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Bearbones, Inc. v. Peerless Indemnity Insurance, Co.

United States District Court, D. Massachusetts

October 17, 2017




         I. Introduction

         This case arises out of a February 19, 2013 incident in which a frozen pipe burst causing water damage to a Pittsfield, Massachusetts commercial bakery (the “Bakery”) operated by plaintiff Bearbones, Inc., d/b/a Morningside Bakery (“Bearbones”) in a commercial condominium unit located at 283 Tyler Street, Pittsfield, MA, (“the condominium unit”) owned and operated by plaintiff Amaral Enterprises, LLC (“Amaral”) (collectively, “Plaintiffs”). In their verified complaint, Plaintiffs allege that their insurer, Peerless Indemnity Insurance Company (“Peerless” or “Defendant”), failed to pay for their covered losses resulting from the incident and engaged in unfair claims settlement practices. Plaintiffs assert claims for breach of contract (Count II) and for unfair and deceptive acts or practices in violation of Mass. Gen. Laws ch. 93A and ch. 176D (hereinafter, “Chapter 93A” and “Chapter 176D”) (Count III).[1] The parties have filed cross motions for summary judgment. Defendant seeks summary judgment in its favor as to both the breach of contract and Chapters 93A and 176D claims, while Plaintiffs seek partial summary judgment in their favor only on their Chapters 93A and 176D claim.

         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 following reasons, the court DENIES Plaintiffs' motion and ALLOWS Defendant's motion.

         II. Standard of Review

         Summary judgment is appropriate where, “the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Carroll v. Xerox Corp., 294 F.3d 231, 236 (1st Cir. 2002) (citing Fed.R.Civ.P. 56(c)). “A factual dispute is ‘genuine' if ‘it may reasonably be resolved in favor of either party' and, therefore, requires the finder of fact to make ‘a choice between the parties' differing versions of the truth at trial.'” DePoutot v. Raffaelly, 424 F.3d 112, 117 (1st Cir. 2005) (quoting Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990) (citations and internal quotation marks omitted)). “[A] fact is ‘material' ‘if its existence or nonexistence has the potential to change the outcome of the suit.'” Jarvis v. Village Gun Shop, Inc., 805 F.3d 1, 7 (1st Cir. 2015) (citing Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 4 (1st Cir. 2010)).

         In ruling on summary judgment, the court “view[s] ‘the entire record in the light most hospitable to the party opposing summary judgment, indulging all reasonable inferences in that party's favor.'” Padilla-García v. Guillermo Rodríguez, 212 F.3d 69, 73 (1st Cir. 2000) (quoting Euromotion, Inc. v. BMW of N. Am., Inc., 136 F.3d 866, 869 (1st Cir. 1998)). A party seeking summary judgment is responsible for identifying those portions of the record, “which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The movant can meet this burden either by “offering evidence to disprove an element of the plaintiff's case or by demonstrating an ‘absence of evidence to support the non-moving party's case.'” Rakes v. United States, 352 F.Supp.2d 47, 52 (D. Mass. 2005) (quoting Celotex, 477 U.S. at 325). If the moving party meets its burden, “‘the nonmoving party must come forward with facts that show a genuine issue for trial.'” Sensing v. Outback Steakhouse of Fla., LLC, 575 F.3d 145, 152 (1st Cir. 2009) (quoting Carroll, 294 F.3d at 236). “‘[T]he nonmoving party may not rest upon mere allegations or denials of [the movant's] pleading, but must set forth specific facts showing that there is a genuine issue of material fact as to each issue upon which he would bear the ultimate burden of proof at trial.'” Id. (second alteration in original) (quoting DeNovellis v. Shalala, 124 F.3d 298, 306 (1st Cir. 1997)). “‘The test is whether, as to each essential element, there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.'” Id. at 152-53 (quoting DeNovellis, 124 F.3d at 306). “Cross-motions for summary judgment require the district court to ‘consider each motion separately, drawing all inferences in favor of each non-moving party in turn.'” Green Mountain Realty Corp. v. Leonard, 750 F.3d 30, 38 (1st Cir. 2014) (quoting D & H Therapy Assocs., LLC v. Boston Mut. Life Ins. Co., 640 F.3d 27, 34 (1st Cir. 2011)).

         III. Findings of Fact [2]

         Plaintiffs held a commercial business insurance policy with Peerless (“the Policy”) effective from October 1, 2012 through October 1, 2013. On February 19, 2013, a frozen pipe burst in the Bakery causing water damage to the Bakery's equipment, as well as to the realty. Plaintiffs timely notified Peerless of the loss.

         Two days later, on February 21, 2013, Matthew Mitchell, an adjustor for Peerless who was assigned to the loss, and Martin Scovill, an estimator from Interstate Restoration, inspected the loss. The following day, Mr. Scovill prepared a loss estimate of $5, 912.32 relative to some of the water damage to the building; Mr. Scovill noted in his estimate that “[m]itigation, drying, and cleaning work [was] being completed by others, ” and the “[p]roperty owner has plumber repairing the frozen lines.” Accordingly, Mr. Scovill noted that the repair scope was limited and might have to be revisited upon completion of the mitigation work.

         On February 25, 2013, Plaintiffs forwarded Mr. Mitchell an estimate from Paul J. Murphy Plumbing & Heating regarding the cost to repair the plumbing and heating at the Bakery. The estimate was $5, 631.47 for the plumbing and $4, 297.38 for the heating.

         On February 27, 2013, Plaintiffs forwarded Mr. Mitchell an invoice from Catamount Response for emergency water mitigating and drying services rendered following the loss and an estimate from Catamount to finish remediation and cleanup of the claimed water damage. The invoice was for $1, 821.20, and the estimate was for $2, 273.79.

         In a document dated March 29, 2013, James Munoz, a commercial HVAC claims consultant with CIS who Peerless retained to review Mr. Murphy's estimates, indicated that he had determined that the estimates prepared by Mr. Murphy for the repairs to the plumbing and heating systems were in line with national standards and represented a fair and reasonable estimate to repair the damage to the HVAC systems.

         On April 15, 2013, Plaintiffs' counsel, who is also counsel in the instant litigation, mailed a letter to Defendant notifying Defendant that he was representing Plaintiffs.

         On April 16, 2013, Defendant issued a claim payment in the amount of $11, 672.94, representing $15, 841.17 in building damage less $3, 168.23 in recoverable depreciation and a $1, 000.00 deductible. The $15, 841.17 figure is the sum of Mr. Scovill's $5, 912.32 estimate and Mr. Murphy's $5, 631.47 and $4, 297.38 estimates.

         On April 19, 2013, Mr. Mitchell directed email correspondence to Plaintiffs inquiring whether Plaintiffs planned to replace or repair the oven damaged in the loss and requesting documentation of Plaintiffs' efforts to find a replacement oven or repair the existing one. In the same correspondence, Mr. Mitchell indicated that, for Peerless to consider a claim for business income, Bearbones would have to submit financial documentation in order for Peerless to calculate a business income loss. Specifically, Mr. Mitchell requested a 2012 year tax return (or 2011 if 2012 was not yet available), monthly profit and loss or income statements, monthly or weekly sales records for the prior year through the period of restoration of business operations, and documentation of payroll if Bearbones was claiming payroll continued through the period of restoration.

         On April 22, 2013, Defendant issued payment to Catamount Response in the amount of $4, 094.99, representing the sum of the $1, 821.20 invoice and the $2, 273.79 estimate.

         On April 26, 2013, Arthur Knight, an employee of Peerless, directed a letter to Plaintiffs' counsel advising that he was in receipt of Plaintiffs' counsel's April 15, 2013 letter of representation. Mr. Knight indicated that Plaintiffs' claim remained open while Peerless awaited documentation to support the business income and business personal property claims.

         On May 10, 2013, Peerless issued a second check to Bearbones and Lee Bank, the mortgage holder on the condominium unit, for $11, 672.94. The “remarks” accompanying the check state that it is the “re-issue of prior payment: replacement cost $15, 841.17, less recoverable depreciation of $3, 168.23, less $1, 000 deductible. This represents payment for building repairs.” The Policy provides that Defendant “will pay for covered loss or damage to real estate to each mortgageholder shown in the Declarations, or in an attached schedule, in the order of precedence, as may appear.” While it is undisputed that Lee Bank was the mortgage holder, the commercial property coverage part declarations page of the Policy lists the mortgage holder as “none, ” and there is no attached schedule listing Lee Bank as a mortgage holder.

         On May 16, 2013, Mr. Mitchell directed correspondence to Plaintiffs' counsel requesting documents supporting Plaintiffs' business personal property claim concerning damage to the oven and Plaintiff's business income claim, specifically including days and hours of operation, daily sales for the period 1/1/13 to the present, payroll by pay period for the period 1/1/13 to the present, monthly sales tax returns for the period 1/1/12 to the present, monthly profit and loss statements for the period 1/1/11 to the present, and 2011 and 2012 income tax returns. The letter also advised that Peerless had retained the services of LWG Forensics to inspect the oven in question and provide an evaluation and indicated that Paul Mullen would be reaching out to arrange for the inspection.

         On May 16, 2013, Plaintiffs' counsel emailed Mr. Mitchell the 2011 income tax return.

         The following day, May 17, 2013, Mr. Mitchell emailed Plaintiffs' counsel, referencing and attaching the May 16, 2013 letter and indicating that Peerless “cannot properly calculate the Business Income loss without the required documentation.” Mr. Mitchell also requested that Plaintiff's counsel cooperate with Mr. Mullen to set up an appointment to allow inspection of the oven.

         Mr. Mullen inspected the oven on July 2, 2013, and issued a report on July 18, 2013, indicating that damage to the oven and two proofing boxes was consistent with exposure to water due to a frozen pipe bursting. The estimated cost to replace the oven and proofing boxes was $33, 456.30.

         On July 25, 2013, Defendant issued payment in the amount of $16, 728.15 to Bearbones. The “remarks” accompanying the check state “reimbursement for actual cash value of business personal property claim damages, reflecting recoverable depreciation of $16, 728.15.” On August 6, 2013, Plaintiffs' counsel emailed Peerless a monthly summary of Plaintiffs' business from 2012. Debra Allen Bok, an employee of Peerless, responded the following day, indicating that additional information was required to calculate a loss measure for the business income claim.

         On August 30, 2013 and October 2, 2013, Mr. Mitchell sent letters to Plaintiffs' counsel indicating that Defendant had not received the requested documentation to compute Plaintiffs' loss of business income and again requesting the same list of materials requested in his May 16, 2013 correspondence. In the October 2, 2013 letter, Mr. Mitchell also indicated that, if Defendant did not receive the requested documentation by October 30, 2013, the claim would be closed.

         Two days later, on October 4, 2013, Plaintiffs filed a lawsuit against Defendant in the Suffolk ...

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