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Bearbones, Inc. v. Peerless Indemnity Insurance Co.

United States District Court, D. Massachusetts

October 11, 2016




         I. Introduction

         Before the court is the motion of the plaintiffs, Bearbones, Inc., d/b/a Morningside Bakery (“Morningside”), and Amaral Enterprises LLC (“Amaral”), to file a supplemental complaint pursuant to Fed.R.Civ.P. 15(d) (Dkt. No. 40). The defendant, Peerless Indemnity Insurance Co. (“Peerless” or “Defendant”), opposes the motion (Dkt. No. 43). The parties have consented to this court's jurisdiction (Dkt. No. 36). See 28 U.S.C. § 636(c); Fed.R.Civ.P. 73. For the reasons set forth below, Plaintiffs' motion is DENIED.

         II. Factual Background and Procedural History

         A. The Loss[1]

         Morningside, a Massachusetts corporation, operated a commercial bakery located inside a commercial condominium unit owned by Amaral, a related Massachusetts limited liability company[2] (Dkt. No. 40-1 at ¶¶ 1-2). Morningside and Amaral (collectively, “Plaintiffs”) purchased commercial casualty insurance from Peerless. The Peerless policy provided four categories of coverage, consisting of “Building, ” “Business Personal Property, ” “Business Income, ” and “Extra Expense” (id. at ¶¶ 6-7, 22).

         On or about February 19, 2013, “massive amounts of water emanating from a frozen pipe destroyed [Plaintiffs'] business premises, its equipment, its business operation and its overall viability rendering both [Morningside and Amaral] a total loss” (id. at ¶ 8). Plaintiffs notified Peerless on or about the day of the incident (id. at ¶¶ 6, 13). Plaintiffs did not receive any written response from Peerless until April 19, 2013, nearly 60 days later (id. at ¶ 13). On April 15, 2013, Plaintiffs communicated a demand to Peerless, but Peerless ignored it (id. at ¶ 16). According to Plaintiffs, while their losses exceed $1.5 million, Peerless has paid Plaintiffs only $28, 401.99 (id. at ¶¶ 9-10, 15). Plaintiffs accuse Peerless of “substantial and unwarranted delay” in adjusting their claim and of having a deficient claims handling process (id. at ¶ 19). They also claim that Peerless forces its insureds to initiate lawsuits to achieve compensation (id. at ¶¶ 19, 23).

         B. Plaintiffs' Original Federal Complaint

         On February 6, 2015, Plaintiffs filed a three-count diversity complaint against Peerless in this court. In it, Plaintiffs seek: (I) a declaratory judgment that Peerless is obligated to provide coverage for all of Plaintiffs' losses, compensatory and consequential, as a result of the incident; (II) damages for breach of contract; and (III) damages for unfair business and claims settlement practices in violation of Mass. Gen. Laws chs. 93A and 176D (Dkt. No. 1 at ¶¶ 25-36).

         C. Reference Proceeding

         Massachusetts requires insurance companies issuing certain policies covering property or interests in the Commonwealth to use standard forms as set forth in Mass. Gen. Laws ch. 75, § 99. One provision in the Massachusetts standard policy provides as follows:

In case of loss under this policy and a failure of the parties to agree as to the amount of loss, it is mutually agreed that the amount of such loss shall be referred to three disinterested men, the company and the insured each choosing one out of three persons to be named by the other, and the third being selected by the two so chosen; and the award in writing by a majority of the referees shall be conclusive and final upon the parties as to the amount of loss or damage, and such reference, unless waived by the parties, shall be a condition precedent to any right of action in law or equity to recover for such loss ….

Mass. Gen. Laws ch. 175, § 99, cl. twelfth. The parties had commenced the above-described reference process when Plaintiffs filed their original complaint on February 6, 2015 (Dkt. No. 1 at ¶ 24; Dkt. No. 40-1 at ¶ 24), but the proceeding did not conclude until five months later, on July 6, 2015 (Dkt. No. 14; Dkt. No. 43-12).[3] The Referees' unanimous award was as follows: Building Loss at replacement cost - $31, 111.26, and at actual cash value and after application of the deductible - $26, 116.77; Business Personal Property Loss at replacement cost - $26, 842.22; Business Income Loss - $35, 929.00; and Extra Expense Loss - $324.25 (id.).

         D. Plaintiffs' Supplemental Complaint

         Plaintiffs now seek to file a supplemental complaint adding five counts against Defendant, all of which relate to the reference proceeding. Three of Plaintiffs' proposed counts are for additional alleged violations of Mass. Gen. Laws chs. 93A and 176D. Specifically, in Counts IV and V, Plaintiffs claim that they were subjected to unfair business and claims settlement practices during the reference proceeding because Peerless called two witnesses it claimed were experts, but who were neither independent nor objective (Dkt. No. 40-1 at ¶¶ 37-48). Count IV relates to Peerless witness Mary A. Mull, a Certified Public Accountant (“CPA”), who testified that “an oath she signs ensures she is both objective and independent” (id. at ¶41). According to Plaintiffs, however, she is neither because “she has worked for Liberty Mutual or Peerless or an affiliate for 29 years, her entire professional career, ” (id. at ¶ 40), and she “had no reasonable response to cross-examination questions which challenged her objectivity and independence when her livelihood, paycheck and pension are dependent upon testifying in the way Liberty Mutual tells her to” (id. at ¶ 41). Count V relates to Peerless witness Bruno Graizzaro, also a CPA, and, for 16 years, an “active co-partner in a real estate business in Plymouth County Massachusetts” with William O. Monahan, “the principal Peerless attorney in this lawsuit, in [a related proceeding in Massachusetts state court, ] and at Reference” (id. at ¶¶ 44-45). Plaintiffs claim that Graizzaro's relationship with Monahan prevents him from being objective and independent and that Defendant hid the relationship from the Plaintiffs and referees (id. at ¶¶46-47). Nevertheless, on cross-examination of Graizzaro, Plaintiffs “unmasked [Peerless] as facilitating, encouraging, [sic] funding testimony of so-called experts who are neither objective nor independent but are controlled by Peerless” (id. at ¶ 48; see also Dkt. No. 41 at p. 2 and 41-1). In proposed Count VI, Plaintiffs claim that Defendant engaged in unfair claims settlement practices by refusing to resolve Plaintiffs' claim “despite being advised that its counsel was impermissibly in business with its so-called expert giving the appearance Liberty Mutual purchases favorable testimony it desires” (Dkt. No. 40-1 at ¶ 51), and by “engaging in various acts of trickery and deceit against its insured, ” including “harassing the insured with requests for false stipulations to be entered into [the Electronic Case Filing System] which could result in the insured waiving its claims, ” and claiming that it has never received written discovery from Plaintiffs when it is in possession of all of Plaintiffs' written discovery (id. at ¶ 52).

         In Count VII, Plaintiffs seek a declaration that Mass. Gen. Laws ch. 175, § 99, cl. twelfth is unconstitutional. Specifically, Plaintiffs claim that the reference proceeding violates the access to justice principles protected by art. 11 of the Declaration of Rights of the Massachusetts Constitution, which guarantees each person the right “to obtain right and justice freely, and without being obliged to purchase it, completely, and without any denial, promptly, and without delay; conformably to the laws” (id. at ¶ 55).

         Finally, in Count VIII, Plaintiffs purport to state a class action with the following proposed subclasses:

A. Those insureds, anywhere in the world, who submitted their claim to Reference, or a similar such proceeding, in any jurisdiction throughout the world, and were awarded higher payments by Referees, or a similar judge like body, than Peerless, or another unit of Liberty Mutual, paid such insureds voluntarily prior to the commencement of any Reference, or a similar such proceeding;
B. Those insureds anywhere in the world who were forced to go to Reference, or a similar such proceeding, to the extent Reference (or a similar statute) is found or held to be unconstitutional as currently applied;
C. Those insureds anywhere in the world whose claims or losses were valued by CPA Graizzaro and where he failed to disclose his business partnership with Atty. Monahan.

(id. at ¶ 59).

         III. The Applicable Standard

         “Rule 15(d) affords litigants a pathway for pleading ‘any transaction, occurrence, or event that happened after the date of the pleading to be supplemented.'” U.S. ex rel. Gadbois v. PharMerica Corp., 809 F.3d 1, 4 (1st Cir. 2015). “Under Rule 15(d), the filing of a supplemental pleading is not available to the pleader as a matter of right but, rather, is subject to the court's discretion.” Id. at 6 (citing ConnectU LLC v. Zuckerberg, 522 F.3d 82, 90 (1st Cir. 2008)). “As written, Rule 15(d) contains no standards at all to guide the district court's analysis; it merely authorizes the district court to permit service of a supplemental pleading ‘on just terms.'” Id. at 7. The First Circuit condones treating requests to supplement under Rule 15(d) liberally, “reminiscent of the way in which courts have treated requests to amend under Rule 15(a)'s ‘freely give[n]' standard.” Id. (alteration in original) (citations omitted). “[A] district court faced with a Rule 15(d) motion must weigh the totality of the circumstances, just as it would under Rule 15(a).” Id. (citing Palmer ...

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