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River Farm Realty Trust v. Farm Family Casualty Insurance Co.

United States District Court, D. Massachusetts

February 4, 2019




         Plaintiffs bring suit against their insurance company for breach of contract and for violations of the Massachusetts Consumer Protection Act, M.G.L. c. 93A, based on a dispute between them concerning an insurance claim for losses caused by the formation of ice dams and subsequent water leakage into their residence. The insurer now seeks summary judgment.

         I. BACKGROUND

         A. Factual Background

         1. The Parties and the Policies

          Plaintiff River Farm Realty Trust (“River Farm”) is a nominee realty trust established to hold title to real property located at 262 South Main Street in Sherborn, Massachusetts (“the insured premise”). Plaintiffs Paul and Linda DeRensis reside at the insured premise.

         Defendant Farm Family Casualty Insurance Company (“Farm Insurance” or “the insurance company”) is licensed to transact the business of insurance in the Commonwealth of Massachusetts.

         Farm Insurance issued Special Farm Package “10” Policy No. 2011G1237 (“the River Farm policy”), effective for the period November 15, 2014 to November 15, 2015, to River Farm as the insured entity. The policy provided coverage for the insured premise subject to a limit of liability of $729, 987.00 and a $500.00 deductible. This policy did not, however, provide coverage for household contents.[1]

         2. The River Farm Policy

         The River Farm policy specified that, in the event of a loss or a claim, “[p]roperty losses are settled on the basis of actual cash value, ” and, for loss to property, the company would only be liable for the least of the following:

(a) the applicable limit of liability; (b) an amount not greater than [the insured's] interest in the property; (c) the cost of repairing or replacing the property with materials of equivalent kind and quality to the extent practicable; (d) the amount computed after applying the deductible or other limitation applicable to the loss; or (e) the ACTUAL CASH VALUE of the property at the time of loss (except as provided under the Replacement Cost Provision, if applicable).

         The term “actual cash value” is defined in the contract to mean “the amount it would currently cost to repair or replace the covered property with new material of like kind and quality, less allowance for physical deterioration and depreciation, including obsolescence.” In addition, the policy also required that, if the insured premise was a residence - as is the case here - the insurance company would pay for additional living expenses for at most 24 months “for the necessary and reasonable increase in living costs [the insured party] incur[s] to maintain the normal standard of living” if “a loss covered by this policy makes the [insured premise] uninhabitable.”

         If the insured party and the insurance company disagree on the amount of loss, “either one can demand that the amount of the loss be set by appraisal.” In that event, both the insured party and the insurer will select a “competent, independent appraiser” to assess the amount of loss. If the appraisers agree on the amount of loss, “the amount agreed upon shall be the amount of loss” for which the company is liable. If the appraisers do not agree, the disagreement shall be submitted to an impartial umpire selected by the appraisers, and the umpire shall determine the amount of loss. Once the amount of loss is determined, the insurance company is obligated to make a payment for the loss within thirty days. If the insurance company fails to timely pay the claim once the amount of loss is determined, it is also liable for “the payment of interest to the [insured party] at a rate of one percent over the prime interest rate on the agreed figure.”

         The policy also included a Massachusetts-specific amendment that allowed the insured parties to seek a Reference under M.G.L. c. 175 § 99, et seq., in the event of a disagreement about the value of the claim. The Reference process required the value of the claim to be decided by three uninterested individuals, with the insurance company and the insured party each choosing one Referee, and the two jointly choosing the third. The Reference process was an alternative to the procedure outlined in the policy and carried the same conditions regarding payment once the process was completed.

         3. The Triggering Incident

         As a result of a series of snowstorms, ice dams began forming at the insured premise on February 5, 2015. Due to the freezing and thawing of these ice dams through March 3, 2015, water leaked into and throughout the insured premise. Plaintiffs did not initially call a water mitigation service, though Mr. and Mrs. DeRensis sought help from their employees to shovel snow off their roof and used buckets and towels to contain the flood of water into the premise.

         4. The Reported Claim

         Sometime in March 2015, Mr. DeRensis contacted Farm Insurance to notify it about the ice dam and water damage. On April 27, 2015, Mark Chilton, an adjuster with Farm Insurance, sent Mr. DeRensis correspondence, which stated:

Mr. DeRensis, I must apologize. Unfortunately when your claim arrived at Farm Family they were set up as one singular claim where in fact there are two separate and distinct claims being asserted. Once I had recognized the issue of two claims and separated them a record keeping issue came to light. . . . [T]he independent claim numbers became interchanged. As you can see one minor issue led to a number of problems. . . . I will work to see you receive our coverage determination ASAP. Again, I apologize for the confusion and delay.

         Farm Insurance assigned Scott Howard to handle Plaintiffs' claim. On May 4, 2015, Mr. Howard sent Mr. DeRensis a letter with the subject line, “Claim Report Acknowledgment.” This letter did not indicate when the claim was made. Farm Insurance then assigned Dineley Claims Service, an independent insurance adjusting firm that Mr. Howard had hired in the past, to perform the initial field investigation and loss adjustment. In turn, Dineley Claims Service assigned Mark Whidden to handle the claim.

         On May 20, 2015, Mr. Whidden visited the insured premise and met with Mr. DeRensis. He inspected the areas of damage brought to his attention, including the roof, and took photographs of the insured premise. Following his visit, Mr. Whidden prepared an estimate of the costs he believed were necessary to repair the damage he observed, which he mailed to Mr. and Mrs. DeRensis in June of 2015. Mr. DeRensis did not agree with the estimate of damage prepared by Mr. Whidden, and testified that his first reaction to the estimate was that “it was a fraud” because the estimate was so low. On November 13, 2015, Mrs. DeRensis sent a letter to Mr. Whidden regarding the claim. In her letter, she enclosed three estimates from local contractors for the work she deemed necessary to fix the damage caused by the ice dams and the water leakage. When Mr. Whidden did not immediately respond to the November 15, 2015 letter, Mrs. DeRensis contacted him by telephone.

         On November 24, 2015, Mr. Howard sent Mr. DeRensis an email acknowledging receipt of the estimates that Plaintiffs ”were able to obtain within the last couple of weeks.” In response, Mr. DeRensis stated: “Given how badly this claim handling has been botched, I am consulting an attorney this morning, notwithstanding [sic] the requests from the adjuster to ‘start over' and forget the past.”

         Concomitantly, Mrs. DeRensis sent an email to Richard Dineley, the President of Dineley Claims Service, about her dissatisfaction with the handling of Plaintiffs' claim, to which he responded: “Dear Ms. DeRensis: I had your claim confused with another we have [sic] with a ‘Linda' in NJ. . . . My apologies for the confusion.” In this email, Mr. Dineley reported Bryan Grandmont had been assigned as the new adjuster. That same day, Mr. Grandmont followed up with Mrs. DeRensis, acknowledging that Plaintiffs had retained legal counsel, and again apologizing for any confusion there may have been.

         On February 16, 2016, after several communications with Farm Insurance, Plaintiffs' legal counsel sent Mr. Howard a preliminary statement of loss and associated estimates, totaling $236, 437.60. The scope and pricing reflected in the new contractor's estimates exceeded the estimates previously furnished to Farm Insurance.

         A second inspection of the insured premise occurred on March 2, 2016. On March 18, 2016, Farm Insurance received an updated estimate for interior damage from Dineley Claims Service, which it sent to Plaintiffs' legal counsel. On March 23, 2016, Farm Insurance issued payment for the interior damage in the amount of $28, 005.21. Plaintiffs' were dissatisfied with this second estimate; Mr. DeRensis thought it was a “joke.”

         5. The Reference

         On March 28, 2016, Plaintiffs' legal counsel demanded a Reference pursuant to M.G.L. c. 175 § 99 et seq. From June to July of 2016, a two-day hearing was conducted before a three-member panel of Referees to hear the evidence and determine the extent of loss. On July 20, 2016, the panel issued a unanimous award, which entitled the Plaintiffs to at most $183, 848.00.[2]Farm Insurance has paid Plaintiffs a total of $137, 887.99 - the actual cash value of the loss to the building set forth in the award and the amount to which Plaintiffs were entitled under the terms of the insurance policy.

         Plaintiffs have not alleged that they incurred any additional living expenses; nor have they submitted any documentation to Farm Insurance to show that repairs have been performed to the dwelling in excess of ...

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