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Maryland Casualty Co. v. NSTAR Electric Co.

Supreme Judicial Court of Massachusetts, Middlesex

May 14, 2015

Maryland Casualty Company [1] & another [2]
v.
NSTAR Electric Company & another. [3]

Argued: January 5, 2015.

Civil action commenced in the Superior Court Department on March 27, 2008.

The case was heard by Dennis J. Curran, J., on motions for summary judgment, and entry of a stipulated final judgment was ordered by him.

The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.

Matthew M. O'Leary ( Andrew J. Fay with him) for the plaintiffs.

Andrea Peraner-Sweet ( Barbara L. Drury with her) for the defendants.

Present: Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, & Hines, JJ.

OPINION

[30 N.E.3d 107] Lenk, J.

This case raises the question whether a tariff filed with and approved by the Department of Public Utilities (DPU) may

Page 417

limit a public utility from liability to nonresidential customers for special, indirect, or consequential damages resulting from the utility's gross negligence. We hold that a properly approved tariff may so limit a public utility's liability.

1. Background.

On December 8, 2006, two employees of NSTAR Electric and Gas were performing a switching procedure to restore electrical equipment that had been taken out of service. During the procedure, an explosion occurred, igniting a fire in the basement of a building at One Broadway in Cambridge. Smoke filled the basement and flowed into the stairwells leading up to the other floors of the building. The fire and smoke resulted in extensive damage to the building, requiring its closure for approximately six weeks. Construction and repairs continued for a lengthy period of time thereafter.

At the time of the fire, the building was owned by the Massachusetts Institute of Technology (MIT). MIT leased space in the building to Cambridge Incubator, Inc. (Cambridge Incubator),[4] Sedo.com, LLC (Sedo), and Allodia Corporation (Allodia). Cambridge Incubator and Sedo purchased insurance coverage from Maryland Casualty Corporation (Maryland Casualty); Allodia purchased insurance coverage from Assurance Company of America (Assurance). In the wake of the fire, Maryland Casualty paid claims by Cambridge Incubator and Sedo, and Assurance paid claims by Allodia.

Maryland Casualty and Assurance then brought this complaint against NSTAR Electric Company and NSTAR Electric & Gas Company (collectively, NSTAR), seeking to recover for the claims paid to Cambridge Incubator, Sedo, and Allodia. The plaintiffs asserted causes of action in negligence, gross negligence or reckless, wilful and wanton misconduct, breach of contract, and breach of express and implied warranties. They alleged that the explosion resulted from NSTAR's inadequate maintenance of its equipment at the building [30 N.E.3d 108] and training of the crew performing the switching procedure.

NSTAR moved for partial summary judgment. It contended that, to the extent to which the insurers sought recovery for business interruption losses, their claims were barred as a matter of law by Massachusetts Department of Telecommunications and Energy Tariff No. 200A (tariff), filed with and approved by the DPU on January 31, 2006, and in effect when the explosion

Page 418

occurred in December, 2006. The tariff contained a " Limitation of Liability" clause providing that, " for non-residential Customers served under general service rates, the Company shall not be liable in contract, in tort (including negligence and [G. L. c.] 93A), strict liability or otherwise for any special, indirect, or consequential damages ... ."

A judge of the Superior Court allowed, in part, NSTAR's motion for summary judgment. The judge determined that, while private parties may not contractually limit their liability for gross negligence, a tariff filed with and approved by a regulatory agency may so limit a public utility's liability. Because the claims paid to Allodia and Sedo that the plaintiffs sought to recover were exclusively for business interruption, the judge determined that they were fully precluded by the " Limitation of Liability" clause. By contrast, the judge concluded that, to the extent Maryland Casualty sought to recover for claims paid to Cambridge Incubator for property damage, its claims were not for " special, indirect or consequential damages," and thus were not barred by the tariff.

In the wake of the judge's decision, the parties filed a stipulated judgment awarding Maryland Casualty the amount of $17,062 plus interest for claims paid to Cambridge Incubator for property damage. The plaintiffs then appealed from the decision granting partial summary judgment, and we transferred the case to this court on our own motion.

2. Discussion.

On appeal, the plaintiffs assert that the judge improperly granted partial summary judgment because (1) there is a genuine dispute regarding the authenticity of the tariff; (2) the language at issue in the tariff does not clearly and unambiguously preclude liability for claims based on gross negligence or wilful and wanton misconduct; and (3) NSTAR cannot limit its liability for losses caused by its own gross negligence or wilful and wanton misconduct.[5] We conclude that the tariff is authentic, that the clause at issue does encompass claims based on gross negligence or wilful and wanton misconduct, and that the clause is

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