Karl Hansson, P.E., an engineering
consultant from Cianci Engineering who Nova retained to examine the property
gave the opinion that the single roof drain and its strainer were ‘inadequate’ and
not in compliance with current code requirements. Peter Reynolds, P.E., a
building engineer from Douglas G. Peterson & Associates, Inc., also inspected the
property and determined that the ‘roof membrane was not the cause of the damage
but rather the obstruction of the roof drain caused the ponding of water to such a
height that it flowed over the skylight curbs and entered the building.’ Based on
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the inspections and conclusions of Mr. Hansson and Mr. Reynolds, the design and
maintenance of the roof drain were faulty, inadequate and/or defective. I do not
know how long this condition existed before September 6, 2008.
Fidelity Cooperative Bank’s Mot. For Sum. J. (Docket No. 27), attachment at Docket No. 27-6
(Def., Nova Casualty Co.’s Answers To Fidelity Co-Operative Bank’s Inter.), at p. 4, Answer
No. 5.
Nova makes a dual argument in support of their position that the faulty workmanship
exclusion applies. They first allege that the language of exclusion C.3.c precludes coverage.
They also argue that since they will only pay if the "resulting loss" is covered by the policy, the
rain limitation precludes coverage even if the faulty workmanship exclusion does not apply. The
faulty workmanship exclusion provides that Nova “will not pay for loss or damage caused by . . .
Faulty, inadequate or defective . . . workmanship, repair, renovation.” Nova Policy, at p. 36.
“But if an excluded Cause of Loss . . . results in a Covered Cause of Loss, we will pay for the
loss or damage caused by that Covered Cause of Loss.” Id.
While it is undisputed that the single roof drain was inadequate to remove the rain water,
I am hard pressed to see how this triggers the faulty workmanship exclusion. Fidelity has cited
to several cases and commentaries which posit that this exclusion is rightfully intended to
prevent the expansion of coverage to someone who contracts for alterations or repairs to the
property and is dissatisfied with the quality of the work. “The insurer by this exclusion intended
to prevent the expansion of coverage under the policy to insuring the quality of a contractual
undertaking by the insured or someone authorized by him.” Husband v. Lafayette Ins. Co., 635
So.2d 309, 311 (La.App. 5 Cir. 1994). This makes eminent sense and argues against Nova’s
interpretation. As discussed above, exclusionary clauses must be strictly construed against the

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insurer so as not to defeat any intended coverage or diminish the protection purchased by the
insured. See Vappi & Co., at 431-432, 204 N.E.2d at 275. I find the faulty workmanship
exclusion language does not apply on the facts of this case.
Unfortunately for Fidelity this does not end the analysis. As discussed above, the policy
provides that Nova will not pay for rain damage to the building’s interior unless “the building . .
. first sustains damage by a Covered Cause of Loss to its roof . . . through which rain enters”.
Nova Policy, at p. 37 (emphasis added). While I do not agree with Nova that the faulty
workmanship exclusion language applies, I do agree that the rain limitation does apply thus not
qualifying the damage as being “covered” as that term is used in the policy.
Whether the Nova policy affords coverage for the theft/vandalism claim in December 4, 2008.
Under the terms of the policy, vandalism and theft claims are not covered if the building
was vacant for more than 60 consecutive days and if the repairs and renovations have not been
undertaken. The loss occurred on September 6, 2008 and the building was immediately rendered
vacant. On October 6, 2008 Nova denied coverage for the loss and on December 4, 2008 the
vandalism/theft occurred. Fidelity argues that the owners were ready, willing, and able to repair
the building but were prevented from doing so because of Nova’s wrongful refusal to pay the
claim. Until the claim was paid they had no monetary ability to pay the significant cost of the
repairs. In addition they point to the requirements from the Town of Clinton for engineered
renovation plans which made the 60 day requirement impossible to meet.
Fidelity makes two arguments in support of coverage. They ask the court to adopt a rule
that prevents an insurer from invoking the vacancy exclusion if the insurer's wrongful denial of
the claim is the reason for the vacancy. Secondly, they argue that the vandalism/theft damages

13

are recoverable as reasonably and foreseeably flowing from Nova’s breach of contract for failure
to pay the water damage claim. Fidelity admits that they have been unable to find any case law
supporting or rejecting this position. Their argument in support of such a rule is compelling and
would cause to hold an insurance company accountable for a wrongful coverage denial. The
flaw in the argument is, of course, that the denial of coverage by Nova based upon the rain
limitation was not wrongful. As discussed above, I find that the damages to the interior of the
building was not a Covered Cause of Loss as that term is used in the policy thus making negating
Nova’s argument that the failure to pay was wrongful.
The remaining counts in the Complaint
Fidelity has moved for summary judgment on the first two counts of their complaint both
of which seek declaratory judgment. Count One seeks a declaration that there was coverage for
the damage to the interior of the building and losses due to the vandalism/theft of December 4,
2008. Count Two seeks the same declaration for the loss of business income. I can find no
discussion in the papers of whether or not there was coverage for the claim for loss of business
income. In Count 2 of the complaint, Fidelity avers that the policy provided coverage for the loss
of business income that was sustained during the period of the restoration. They further aver in
43 that “The suspension of operations at the High Street property was caused by a ‘covered
cause of loss’ within the meaning of the policy.” If the issue in Count 2 is whether Fidelity's
claim for lost business income is dependent upon a finding that the interior damage was a
“Covered Cause of Loss,” then I can proceed to decide that issue consistent with my decision
above. This appears to be the case based upon the Plaintiffs’ Complaint and the lack of any
contrary arguments by either counsel. Accordingly, I am ruling that summary judgment should

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issue for Nova on count 2 that a declaration enter that the losses to the interior of the building,
for the theft and vandalism of December 4, 2008, and for the loss of business income were not
“Covered Causes of Loss” as that term is used in the policy. I make this declaration based upon
the rain limitation and not the faulty workmanship exclusion.
Nova has moved for summary judgment on all counts. Nova has supplied nothing in the
record in support of their motion on Counts 3 and 4. Count 3 of the Plaintiffs’ complaint alleges
that Nova breached the insurance contract by not paying the claims submitted by the Knowles,
the result of which was that the Knowles were unable to continue their commercial landlord
business and lost the property to foreclosure. This theory of recovery is again dependent upon
whether there was coverage for the loss. Since I have found that there was no coverage, the
Plaintiffs’ breach of contract claim must likewise fail.
The plaintiffs” negligence count (Count 4) alleges that Nova failed to reasonably
investigate and adjust the claims. They aver that Nova was aware that the plaintiffs were relying
upon the Nova policy to fund the repairs from the storm and to replace the rental income.
(Plaintiffs” Complaint, at ¶58). They further allege that Nova breached its duty to the Knowles
by failing to reasonably investigate and adjust their claims. This position is badly undermined
by their opposition to Nova’s motion. In their argument in opposition to Nova’s requested
summary judgment on their Chapter 93A claim, Fidelity goes to great lengths to point out how
quickly Nova moved to deny their claim. Fidelity also points out the unusual timing of this
claim. This loss occurred on September 6, 2008. Within 30 days, Nova had hired 2 engineers,
one coverage lawyer, two outside adjusters, and referred this matter to its corporate president
because of the potential adverse impact on Nova’s financial interests. Also within this 30 day

15

period, Nova denied the claim in its entirety. Fidelity suggest that the speed and intensity of this
effort, coupled with the unusual attention of corporate (ie non-claim) interests, is further
evidence of Nova’s unfair and deceptive trade practice. (Fidelity Cooperative Bank’s Opposition
to Nova’s Motion for Summary Judment and Supporting Memorandum of Law with Request for
Oral Argument (Document No. 32), at p. 10.
Neither party has expended a lot of effort in support of their position on the negligence
claim. This count appears to again rely upon whether there was coverage for the loss and seeks
consequential damages for Nova’s alleged failure to act on the claim in a timely manner. Since I
have found that there was no coverage, Nova's failure to pay in a timely manner is of no
consequence since they were under no obligation to pay. Summary judgment shall issue for
Nova on count 4.
Finally, count 5 of Fidelity’s complaint seeks monetary damages under Chapter 93A, the
Commonwealth's consumer protection statute. Their complaint alleges that Nova denied the
claim before properly investigating, failed to adequately explain its coverage position, and failed
to respond to communications from the Plaintiffs seeking documentation of their coverage
position, all of which constitute an unfair or deceptive act or practice under Chapter 93A.
Plaintiffs’ Complaint, at ¶¶ 62-66. In their memorandum in opposition to Nova’s motion for
summary judgment, they change their focus significantly. Fidelity now alleges that Nova was
improperly influenced to deny the claim because of the poor financial performance of this group
of insurance policies. These policies were part of a program marketed by Breed's Hill Insurance
Agency, an independent insurance agency not a party to this case, and underwritten by Nova.
Fidelity claims that Nova’s decision to deny coverage was not based upon the terms of the policy

16

t rather upon the poor financial performance of the Breed's Hill program. Assuming those facts
to be true, does this create a contested issue of fact even though I have already found that there
was no coverage due to the rain limitation? Fidelity cites to no authority for the proposition that
they are entitled to monetary damages if the insurance policy excluded coverage but that the
claim was denied for a different, unrelated reason, i.e., that the policy was part of a financially
underperforming group.
Conclusion
The Motion for Summary Judgment of Defendant Nova Casualty Company (Docket No.
26) is allowed and Fidelity Co-operative Bank’s Motion for Summary Judgment (Docket No.
27) is denied. Judgment shall enter for Nova Casualty Company.

/s/ Timothy S. Hillman
TIMOTHY S. HILLMAN
UNITED STATES MAGISTRATE JUDGE

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Appendix A
The Nova Policy: Relevant Policy Provisions
The Nova Policy provides in pertinent part as follows:
A. Coverage
We will pay for direct physical loss of or damage to Covered Property at “covered
locations” caused by or resulting from any Covered Cause of Loss.
....
B. Covered Causes of Loss
Covered Causes of Loss means Risks of Direct Physical Loss unless the loss is:
1. Excluded in Section C. Exclusions; or
2. Limited in Section D. Limitations.
....
C. Exclusions
1.

We will not pay for loss or damage caused directly or indirectly by any of the following.
Such loss or damage is excluded regardless of any other cause or event that contributes
concurrently or in any sequence to the loss or damage.
....
f. Water
....
(3)

Water or water-borne material, that backs up or overflows from a
sewer, drain or pump;

....
3.

We will not pay for loss or damage caused by or resulting from any of the
following, Paragraphs 3.a. through 3.c. But if an excluded Cause of Loss that is
listed in Paragraphs 3.a. through 3.c. results in a Covered Cause of Loss, we will
pay for the loss or damage caused by that Covered Cause of Loss.
....
c. Plan, Design Faults
Faulty, inadequate or defective:
(1) Planning, zoning, development, surveying, siting;
(2) Design, specifications, workmanship, repair, construction, renovation, remodeling,
grading, compaction;
(3) Materials used in repair, construction, renovation or remodeling; or

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(4) Maintenance;
of part or all of any property on or off your “covered locations”.
....
D. Limitations
The following limitations apply to the coverage form and endorsements, unless otherwise stated:
1.

We will not pay for loss of or damage to property, as described and limited in this section.
In addition, we will not pay for any loss that is a consequence of loss or damage as
described and limited in this section.
....

c.

The interior of any building or structure, or to business personal property in the building
or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether
driven by wind or not, unless:
(1)

The building or structure first sustains damage by a Covered Cause of Loss to
its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or

(2)

The loss or damage is caused by or results from thawing of snow, sleet or ice on
the building or structure.

....
H. Loss Conditions
....
6. Vacancy
....
b.

Vacancy Provisions
If the building where loss or damage occurs has been vacant for more than 60 consecutive
days before that loss or damage occurs:
(1)

We will not pay for any loss or damage caused by any of the following
even if they a Covered Causes of Loss:
(a) Vandalism;
....
(e) “Theft”;

Nova Policy, at pp. 17, 32, 33, 36, 37, and 42-43.

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