Clarendon National Ins. Co. v. Philadelphia Indemnity Ins. Co ( 2020 )

United States Court of Appeals
For the First Circuit
No. 19-1212
CLARENDON NATIONAL INSURANCE COMPANY,
Plaintiff, Appellant,
v.
PHILADELPHIA INDEMNITY INSURANCE COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Leo T. Sorokin, U.S. District Judge]
Before
Torruella, Lynch, and Kayatta,
Circuit Judges.
John W. Dennehy, with whom Dennehy Law was on brief, for
appellant.
David W. Zizik, with whom Sulloway & Hollis PLLC was on brief,
for appellee.
April 1, 2020
TORRUELLA, Circuit Judge. In this diversity case,
Clarendon National Insurance Company ("Clarendon") appeals the
district court's entry of summary judgment against its claim that
Philadelphia Indemnity Insurance Company ("Philadelphia") breached
its contract with Lundgren Management Group, Inc. ("Lundgren")
when Philadelphia declined to tender a defense to Lundgren, whom
Philadelphia had insured from 2007 to 2008. Lundgren had assigned
these claims to Clarendon. The district court determined that
because the property damage allegations were excluded by the prior
policy period exclusion, the complaint did not give rise to a duty
to defend. Furthermore, Clarendon challenges the summary
dismissal of its additional claims for contribution and alleged
violations of Massachusetts General Laws, chapters 93A and 176D,
which the district court concluded should also be dismissed because
they were premised on the incorrect notion that Philadelphia had
breached its duty to defend. After careful consideration, we
affirm.
I. Background
A. Factual Background
Clarendon, a New York corporation, provided indemnity
insurance to Lundgren, a building management corporation, from
June 24, 2004, to June 24, 2005. Subsequently, Philadelphia, a
Pennsylvania corporation, provided insurance for Lundgren from
-2-
September 1, 2007, to September 1, 2008. Philadelphia's insurance
policy with Lundgren contained the following provision that
excludes coverage for damage beginning prior to the inception of
the insurance policy:
b. This insurance applies to "bodily injury" and
"property damage" only if:
. . . .
(3) Prior to the policy period, no insured listed
. . . and no "employee" authorized by you to give or
receive notice of an "occurrence" or claim, knew that
the "bodily injury" or "property damage" had occurred,
in whole or in part. 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.
On February 12, 2009, Denise Doherty ("Doherty"), a
resident in a Lundgren-managed building, filed a complaint in the
Superior Court for Suffolk County, Massachusetts, against the
Admirals Flagship Condominium Trust ("Admirals"), certain named
trustees of Admirals, Lundgren, and Construction by Design, LTD
("CBD"). In the complaint, Doherty asserted negligence claims
against Lundgren stemming from alleged water infiltration into her
condominium. On April 29, 2009, Doherty filed an amended
complaint that proffered new factual information and asserted
additional claims of misrepresentation, nuisance, trespass, and
breach of contract under Massachusetts law ("the Underlying
Complaint").
-3-
According to the Underlying Complaint, in February 2002,
Doherty purchased a condominium unit in a building owned by
Admirals. Admirals contracted with Lundgren to serve as the
property manager of the building. In turn, Lundgren contracted
CBD to maintain and repair the building. "During the year 2004[,]
leaks developed in the roof above [Doherty's] unit and/or the
exterior area of the structure just below the roof line." Doherty
alleged that subsequent repairs to the ceiling were "not made in
a timely or appropriate manner." In 2005, a Lundgren employee
notified Doherty that the threshold leading to her condominium's
deck was rotting. In February 2006, Doherty discovered a mushroom
and water infiltration on "said threshold" and notified Lundgren.
At that time, Lundgren asked CBD to replace the rotting threshold.
According to Doherty, CBD "did not do this repair in a timely
manner and left the debris exposed in [her] bedroom."
On March 10, 2006, Gordon Mycology Laboratory, Inc.,
hired by Lundgren to conduct mold testing, "issued a report
disclosing the presence of hazardous mold in unsafe levels in
[Doherty's] unit caused by water intrusions and chronic dampness."
Doherty complained that although Lundgren had assured her that the
mold problem would be resolved, the cleanup was "ineffectual."
According to Doherty, "Lundgren . . . promised [her] that [CBD]
would stop the leaks into the unit but it [did] not [do] so." On
-4-
September 2, 2008, Doherty's doctor ordered her to leave the
condominium and not to return unless the mold was eliminated and
the leaks were repaired.
Doherty alleged that she suffered damages as a result of
the defendants' actions, including adverse health effects, loss of
personal belongings, loss of her home, loss of value to her
condominium unit, and loss of income.
On June 30, 2009, shortly after the Underlying Complaint
was filed, Lundgren tendered the defense of the Underlying
Complaint to Philadelphia. In a letter dated July 24, 2009,
Philadelphia denied coverage. It stated that "there are no
allegations in the complaint that occurred within our policy
period." In addition, it stated that the "damages sought in this
matter pertain to exposure to mold," yet, "the policy specifically
excludes 'property damage' . . . and any damages that result from
'fungi' as defined in the policy" 1 (hereinafter the "mold
exclusion"). Clarendon, on the other hand, financed the defense
of Lundgren with a Reservation of Rights to exclude mold and fungus
damage.
1 The policy defined "fungi" as "any type or form of fungus,
including mold or mildew and any mycotoxins, spores, scents or
byproducts produced or released by fungi."
-5-
On October 7, 2014, North American Risk Services,
Clarendon's third-party claims administrator, demanded that
Philadelphia contribute to the cost of defending Lundgren. After
the Doherty case eventually settled, Philadelphia again denied
Clarendon's claim for contribution in a letter dated November 3,
2014, admitting that "potentially" the mold exclusion did not apply
to the allegations in the Underlying Complaint, but insisting that
"the alleged damage occurred prior to the inception of
[Philadelphia]'s policy, . . . during the Clarendon policy period."
On or about March 17, 2015, Clarendon received an assignment from
Lundgren of all the claims arising from the Doherty matter.
B. Procedural Background
On November 29, 2017, Clarendon filed suit against
Philadelphia in the Superior Court for Suffolk County,
Massachusetts, based upon Philadelphia's denial of coverage to
Lundgren. Clarendon brought three claims: "Contribution"
(Count I), "Breach of Contract" (Count II), and "93A/176D
Violations" (Count III). In essence, Clarendon's complaint stated
that Philadelphia breached its contract with Lundgren when it
"improperly denied coverage for defense and indemnity," failed to
contribute "its pro rata share for either coverage," and "failed
to investigate the matter." On December 21, 2017, Philadelphia
removed the case to the United States District Court for the
-6-
District of Massachusetts.
The parties agreed to discovery in phases. Discovery
Phase I was for the purpose of collecting information related to
Philadelphia's duty to defend Lundgren, and later phases were
scheduled for remaining issues in the case. On May 21, 2018,
Philadelphia served its Rule 26(a)(1) initial disclosures on
Clarendon. Clarendon did not provide its initial disclosures and
did not conduct any discovery. Philadelphia then filed a motion
for summary judgment on July 2, 2018, which Clarendon opposed. On
January 8, 2019, the district court granted summary judgment for
Philadelphia on all claims. Clarendon Nat'l Ins. Co. v. Phila.
Indem. Ins. Co., No. 17-12541, 2019 WL 134614, at *4 (D. Mass.
Jan. 8, 2019). Regarding the breach of contract claim -- which
was premised on the allegations that Philadelphia breached its
contract with Lundgren when it "improperly denied coverage for
defense and indemnity" -- the court noted that Philadelphia's
policy only covered damages caused by "bodily injury" or "property
damage" that occurred during the policy period, and that did not
result from the "continuation, change or resumption" of "bodily
injury" or "property damage" "deemed to have been known prior to
the policy period." Id. at *3 (citation omitted). The court
further noted that the Underlying Complaint alleged damages that
began in 2004, "well before the beginning of Philadelphia's policy
-7-
period on September 1, 2007," and continued throughout the years.
Id. Accordingly, the court concluded that the damages were not
covered by Philadelphia's policy. Id.
The court also rejected Clarendon's contention that the
Underlying Complaint could be read to suggest that the original
leaks arising prior to the policy period were adequately repaired
and "new leaks" had arisen during the period of Philadelphia's
policy, reasoning that the Underlying Complaint clearly states
that "the leaks and resulting problems were continuous throughout
the relevant period," and "Philadelphia's policy also excludes
coverage for damage that resumes during the policy period if the
damage began and was known before the period." Id. Furthermore,
the court noted that the Underlying Complaint "does not allege
that Lundgren's repair efforts were ever successful at abating the
leaks entirely, [or] even temporarily, such that leaks occurring
during the policy period could have been considered new leaks."
Id. The court concluded that, because the Underlying Complaint
did not contain allegations "'reasonably susceptible of an
interpretation that they state' a claim covered by Philadelphia's
policy," Philadelphia did not have a duty to defend or indemnify
its insured and, thus, Clarendon's breach of contract claim failed.
Id. at *4 (quoting Cont'l Cas. Co. v. Gilbane Bldg. Co., 461 N.E.2d
209, 212 (Mass. 1984)).
-8-
Finally, the court held that Clarendon's additional
claims for contribution and under Massachusetts General Laws,
chapters 93A and 176D also failed because they were premised on
the incorrect notion that Philadelphia had breached its duty to
defend and indemnify Lundgren in the Doherty case. Id.
Accordingly, the court entered summary judgment dismissing
Clarendon's complaint. Id.
On January 17, 2019, Clarendon moved for
reconsideration, which the district court denied on January 24,
2019. Clarendon Nat'l Ins. Co. v. Phila. Indem. Ins. Co., No. 17-
12541, 2019 WL 319993, at *2 (D. Mass. Jan. 24, 2019).
Thereafter, on February 25, 2019, Clarendon filed a timely notice
of appeal.2
II. Discussion
We review a district court's grant of summary judgment
de novo, construing the record in the light most favorable to the
nonmovant and resolving all reasonable inferences in that party's
favor. Ocasio-Hernández v. Fortuño-Burset, 777 F.3d 1, 4 (1st Cir.
2 Although Clarendon's notice of appeal included the court's
ruling on its Motion for Reconsideration, Clarendon failed to
meaningfully discuss that ruling in its appellate briefs. As
such, any arguments regarding the court's ruling on its Motion for
Reconsideration are waived. United States v. Zannino, 895 F.2d
1, 17 (1st Cir. 1990) ("[I]ssues adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation,
are deemed waived.").
-9-
2015); Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991)
(quoting Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990)).
Summary judgment may be granted only when "there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law." Ameen v. Amphenol Printed Circuits,
Inc., 777 F.3d 63, 68 (1st Cir. 2015) (quoting Barclays Bank PLC
v. Poynter, 710 F.3d 16, 19 (1st Cir. 2013)). The party opposing
summary judgment "bears 'the burden of producing specific facts
sufficient to deflect the swing of the summary judgment scythe.'"
Theidon v. Harvard Univ., 948 F.3d 477, 494 (1st Cir. 2020)
(quoting Mulvihill v. Top-Flite Golf Co., 335 F.3d 15, 19 (1st
Cir. 2003)). "For this purpose, [it] cannot rely on 'conclusory
allegations, improbable inferences, acrimonious invective, or rank
speculation.'" Id. (quoting Ahern v. Shinseki, 629 F.3d 49, 54
(1st Cir. 2010)).
A. Duty to Defend
On appeal, Clarendon argues that the district court
erred in its interpretation of Massachusetts law and its dismissal
of Clarendon's breach of contract claim, which Clarendon contends
was premised on the alleged breach of Philadelphia's duty to defend
Lundgren. Specifically, citing Metropolitan Property and Casualty
Insurance Company v. Morrison, 951 N.E.2d 662 (Mass. 2011)
("Metropolitan"), Clarendon posits that under Massachusetts law,
-10-
"there is no requirement that the facts alleged in the complaint
specifically and unequivocally make out a claim within the
coverage." Id. at 667 (quoting Billings v. Commerce Ins. Co.,
936 N.E.2d 408, 414 (Mass. 2010)). Instead, according to
Clarendon, a duty to defend should be found unless "the express
language in the complaint unequivocally demonstrate[s] that the
insurer does not owe coverage." And, here, its argument goes, the
Underlying Complaint's generalized allegations "can be read to
infer coverage," thus triggering Philadelphia's duty to defend
Lundgren in the suit.
In support of the contention that the Underlying
Complaint is reasonably susceptible to an interpretation entailing
coverage, Clarendon argues that the Underlying Complaint specifies
the date for only one leak: a "leak near a roofline," which
occurred "in 2004." It emphasizes that there is no "specific
information as to the time and the location of other leaks," and
that the Underlying Complaint fails to provide information about
"when each leak occurred, what measures were taken to repair them,
and whether any of the repairs were effective." Thus, in
Clarendon's view, the Underlying Complaint's assertion of "several
leaks" suggests that there were multiple issues over time.
Accordingly, this assertion is reasonably susceptible to an
interpretation in which "a new leak occurr[ed] during
-11-
Philadelphia's policy period." It further argues that even if the
exact same 2004 leak resumed after CBD repaired it, "[a] reasonable
inference is that Lundgren would anticipate the repairs to be
corrected and would not know that they would reoccur after repairs
were undertaken."
In addition, Clarendon posits that Philadelphia, as an
insurer, had an independent duty to investigate the "claim or loss"
regardless of the language in the Underlying Complaint. To comply
with that duty, Clarendon asserts that Philadelphia should have
"take[n] steps to obtain a copy of the [original] complaint" and
should have "sp[oken] to its insured." According to Clarendon,
Philadelphia's failure to investigate, to file an interpleader
action, and to draw inferences in favor of the insured, together
warrant a "remand[] in its entirety" because each of those failures
amounts to a breach of the duty to defend.
Finally, Clarendon argues that Philadelphia should be
estopped from denying coverage by relying on the "known loss"
justification -- the policy provision establishing that damages
occurring during the policy period are not covered if they result
from the "continuation, change or resumption," of damages known
prior to the policy period -- because, according to Clarendon,
Philadelphia did not rely on those grounds to deny coverage in
2009 when it initially considered Lundgren's claim. Clarendon
-12-
posits that, because Philadelphia denied coverage in 2009 based on
the "mold exclusion" and improperly induced reliance on this
exclusion, Philadelphia cannot now shift its denial justification
to an "entirely new" "known loss" justification in its 2014 letter.
According to Clarendon, Philadelphia should have initially
defended its insured and then sought a declaratory judgment on its
lack of coverage claim. We address each argument in turn.
The parties agree that Massachusetts law governs. Under
Massachusetts law, an insurer's duty to defend "is determined based
on the facts alleged in the complaint, and on facts known or
readily knowable by the insurer that may aid in its interpretation
of the allegations in the complaint." Metropolitan, 936 N.E.2d
at 667; Bos. Symphony Orchestra, Inc. v. Commercial Union Ins.
Co., 545 N.E.2d 1156, 1160 (Mass. 1989). To establish an insurer's
duty to defend and investigate allegations against an insured, a
plaintiff must demonstrate that the "allegations in [the
underlying complaint] are reasonably susceptible of an
interpretation that states or roughly sketches a claim covered by
the policy terms." Metropolitan, 951 N.E.2d at 667 (quoting
Billings, 936 N.E.2d at 414). The underlying complaint need not
"unequivocally make out a claim within the coverage," but rather,
"need only show, through general allegations, a possibility that
the liability claim falls within the insurance coverage,"
-13-
Billings, 936 N.E.2d at 414 (quoting Sterilite Corp. v. Cont'l
Cas. Co., 458 N.E.2d 338, 341 (Mass. App. Ct. 1983)), regardless
of "the possibility that the underlying claim may ultimately fail,
or that the merits of the claim are weak or frivolous." Holyoke
Mut. Ins. Co. in Salem v. Vibram USA, Inc., 106 N.E.3d 572, 576
(Mass. 2018). Where there is uncertainty "as to whether the
pleadings include or are reasonably susceptible to an
interpretation that they include a claim covered by the policy
terms," the uncertainty "is resolved in favor of the insured," and
the insurer's duty to defend will attach "until [the insurer]
obtains a declaratory judgment of no coverage." Deutsche Bank
Nat'l Ass'n v. First Am. Title Ins. Co., 991 N.E.2d 638, 642 (Mass.
2013).
However, where the allegations within the underlying
complaint "lie expressly outside the policy coverage and its
purpose," an insurer is relieved of its duty to defend and
investigate. Metropolitan, 951 N.E.2d at 668 (quoting Herbert A.
Sullivan, Inc. v. Utica Mut. Ins. Co., 788 N.E.2d 522, 531
(Mass. 2003)). Additionally, "[e]ven where the allegations in the
complaint state or roughly sketch a claim covered by" an insured's
policy, no duty to defend and investigate arises if "there is
'undisputed, readily knowable, and publicly available information'
in court records that demonstrates that the insurer has no duty to
-14-
defend" and if "there is 'an undisputed extrinsic fact that takes
the case outside the coverage and that will not be litigated at
the trial of the underlying action.'" Id. (quoting Billings,
936 N.E.2d at 200 n.8, 205). Moreover, although an initial
complaint may contain allegations which give rise to a duty to
defend, the duty no longer exists when the complaint is amended to
remove the triggering allegations. See Herbert A. Sullivan, Inc.,
788 N.E.2d at 531.
A close read of the Underlying Complaint and the record
shows that the district court did not err by granting summary
judgment for Philadelphia on the duty to defend issue. Examined
according to Massachusetts law, the allegations in the Underlying
Complaint are not "reasonably susceptible of an interpretation
that states or roughly sketches a claim covered" by Philadelphia's
policy. Metropolitan, 951 N.E.2d at 667 (quoting Billings,
936 N.E.2d at 414). The parties do not dispute that Philadelphia's
policy expressly excludes coverage for property damage known prior
to Philadelphia's period of coverage. To establish that the
Underlying Complaint "roughly sketches" a potentially covered
event, Clarendon points to small differences in grammatical
structure between paragraphs and ambiguities arising from missing
information about the time and place of various leaks. Neither
of these assertions give rise to a rough sketch of a covered claim.
-15-
Clarendon's reliance on the use of the word "leak" (in
singular) in paragraph seventeen of the Underlying Complaint to
suggest that the use of the term "leaks" in other paragraphs3 could
reasonably be interpreted as referencing new distinct leaks
arising from different structural problems is inconsistent with a
reading of the Underlying Complaint as a whole. Paragraph sixteen
of the Underlying Complaint clearly states that "[d]uring the year
2004 leaks developed in the roof above [Doherty's] unit and/or the
exterior area of the structure just below the roof line."
(Emphasis added). The Underlying Complaint then goes on to discuss
the water infiltration problems caused by these "leaks" that
started in 2004, including the fact that "[t]he roof leak caused
ceiling cracks and loosening plaster in [Doherty's] unit," as
stated in paragraph seventeen. Contrary to Clarendon's
contentions, the fact that the Underlying Complaint does not
mention the precise location, time, and repairs undertaken is
insufficient to show that Doherty's claim "possib[ly] . . . falls
within the insurance coverage." See Billings, 936 N.E.2d at 414.
The Underlying Complaint unambiguously indicates that the 2004
repairs were not made in an "appropriate manner," and that Doherty
had continued to request "complete repair of all leaks . . . to no
3 See Underlying Complaint at ¶¶ 16, 24, 26, and 27 ("leaks"); 17
("leak"); 28 ("all leaks").
-16-
avail." See Underlying Complaint at ¶¶ 17 and 28. Further, it
references "chronic dampness" occurring at least as early as
March 10, 2006, before the inception of Philadelphia's policy.
See Underlying Complaint at ¶¶ 23 and 28. Nothing in the Underlying
Complaint is reasonably susceptible to an interpretation in which
the leaks were resolved prior to the inception of Philadelphia's
policy. Clarendon, therefore, has failed to show that the
Underlying Complaint provides the "rough sketch" of a covered event
necessary to trigger the duty to defend. Metropolitan, 951 N.E.2d
at 667.4
Furthermore, contrary to Clarendon's contentions,
Philadelphia did not have an independent duty to investigate claims
4 Although its arguments are not a model of clarity, Clarendon
also seems to suggest that Lundgren could rely on CBD to resolve
the leaks, negating its knowledge of a problem, and thus each
resumption would be a "new leak" or new "property damage" under
the policy. This argument, however, is not consistent with the
plain terms of the insurance policy, which provides in relevant
part: "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." There is no dispute that the Underlying Complaint
alleges that Lundgren initially knew about the property damage and
made representations about their repair. See Underlying Complaint
at ¶¶ 18, 24. Regardless of its reliance on CBD to effectuate
repairs and whether Lundgren knew or reasonably believed them to
be effective, under the plain terms of the policy, the damages
would be a "resumption of such 'property damage'" of which Lundgren
was initially aware.
-17-
that were not reasonably susceptible of an interpretation that
states or roughly sketches a claim covered by its policy. See id.
at 667-68 ("[W]hen the allegations in the underlying complaint
'lie expressly outside the policy coverage and its purpose, the
insurer is relieved of the duty to investigate.'" (quoting
Billings, 936 N.E.2d at 414)); see also Nascimento v. Preferred
Mut. Ins. Co., 513 F.3d 273, 277 (1st Cir. 2008). While Clarendon
is correct that Massachusetts law does look to facts "known or
readily knowable by the insurer" as well as to the underlying
complaint to determine whether a duty to defend has been triggered,
information that is "readily knowable" is distinct from the duty
to investigate. Metropolitan, 951 N.E.2d at 667-68 (quoting
Billings, 936 N.E.2d at 414, 417). This Court has held that
information known or readily knowable does not independently
trigger the duty to defend under Massachusetts law when the
complaint does not "adumbrate a claim." Open Software Found.,
Inc. v. U.S. Fidelity & Guar. Co., 307 F.3d 11, 15-16 (1st Cir.
2001) (internal quotation marks omitted) ("Massachusetts courts
generally use extrinsic facts . . . to aid interpretation of the
complaint, and not as independent factual predicates for a duty to
defend. . . . We do not consider them as independent grounds for
a duty to defend."); accord Bos. Symphony, 545 N.E.2d at 1160-61.
Philadelphia therefore did not breach either its duty to
-18-
investigate or its duty to defend Lundgren.
Finally, we refuse to address, on waiver grounds, the
merits of Clarendon's argument that Philadelphia is estopped from
relying on the "known loss" justification to deny coverage because,
according to Clarendon, Philadelphia changed its grounds for
denial of coverage between 2009 and 2014. Contrary to its
contentions, Clarendon did not properly raise that claim in the
district court. While Clarendon may have flagged discrepancies
between the 2009 and 2014 denial-of-coverage letters in the
district court, it never affirmatively linked these discrepancies
to an estoppel argument nor explained how they resulted in
Lundgren's reliance. A litigant's mere mentioning of facts that
could potentially make up a claim is insufficient to effectively
raise the argument. United States v. Slade, 980 F.2d 27, 30
(1st Cir. 1992) ("Passing allusions are not adequate to preserve
an argument in either a trial or appellate venue.").
B. Claims for contribution and for alleged violations of
Massachusetts General Laws, chapters 93A and 176D
Next, Clarendon challenges the district court's entry of
summary judgment dismissing its contribution claim (Count I) and
its claim for alleged violations of Massachusetts General Laws,
chapters 93A and 176D (Count III).5 Despite mentioning in its
5 Clarendon interchangeably refers to "consumer protection claim"
-19-
opening brief's statement of the case that it was seeking appellate
review of the dismissal of its contribution claim, Clarendon did
not discuss this elsewhere in its briefs. We thus deem the
contribution claim waived. See United States v. Zannino, 895 F.2d
1, 17 (1st Cir. 1990). Even if not waived, Clarendon's challenge
to the summary dismissal of its contribution claim would fail
inasmuch as it was premised on the incorrect notion that
Philadelphia had breached its duty to defend and to indemnify
Lundgren in the Doherty case and thus needed to proportionately
contribute to Clarendon, who had satisfied an obligation common to
both Clarendon and Philadelphia. See Ins. Co. of the State of Pa.
v. Great N. Ins. Co., 45 N.E.3d 1283, 1286 (Mass. 2016) ("Under
the doctrine of equitable contribution, where multiple insurers
provide coverage for a loss of an insured, an insurer who pays
more than its share of the costs of defense and indemnity may
require a proportionate contribution from the other coinsurers.").
We now turn to the remaining claim. Clarendon first
argues that the district court improperly dismissed its claim for
alleged violations of Massachusetts General Laws, chapters 93A and
176D because "Philadelphia's Motion for Summary Judgment did not
seek dismissal of [that] claim" and, thus, "Clarendon was not
and "bad faith claim" to describe Count III.
-20-
afforded an opportunity to oppose [its] dismissal." In addition,
Clarendon claims that if Philadelphia had conducted an
investigation, "it would have learned that Lundgren did not 'know'
of an ongoing loss at the time [that] the [Underlying] Complaint
was filed because CBD had undertaken repairs and abated several
issues." It asserts that the Underlying Complaint "includes
allegations of personal property damage caused by water alone,
which would not result in the personal property damage being
excluded by the mold exclusion." It maintains that both the
failure to investigate and the 2009 denial on the basis of the
mold exclusion constitute bad faith that survives regardless of
whether Philadelphia had a duty to defend. We address Clarendon's
procedural and substantive challenges in turn.
Contrary to Clarendon's contentions, in its motion for
summary judgment, Philadelphia did request the dismissal of
Clarendon's claim for alleged violations of Massachusetts General
Laws, chapters 93A and 176D.6 Specifically, it stated:
"Phase 1" is intended to focus on the duty to defend
issue. However, because [Philadelphia] had no duty
to defend the insureds in the underlying Suffolk
Superior Court action, Clarendon's claims against
[Philadelphia] in the other two counts (for equitable
contribution and alleged violations of Chapter
93A/176D) fail as a matter of law, and should also be
dismissed.
6 So did Philadelphia request the dismissal of Clarendon's
contribution claim.
-21-
Philadelphia also briefed the issue in its memorandum of law in
support of summary judgment. There, Philadelphia stated that if
the district court were to grant summary judgment as to the duty
to defend issue, then:
[A]s a matter of law Clarendon cannot prove that it
is entitled to "contribution" as alleged in Count I,
or that [Philadelphia] violated M.G.L. ch. 93A or 176D
[ ] as alleged in the third count . . . of Clarendon's
Complaint. The Court should therefore grant summary
judgment and dismiss the Plaintiff's Complaint in its
entirety.
Philadelphia then proceeded to discuss why those two claims failed
as a matter of law. The issue was thus squarely before the
district court, and Clarendon had the opportunity to address it.
In fact, Clarendon did address Philadelphia's arguments in its
opposition to summary judgment, including the merits of its claim
for alleged violations of chapters 93A and 176D.7 Accordingly,
Clarendon's contention that the district court abused its
discretion in dismissing Count III without giving it an opportunity
to oppose such dismissal lacks merit.
We now turn to Clarendon's substantive challenge.
Massachusetts General Laws chapter 176D, section 2 prohibits
insurance providers from engaging in "an unfair method of
7 Clarendon also addressed the merits of its contribution claim,
stating that "[t]he contribution claim [Count I] survives the
Motion because the defense is based upon Philadelphia's [duty to
defend] argument succeeding, and that argument fails."
-22-
competition or an unfair or deceptive act or practice in the
business of insurance," while section 3(9) provides specific
instances of conduct that violate this mandate.8 Mass. Gen. Laws
ch. 176D, §§ 2, 3(9). Massachusetts General Laws chapter 93A, the
Massachusetts Consumer Protection Law, prohibits "[u]nfair methods
of competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce," Mass. Gen. Laws ch. 93A, § 2(a),
and "provides a cause of action for business plaintiffs injured by
unfair trade practices," Brazas Sporting Arms, Inc. v. Am. Empire
Surplus Lines Ins. Co., 220 F.3d 1, 9 (1st Cir. 2000); Mass. Gen.
Laws ch. 93A, § 11.9 "For a consumer plaintiff, a violation of
8 Neither party specifically points to a provision in chapter
176D, section 3, for the purpose of this appeal. Presumably,
Clarendon's claims arise under sections 3(9)(a) (prohibiting
"misrepresenting pertinent facts or insurance policy provisions
relating to coverages at issue") and 3(9)(n) (prohibiting "failing
to provide promptly a reasonable explanation of the basis in the
insurance policy in relation to the facts or applicable law for
denial of a claim").
9 Mass. Gen. Laws ch. 93A, § 11 states that:
Any person who engages in the conduct of any trade or
commerce and who suffers any loss of money or
property, real or personal, as a result of the use or
employment by another person who engages in any trade
or commerce of an unfair method of competition or an
unfair or deceptive act or practice declared unlawful
by section two or by any rule or regulation issued
under paragraph (c) of section two may, as hereinafter
provided, bring an action in the superior court . . .
whether by way of original complaint, counterclaim,
cross-claim or third-party action for damages and such
equitable relief, including an injunction, as the
-23-
chapter 176D, section 3(9) constitutes a violation of chapter 93A,"
whereas "a plaintiff engaged in 'trade or commerce,' [such as
Clarendon,] may only use a violation of chapter 176D as evidence
of a chapter 93A violation." River Farm Realty Tr. v. Farm Family
Cas. Ins. Co., 943 F.3d 27, 37 (1st Cir. 2019) (citing Polaroid
Corp. v. Travelers Indem. Co., 610 N.E.2d 912, 917 (Mass. 1993)).
Under both chapter 176D and chapter 93A, insurers are "held to the
duty of good faith and fair dealing." McGovern Physical Therapy
Assocs., LLC v. Metro. Prop. & Cas. Ins. Co., 802 F. Supp. 2d 306,
315 (D. Mass. 2011). To establish a claim of bad faith, a plaintiff
must produce factual evidence of the defendant's knowledge and
intent. O'Leary-Alison v. Metro. Prop. & Cas. Ins. Co., 752
N.E.2d 795, 797 (Mass. App. Ct. 2001). Although an insurer's
denial of coverage based on an unreasonable interpretation of
policy terms may constitute bad faith, "plausible, although
ultimately incorrect" interpretations of an insured's policy
coverage do not. See Bos. Symphony, 545 N.E.2d at 1160.
Clarendon's claim is premised on Philadelphia's alleged
failure to investigate the allegations in the Underlying Complaint
and to adequately inform its insured of the basis for the denial.
We have already rejected Clarendon's failure to investigate claim.
We now similarly reject Clarendon's contention that Philadelphia
court deems to be necessary and proper.
-24-
failed to adequately inform its insured of the basis for its denial
of coverage. We note that in its 2009 letter, Philadelphia
grounded its denial not only on the mold exclusion, but also on
the fact that the allegations included in the Underlying Complaint
had occurred outside of the coverage period. It advised that
"there are no allegations in the complaint that occurred within
our policy period." That, by itself, dooms Clarendon's contentions
that Philadelphia violated Mass. Gen. Laws chs. 93A and 176D. See
Manganella v. Evanston Ins. Co., 700 F.3d 585, 589-90, 595 (1st
Cir. 2012) (holding -- where the insurer had denied coverage on
one ground, but the denial letter "also adverted, without
elaboration," to a policy exclusion -- that because the
"[insurer's] denial of coverage was justified by the [policy]
[e]xclusion, [plaintiff's] claims [for alleged violations of Mass.
Gen. Laws chs. 93A and 176D could] not proceed under the theory
that the denial of coverage was wrongful"); Bos. Symphony, 545
N.E.2d at 1160 (no 93A violation where disclaimer of coverage was
incorrect but not "unreasonable," nor in "bad faith" or for
"ulterior motives"); Gulezian v. Lincoln Ins. Co., 506 N.E.2d 123,
127 (Mass. 1987) ("An insurance company which in good faith denies
a claim of coverage on the basis of a plausible interpretation of
its insurance policy is unlikely to have committed a violation of
[Mass. Gen. Laws ch.] 93A"); see also Brazas Sporting Arms,
-25-
220 F.3d at 10 ("Where . . . the insurer properly denied coverage,
there can be no violation of chapter 176D."). Accordingly, the
district court did not err in granting summary judgment against
Clarendon on its claim for alleged violations of chapters 93A and
176D.
III. Conclusion
For the foregoing reasons, we affirm the district
court's summary judgment order.
Affirmed.
-26-