United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON DEFENDANT'S MOTION FOR
Dennis Saylor, IV United States District Judge.
an action seeking defense costs and indemnity from an
insurance company, arising out of the defective construction
of a home. Jurisdiction is based on diversity of citizenship.
689 Charles River, LLC built a single-family home in Needham,
Massachusetts. Charles River sold it to non-party Needham
Holdings, LLC, which purchased the property on behalf of
Steven J. Sands. The home proved to have multiple
construction defects. Sands and Needham Holdings later filed
a lawsuit against Charles River in Norfolk Superior Court
alleging breach of the implied warranty of habitability,
fraud and deceit, fraudulent misrepresentation, negligence,
and unfair and deceptive business practices in violation of
Mass. Gen. Laws. ch. 93A. (C.A. No. 15-0136). Sands's
subrogee, Privilege Underwriters Reciprocal Exchange
(“PURE”), later filed a second complaint against
Charles River in Suffolk Superior Court, alleging damages
arising from the same set of facts. (No. 1684CV00962).
River seeks a declaration from this Court that defendant
American Zurich Insurance Company, which issued two insurance
policies to Charles River, is obligated to defend and
indemnify it in the Sands and PURE lawsuits
under the terms of those policies. Zurich has moved for
summary judgment. Because the policies do not provide defense
and indemnity coverage for third-party claims such as those
alleged in the Sands and PURE lawsuits
against Charles River, the motion will be granted.
issued a Builders' Risk Policy to “689 Charles
River Street LLC, ” with a policy period that ran from
July 3, 2013, to July 3, 2014. (Def. SMF Ex. 3 at
It provided coverage for damage to new construction occurring
at 689 Charles River Street, Needham, Massachusetts, up to
$850, 000, and included coverage of certain consequential
losses, such as debris removal, pollutant clean-up, fire
department service charges, and storage of property at a
temporary location. (Id. at 3, 5).
the heading “Coverage, ” the policy states as
follows: “We will pay for direct physical loss or
damage to Covered Property from any Covered Cause of Loss
described in this Coverage Form.” (Def. SMF Ex. 3 at
policy defines “Covered Property, ” in part, as
“[p]roperty which has been installed, or is to be
installed in any ‘commercial structure' or any one
to four family dwelling . . . includ[ing]: (a) Your property;
(b) Property of others for which you are legally responsible;
[and] (c) Paving, curbing, fences and outdoor
fixtures.” (Def. SMF Ex. 3 at 14). The policy further
provides that Zurich “may adjust losses with the owners
of lost or damaged property if other than you. If we pay the
owners, such payments will satisfy your claim against us for
the owners' property. We will not pay the owners more
than their financial interest in the Covered Property.”
(Def. SMF Ex. 3 at 9). In the next paragraph, it states that
Zurich “may elect to defend you against suits arising
from claims of owners of property. We will do this at our
policy defines “Covered Cause of Loss” as
“risk of direct physical loss or damage to Covered
Property, except those causes of loss listed in Section B.
EXCLUSIONS.” (Id. at 14). The exclusions
include “loss or damage caused by or resulting from . .
. [d]ishonest or criminal acts by you, any of your partners,
employees or leased employees, directors, trustees,
authorized representatives or anyone to whom you entrust the
property for any purpose, ” (id. at 19), and
“loss or damage caused by or resulting from . . .
[f]aulty, inadequate or defective: (1) Planning, zoning,
development, surveying, siting; (2) Design, specifications,
workmanship, repair, construction, renovation, remodeling,
grading, compaction; (3) Materials used in repair,
construction, renovation or remodeling; or (4) Maintenance of
all or part of any Covered Property wherever located, ”
(id. at 20).
issued a second policy, a Commercial Insurance Policy, to
“689 Charles River Street LLC, ” which was to
have a policy period extending from July 3, 2014, through
July 3, 2015. (Def. SMF Ex. 4 at 35). However, Charles River
never paid the premium for that second policy. Presumably,
that it is because it sold the house to Sands on July 5,
2014, two days later. (See Def. SMF Ex. 5).
Sands lawsuit was filed on October 9, 2015, in
Norfolk Superior Court. The second amended complaint seeks
damages from Charles River and five individuals for the
“spectacularly shoddy and stunningly substandard design
and construction” of the house. (Def. SMF Ex. 1 ¶
1). Among other things, it alleges that the house contained
“serious latent defects” caused by
“improper design, material, and/or workmanship, ”
which combined to make the house “unfit for human
habitation.” (Id. Ex. 1 ¶ 23). It alleged
that the defects did not manifest themselves until February
2015. (Id. Ex. 1 ¶ 23). The alleged defects
included inadequate or wholly missing insulation, improper
air filtration, missing joists and structural beams, improper
toilet installation, and sealing so poor as to cause
“catastrophic water damage to the interior of the Home
from typical regional weather such as snow, rain and
ice” and “disastrous growth of mold.”
(Id. Ex. 1 ¶ 23). The second amended complaint
asserted five counts for relief: (1) breach of the implied
warranty of habitability; (2) fraud and deceit; (3)
fraudulent misrepresentation; (4) negligence; and (5)
violation of Mass. Gen. Laws ch. 93A. (Id. Ex. 1
December 2015, Charles River submitted a claim to Zurich for
defense costs and indemnity for the Sands suit, with
a reported loss date of February 15, 2015. Zurich denied
coverage on January 7, 2016, and again on April 8, 2016.
(Def. SMF Exs. 7 & 8).
PURE lawsuit was filed in Suffolk Superior Court on
March 22, 2016. It arises from the same operative facts and
alleges negligence. (Pl. Opp. Ex. F). It was stayed pending
the outcome of the Sands action. (Def. SMF Ex. 2).
It is not clear from the exhibits whether Charles River also
submitted a claim to Zurich for ...