The Supreme Judicial Court (SJC) has decided a case that demonstrates the difficulty an insured can cause itself when it gives its insurance agent confused and cryptic instructions and then does not update the agent about the reasons for its requests. In this case, Masonic Temple Association of Quincy, Inc. vs. Jay Patel et al v. Union Insurance et al., the SJC construed for the first time the meaning of “doing business as” in relation to CGL coverage. Also, the Court reviewed the E&O liability, or lack thereof, for an insurance agent’s alleged failure to follow up on an insured’s possible request for coverage.
A project that has trouble getting off the ground
The Masonic Temple (Temple) in Quincy was a 1926 neoclassical edifice located on Hancock St. that had a long history in the city. In 1989, the Temple became part of the National Register of Historic Places. However, by 2012, the members of the Temple found that the cost of maintaining the building had become prohibitive.
The members negotiated a purchase and sale agreement with the Grossman Munro Trust (Trust) that would allow the Trust to develop the building into two large condominium units. The Masons would retain the basement unit while the Trust would own a two-story upstairs unit.
After having started renovation, the Trust decided that the project did not make financial sense and assigned the agreement and its development rights to Jay Patel. Mr. Patel planned to construct a boutique hotel in the upstairs condominium unit with 50-60 rooms.
Mr. Patel was the President of Dipika, Inc. which owned a Super 8 motel located in Weymouth, Massachusetts. Per Mr. Patel, Dipika’s “business [was] essentially owning the motel.” Mr. Patel owned and operated motel properties in Massachusetts, Rhode Island, and Connecticut and his practice was to set up separate corporations to own each property with separate insurance policies for each.
Mr. Patel then paid $100,000 to the Trust for an assignment of the Agreement to him individually. When Mr. Patel applied for a building permit in July 2013, he noted that the “owner” of the Temple was “Jay Patel”.
When the Masons became aware that Mr. Patel’s company, Dipika, and not the Trust, was undertaking the construction work at the Temple, they insisted that all work at the Temple stop until Dipika obtained adequate insurance to cover the work.
The Dipika insurance policies
Mr. Patel placed Dipika’s insurance through the Roblin Insurance Agency (Roblin Agency).
The Roblin Agency placed Dipika property and general liability insurance coverage for its hotel business with Union Insurance (Union), with liability limits of $1 million and umbrella coverage from Acadia Insurance (Acadia) with limits of $5 million. Union and Acadia were affiliated insurers ultimately owned by W.R. Berkley Corporation.
Union’s policy contained two premium-bearing endorsements. A “Designated Construction Projects” Endorsement applicable to “all projects,” and a “Designated Location[s]” Endorsement covering activities by Dipika at “all locations.” Neither endorsement referenced the Super 8 in Weymouth.
A builder without builder’s risk coverage
In response to the Temple’s stop work order, Mr. Patel contacted Dipika’s account manager at the Roblin Agency and left a voicemail message stating:
“I need to do a name, loss payee of Quincy Masonic Temple Associates, and this is something I need right away.”
One minute later, Mr. Patel sent the Roblin Agency an email message, which read:
“I need ryder [sic] for Dipika, Inc. name quincy masonic Temple association loss payee.” (Capitalization of original)
This was the only communication that Mr. Patel had with the Roblin Agency about coverage for the Temple. Within one-half hour, the Roblin Agency transmitted a certificate of insurance for Dipika’s then current policy with Union.
The certificate showed the coverages for Dipika at the Weymouth location, “doing business as Super 8 Motel.” The next day a Roblin Agency’s account manager sent an email message to Mr. Patel asking, “What is the relationship between Quincy Masonic Temple Association and Dipika? Are they asking you for a certificate?” Mr. Patel subsequently acknowledged that he received the message, but he never responded to it.
The Certificate listed the insured as “Dipika Inc. dba Super 8, Jay Patel, 655 Washington Street, Weymouth, MA 02188,” and named the certificate holder as “Quincy Masonic Temple Associates, 1170 Hancock Street, Quincy, MA” (the “Certificate”). The Certificate stated that it was “Issued as Evidence of Insurance.”
Mr. Patel’s, Dipika, assuming it had received what it requested, forwarded the Certificate to the Masons. After reviewing the Certificate, the Masons allowed Dipika to continue with its demolition work.
The fire loss of the Temple
Several months after delivering the certificate of insurance to the Masons, Dipika had two workers on the site. Mr. Patel was involved in supervising and paying for their work. The workers cutting pipes created sparks that started a fire in the Temple’s installation. The fire caused major damage to the Temple.
The Masons’ fire loss claims and coverages
The Masons had property insurance from Great American Insurance Company (“Great American”) and hired a public adjuster to negotiate its claim with Great American. The adjuster presented a proof of loss to Great American that claimed an insured loss of $12,239,329 based on the supposed cost to repair the damage to the Temple building, and $848,254 for damages to personal property. Ultimately, Great American and the Masons negotiated a settlement for immediate payment of $5,625,000, plus approximately $1,000,000 to clean and shore up the Temple in the aftermath of the fire.
After Great American paid the Association $6,625,000, the Association filed a Complaint against the Trust, The Association reached a $500,000 settlement with the Trust and as part of the settlement agreement, the Trust agreed to buy the fire-damaged Temple from the Association for $1,775,000
Immediately after the fire, Dipika notified Union of its claim. Union denied coverage on the grounds that it insured Dipika only for operations at Dipika’s “dba” address for the Super 8 in Weymouth.
After this denial, a veritable round robin of litigation ensued. The Masons sued Mr. Patel and Dipika for starting the fire and for failing to obtain proper insurance. Dipika then brought third-party claims against Union for denial of coverage and the Roblin Agency for negligence. The Masons subsequently also asserted direct claims against Union and the Roblin Agency and attempted to add claims against Acadia.
The litigation filed involved:
(1) the Masons’ claims against Union for misrepresentation, negligence, and violations of G. L. c. 93A.
(2) the Masons’ claims against the Roblin Agency for misrepresentation and negligence.
(3) the Masons’ request for a declaratory judgment as to coverage.
(4) Dipika’s and Mr. Patel’s claims against the Roblin Agency for indemnification and contribution, breach of contract, negligence, and violations of G. L. c. 93A.
(5) Dipika’s and Mr. Patel’s claims against Union for indemnification and contribution, breach of contract, negligence, and violations of G. L. c. 93A.
(6) Dipika’s and Mr. Patel’s request for a declaratory judgment as to coverage.
(7) the Masons’ claims against Acadia, mirroring those they brought against Union; and
(8) Dipika’s and Mr. Patel’s claims against Acadia, mirroring those they brought against Union.
After summary judgment entered in favor of Union and the Roblin Agency on all claims and counts, the Masons, Dipika and Mr. Patel appealed the Superior Court decision to the Appeals Court.
The SJC transfers the appeals from the Appeals Court and request amicus briefs
During the course of the appeal, the Supreme Judicial Court identified the appeal as having important issues of first impression and transferred all the appeals to its docket. The Court also published a request for amicus briefs from interested parties, stating:
The Justices are soliciting amicus briefs. Where the named insured in a general liability insurance policy includes a “doing business as” designation, whether policy coverage is limited to liabilities arising out of the “doing business as” entity’s business or whether it applies to the named insured when it operates in other capacities; e.g., where, as here, the named insured is “Dipika Inc. dba Super 8,” whether policy coverage is limited to liabilities arising out of Dipika’s operation of the Super 8 Motel or whether the policy also provides coverage more broadly to other Dipika, Inc., operations.
Both the Complex Insurance Claims Litigation Association (CICLA) and United Policyholders answered the SJC’s call for amicus briefs.
CICLA identifies itself as “a trade association composed of major property and casualty insurance companies. [Its member] insurers provide a substantial percentage of liability coverage written in Massachusetts and nationwide. For decades, CICLA has sought to help courts resolve important insurance cases, appearing as amicus curiae to address issues of great consequence to insurers, their policyholders, and the public.”
United Policyholder, for its part, advised the Court that it is “a unique non-profit, tax-exempt, charitable organization founded in 1991 that provides valuable information and assistance to the public concerning insurers’ duties and policyholders’ rights. UP monitors legal developments in the insurance marketplace and serves as a voice for policyholders in legislative and regulatory forums. UP helps preserve the integrity of the insurance system by educating consumers and advocating for fairness in policy sales and claim handling. Grants, donations and volunteers support the organization’s work. UP does not accept funding from insurance companies.
Not surprisingly, CICLA’s amicus brief supported Union Insurance’s arguments and UP’s amicus brief advocated for Union’s insured, Dipika.
The limits of Dipika’s “All projects” and “All locations” endorsements
The policy declaration page listed the insured is Dipika, Inc. DBA Super 8 at 655 Washington St. in Weymouth in the business description as “motel.” The location schedule listed on the policy only listed the Weymouth address.
Dipika and the Masons claimed that notwithstanding any address or business description limitation there was potential coverage under the commercial general liability for the construction work undertaken at the Masons’ property based upon two policy endorsements.
These endorsements titled “DESIGNATED CONSTRUCTION PROJECT(S) GENERAL AGGREGATE LIMIT” and “DESIGNATED LOCATION(S) GENERAL AGGREGATE LIMIT, respectively applied to “All projects” and “All locations.”
The Court, however, found that these endorsements applied to liability while constructing a new building for the Super 8 motel or Super 8 related activities at a different location. The endorsements, however, did not create additional coverage for independent projects like the Temple reconstruction project. Per the Court, “the endorsements do not, either by plain language or implication, affect what losses are covered in the first instance, and therefore do not extend coverage to include the Masonic Temple losses.”
The policy description “doing business as” limiting coverage
The Court noted that no Massachusetts courts had opined on the question of the scope of coverage where the policy identifies a named insured as “doing business” under another name. The Court observed, however, that some jurisdictions other than Massachusetts had held that coverage is limited to the businesses designated by the DBA description, and did not extend to other businesses that may be operated by the insured.
Based on these decisions, the SJC ruled that in this case the “doing business as Super 8” policy designation limited coverage to the operations of the Super 8 Motel. The Court stated that to hold otherwise would allow any new business endeavors undertaken by Dipika for any purpose and in any location which might relate to a hotel and motel to have coverage under a policy written to protect only the Super 8 location in Weymouth.
The Court also pointed out that the Masons’ and Dipika’s expansive interpretation of the policy’s coverage would require it to consider the descriptive language “DBA Super 8” as superfluous. That interpretation would then flaunt the rules of contract construction that require the Court to consider all parts of a contract as having meaning.
The claim that the Roblin Agency had a duty of inquiry
The Court found that it should have been clear to Mr. Patel based on the terms of the certificate that his voicemail and email had not resulted in securing the requested insurance coverage for the Masons’ property.
The certificate clearly listed “Dipika, Inc. DBA Super 8, J. Mr. Patel, 655 Washington St., Weymouth Mass. 02188” as the only insured, and contained a disclaimer noting that it created no rights in the certificate holder. The Court therefore found that the certificate did no more than confirm the existence of a policy covering the Super 8 motel. Moreover, the certificate could not reasonably have induced Mr. Patel to believe there was coverage for the Masons’ property.
The record demonstrated Mr. Patel did not request the required coverage which would have been a builder’s risk policy when he contacted the Roblin Agency. The certificate issued by the Roblin Agency did not state that the Masons were insured under the policy, or that the certificate conferred any rights to its holder. Thus, the Court found that there was no basis to conclude that the Roblin Agency’s action in producing a certificate required Union to cover the damage to the property.
The Masons claims against Union and the Roblin Agency
The Masons had also sued Union for negligence and misrepresentation based on its vicarious liability for the actions of its agent, the Roblin Agency. The Court summarily found that Union had no liability to Dipika which made all the Masons’ claims against Union unsustainable.
Dipika claims against the Roblin Agency
Dipika further claimed that if it could not recover from Union, it had the right to obtain recovery from the Roblin Agency. The Court, however, found that claim to have a fundamental flaw.
Any such viable claim required proof that Mr. Patel had requested additional insurance for Dipika from the Roblin Agency. The Court held that even in the most favorable light to Dipika, Mr. Patel asking to add the Masons as a “loss payee” was not a request for insurance.
The Court did agree that “brokers have a duty to obtain insurance coverage that their clients ask them for” but in this case, the Roblin Agency could not be liable for failing to procure the insurance when the Court found there was “no intelligible request for to do so.”
The Court also disposed of Dipika’s claim that Mr. Patel’s communication should have triggered a duty for the Roblin Agency to inquire further so that it could have better understood what Mr. Patel wanted. The Court affirmatively stated that such a duty was too much to ask of an insurance broker.
The Court noted that it had never ruled that such a duty of inquiry was part of a broker’s general duty of care. Such a duty, the Court stated, would only apply if there existed “special circumstances of assertion, representation, and reliance between the broker and their client. Here Dipika had conceded that no such special circumstances existed. Therefore, the Court declined to impose any heightened duty on the Roblin Agency to inquire further about Mr. Patel’s confusing message.
The Masons’ claims against the Roblin Agency for negligence and misrepresentation
The Masons also asserted a claim for misrepresentation and negligence against the Roblin Agency premised on the Roblin Agency sending a certificate of insurance to Mr. Patel. The Court restated the law of certificates holding that the certificate of insurance was simply a form completed at the request of an insured.
The Court noted that the one-page certificate furnished to Mr. Patel by the Roblin Agency which Mr. Patel had delivered to the Masons, accurately described the commercial general liability policy and listed the Masons as a certificate holder.
On its face, it stated: “This certificate is issued as a matter of information only and confers no rights upon the certificate holder… This is to certify that the policies of insurance listed below have been issued to the insured named above.”
The Court noted that the certificate the Roblin Agency furnished Mr. Patel was accurate and nothing on its face suggested that Dipika’s existing coverage extended to the project at the Masonic Temple. Further that there was no dispute that at the time certificate issued the Roblin Agency had no contract with the Masons, no knowledge about Dipika’s relationship with them, and no awareness of Dipika’s work at the Masonic Temple.
Also, there was no evidence presented that the Roblin Agency had actual knowledge that the Masons “would rely on the certificate in confirming that [Dipika] had procured insurance to cover their interests…” In fact, the plain terms of the certificate stated otherwise.
Finally, there was no evidence that Mr. Patel or Dipika requested the relevant insurance, nor was there any evidence that the Roblin Agency ever promised Dipika to obtain such insurance. Without evidence of such an undertaking by the Roblin Agency, there was no duty owed to the Masons.
Finally, the Court rejected the Masons’ assertion that the sending of the insurance certificate could be construed as an “implied promise” to obtain coverage, The Court based its rejection on the undisputed facts that Dipika did not request coverage and that the Roblin Agency knew nothing about Dipika’s relationship with either the Masons, the project at the Masonic Temple, or any resulting obligation to procure insurance for the project.
The Chief Justice dissents in part to the majority opinion
While six justices of the SJC concurred in the decisions in favor of Union, Chief Justice Kimberly S. Budd dissented.
The Chief Justice agreed with the majority that there was no legal liability of any nature against the Roblin Agency.
In a nine-page dissent, she argued with the majority’s conclusion that the commercial general liability policy issued by Union to Dipika only applied to the Super 8 Motel in Weymouth.
The Chief Justice based her argument on the fact that the policy terminology the majority had focused on, such as “DBA Super 8,” the description of Dipika’s business as a “Motel” and the policy premium being calculated upon the gross sales of the Super 8 Motel in Weymouth did not define coverage. She argued that the DBA Super 8 language only meant what it said, “doing business as Super 8.” The phrase, to her, said nothing about the scope of the coverage under the policy. Likewise, the standalone description of Dipika’s business as a “Motel,” did not define the scope of the policy’s coverage. None of these descriptions appeared in the policy’s insuring agreements or exclusions. Thus, according to the Chief Justice, for these descriptions to have an effect on coverage, they would need to accompany or be referenced by language delineating the scope of coverage.
Her dissent ended with the statement:
Because the policy nowhere expressly provides that coverage is limited to operations associated with Dipika’s Super 8 motel, this interpretation cannot form the basis of summary judgment in favor of Union…. I dissent.
The final ruling in the SJC’s 6-1 decision
“Conclusion. Summary judgment properly entered in favor of Union and Roblin…The judgments are therefore affirmed…”
Notwithstanding the Chief Justice’s lengthy and well-reasoned dissent, the decision of the six other justices carried the day, and the Court’s final Conclusion stated:
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
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