Shri Gayatri, LLC v. The Charter Oak Fire Insurance Company

Filing 66

District Judge Timothy S Hillman: MEMORANDUM AND ORDER entered granting 47 Motion for Summary Judgment. (Castles, Martin)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
________________________________________________
)
SHRI GAYATRI, LLC,
)
Plaintiff
)
)
v.
)
)
)
THE CHARTER OAK FIRE INSURANCE COMPANY, )
Defendant.
)
________________________________________________)

C.A. NO. 13-40153-TSH

MEMORANDUM OF DECISION AND ORDER FOR ENTRY OF JDUGMENT
September 12, 2016

HILLMAN, D.J.
Introduction
Shri Gayatri, LLC (“Shri Gayatri”) filed suit against The Charter Oak Fire Insurance
Company (“Charter Oak”) seeking a declaratory judgment that that it is entitled to an award for
Replacement Cost Value of the loss owed and Ordinance and Law loss under an insurance
policy, Policy Number I-660-7496M38A-COF-10 (“Policy”) issued to Shri Gayatri that covered
a commercial property owned by it and operated as a motel at 66-68 Haynes Street, Sturbridge,
MA. More specifically, the property was a Days Inn consisting of four buildings, which housed
thirty-four (34) rooms, and a pool (“Property”). Shri Gayatri has also asserted claims for breach
of the implied covenant of good faith and fair dealing, and violation of the Massachusetts
Consumer Protection Act, Mass.Gen.L. ch. 93A, §§2,11 and Mass.Gen.L. ch. 176D, §§
3(9)(f),(g) (“Chapter 93A claim”). Charter Oak has filed a Counterclaim seeking a declaratory

judgment that it has no obligation to pay Shri Gayatri for: (1) the difference between the
replacement and actual cash value for any property loss or damage; and (2) the increased cost of
construction of building, zoning and use ordinance. This Memorandum of Decision and Order
For Entry Of Judgment addresses Defendant’s Motion For Summary Judgment (Docket No. 47).
For the reasons set for the below, that motion is granted.
Relevant Policy Provisions
Replacement Cost
The Policy contains the following provisions relevant to replacement cost coverage:
4. Loss Payment
a.

In the event of [covered] loss or damage … at our option, [Charter Oak]
will either:
(1) Pay the value of lost or damaged property;
(2) Pay the cost of repairing or replacing the lost or damaged
property, subject to b. below;
(3) Take all or any part of the property at an agreed or
appraised value; or
(4) Repair, rebuild or replace the property with other property
of like kind and quality, subject to b. below.
[Charter Oak] will determine the value of lost or damaged
property, or the cost of its repair or replacement, in accordance
with the applicable terms of the Valuation Condition in this
Coverage Form or any applicable provision which amends or
supersedes the Valuation Condition.

b.

The cost to repair, rebuild or replace does not include the increased cost
attributable to enforcement of any ordinance or law regulating the
construction, use or repair of any properly, except as provided under the
increased Cost of Construction or Repair Additional Coverage.
….

2

6.

Valuation
[Charter Oak] will determine the value of Covered Property in the
event of covered loss or damage as follows:
a.

At actual cash value as of the time of the loss or damage,
.…
The Policy further provides “Replacement Cost” as an “Optional Coverage,”, in relevant
part, as follows:
3. Replacement Cost
a.

Replacement Cost (without deduction for depreciation)
replaces the term Actual Cash Value provisions in a., e. and
h. of the Loss Condition, Valuation, in Section E.6. of this
Coverage Form.
….

d.

You may make a claim for loss or damage covered by this
insurance on an actual cash value basis instead of on a
replacement cost basis … .

e.

[Charter Oak] will not pay on a replacement cost basis for
any loss or damage:
(1)

Until the lost or damaged property is actually
repaired or replaced; and

(2)

Unless the repairs or replacement are made as soon
as reasonably possible after the loss or damage.

The Policy contains the following Endorsement as required under Massachusetts law:
C.

Paragraph 3.e. of the REPLACEMENT COST Optional
Coverage is replaced by the following:
e.

[Charter Oak] will not pay on a replacement cost
basis for any loss or damage:
(1)

Until the lost or damaged property is
actually repaired or replaced:
(a)
(b)

On the described premises; or
At some other location in the
Commonwealth of Massachusetts;
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(2)

Unless the repairs or replacement are made
within a reasonable time, but no more than 2
years after the loss or damage.
Ordinance or Law Coverage

The Policy contains the following provisions relevant to ordinance of law coverage:
2.

The following coverages are added … Each of these Additional Coverages is
additional insurance unless otherwise indicated.
a. Ordinance or Law
(1)

If a Covered Cause of Loss occurs to Covered Building Property, [Charter
Oak] will pay for:
(a)

Loss to the Undamaged Portion of the Building caused by
enforcement of any ordinance or law that:
(i)
Requires the demolition of parts of the same property not
damaged by a Covered Cause of Loss;
(ii)

(iii)
(b)

Regulates the construction or repair of buildings, or
establishes zoning or land use requirements at the described
premises; and
Is in force at the time of loss.

Demolition Cost, meaning the cost to demolish and clear the site of
undamaged parts of the Building property caused by enforcement
of the building, zoning or land use ordinance or law.

(c)

The Increased Cost of Construction caused by enforcement of
building, zoning or land use ordinance or law, meaning the
increased cost to repair, rebuild or construct the property in
compliance with the minimum requirements of such ordinance or
law. This increased cost of construction coverage is subject to the
following provisions:
(i)

This coverage applies only if:
(A)

The Building property is insured for replacement
cost;

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(B)
(C)

(ii)

The Building property is repaired, rebuilt or
re-constructed; and
The repaired, rebuilt or reconstructed Building
property is intended for similar occupancy as the
current Building property, unless otherwise required
by zoning or land use ordinance or law.

[Charter Oak] will not pay for the Increased Cost of
Construction:
(A)

Until the Building prop-erty is actually repaired or
replaced at the same premises or another premises;
and

(B)

Unless the repairs or re- placement are made as
soon as reasonably possible after the loss or
damage, not to exceed two years. [Charter Oak]
may extend this period in writing during the two
years.

Findings of Fact1
The Policy was a commercial insurance policy effective from September 24, 2010
through September 24, 2011. Charter Oak renewed the Policy on September 24, 2011 and
terminated the renewal Policy pursuant to a notice of cancellation sent to Shri Gayatri on
September 29, 2011. The Policy terminated effective December 3, 2011.

1

Pursuant to L.R, D.Mass. 56.1, the party moving for summary judgment must include a concise statement
of material facts of record as to which it contends there is no genuine issue of dispute. The party opposing summary
judgment must include a concise statement of material facts of record as to which it contends there exists a genuine
issue to be tried. Plaintiff has included a statement of material facts which purports to set forth those material facts
“as to which there exists a genuine issue to be tried.” However, what Plaintiff has actually filed is its own version
of the facts in narrative form. More to the point, Plaintiff has made no attempt to highlight for the Court those facts
asserted by Charter Oak which it contends are in dispute versus those facts that are undisputed. Consequently,
Plaintiff has improperly shifted the burden to the Court to read through both parties’ statement of facts and figure
out what facts are in dispute. While the Court has made an attempt to isolate the material facts which remain in
dispute, because the Plaintiff has failed to comply with L.R. 56.1, the Court has largely adopted Charter Oak’s
statement of facts. Caban Hernandez v. Philip Morris USA, Inc., 486 F.3d 1, 7 (1st Cir. 2007)(“In the event that a
party opposing summary judgment fails to act in accordance with the rigors that such a rule imposes, a district court
is free, in the exercise of its sound discretion, to accept the moving party's facts as stated.”); see also S. Shore
Hellenic Church, Inc. v. Artech Church Interiors, Inc., No. CV 12-11663-GAO, 2016 WL 1732720, at *29 (D.
Mass. Apr. 28, 2016)(anti-ferreting rules such as Rule 56.1 are designed to reduce burden on trial courts and prevent
party from shifting burden to court to organize evidence).
.

5

On June 1, 2011, the Property sustained damage caused by a tornado (the “Loss”). The
damage included fallen trees and roof and structural damage to the four buildings. That same
day, Shri Gayatri submitted a claim to Charter Oak. On June 2, 2011, Charter Oak conducted an
initial inspection of the damage to the Property. Based on the initial inspection, Charter Oak
assigned the claim to Gerald Alfieri (“Alfieri”), a General Adjuster in Charter Oak’s Property
Major Case Unit. Alfieri, on behalf of Charter Oak, retained the following outside consultants to
assist in Charter Oak’s investigation of the loss: Gary Page (“Page”), of Page Consulting, to
assist with an estimate of the building damage; Leonard J. Morse-Fortier, a structural engineer,
to assist with a determination of the scope of damages to the buildings; Russell Drummey, a
mechanical engineer, to assist with an evaluation of the extent of damages to HVAC systems and
other building mechanicals; and Commercial Equipment Insurance Pricing Service to assist with
an evaluation of the business personal property loss. Alfieri also requested Walter Shutak, a CPA
employed by the Charter Oak claim department, to assist with an evaluation of the business
income loss. On June 3, 2011, Charter Oak conducted a site inspection of the Property. Alfieri
indicated that it may take six months or more to restore the Property. Charter Oak’s
representatives, including Alfieri and Page, visited the Property additional times in June and
July, 2011 to investigate the Loss.
Facts Relating to Building Loss
Charter Oak issued two payments dated June 9, 2011 to Shri Gayatri totaling $107,500 as
an advance payment on the building loss. A $100,000 payment was made payable jointly to Shri
Gayatri and United Bank, the mortgage holder. United Bank held $50,000 and the remaining
$50,000 was released to Shri Gayatri for emergency repairs. The $7,500 payment was made
jointly to Shri Gayatri, United Bank and John Grenier (‘Grenier”), Shri Gayatri’s public adjuster;
Grenier retained the entire amount.
6

On Shri Gayatri’s behalf, Grenier retained a building estimator, Dennis Walsh (“Walsh”),
who worked with Page in June and July, 2011 to arrive at an agreement on the scope of damages.
Walsh’s estimate, dated July 7, 2011, shows a total replacement cost value of $755,200.20. Shri
Gayatri never provided Walsh’s estimate to Charter Oak.2 Page prepared an estimate of the
building damage and provided it to Alfieri on or before August 5, 2011. The estimate calculated
the total replacement cost value of the building loss to be $647,022.21. Page, who had prior
work experience for a construction contractor, based his estimate on figures provided by
Xactimate, a computer software program he regularly uses to estimate such losses. Charter Oak
prepared a Statement of Loss based on Page’s estimate. The Statement of Loss calculated the
replacement cost value of the total building loss, including estimated amounts for initial services
and tree removal (that were not part of the Page estimate), to be $686,387, with an actual cash
value (“ACV”) of $509,324. Alfieri shared the estimate and Statement of Loss with Grenier on
August 8, 2011. Shri Gayatri was informed by Alfieri that there was no coverage for fences,
retaining walls and paved surfaces damaged by wind. On the same day, Alfieri also obtained
authority from his supervisor to pay Shri Gayatri the undisputed ACV loss.
Charter Oak issued payments dated August 8, 2011 to Shri Gayatri totaling $396,824 (a
check for $367,062 and a check for $29,762) for the building loss and $40,089 for business
personal property losses. Shri Gayatri did not deposit the $367,062 check until March 22, 2012.
Shri Gayatri did not challenge Charter Oak’s August, 2011 estimate of the building loss, either in
its evaluation of the scope of damages or the cost of making repairs. In mid-August, 2011, Shri

2

In its statement of disputed facts, Shri Gayatri states that Patel did not know that Grenier had hired Walsh
and was not aware of his estimate. Shri Gayatri hired Grenier and gave him authority to act as its agent. Given that
Grenier had actual authority to act on Shri Gayatri’s behalf, it would have been reasonable for Charter Oak and Page
to assume that Walsh also had the authority to act on behalf of Shri Gayatri. Shri Gayatri does not argue that Walsh
did not have actual or at least apparent authority to act on its behalf. For this reason, the Court is unclear as to the
legal significance of Patel’s lack of knowledge that Grenier hired Walsh to assist with providing Charter Oak a loss
estimate.
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Gayatri retained Tocci Building Companies (“Tocci”), a company that builds hotels, to prepare
an estimate of the loss. Shri Gayatri did not inform Charter Oak that it had retained Tocci to
prepare an estimate.
On or about August 28, 2011, the Property sustained additional property damage caused
by Tropical Storm Irene. Shri Gayatri did not report the additional damage caused by Tropical
Storm Irene to Charter Oak and Tocci had not inspected the Property prior to the additional
damage caused by Irene. Tocci completed its estimate of the cost to repair the building damage
($2,195,426) and provided it to Mr. Jayesh Patel (“Patel”), manager of Shri Gayatri, at the end of
September 2011. The estimate was provided to Charter Oak on or about November 9, 2011. On
or about October 29, 2011, the Property sustained a third loss caused by an early ice/snow storm
(“October Snowstorm”). Again, Shri Gayatri did not report the additional damage caused by this
storm to Charter Oak. On November 4, 2011, Alfieri, while driving past the Property, observed
that no repairs were in progress. On November 7, 2011, he called Grenier to inquire into the
status of the claim and the repairs. Grenier informed Alfieri, for the first time, that the Property
had sustained additional damage as a result of the August and October storms. Grenier also
informed Alfieri, for the first time, of the Tocci estimate. Grenier provided the Tocci estimate to
Alfieri on November 9, 2011. The Tocci estimate, based on an inspection of the Property that
occurred after Tropical Storm Irene, calculated the total replacement cost value of the loss to be
$1,945,474. The Tocci estimate did not contain any calculation of the ACV of the Loss.
On November 29, 2011, Charter Oak conducted another inspection of the Property along
with representatives of the insured. At this inspection, Charter Oak observed the damage to the
Property caused by Tropical Storm Irene and the October Snowstorm for the first time. Charter
Oak’s representatives also observed that, despite the $509,324 ACV amount Charter Oak had

8

paid to Shri Gayatri on the building loss, Shri Gayatri had not undertaken any repairs other than
temporary roof covering, initial removal of wet items, and other minor remediation.
Following the November 29, 2011 inspection, Alfieri asked Page to revise his estimate.
Page’s revised estimate calculated the replacement cost value of the building loss to be
$1,010,655. The major reason for the increase was Charter Oak’s determination that one of the
buildings in the motel complex was a total loss and needed to be demolished and replaced. In
addition, Charter Oak made payment allowances to repair water damage observed in two guest
rooms above the eating area in another building, repair additional water damage to the guest
rooms on the south side of that building, and repair damage caused by water on the floor in
additional rooms in another building. The new water damage claims arose because Shri Gayatri
had not adequately protected the buildings on the Property from the elements, leaving them
vulnerable to rain and snow damage from Tropical Storm Irene and the October Snowstorm.
Charter Oak prepared a revised Statement of Loss based on Page’s revised estimate. The revised
Statement of Loss calculated the replacement cost of the building loss to be $1,050,020, with an
ACV of $808,478. Charter Oak forwarded the revised building estimate and Statement of Loss to
Grenier. On December 9, 2011, Patel received a letter from Wyndham Hotel Group that as of
December 3, 2011, the Days in franchise at the Property was cancelled. On or about December
16, 2011, Patel received a letter from the Town of Sturbridge building inspector stating that it
was reasonable to conclude the Property was a total loss.
Charter Oak issued two payments dated February 2, 2012 to Shri Gayatri, totaling
$299,154, for the additional ACV of the building loss. On or about February 24, 2012, Patel
received a revised estimate from Tocci. The estimate broke down as follows: $1,816,014 to
reconstruct the four buildings; $224,753 for site work; $164,917 for septic/pool/well; and
$412,039 for code upgrades. Although it is not clear when, the revised estimate was forwarded
9

to Alfieri. On March 1, 2012, Charter Oak conducted another inspection of the damage to the
Property. As of the March 1, 2012 inspection, Shri Gayatri still had not made permanent repairs
to the Property. According to Patel, he was holding the checks (he had not deposited them) and
not initiating repairs due to the perceived concerns of United Bank, the mortgage holder.
Additionally, Patel did not start repairs because Charter Oak had not provided him with enough
funds to rebuild the property. A Mr. Ferolito (“Ferolito”) from Tocci was present at the
inspection. He compared the Page estimate to Tocci’s first and second estimates and concluded
that Page had missed a number of items and had priced the work for a number of repairs lower
than what Tocci had estimated it would cost to perform the work. It is not clear that Grenier,
Ferolito or anyone else associated with Shri Gayatri ever raised these concerns with Page or
anyone else from Charter Oak.
Following the March 1, 2012 inspection, Alfieri asked Page to revise his estimate. Page’s
revised estimate calculated the replacement cost of the building loss to be $1,038,331. The
modest increase was based on observations made during the March 1, 2012 inspection and
Page’s use of an updated price list. Charter Oak prepared a revised Statement of Loss based on
the revised estimate. The revised Statement of Loss calculated the replacement cost of the
building loss to be $1,082,715, with an ACV of $836,825. Charter Oak forwarded the revised
building estimate and Statement of Loss to Grenier. On March 23, 2012, Alfieri met with Grenier
and Patel and informed them that once the April payment was made, Charter Oak believed that it
did not owe any additional money on the claim, and that the parties should proceed with
reference if there was disagreement about whether the proper amount had been paid. Also on
March 23, 2012, Patel requested from Alfieri that Charter Oak exercise its option under the
Policy to find and engaged a contractor to repair and rebuilt the Property. Charter Oak declined
to do so. Charter Oak issued additional payments on April 2, 2012 to Shri Gayatri totaling
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$23,328 for the building loss. Charter Oak issued a payment dated July 10, 2012 to Shri Gayatri
in the amount of $11,359 for remediation services, after Shri Gayatri presented it with
documentation of the services. Some of these funds were retained by Grenier to pay his fee and
others were sent directly to companies who had performed repair services.
On August 15, 2012, Attorney Caryn L. Daum, on behalf of Charter Oak, sent a letter to
Timothy Wickstrom, counsel for Shri Gayatri, stating that “if your client disagrees with the
amount of loss as determined by Charter Oak, the amount of loss must be submitted to reference
in accordance with the Policy and the procedures set forth in M.G.L. ch. 175, §100, et seq.”
Attorney Wickstrom replied by letter dated August 30, 2012, in which he stated that “[i]t is the
insured’s position that reference must be initiated by the insured, not the insurer, pursuant to the
statute.”
Charter Oak issued payments dated August 27, 2012 to Shri Gayatri totaling $18,956 for
business personal property losses (this payment amount was re-issued to Shri Gayatri at a later
date because the checks had not been deposited). On or about on October 1, 2012, Shri Gayatri
replaced Grenier as its public adjuster and retained David A. Benton (“Benton”) in his place.
Over the next seven months, Benton attempted to obtain photographs and reports and determine
how the damages occurred at the time of loss plus the two subsequent storms. Benton never
received any documents from Grenier, and he never spoke with Grenier. Benton also never saw
any estimates from Grenier. Benton had no knowledge of what Grenier did during the almost
year and a half Grenier worked on the claim on behalf of Shri Gayatri.
By letter dated April 12, 2013, Benton, on behalf of Shri Gayatri, demanded reference on
the claim. By letter dated May 20, 2013, Benton asked Charter Oak to extend the two year time
period listed in the Policy for Shri Gayatri to repair or replace the damages to the Property. By
letter dated May 22, 2013, Charter Oak declined to extend the two-year period set forth in the
11

Policy for Shri Gayatri to repair or replace the damages to the Property, but agreed that the twoyear limitation period to file suit in the Policy would be tolled pending the conclusion of the
reference. Shortly before the reference hearings held between October 17 and 29, 2013, Benton
submitted to the referees a Public Adjuster/Loss Consultant memorandum providing an overview
of the issues in dispute at the reference. Benton’s memorandum enclosed a Statement of Loss
prepared by him. The memorandum and Statement of Loss calculated the replacement cost value
of the building loss to be $1,894,047.89, with an ACV $1,569,580.57. At about the same time,
Shri Gayatri also submitted to the reference panel a claim binder containing voluminous invoices
and estimates, most of which had not previously been provided to Charter Oak. Specifically, Shri
Gayatri produced the following documents to the reference panel, none of which had been
previously produced to Charter Oak, either by Benton or Grenier:
a. a list of incurred emergency repairs totaling $85,232,77;
b. two cancelled checks to Barry Brothers Landscaping dated June 22, 2011 I the
amounts of $22,000 and $750, respectively;
c. invoice from Peticular Care Cleaning & Restoration dated July 27, 2012 in the
amount of $13,923.76;
d. cancelled check to William Gravel dated July 1, 2011 in the amount of
$9,000;
e. invoices from Stan Kaitbenski dated September 7, 2011, December 6, 2011,
December 14, 2011, and December 18, 2012 in the amounts of$2,300, $2,425,
$4,800, and $2,000, respectively;
f. cancelled checks to Howlett Lumber dated December 19, 2011 and April 4,
2012 in the amounts of $3,089 and $2,541, respectively;
g. checks to Renovation GTC, LLC dated April 14, 2012 and April 18, 2012 in
the amounts of $1,600 and $4,000, respectively;
h. email from Sturbridge Building Inspector to Mr. Patel dated April 17, 2013
regarding compliance with code;

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i. Mid-Point Engineering and Consulting Report letter to Mr. Patel dated April
11, 2013 providing an estimate for civil engineering design fees and
improvement costs;
j. Thompson-Liston Associates, Inc. letter to Shri Gayatri dated April 30, 2013
with a proposal for replacement of the motel;
k. estimate Prepared by CCG dated April 10, 2012 for repair costs;
l. A-1 Spectrum Services Invoice dated June 11, 2012 in the amount of$2,650;
A-1 Spectrum results of samples dated May 4, 2012 and June 4,2012; and A-1
Spectrum Inspection Report dated June 10, 2012, in connection with asbestos
inspection;
m. Walsh Environmental Service Invoice dated February 10, 2013 in the amount
of $65,000 for asbestos abatement;
n. GESI Invoice dated January 15, 2013 in the amount of $29,852.86 for
keycards and locksets;
o. Active Telephones, Inc. proposal for telephone and internet services received
on August 30, 2011;
p. HD Supply quote dated January 14, 2013 in the amount of $28,894.32 for
HVAC;
q. KayGee Sign estimate in the amount of $26,228 for signs;
r. BMA Architectural Group proposal dated March 5, 2012 for architectural and
structural services;
s. Tocci estimated code upgrades totaling $323,451;
t. HD Supply estimate of furniture/fixtures/equipment/operating supplies
totaling $305,587.22;
u. Chockshi, Mund & Raczkowski, PC email to Mr. Patel dated October 7, 2013
with accountant’s bill;
v. Wyndham Hotel Group letter to Mr. Patel dated December 9, 2011 with
acknowledgment of termination of Days Inn license; and
w. Pinnacle Advisory Group letter to Attorney Wickstrom dated May 14, 2013
with review of impact to hotel due to tornado damage.

13

Facts Relating To Lost Business Income
Alfieri asked Shutak to prepare an four month business loss estimate, which
represented the least amount of time that the Property would be out of service. Shutak did
not request a copy of the Days Inn franchise agreement before preparing the estimate. On
or about June 29, 2011, Shutak estimated that the business income loss over an eight
month period would be $168,000. Charter Oak issued a payment dated July 5, 2011 to
Shri Gayatri in the amount of $43,000 for business income loss.
Shutak did not perform any work on the Shri Gayatri file between July 7, 2011
and November 1, 2011. In November 2011, Alfieri requested a new business loss
estimate covering the six month period from June 1, 2011 to December 1, 2011. Shutak
completed the estimate around November 15, 2011. He calculated a projection of lost
sales in the amount of $266,000, which represented an increase of $98,000.00 from his
previous estimate of $168,000. In his calculation, Shutak did not consider rental
expense, in the amount of $8,601.22, to be a continuing expense, which resulted in a
lower estimate: When rent was not considered a continuing expense, the business income
loss was estimated to be $164,391.26 and when it was considered, a continuing expense,
the business income loss was estimated to be $173,054.72. On or about November 16,
2011, Shutak informed Alfieri that he estimated the business income loss to be
$164,391.28.
On or about January 30, 2012, Shutak sent a business interruption loss report to
Alfieri which indicated an eight month business income loss for Shri Gayatri in the
amount of $173,905.85. This calculation did not include rent as a continuing expense.

14

By this time, the rental expense had increased to $11,547.49 and had it been included in
the business loss income calculation, the estimated loss would have been $185,000.00.
On February 10, 2012, Alfieri and Shutak discussed the estimate and concluded that
the sales projection was not as great as Shutak had first calculated-- Shutak had used a
50% growth trend in making his calculation. Shutak had also prepared an estimate that
included a 19.42% increase in monthly revenues/sales. Using the 19.42% growth trend,
Shutak calculated the lost business income to be $131,230.47, excluding rent. A
colleague of Shutak had reviewed the estimate and suggested using an 11.93% growth
trend. Using the 11.93% sales projection figure resulted in a business income loss of
$121,300.04. After talking to Alfieri, Shutak revised his estimate and found the business
lost income to be $121,127.10. Charter Oak issued a check dated February 13, 2012 to
Shri Gayatri in the amount of $78,127, representing its calculation of eight months of loss
of business income. At the same time, Alfieri acknowledged that the restoration period
was likely to increase from eight to twelve months.
After receiving the February 13th payment, Patel requested that his accountant,
Giris Chokshi (“Chokshi”), review Shutaak’s calculation. The worksheet containing
Chokshi’s calculations was forwarded to Alfieri3. On or about March 1, 2012, Shutak
requested a copy of the Days Inn franchise agreement. On or about April 2, 2012,
Shutak sent Alfieri a revised estimate, which increased the business income loss to
$158,494.92 for an eight month period. On or about August 10, 2012, Shutak provided

3
In its statement of material facts Shri Gayatri states that Chockshi’s estimate was “significantly higher”
than Shutak’s. Inexplicably, Shri Gayatri did not attach a copy of the worksheet as an exhibit, nor did it quote the
amount of the estimate. Instead, Shri Gayatri has simply cited to Patel’s sworn affidavit in which he states that
Chokshi’s calculation was “significantly higher.” Shri Gayatri is seeking to use Chokshi’s “ significantly higher”
estimate to support its Chapter 93A claim against Charter Oak. However, the Court cannot based on the evidence in
the record find that Chokshi’s estimate was “significantly higher” or even at all higher than Charter Oaks.

15

Alfieri with a preliminary twelve month estimate of lost business income in the amount
of $222,294.88. On August 27, 2012, Charter Oak issued a business income payment in
the amount of $101,168.00 to Shri Gayatri, representing twelve months of lost income.
This was the last payment Shri Gayatri received until after the reference.
The Reference Panel Decision
On December 4, 2013, the reference panel issued its decision (the “Reference Award”):
(1) the ACV of the Building loss was $1,053,880.35 and the replacement cost was
$1,281,164.35; (2) the ACV of the Business Personal Property loss was $74,305.50 and the
replacement cost was $97,770.00; (3) the ACV of the Appurtenant Building and Structures loss
was $7,750.69 and replacement cost was $9,811.00; (4) the ACV of the Outdoor Property loss
was $10,000 (the Policy limit); (5) the ACV of the Outside Sign loss was $13,307.71 and the
replacement cost was $16,845.20; (6) the Claim Data Expense loss was $2,475.00; (7) the
Business Income and Extra Expense loss was $320,000 (the Policy limit); and (8) subject to
Policy terms and conditions, $260,000 for Ordinance or Law costs. On December 23, 2013,
Charter Oak issued a payment to Shri Gayatri in the amount of $364,243.55. This amount
represented the difference between the amount listed in the Reference Award as the total ACV of
the loss and the amount previously paid by Charter Oak to Shri Gayatri, less the $5,000 Policy
deductible. It also included the difference in business income loss awarded based on a longer
period of interruption.
Purchase of the Replacement Property
Patel applied for a loan in the spring of 2011 to assist him with his intended purchase of
21 Boston Post Road in Sturbridge, Massachusetts, for a new Holiday Inn Express hotel. When
he applied for the loan, Patel did not request any funds to make permanent repairs at the
Property. In a letter from Shri Gayatri’s counsel dated March 3, 2014, approximately two years
16

and eight months after the tornado loss, Shri Gayatri told Charter Oak, for the first time, that it
had purchased a replacement property located at 408 Main Street, Sturbridge, Massachusetts.
The purchase and sale agreement for the purported replacement property was not executed until
January 15, 2014. Shri Gayatri “purchased” the property from Om Shri Uma Bhavani, LLC, a
limited liability company owned by Patel. The transaction involved Patel transferring assets
between the two entities he owned. Shri Gayatri did not complete the purchase within two years
of the date of Loss, or within two years of the expiration of the Policy on December 3, 2011.
Standard of Review
“Summary judgment is appropriate when the moving party shows that there is no genuine
dispute of material fact and the movant is entitled to judgment as a matter of law. In considering
whether or not a genuine issue of material fact exists, the court ‘must view the evidence in the
light most favorable to the opposing party.’ “Under Massachusetts law, the interpretation of an
unambiguous insurance policy is normally a question of law for the court.” BioChemics, Inc. v.
Axis Reinsurance Co., 83 F. Supp. 3d 405, 407 (D. Mass. 2015)(internal citations and citation to
quoted case omitted). The court applies general rules of contract interpretation, and looks first to
the actual policy language, which is A>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 Athe 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., 674
F.3d 1, 11 (1st Cir. 2012).
17

AThe 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).
Discussion
Shri Gayatri seeks a declaration that it is entitled to recover: (1) the difference between
the replacement cost of the damaged property and the ACV of that property; and (2) the
hypothetical cost of the additional expenses it would have incurred to bring a repaired or
replaced building up to the current building code standards if it had actually repaired or replaced
the damaged property. Shri Gayatri has also asserted claims for breach of the implied covenant
of good faith and fair dealing, and unfair and deceptive trade acts or practices in violation of
Chapter 93A.
Whether Shri Gayatri Is Entitled To Recover The Difference Between The Replacement Cost Of
The Damaged Property And The ACV Of That Property And/Or Is Entitled To Payment Under
Ordinance Or Law Coverage
Charter Oak has paid Shri Gayatri the amount of the Reference Award, i.e., the ACV
(less the $5,000 Policy deductible), for damage to the Property sustained as a result of three
distinct weather events which occurred in the 2011 calendar year: a tornado (June 1, 2011),
Tropical Storm Irene (August 28, 2011) and the October Snowstorm (October 29, 2011). Shri
Gayatri claims that it was entitled to the replacement cost to repair and/or replace the Property
and seeks to recover the difference between the replacement cost and the ACV. Shri Gayatri also
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asserts that it is entitled to payment under the Ordinance or Law provision of the Policy which
entitles it to recover increased costs incurred in connection with the repair and replacement of
damaged property in order to bring the repaired/replaced property into minimum compliance
with building, zoning or land use ordinance or law (hereafter, “ordinance cost”).
Charter Oak asserts that the clear and unambiguous language of the Policy provides that
the insured is not entitled to replacement cost or ordinance cost unless the damaged property is
repaired or replaced within two years of the date of loss. Because it is undisputed that Shri
Gayatri did not repair or replace the Property within two years of the date of loss, Charter Oaks
argues that Shri Gayatri’s was not entitled to recover replacement cost or ordnance cost. I agree
with Charter Oaks: The plain language in the Policy provides that Shri Gayatri is not entitled to
recover replacement or ordinance cost under the Policy until the damaged property is actually
repaired or replaced. Moreover, such repairs or replacement were to be made as soon as
reasonably possible and must have been completed within two years of the date of loss. Shri
Gayatri asserts that it was unable repair and/or replace the Property within two years of the date
of the loss because of the actions or inactions of Charter Oak and therefore, Charter Oak is
“estopped” from denying coverage for replacement cost and/or ordinance cost. More
specifically, Shri Gayatri argues that it was unable to timely repair and/or replace the Property
because Charter Oak made untimely payments on Shri Gayatri’s claims and provided unduly low
estimates of the cost to repair/replace the Property (based on the insurance estimating program,
Xactimate).
Before discussing the merits of Shri Gayatri’s claim, the Court must first examine
whether Shri Gayatri’s reliance on an “estoppel” theory is legally sound. The requirement that
the damaged property be repaired or replaced is a condition precedent to the insured being
entitled to replacement cost and ordinance cost proceeds. That is, the insurer is not liable to pay
19

either replacement or ordinance unless and until the insured has met all necessary conditions, i.e.,
repaired or replaced the damaged property. If the time by which the condition must be fulfilled
ends the condition remains unsatisfied, the obligor’s duty is discharged unless the obligor
excuses fulfillment of the condition. Charter Oak expressly notified Shri Gayatri in writing that it
was not waiving the condition that repair or replacement of the damages Property occur within
two years of the Loss. Accordingly, performance of the condition precedent was not excused.
Therefore, Shri Gayatri is left to argue that Oak Charter breached its obligations under the Policy
and prevented the condition precedent from being met. Moreover, the burden of proof is on Shri
Gayatri to establish that Charter Oak prevented it from complying with the condition that that the
damaged Property be repaired and replaced within two years of the Loss.
Shri Gayatri essentially asserts that it was unable to timely complete the repairs and
restoration of the Property because Charter Oak undervalued the damage to the Property and
dragged its heels when making payments reflecting the ACV of the Property, payments
reflecting lost business, etc. However, the record does not substantiate Shri Gayatri’s assertions.
Charter Oak promptly viewed the damage to the Property after Shri Gayatri made its initial
claims and made numerous follow-up inspections of the Property. It was as a result of these
follow-up inspections that Charter Oak discovered that the Property was further damaged by
Tropical Storm Irene and the October Snowstorm since Shri Gayatri had never filed claims with
Charter Oak regarding damage caused by these events. Charter Oak also provided Shri Gayatri
with ongoing estimates of the ACV of Property was well as its estimates of the cost to repair and
rebuild. Page’s estimate was within $100,000 of the estimate prepared by Walsh (who was hired
by Grenier to assist with the process of valuing the damage to the Property). While there may
have been some minimal lag time, Charter Oak sent checks to Shri Gayatri within a reasonable
time of assessing the loss. Some of those checks were retained by United Bank, the Mortgagor
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and some went directly to companies who had provided repair services. Additionally, Patel
retained some of the funds rather than initiate repairs because he perceived that United Bank had
some unspecified concerns. Funds in the amount of $367,062 which Charter Oak issued to Shri
Gayatri in August 2011, were not deposited until March 2012. Shri Gayatri received an estimate
from Tocci in September 2011, yet it did not forward that estimate to Charter Oak until
November 9, 2011. Moreover, Tocci grossly overestimated the ACV and replacement cost,
primarily because its figures reflected a complete restoration of the Property, not just the repair
or replacement of damaged Property. Over nine months after the Property was damaged by the
tornado, Shri Gayatri had not made any permanent repairs. In March 2012, Charter Oak
informed Shri Gayatri that it had paid its claim in full and advised it that if it was unsatisfied,
they should proceed with reference. On August 15, 2012, Charter Oak made a formal written
demand for reference. However, Shri Gayatri took the position that only the insured can demand
reference and declined to participate. On October 1, 2012, Shri Gayatri replaced its public
adjuster, Grenier, with Benton. Benton then spent seven months investigating the damage done to
the Property by the tornado, Tropical Storm Irene and the October Snowstorm. Benton never
spoke to Grenier, nor did he obtain any files from Grenier. On April 12, 2013, almost eight
months after Charter Oak had attempted to do so, Shri Gayatri demanded reference. Over a
month later, on May 20, 2013, Shri Gayatri requested that Charter Oak agree to extend the two
year limitation for repairing or replacing damages to the Property. Charter Oak declined, but
agreed that that the time for bringing suit would be tolled until after reference had concluded.
At this time, Shri Gayatri had not made any permanent repairs.
The reference proceedings were held from October 17 through October 29, 2013. Shri
Gayatri submitted an estimate that the replacement cost was $1,894.047.89 and ACV of
$1,569,580.57. Shri Gayatri also submitted a claim binder which included a substantial number
21

of invoices and estimates which had never been provided to Charter Oak. The reference panel
made the following award:
Building loss and damage: Replacement cost $1,281,164.35; ACV $1,053,880.35
Business Person Property: Replacement cost: 97,770; ACV $74,305.50
Appurtenant Building & Structures: Replacement cost $9,811; ACV $7,750.69
Outdoor Property: $10,000 (exceeded policy limit)
Outside Sign: Replacement cost $16,845.20; ACV $13,307.71
Claim Data Expense: $2,475.00
Business Income & Extra Expense: $320,000.00
Ordinance Law: $260,000
The award included modest amounts for which Charter Oak and not made any previous
payments or offered payment, i.e., appurtenant building and structures, outdoor property, and
claim data expense. The reference determined that it would take eighteen months to complete the
restorations. The reference panel determined that Charter Oak had underpaid Shri Gayatri on its
claim by $369,243.55 of which $97,705 was for loss of business income. While this was a fairly
substantial underpayment, it is significantly less than the amount which Shri Gayatri contended it
was due. On December 23, 2013, Charter Oak sent Shiri Gayatri a check for $364,243.55,
which reflected the difference between what Charter Oak had previously paid Shiri Gayatri and
the ACV of the loss determined by the reference panel (less the policy deductible). On March 3,
2014, Shri Gayatri informed Charter Oak that it had purchased a replacement property at another
location in Sturbridge, MA. The purchase took place on January 14, 2014, which was over two
years after the Loss.
I find that when viewing this evidence in the light most favorable to Shri Gayatri, it has
failed to meet its burden of establishing that there is a genuine issue of fact as to whether Charter
22

Oak prevented it from satisfying the condition that it timely repair and replace the damaged
Property. On the contrary, the undisputed evidence establishes that Charter Oak acted reasonably
promptly in investigating the loss, providing its estimate and paying the claim. However, as
discussed above, Shri Gayatri was always one or two steps behind. Much of the delay was
attributable to Shri Gayatri’s dissatisfaction with the people it hired to pursue its claim, or a lack
of communication with its agents. Charter Oak can hardly be faulted for Shri Gayatri changing
public adjuster’s mid-stream and essentially starting the process anew.4 Charter Oaks can also
not be faulted for Patel inexplicably holding checks totaling over $360,000 for months due to his
own perception that United Bank had some concerns. Additionally, Charter Oak cannot be
faulted for failing to pay estimates and invoices which Shri Gayatri presented for the first time to
the reference panel. Finally, after being advised of Charter Oak’s final estimate of replacement
cost and ACV damages, Shri Gayatri’s delayed almost a year before demanding reference. Given
the totality of these circumstances, I cannot find that Shri Gayatri’s failure to timely repair or
replace the damaged Property was due to any action or inaction on the part of Charter Oak.5

4

It is telling that: (1) Patel claims that he was not aware that Grenier had hired Walsh and that the estimate
that Walsh and Page discussed was not forwarded to Charter Oak; (2) that Patel was unaware that the Tocci estimate
was not provided to Charter Oak until November 9, 2011, despite the fact it was provided to him (Patel) at the end
of September; and (3) on October 1, 2012, after Charter Oak had notified Shri Gayatri that it had paid the claim in
full, Shri Gayatri hired a the new public adjuster, Benton who never spoke to Grenier after he was hired or obtained
a copy of Grenier’s files.
5
Were the Court to apply Shri Gayatri’s estoppel theory, for substantially the same reasons that I find that
it has failed to establish that Charter Oak prevented it from complying with the condition precedent that it repair or
replace the damaged Property within two years, I would find that Shri Gayatri has failed to establish that Charter
Oak is estopped from denying coverage for replacement cost and ordinance cost. More specifically, an insurer will
become estopped from denying coverage, if it says or does something which is “intended to induce conduct on the
part of its insured; the insured … act[s] or refrain[s] from acting in reasonable reliance on the insurer's
representation; and the insured … suffer[s] some detriment as a result. Estoppel often turns on determinations of
fact, but where the relevant facts are established, the court may treat the issue as a question of law.” Clermont v.
Cont'l Cas. Co., 778 F. Supp. 2d 133, 142 (D. Mass. 2011)(internal citations omitted). Based on the undisputed
facts, I find, as a matter of law, that Shri Gayatri cannot establish that Charter Oak did or failed to do or say
something which induced Shri Gayatri, in reasonable reliance thereon, to refrain from fulfilling its obligation to
repair or replace the damaged Property within two years of the Loss.
23

Therefore, summary judgment shall enter for Charter Oak on Count I of the Complaint (for
declaratory judgment) and on its Counterclaim (for declaratory judgment).
Shri Gayatri’s Claim For Violation Of The Covenant Of Good Faith And Fair Dealing
As to Shri Gayatri’s claim against Charter Oak for breach of the covenant of good faith and
fair dealing, on the record before me, I find that as a matter of law, the undisputed facts fail to
establish a lack of good faith on the part of Charter Oak. Therefore, summary judgment shall
enter for Charter Oak on this claim.
Shri Gayatri’s Chapter 93A claim
Shiri Gayatri asserts that Charter Oak violated Chapter 93A by engaging in unfair or
deceptive acts or practices in processing its claim and violated the covenant of good faith and fair
dealing. More specifically, Shri Gayatri alleges that Charter Oak delayed the settlement process
by making unduly low payments, relied solely on Xactimate estimate rather than obtaining a
contractor’s bid, failed to consider the Tocci bid and refused to engage a contractor to either
provide or substantiate its bid. Shri Gayatri also asserts that Charter Oak engaged in unfair
settlement practices when it refused to extend the Policy’s two year limitation period for
repairing or preplacing the damaged property.
That the reference panel ultimately found that Charter Oak underpaid Shri Gayatri’s
claim in and of itself does not constitute an unfair settlement practice. On the contrary,
considering the totality of the circumstances, including Shri Gayatri’s failure to provide Charter
Oak with timely estimates and/or invoices of its losses, and its continued failure to timely or
adequately contest Charter Oak’s valuation of the damages to the Property and its lost business
income, I do not find that Charter Oak’s underpayment constituted an unfair settlement practice.
Additionally, as discussed above, I find that Shri Gayatri was responsible for the long delays in
settling this claim. Moreover, on the record before me, I do not find that there is a genuine issue
24

of disputed fact as to whether Charter Oak’s conduct prevented Shri Gayatri from rebuilding the
Property: clearly it did not. The evidence is that Shri Gayatri made no attempt to make any
permanent repairs to the Property and its attempt to attribute this to the fact that Charter Oak
provided it insufficient funds is unsupported by the record. Additionally, Shri Gayatri did not
even request an extension of the two year limitation until May 20, 2013. Charter Oak’s refusal to
consider extending the deadline for an indeterminate, but certainly lengthy period, as a matter of
law, did not constitute an unfair settlement practice.6 Shri Gayatri also contends that Charter
Oak engaged in unfair and/or deceptive settlement practices by: failing to adequately compensate
it for damage from Tropical Storm Irene and the October Snowstorm and by refusing to
acknowledge that those claims were to be included in the reference; by failing to to engage a
contractor to obtain an estimate; by “misrepresenting” Policy provisions; by causing the
termination of its Days Inn franchise agreement; and by estimating an unduly short restoration
period.

As to these claims, I find that Charter Oak’s reply brief accurately states the law and

factual basis for denying Shri Gayatri’s Chapter 93A claim based on such alleged misconduct.
For the reasons set forth above, I find that Charter Oak is entitled to summary judgment on Shri
Gayatri’s Chapter 93A claim.
Conclusion
Defendant’s Motion For Summary Judgment (Docket No. 47) is hereby granted.
Judgment shall enter against the Plaintiff, Shri Gayatri, LLC, on its claims against Defendant,

6

In support of its contention that Charter Oak’s failure to agree to an extension of the Policy’s two year
limitation period constitutes an unfair settlement practice, Shri Gayatri relies primarily on a statement by David
Reed, a representative of Travelers Insurance, Charter Oak’s parent company. Reed testified at his deposition that he
did not recall agreeing in any prior cases to extend the policy requirement that repairs be made within two years.
Shri Gayatri attempts to impeach Reed’s deposition testimony by referencing multiple agreements to extend the
deadline for repairs which Reed approved over a decade before for another insured. However, there is nothing in the
record which would permit the Court to find that the circumstances of this case are similar to the case in which Reed
approved an extension. On the contrary, based on the evidence presented by Shri Gayatri, the circumstances were
markedly different. Moreover, Reed was not involved in the decision to deny an extension in this case.
25

The Charter Oak Fire Insurance Company. Judgment shall enter in favor of Defendant on its
Counterclaim.

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

26