United States District Court, D. Massachusetts
MILLS CONSTRUCTION CORPORATION, INC., and NEIL CROTHERS, Plaintiffs,
NAUTILUS INSURANCE COMPANY, Defendant.
MEMORANDUM & ORDER
Talwani United States District Judge
parties in this insurance coverage dispute have filed
cross-motions for summary judgment. For the reasons set forth
below, Defendant's Motion for Summary Judgment
[#21] is GRANTED and Plaintiffs' Motion for Summary
Judgment [#25] is DENIED.
Mills Construction Corporation, Inc., and its president, Neil
Crothers, purchased commercial general liability
(“CGL”) insurance from Defendant Nautilus
Insurance Company (“Nautilus”). Plaintiffs'
Statement of Material Facts (“Pls. SOF”) ¶
31 [#27]; Defendant's Statement of Material Facts
(“Def. SOF”) ¶¶ 18-19 [#23] & Ex. C
(Nautilus Policies (“Policies”)) [#23-3].
October 2017, Plaintiffs requested defense of a suit brought
against them in Superior Court by Collette Sychantha. Pls.
SOF ¶ 39 [#27] & Ex. J (Letter to Kym Baldyga,
Eastern Ins. Grp. (Oct. 23, 2017)) [#27-5], refiled at Joint
Mem., Att. 1 [#42-1]; Def. SOF ¶ 1 Ex. A (Sychantha
Amended Complaint (“Sychantha Compl.”)) [#23-1],
refiled at Joint Mem., Att. 2 [#42-2]. In her complaint,
Sychantha alleges that she hired Mills and Crother in June
2014 to “perform construction work to rebuild the
Premises” after a November 2013 fire damaged her
property. Sychantha Compl. ¶¶ 4-5 [#23-1]. The
complaint alleges that Mills and Crother undertook demolition
of the “damaged Premises, ” and that during
demolition, they damaged the foundation. Id. ¶
7. The foundation damage allegedly led to delays and required
relocating the home. Id. ¶¶ 8-10. The
complaint alleges further that once construction started, it
“did not proceed smoothly.” Id. ¶
11. The “many problems with the construction of the
home” allegedly included improper construction of
various parts of the house, the “exterior deck is not
properly supported, ” the “foundation lacks
rebar, ” and Mills' failure to complete work.
Id. ¶¶ 1-17. Sychantha claimed Breach of
Contract, Negligence, Breach of Warranty of Habitability,
Negligent Misrepresentations, Negligent Supervision, and
violation of Mass. Gen. L. c. 93A. Id. ¶¶
November 2017, Nautilus denied Plaintiffs' request for
coverage. Def. SOF ¶ 23 Ex. D (Letter to Mills (Nov. 27,
2017)) [#23-4], refiled as Joint Mem., Att. 3 [#42-3].
Notwithstanding the denial, Nautilus requested that Mills
“provide for our consideration any additional
information or facts you currently have in your possession or
may develop in the future that may change our decision
regarding coverage of this loss, thereby providing us the
opportunity to reconsider our position.” Id.
next month, Plaintiffs again contacted Nautilus requesting
coverage. Pls. Reply to Def. Opp. to Pls. Mot. Summ. Judg.
(“Reply”) Ex. L (State Court Record, Letter to
Kristian Yates, Litigation Specialist, Nautilus Insurance
(Dec. 21, 2017)) 63-67 [#34-2], refiled as Joint Mem., Att. 4
[#42-4]. Mills asserted that the foundation damage alleged in
Sychantha's complaint was accidental (because Sychantha
did not allege intentional or willful conduct) and was not
subject to any exclusions (because Mills had not performed
work on the foundation prior to the damage, nor was any work
intended). Id. at 63-64. Plaintiffs enclosed their
original contract with Sychantha, an estimate for repairs
from Sychantha's insurance company following the fire, a
subcontract between Mills and Assabet Construction Services
(“Assabet”), and emails between Sychantha and
Crothers describing damage to the property. See Def.
SOF Ex. B (Contract with Sychantha (“Contract”))
[#23-2], refiled at Joint Mem., Att. 5 [#42-5]; Pls. SOF Ex.
F (Insurance Estimate) 28-60 [#27-1], refiled at Joint Mem.,
Att. 6 [#42-6]; Pls. SOF Ex. F (Assabet Subcontractor
Agreement) 62-63 [#27-1], refiled at Joint Mem., Att. 7
again disclaimed coverage. Pls. Reply Ex. L. (State Court
Record, Letter to Attorney Kennedy, December 28, 2017) 83-86
[#34-2], refiled at Joint Mem., Att. 8 [#42-8].
wrote to Nautilus again in January 2018. This request sought
to “bring to [Nautilus's] attention certain
admissions by [Sychantha]” in the state court action.
Pls. Reply Ex. K (Letter to Kristian Yates, Litigation
Specialist, Nautilus Insurance (Jan. 18, 2018)) 3 [#34-1],
refiled as Joint Mem., Att. 9 [#42-9]. Plaintiffs asserted
that Sychantha had admitted in discovery responses that:
“[p]rior to the alleged damage to the foundation,
[Mills and Crothers] had performed no work on the
foundation”; “at the time the foundation was
damaged, [Mills and Crothers] or their agents were not
performing any actual work on the foundation. Rather, they
were performing work and the excavator got too close to the
foundation and caused irreparable harm to the
foundation”; and she “alleges that the alleged
damage to the foundation was accidental.” Id.
at 3-4. Plaintiffs quoted, but did not enclose, the
February 2018, Plaintiffs sent Nautilus a draft of their
complaint for declaratory judgment and violations of M.G.L.
c. 93A. They enclosed with the draft complaint
Sychantha's Responses to Mills' Request for
Admissions and Sychantha's Answers to Mills' First
Set of Interrogatories. See Def. SOF Ex. E (Req. for
Admissions) [#23-5], refiled at Joint Mem., Att. 10 [#42-10];
Pls. SOF Ex. I (First Interr. Resp.) [#27-4], refiled at
Joint Mem., Att. 11 [#42-11]. Plaintiffs formally served
Nautilus with their complaint and the attached documents on
March 1, 2018. Joint Mem. 2 [#42].
months later, Plaintiffs sent Nautilus the affidavit of Neil
Crothers. Pls. SOF ¶ 4 [#37] & Ex. F (Affidavit of
Neil Crothers) [#27-1], refiled at Joint Mem., Att. 12
[#42-12]. Attached to the affidavit were photographs of work
being performed at the Property by individuals who Crothers
asserted were not affiliated with Mills Construction, and
copies of the previously provided contracts and insurance
Plaintiffs sent Nautilus copies of Sychantha's
Supplemental Answers to Mills' First Set of
Interrogatories and receipts produced by Sychantha.
See Pls. SOF Ex. G (Supp. Interr. Resp.) [#27-2],
refiled at Joint Mem., Att. 13 [#42-13]; Pls. SOF Ex. H
(Receipts) [#27-3], refiled at Joint Mem., Att. 14 [#42-14].
Sychantha's Supplemental Answers contain her timeline of
the events at the Property, and responses to Mills and
Crothers' request for information regarding expert
witnesses and her Consumer Complaint against Mills.
Standard of Review
judgment is appropriate only if “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).
“A dispute is genuine if the evidence about the fact is
such that a reasonable jury could resolve the point in the
favor of the non-moving party. A fact is material if it has
the potential of determining the outcome of the
litigation.” Patco Constr. Co. v. People's
United Bank, 684 F.3d 197, 206-07 (1st Cir. 2012)
(internal quotation marks and citations omitted). In
resolving a motion for summary judgment, the court takes all
properly supported evidence in the light most favorable to
the non-movant and draws all reasonable inferences in the
non-movant's favor. Griggs-Ryan v. Smith, 904
F.2d 112, 115 (1st Cir. 1990). When presented with
cross-motions for summary judgment, the court
“‘must view each motion, separately,' in the
light most favorable to the non-moving party, and draw all
reasonable inferences in that party's favor.”
OneBeacon Am. Ins. Co. v. Commercial Union Assur. Co. of
Canada, 684 F.3d 237, 241 (1st Cir. 2012) (quoting
Estate of Hevia v. Portrio Corp., 602 F.3d 34, 40
(1st Cir. 2010)).
this is a matter brought in diversity jurisdiction, the court
applies applicable state law to substantive rules of
decision. See Erie R.R. Co. v. Tompkins, 304 U.S.
64, 78 (1938).
Duty to Defend
seek a declaratory judgment that Nautilus is obligated to
defend them against Sychantha's underlying action.
Defendant, in turn, seeks declaratory judgment that it is not
obligated to defend Mills and Crothers.
Massachusetts, interpretation of an insurance policy is
“a question of law” for the court and therefore
appropriate for summary judgment. Essex Ins. Co. v.
BloomSouth Flooring Corp., 562 F.3d 399, 403 (1st Cir.
2009). The scope of an insurer's duty to defend is
determined by the policy, to which courts apply
“familiar rules of contract interpretation.”
Sanders v. Phoenix Ins. Co., 843 F.3d 37, 42 (1st
Cir. 2016); see also B&T Masonry Constr. Co. v. Pub.
Serv. Mut. Ins. Co., 382 F.3d 36, 39 (1st Cir. 2004).
Like other contracts, words in insurance policies are given
their usual and ordinary meaning, see Hakim v. Mass.
Insurers' Insolvency Fund, 424 Mass. 275, 280
(1997). However, any ambiguity in an insurance contract is
“resolved against the insurance company that employed
them and in favor of the insured.” Cody v. Conn.
Gen. Life Ins. Co., 387 Mass. 142, 146 (1982) (quoting
August A. Busch & Co. of Mass. v. Liberty Mut. Ins.
Co., 339 Mass. 239, 243 (1959)); see also B & T
Masonry, 382 F.3d at 39 (“[A]ny ambiguity [that]
permeates a policy exclusion . . . must be construed strictly
against the insurer.”).
relevant part, the Policies cover “sums that the
insured becomes legally obligated to pay as damages because
of . . . ‘property damage, ”' provided
property damage is caused by an
“occurrence.” “Property damage” includes
“[p]hysical injury to tangible property” and
“loss of use” of tangible property. An
“occurrence” is defined by the Policies as an
“accident, including continuous or repeated exposure to
substantially the same general harmful conditions.”
Nautilus Insurance Policies, Def. SOF Ex. C, 66-67 [#23-3].
interpreting similar commercial general liability policies
understand an accident as “an unexpected happening
without intention or design.” See Friel Luxury Home
Const., Inc. v. ProBuilders Specialty Ins. Co. RRG, No.
09-CV-11036-DPW, 2009 WL 5227893, at *5 (D. Mass. Dec. 22,
2009) (collecting cases).
liability coverage is not intended as a guarantee of the
insured's work, and for that reason, general liability
policies contain ‘business risk' exclusions.”
Dorchester Mut. FireIns. Co. v. First Kostas
Corp., 49 Mass.App.Ct. 651, 654 (2000), citing
Sterilite Corp. v. Continental Cas. Co., 17
Mass.App.Ct. 316, 321-322 (1983). Because the
“consequence of not performing properly is a part of
every business enterprise, ” business risk exclusions
in commercial general liability policies are intended to
ensure that the cost of normal business risks are borne by