On March 19, 2018, the Business Litigation Session of the Suffolk Superior Court entered a judgment against Roche Brothers Supermarkets (Roche Bros.) in the case of Roche Brothers Supermarkets LLC v. Continental Casualty Company,
The extraordinary winter of 2015, spawns the lawsuit over snow removal
Insurance companies and agents remember well, the severe winter of 2015 when between January and March Massachusetts experienced record snowfall accompanied by record numbers of claims for ice dams and roof collapses.
Roche Brothers based in Wellesley, Massachusetts operates a chain of twenty supermarkets primarily located in the Boston Metro Area under the trade name, Roche Brothers, Sudbury Farms, and Brothers Marketplace.
During the winter of 2015, as snow piled up on the flat roofs of some of its supermarkets, Roche Brothers took extraordinary action to prevent the extreme weight of the snow piling up to cause roof systems to fail. In a short period, Roche Brothers spent over $800,000 for snow removal on its supermarket’s roofs.
The decision by Judge Mitchell H. Kaplan of the Business Litigation Session on Roche Brothers’ coverage claim offers a primer on interpreting policy coverage.
Roche Brothers file an insurance claim for cost incurred to prevent losses from collapsing roofs
During the period Roche Brothers was incurring extraordinary snow removal bills to prevent its supermarket roofs from failing and causing resulting property damage, it had in force a commercial property insurance policy issued by Continental Casualty Company (Continental). After incurring the snow removal costs to avoid or mitigate any property damage, Roche Brothers submitted a claim to Continental claiming it had the right to payment for the snow removal expenses under the policy.
Continental denied the claim and Roche Brothers filed suit in the Business Litigation Session of the Superior Court on January 17, 2017.
The suit alleged Continental, in denying the Roche Brothers’ claim, had breached the property insurance contract, breached the implied covenant of good faith and fair dealing implied in all Massachusetts contracts, and was guilty of unfair and deceptive acts in violation of §§2 and 11 of General Laws c. 93A. Also, Roche Brothers sought a declaratory judgment as to coverage under General Laws c. 231A.
Continental does not answer suit but moves to dismiss for failure to state a claim
Under Massachusetts court rules, if the law bars a suit (e.g., the statute of limitations) or the suit’s allegations fail to state any legal claim upon which a court may grant relief, the defendant can file a motion to dismiss instead of an answer. Insurance carriers sued over coverage questions often file motions to dismiss alleging their policies are unambiguous, and the court should rule in their favor as a matter of law.
Continental chose to respond to the Roche Brothers complaint with just such a motion to dismiss alleging its policy was unambiguous, and the court should apply the terms of the contract in favor of Continental.
Judge Kaplan agreed with Continental that the case turned entirely on the interpretation of a written insurance contract and that the rules for courts to follow in interpreting an insurance policy under Massachusetts law involved some three fundamental principles:
- an insurance contract, like other contracts, is to be construed according to the fair and reasonable meaning of its words;
- exclusionary clauses must be strictly construed against the insurer so as not to defeat any intended coverage or diminish the protections of the protection purchased by the insured;
- doubts created by any ambiguous words or provisions are resolved against the insurer;
- in determining whether an ambiguity exists, every word in an insurance contract must be presumed to have been employed with a purpose and must be given meaning and effect whenever practicable;
- an ambiguity exists when there are two rational interpretations of policy language;
- in that case, the court should consider what an objectively reasonable insured, reading the relevant policy language, would expect to be covered.
Continental’s position: Policy only covers direct physical loss or damage to property
Continental’s position before the court was the policy was a standard “all risk” commercial property policy and the coverage provisions in question only had one single rational interpretation: The policy insured against two types of risk “direct physical loss of property” and “direct damage to property.”
The policy only provided payments in the event of physical loss or damage to covered property by insured perils and will only pay the least of:
- the limit of liability applicable to lost or damaged property;
- the interest of the insured and lost or damaged property;
- the cost to repair the lost or damaged property;
- the actual expenditure incurred in repairing or replacing the damaged property; or,
- the value of the property insured determined under the policy’s various valuation methods.
None of the policy’s payments provided for expenses to mitigate risks from covered losses.
Roche Brothers’ position: Policy has coverage for expenses to avoid loss or damage
Roche Brothers’ position was Continental’s policy implicitly provided coverage for expenses incurred to prevent “the risk the property will be lost or the risk that it will be damaged.”
Judge Kaplan assumed as alleged in Roche Brothers’ complaint that removing the snow from the roofs of its building was a very prudent and responsible step “for Roche Brothers Roche to take in the winter of 2015, to avoid possible structural damage to its buildings.”
Judge Kaplan noted, however, Roche Brothers’ complaint did not allege that any of the insured properties suffered any physical damage as the result of the snowstorms or that any property located within the buildings was lost or damaged. Roche Brothers’ claim entirely consisted of the costs of the preventative expense of removing snow that could have caused property damage if not removed.
In Judge Kaplan’s opinion, Roche Brothers’ policy interpretation did not follow the words of the policy but required the court to read additional coverage terms into the policy. Judge Kaplan reasoned that Roche Brothers’ argument was that if the insured reasonably believed there was a risk that property damage would occur, the policy covered the cost of eliminating that risk. In other words, Roche Brothers was arguing that the policy would provide for “preventive maintenance.”
Judge Kaplan noted that Roche Brothers’ conduct as alleged in the complaint established Roche Brothers’was concerned the snow might cause structural damage and removed it. However, the complaint did not allege that Roche Brothers’ contacted Continental to involve them in determining whether they would assess whether the risk of potential damage was sufficient to trigger coverage. Instead, they simply cleared the roof without any contact with the insurer
Applying principles of policy interpretation, judge rules Roche Brothers has no valid claim
In the end, Judge Kaplan found Roche Brothers’ interpretation did not make sense under the terms and conditions of the policy.
In ruling against Roche Brothers, the trial judge relied upon prior Massachusetts caselaw that held in an analogous insurance coverage case, “it would make no sense to cover an event which creates a risk of physical damage if physical damage was not a triggering event for coverage.” The judge agreed with the prior court’s decision ruling, “It is impossible to read the insurance policy as providing coverage for ‘risk’ in the absence of ‘damage.”
Judge Kaplan concluded his decision on Continental’s motion to dismiss finding the coverage clause at issue that states the policy insures, “against risks of direct physical loss of or damage to property” was unambiguous.
Since the policy was unambiguous, the only risks covered were the physical loss of property or damage to property. Therefore, Judge Kaplan ruled,“Continental properly applied the policy to Roche Brothers’ claim for the expense it incurred in shoveling snow from its roofs to protect against the possibility that the snow might cause physical damage to the buildings.”
The final ruling was Continental had neither breached its contract with Roche Brothers nor had it breached the covenant of good faith and fair dealing arising under the contract or violated Chapter 93A.
Roche Brothers filed appeal two weeks after the decision
Roche Bros. had until April 19, 2018, to file an appeal of the Superior Court decision. On March 28, 2018, it filed its appeal to the Appeals Court.
Agency Checklists will follow the Roche Brothers appeal and keep its readers posted.