United States District Court, D. Massachusetts
MEMORANDUM AND ON DEFENDANTS' MOTION TO DISMISS
COUNT TWO OF THE AMENDED COMPLAINT
RICHARD G. STEARNS, UNITED STATES DISTRICT JUDGE
National Union Fire Insurance Company of Pittsburgh brought
this action against the Town of Norwood and a host of
affiliated defendants seeking a declaratory judgment that
National Union is not required to provide a defense in an
earlier-filed suit before this court. Defendants have moved
to dismiss Count Two of National Union's Amended
Complaint for failure to state a claim. See Fed. R.
Civ. P. 12(b)(6).
held two insurance policies with National Union which
together covered the period from July 1, 2014, to July 1,
2016. Am. Compl. ¶ 16. Both policies required defendants
to notify National Union of any suit, claim, occurrence, or
offense arising under the policies “as soon as
practicable.” Am. Compl. ¶ 26. National Union
asserts that defendants failed in this duty when threatened
with a lawsuit by BEH. BEH, which offers flight services from
Norwood Memorial Airport, sought to expand its business by
obtaining a permit to become a fixed base operator (FBO) at
the airport. Am. Compl. ¶¶ 29-30. BEH's pursuit
of the permit led to a number of conflicts with defendants,
ranging from disputes over the ability of BEH to lease a
required ramp required to actions taken by defendants that
BEH perceived as favoring FlightLevel, an existing FBO at the
airport. Am. Compl. ¶ 32.
2014, BEH sought an order in the Superior Court compelling
defendants to comply with its public records requests, and in
February of that year, BEH sought the intervention of the
Federal Aviation Administration (FAA). Am. Compl. ¶ 51.
In March of 2015, BEH secured an order in the Superior Court
requiring that FlightLevel remove an obstruction it had
installed at the airport (supposedly with defendants'
approval). Id. Roughly a week later, BEH filed an
administrative complaint with the FAA's Office of Chief
Counsel. Id. On October 7, 2015, BEH filed suit
against defendants in the Superior Court, alleging breach of
contract, antitrust violations, and violations of both
Massachusetts and federal civil rights
statutes. Am. Compl. ¶ 33. Defendants removed
the lawsuit to the federal district court shortly thereafter.
Defendants tendered notice of the suit to National Union on
December 1, 2015. Am. Compl. ¶ 2.
Union argues that the seeds of the 2015 suit had germinated
in 2014. Moreover, nearly two months elapsed from the time
the suit was filed and defendants' tender of notice and
request for a defense. For both these reasons, it asserts
that defendants failed to provide notice “as soon as
hurdle facing National Union is that any breach of the duty
of notice is irrelevant, because in Massachusetts, “an
insured's failure to comply with a notice obligation in
an insurance policy does not relieve the insurer of its
duties under that policy unless the insurer demonstrates that
it suffered prejudice as a result of the breach.”
Boyle v. Zurich Am. Ins. Co., 472 Mass. 649, 651
(2015). An insurer bears the burden of demonstrating
prejudice. Darcy v. Hartford Ins. Co., 407 Mass.
481, 485 (1990). And, under Rule 12(b)(6), the insurer must
plead sufficient factual matter to make out a plausible
entitlement to relief. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009).
Union's Complaint is wholly lacking on this score. The
only mention of prejudice in the Complaint occurs in a single
Upon information and belief, during the approximately year or
more that the dispute with BEH was ongoing before notice was
provided to National Union, developments occurred and the
Norwood Defendants engaged in conduct including, but not
limited to, engaging in settlement discussions as reported to
the Court in the BEH Action on November 23, 2015. Such
developments and conduct caused prejudice to National Union
as a result of the Defendants' breach of the
Policies' conditions to coverage concerning notice of a
Am. Compl. ¶ 54. The sole “development”
alleged as prejudicial is an unsuccessful attempt by
defendants to negotiate a settlement with BEH. This raises no
plausible claim of prejudice, as BEH would be prohibited from
using any information obtained in settlement discussions for
any relevant purpose. See Fed. R. Evid. 408(a).
only case National Union cites for the contrary proposition,
Steelcase, Inc. v. American Motorists Insurance Co.,
907 F.2d 151, 1990 WL 92636 (6th Cir. 1990) (unpublished
table decision), is not on point. In Steelcase, the
insured had not only engaged in settlement discussions, but
had actually entered into a settlement agreement with a state
agency regarding a leak of paint solvent from an underground
storage tank. Id. at *1. The insured sought coverage
for the cost of the cleanup, and the court concluded that the
advanced stage of the cleanup and the insured's ongoing
obligations under the agreement meant that the insurer was
denied its opportunity to investigate the claim and to
“participate in Steelcase's remedial
efforts.” Id. at *2.
comparable occurred here. No settlement was reached in the
BEH action, and National Union does not allege that its
ability to investigate the claims or present a defense in the
BEH action has been compromised in any way. See
Boyle, 472 Mass. at 656-657. Nor does defendants'
failed settlement effort preclude future efforts to settle
the remaining claim with National Union's participation.
foregoing reasons, Count Two of National Union's Amended