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Philadelphia Indemnity Insurance Co. v. Consigli Construction Co., Inc.

United States District Court, D. Massachusetts

March 22, 2017

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff
v.
CONSIGLI CONSTRUCTION COMPANY, INC., THE ARCHITECTURAL TEAM, INC., SAGAMORE PLUMBING & HEATING, INC., CENTRAL CEILINGS, INC., and STOCK BUILDING SUPPLY, LLC, Defendants. and CONSIGLI CONSTRUCTION COMPANY, INC., Defendant/ Third-Party Plaintiff
v.
CENTRAL CEILINGS, INC., Third-Party Defendant.

          MEMORANDUM AND ORDER

          WOLF, D.J.

         In a December 8, 2016 Report and Recommendations (the "R & R") the Magistrate Judge recommended that the court: (1) retain jurisdiction of defendant Consigli Construction Company, Inc.'s ("Consigli") claims against Central Ceilings Inc. ("Central"), Sagamore Plumbing & Heating, Inc. ("Sagamore"), and Stock Building Supply, LLC. ("Stock"); and (2) grant partial summary judgment ordering Central and Sagamore, but not Stock, to defend plaintiff Philadelphia Indemnity Insurance Company's ("Philadelphia Indemnity") claims against Consigli.

         Consigli, Central, and Sagamore filed objections to the Report and Recommendation, in part based on the proposed finding that Stock does not have a duty to defend the claims against Consigli. Stock replied to those objections. Consigli also replied to certain objections.

         The court has reviewed de novo the parts of the Magistrate Judge's recommendation to which a proper objection has been filed. See F.R.Civ.P. 72(b)(3). The court finds the Report and Recommendation to be properly reasoned and persuasive except with regard to the proposed denial of Consigli's motion for partial summary judgment seeking an order that Stock defend Philadelphia Indemnity's claims against Consigli. Therefore, the court is granting Consigli's motions for partial summary judgment against Central, Stock, and Sagamore.

         No party has objected to the Magistrate Judge's recommendation that despite the identical forum selection clauses in each relevant contract: this court has jurisdiction concerning Consigli's claims against Sagamore, Central, and Stock; the court has the discretion to require that these claims be litigated in this case; and that the court should exercise that discretion to do so. In any event, the Magistrate Judge's interpretation of the law on these issues is correct and her reasoning is persuasive. See e.g. Barletta Heavy Div., Inc. v. Erie Interstate Contractors, Inc., 677 F.Supp.2d 373, 378 (D.Mass. 2009); Silva v. Encyclopedia Britannica Inc., 239 F.3d 385, 388 n.6 (1st Cir. 2001).

         Upon de novo review, the court finds the Magistrate Judge's analysis to be correct concerning the duty of Central and Sagamore to defend Consigli with regard to Philadelphia Indemnity's claims against it. The Report and Recommendation on these issues is, therefore, being adopted.

         The court finds, however, that the Magistrate Judge made an error of law that contributed to her recommendation that this court should find that Stock does not also have a duty to defend. The identical subcontract agreements in this case each, in pertinent part, require the subcontractor to "defend...the Contractor from any and all claims...and causes of action by any party arising out of...the Subcontractor's work." Docket No. 116, Exhibit 1, Article 4A.

         The Magistrate Judge correctly concluded that a duty to defend is distinct from a duty to indemnify and requires that a defense be provided when a covered claim is made. See Miley v. Johnson & Johnson Orthopaedics, Inc., 41 Mass.App.Ct. 30, 34 (1996); Urban Inv. & Dev. Co., 35 Mass.App.Ct. 100, 107 (1993). In addition, the Magistrate Judge rightly recognized that whether a claim is covered by a duty to defend clause is determined by reference to the allegations in the complaint. See Siebe, Inc. v. Louis M. Gerson Co., Inc., 74 Mass.App.Ct. 544, 552-553(2009).

         The Magistrate Judge erred, however, in evaluating the reasonableness of the allegations against Stock and, in effect, finding them implausible. Stock was allegedly responsible for the "rough framing" work done on the building at issue, in which water pipes burst and caused substantial damage. In recommending that Stock does not have a duty to defend Consigli against Philadelphia Indemnity's claims, the Magistrate Judge wrote:

There are no allegations describing how the rough framing work led to the negligent installation of plumbing or insulation at the Property or otherwise caused the pipes to freeze. As Stock argued in its papers, "[e]ven with a layperson's understanding of sequencing work, a subcontractor performing rough framing would not even have the opportunity to see how the water piping was installed as the former would be completed before the latter work started." Without some indication as to how Stock Building's actions related to Plaintiff's losses, the Second Amended Complaint cannot reasonably be construed as giving rise to a duty by Stock Building to defend Consigli in this case.

         R & R at 23. (internal citation to the record omitted.)

         In reaching this conclusion, the Magistrate Judge evidently construed the standard for determining whether a duty to defend exists to be comparable to the standard for granting a motion to dismiss under Federal Rule of Civil Procedure 12(b) (6), which requires that the facts alleged state a claim that is plausible rather than merely possible. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In doing so, the Magistrate Judge misconstrued, or misapplied, the reasonableness test concerning the duty to defend. As explained in the analogous context of an insurance company's duty to defend, "[i]t is settled [law] in [Massachusetts] that the question of the initial duty...to defend...is decided by matching the third-party complaint with the policy provisions: if the allegations in the complaint are 'reasonably susceptible' of an interpretation that they state or adumbrate a claim covered by the policy terms, " a duty to defend exists. Sterilite Corp. v. Continental Cas. Co., 17 Mass.App.Ct. 316, 318 (1983).

         In 2010, the Massachusetts Supreme Judicial Court re-affirmed and amplified this principle, writing that:

An insurer has a duty to defend an insured when the allegations in a complaint are reasonably susceptible of an interpretation that states or roughly sketches a claim covered by the policy terms. Ruggerio Ambulance Serv., Inc. v. National Grange Mut. Ins. Co., 430 Mass. 794, 796, 724 N.E.2d 295 (2000). The duty to defend is determined based on the facts alleged in the complaint, and on facts known or readily knowable by the insurer that may aid in its interpretation of the allegations in the complaint. See Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass. 7, 10-11, 545 N.E.2d 1156 (1989); Desrosiers v. Royal Ins. Co., 393 Mass. 37, 40, 468 N.E.2d 625 (1984). "In order for the duty of defense to arise, the underlying complaint need only show, through general allegations, a possibility that the liability claim falls within the insurance coverage. There is no requirement that the facts alleged in the ...

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