United States District Court, D. Massachusetts
ORDER ON MOTION FOR SUMMARY JUDGMENT (DOC. NO.
Sorokin United States District Judge.
November 29, 2017, plaintiff Clarendon National Insurance
Company (“Clarendon”) filed suit in Suffolk
Superior Court against defendant Philadelphia Indemnity
Insurance Company (“Philadelphia”), claiming
damages arising from Philadelphia's denial of coverage
under an insurance policy issued to Lundgren Management
Group, Inc. (“Lundgren”), whom Clarendon had also
insured, in a 2009 Suffolk Superior Court suit. Doc. No. 1-3.
On December 21, 2017, Philadelphia removed the case to this
Court. Doc. No. 1. The parties agreed to phased discovery
that would be initially “limited to the discre[te]
question of whether [Philadelphia] had a duty to defend
Clarendon's insured” in the 2009 suit. Doc. No. 13
at 2, 14. Now that the first phase of discovery has
concluded, pending before the Court is Philadelphia's
motion for summary judgment, Doc. No. 16.
issued a liability insurance policy to Admirals Flagship
Condominium Trust (“Admirals”) for the period of
June 24, 2004 through June 24, 2005, in which Lundgren was an
insured. Doc. No. 28 ¶ 1. Philadelphia issued a liability
insurance policy to Lundgren for the period of September 1,
2007 through September 1, 2008. Doc. No. 18 ¶ 1.
February 12, 2009, Denise Dougherty brought suit in Suffolk
Superior Court against Lundgren, Admirals, and others,
amending her complaint on or about April 29, 2009. Doc. No.
28 ¶ 3; Doc. No. 19-2. The amended complaint sought
damages for negligence, nuisance, trespass,
misrepresentation, and breach of contract, stemming from the
failure of Dougherty's condominium's management to
make adequate repairs to her unit at 50 Boatswains Way,
Chelsea. See generally Doc. No. 19-2. The amended
complaint alleged that Admirals owned the common areas of 50
Boatswains Way, while Lundgren managed them. Id.
¶¶ 12, 14. The complaint alleged that leaks had
developed in the condominium unit's roof area
“during the year 2004.” Id. ¶ 16.
It alleged that those leaks “caused ceiling cracks and
loosening plaster, ” which was not repaired “in a
timely or appropriate manner” despite Dougherty's
requests. Id. ¶ 17. These issues continued in
2005 and 2006, and on March 10, 2006, hazardous mold was
discovered in the unit. Id. ¶¶ 18-23.
According to the amended complaint, although Lundgren told
Dougherty the leaks and mold would be remediated, repair
efforts were unsuccessful. Id. ¶¶ 24-26.
Finally, on September 2, 2008, Dougherty's doctor ordered
her to vacate the unit until the mold was eliminated and the
leaks repaired. Id. ¶ 27. The complaint alleges
that these events led to severe adverse health effects, loss
of personal property, loss of value in the condominium, and
loss of income for Dougherty. Id. ¶ 29.
30, 2009, counsel for Lundgren and Admirals tendered the
defense of the amended complaint to Philadelphia, Doc. No. 18
¶ 3. Philadelphia declined it by letter on July 24,
2009. Id. ¶ 4. Acknowledging that
Dougherty's complaint “allege[d] water leaks that
began in year 2004 which caused mold, ”
Philadelphia's letter stated that its policy did not
cover the damages sought in Dougherty's suit. Doc. No.
19-3 at 9. The letter offered several justifications for this
claim, including that the suit contained “no
allegations that occurred within [Philadelphia's] policy
period” and that “the policy specifically
exclude[d] ‘property damage' to property owned
(common elements) and any damages that result from
‘fungi' as defined in the policy.”
Id. at 15. However, because Philadelphia
“believe[d the] matter [was] so clearly outside the
scope of the Policy, ” it did “not raise other
defenses to coverage which may be applicable and reserve[d
its] right to raise other such” defenses later.
October 7, 2014, Clarendon issued another demand to
Philadelphia through North American Risk Services
(“NARS”), Clarendon's third-party
administrator. Doc. No. 28 ¶ 20; Doc. No. 18
¶¶ 6-7. The letter argued that, while Philadelphia
had no responsibility to indemnify its insureds for damages
caused by mold, it did have a duty to defend against
Dougherty's suit “for personal property damage
possibly caused by water alone.” Doc. No. 19-3 at 17.
Because the damages in Dougherty's suit could have
included some compensation awarded solely for water damage,
the letter claimed, Philadelphia “had a duty to defend
the matter and indemnify for personal property damage”
caused by water alone and therefore owed “a pro rata
share of the defense costs related to” Dougherty's
suit. Id. at 23. On November 3, 2014, Philadelphia
responded to NARS by letter. Doc. No. 18 ¶ 8. This
letter again denied that Philadelphia had a duty to defend
against Dougherty's suit, reiterating that the
“‘property damage' is alleged to have
occurred prior to the inception of [Philadelphia's]
policy” and therefore was not covered. Doc. No. 19-3 at
lawsuit ended in settlement in October or November
2014. On March 17, 2015, Clarendon obtained
authority from Lundgren to bring claims against Philadelphia
arising from the Dougherty suit. Doc. No. 28 ¶ 23.
Court applies the familiar summary judgment standard. Summary
judgment is appropriate when “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). The Court is “obliged to view the
record in the light most favorable to the nonmoving party,
and to draw all reasonable inferences in the nonmoving
party's favor.” LeBlanc v. Great Am. Ins.
Co., 6 F.3d 836, 841 (1st Cir. 1993). Even so, the Court
must ignore “conclusory allegations, improbable
inferences, and unsupported speculation.” Sullivan
v. City of Springfield, 561 F.3d 7, 14 (1st Cir. 2009).
insurance dispute such as this one, “[t]he insured has
the initial burden of proving that a loss falls within the
policy's description of covered risks, ” after
which it becomes “the insurer's burden to show the
applicability of a particular exclusion.” New Fed
Mortg. Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh,
Pa., 543 F.3d 7, 11 (1st Cir. 2008). At that point,
settled law instructs that (1) “[e]xclusions from
coverage are to be strictly construed” and that (2)
“[a]ny ambiguity in the somewhat complicated exclusions
must be construed against the insurer.” Mt. Airy
Ins. Co. v. Greenbaum, 127 F.3d 15, 19 (1st Cir. 1997)
(quoting Sterilite Corp. v. Continental Cas. Co.,
458 N.E.2d 338, 342 n.10 (Mass. App. Ct. 1983)); see also
Utica Mut. Ins. Co. v. Herbert H. Landry Ins. Agency,
Inc., 820 F.3d 36, 42 (1st Cir. 2016) (noting that the
rule of construing an insurance policy in favor of the
insured “applies with particular force to exclusionary
provisions” (quoting Metropolitan Prop. & Cas.
Ins. Co. v. Morrison, 460 Mass. 352, 363 (2011))).
Settled law also advises that “every word must be
presumed to have been employed with a purpose and must be
given effect whenever practicable.”
Metropolitan, 460 Mass. at 362 (internal citation
and formatting omitted).
insurance policy provided that Philadelphia would “pay
those sums that the insured becomes legally obligated to pay
as damages because of ‘bodily injury' or
‘property damage' to which this insurance
applies.” Doc. No. 19-1 at 60. But it further provided
that such coverage would apply “only if . . . [t]he
‘bodily injury' or ‘property damage'
occurs during the policy period; and . . . [p]rior to the
policy period, no insured . . . knew that the ‘bodily
injury' or ‘property damage' had occurred, in
whole or in part.” Id. “If such a listed
insured or authorized ‘employee' knew, prior to the
policy period, that the ‘bodily injury' or
‘property damage' occurred, then any continuation,
change, or resumption of such ‘bodily injury' or
‘property damage' during or after the policy period
will be deemed to have been known prior to the policy
period.” Id. “‘Bodily injury'
or ‘property damage' will be deemed to have been
known to have occurred at the earliest time when any insured,
” or authorized employee thereof, “[b]ecomes
aware . . . that ‘bodily injury' or ‘property
damage' has occurred or has begun to occur.”
amended complaint alleges damage that began well before the
beginning of Philadelphia's policy period on September 1,
2007. The complaint alleges that leaks developed
“during the year 2004, ” Doc. No. 19-2 ¶ 16,
and continued through 2005 and 2006, developing into
hazardous mold. Id. ¶¶ 18-23. It also
specifically alleges that Dougherty notified Lundgren of the
leaks on several occasions throughout that period.
Id. ¶¶ 17, 24-26. Lundgren therefore had
knowledge of the damage before the policy period began.