No Chapter 93A Liability When Insurers Refuse Additional Insured Coverage to Each Other’s Insureds

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A recent decision of Judge Denise Casper of the United States District Court for Massachusetts dismissed all claims in a lawsuit seeking to hold two liability insurers responsible under G.L. c. 93A and c. 176D for not providing coverage as additional insureds to each other’s named insureds.

The plaintiff, Melanie Costa, had previously settled her wrongful death claims against two construction subcontractors, Maxim Crane Works and G&C Concrete Construction, for $12 million after her husband died in a 2019 construction accident at MIT. After settling, Costa sued Zurich American Insurance (Maxim’s insurer) and Hartford Accident and Indemnity Company (G&C’s insurer), claiming each insurer had violated Massachusetts’ consumer protection and unfair insurance practices statutes by failing to acknowledge additional insured obligations to the other’s named insured.

Costa alleged that under Walsh Brothers’ (the general contractor) subcontracts with Maxim and G&C, each subcontractor had agreed to provide liability insurance protecting other subcontractors. Based on these contract provisions, Costa claimed Zurich and Hartford breached their statutory duties by not stepping forward to provide coverage to G&C and Maxim respectively when her husband’s death occurred.

The court rejected Costa’s interpretation of the subcontracts’ insurance requirements. Judge Casper found that neither subcontract required one subcontractor to name another subcontractor as an additional insured. Without such a contractual requirement, neither Zurich nor Hartford had any obligation under their respective policies to provide additional insured coverage to the other’s named insured.

The Fatal Accident and Ensuing Litigation

On February 28, 2019, Anthony Costa Jr. suffered fatal injuries at an MIT construction site in Cambridge when approximately 1,500 pounds of steel screw jacks fell on him from four stories above. At the time, Costa worked for Walsh Brothers, Inc., the general contractor on MIT’s new undergraduate dormitory project.

The accident occurred during what OSHA later termed a prohibited “double pick” crane operation involving two different types of construction materials – stacked perry decking and screw jacks. G&C Concrete had rigged the materials for lifting by a tower crane operated by Maxim Crane Works. The crane, which had a 197-foot jib, was operated by Adam Anderson, who OSHA later determined was an uncertified apprentice working without required supervision.

According to court documents, Anderson, from his position in the crane’s cab, could see that the two different types of construction materials were rigged side-by-side. After lifting the materials to the fourth floor, G&C’s employees unhooked the screw jacks while the perry decking remained attached to the crane’s hook. When Anderson then attempted to lift the perry decking alone, the load’s movement toward center pushed the unsecured screw jacks over the building’s edge, striking Costa and two other workers below.

The Path to Settlement

On February 28, 2020, exactly one year after her husband’s death, Melanie Costa filed suit in Middlesex Superior Court against both Maxim and G&C alleging negligence, gross negligence, and wrongful death claims. Despite the severity of the accident and the available evidence regarding both defendants’ roles, settlement negotiations progressed slowly.

The first meaningful settlement offer did not come until February 2022, when Zurich and Hartford collectively offered $1 million. At a June 1, 2022 mediation, the insurers increased their combined offer to $2.4 million. Costa rejected both offers.

At a second mediation session on September 20, 2022, the parties finally made substantial progress, with the defendants extending a global offer of $11.8 million. Within days, this offer increased to $12 million, with Maxim’s portion being $7 million and G&C’s portion being $5 million. Soon after Costa and Maxim agreed to a settlement number of $7.25 million reserving her rights against Maxim’s insurer for unfair claim practices. Costa also demanded from G&C’s insurers, Zurich’s $5 miillion primary policy limit and the $10 million excess limit from National Fire.

Costa subsequently filed suit against Harford and Zurich, contending their handling of her claim violated Massachusetts consumer protection laws. She specifically alleged that each insurer had additional insured obligations to the other’s named insured that they wrongfully ignored during the claims process.

The Insurance Coverage Dispute

The core of Costa’s case against the insurers rested on her interpretation of the subcontracts Walsh Brothers had with Maxim and G&C and the insurance policies issued by Zurich and Hartford. According to Costa, both subcontractors had agreed to obtain liability insurance protecting other subcontractors on the MIT project, creating reciprocal additional insured obligations between their insurers.

The Insurance Policies and Subcontracts

Zurich insured Maxim under a commercial general liability policy that included additional insured coverage for “any organization whom [Maxim is] required to add as an additional insured under a written contract.” Similarly, Hartford’s policy to G&C provided additional insured status to any “organization(s) [that] are an additional insured when you [G&C] have agreed, in a written contract…that such organization be added as an additional insured.”

Both subcontracts with Walsh Brothers contained identical insurance requirements in Section 13.1, requiring each subcontractor to “purchase and maintain insurance of the following types of coverage and limits of liability.” The contracts’ Exhibit 4 further specified that “All Subcontractors shall purchase and maintain…insurance as will protect the General Contractor, Subcontractors, Owner, Owners Representative and all affiliated entities” from various claims including bodily injury.

Costa’s Statutory Claims

Based on these provisions, Costa filed suit alleging Zurich and Hartford violated G.L. c. 93A and c. 176D by failing to acknowledge their respective additional insured obligations. She claimed each insurer had unfairly prolonged settlement by ignoring duties to provide coverage to both defendants in her underlying wrongful death action.

To support her position, Costa pointed to certificates of insurance issued to Walsh Brothers stating that “any entity required by contract or agreement [is] additional insured.” She argued these certificates confirmed the insurers’ understanding that their policies covered other subcontractors as additional insureds.

Costa also relied on the subcontracts’ use of the plural term “Subcontractors” in describing who must be protected by the required insurance. She contended this language demonstrated Walsh Brothers’ intent to have each subcontractor’s insurance protect all subcontractors on the project.

Additionally, Costa alleged Zurich breached a settlement agreement regarding her motion for sanctions in the underlying case. This claim arose from representations made at a June 30, 2023 court hearing that allegedly violated the terms under which Costa had agreed to settle her claims against Maxim.

The Court’s Analysis and Rulings

In dismissing all of Costa’s claims, Judge Casper methodically addressed each of her legal theories, starting with the foundational issue of whether Costa had standing to bring claims under c. 93A.

Standing to Sue Insurers

The court first rejected Zurich’s argument that Costa lacked standing because she had no contractual relationship with either insurer. Judge Casper noted that claims under c. 93A do not require contractual privity between plaintiff and defendant. Instead, any person whose rights are affected by an insurer’s violation of c. 176D may bring an action under c. 93A.

Contract Interpretation

The court’s central analysis focused on whether the Walsh Brothers’ subcontracts actually required Maxim and G&C to provide insurance coverage for each other. This question proved dispositive because both insurers’ additional insured provisions only applied when their named insureds had agreed by contract to add another party as an additional insured.

Judge Casper found the subcontracts’ use of “Subcontractors” was a defined term that did not create mutual insurance obligations. In the Maxim subcontract, “Subcontractor” meant only AmQuip Crane Rental LLC and Maxim Crane Works. Similarly, in the G&C subcontract, the term referred only to G&C Concrete Construction, Inc.

The court also dismissed Costa’s reliance on the certificates of insurance. Judge Casper noted these certificates explicitly stated they were “issued as a matter of information only” and did not “amend, extend or alter the coverage afforded by the policies.” The certificates thus could not expand coverage beyond what the underlying insurance policies and subcontracts required.

Chapter 93A Claims

Having found no contractual requirement for either subcontractor to insure the other, the court concluded neither Zurich nor Hartford had any obligation to provide additional insured coverage. Without such an obligation, their alleged failure to acknowledge additional insured status could not constitute an unfair insurance practice under c. 176D or c. 93A.

Judge Casper cited Massachusetts precedent holding that “recovery under Chapter 93A for a violation of Chapter 176D is unlikely when an insurance company in good faith denies a claim of coverage on the basis of a plausible interpretation of its insurance policy.” Here, the insurers’ interpretation was not only plausible but correct under the court’s analysis.

Breach of Contract Claims

Finally, the court dismissed Costa’s claims regarding the alleged settlement agreement breach. Judge Casper found this claim essentially duplicated allegations previously rejected in related litigation. She also noted Costa failed to allege facts showing Zurich was a party to the settlement agreement or that the agreement included any valid consideration flowing to or from Zurich.

Lessons from The Costa Decision

The Costa decision reaffirms several important aspects of Massachusetts insurance law regarding additional insured coverage and unfair insurance practice claims.

Additional Insured Status Requires Clear Contractual Obligation

The court emphasized that additional insured coverage only exists when specifically required by contract. Where subcontracts carefully define terms like “Subcontractor,” those definitions control which entities must be added as additional insureds. General references to protecting “Subcontractors” will not create additional insured obligations beyond the contract’s defined terms.

Certificates of Insurance Have Limited Legal Effect

Judge Casper reaffirmed that certificates of insurance serve only as informational documents. They cannot create coverage obligations beyond those contained in the actual insurance policies and underlying contracts. The court cited with approval the principle that certificates are “simply…form[s] completed by an insurance broker or agent at the request of a policyholder to document the fact that an insurance policy has been written.” See Agency Checklists’ article of  February 20, 2024, “What You Need To Know About The Massachusetts Insurance Certificate Law.”

CHAPTER 93A CLAIMS REQUIRE MORE THAN COVERAGE DISPUTES

While third-party claimants can bring c. 93A actions against insurers without contractual privity, they must still show the insurer violated a duty owed under the policy or law. An insurer’s good faith denial of coverage based on a correct policy interpretation cannot support a c. 93A claim, even if that denial delays settlement of the underlying case.

CONTRACT FORMATION BASICS STILL MATTER

The court’s dismissal of Costa’s settlement agreement claims demonstrates that basic contract principles remain important in insurance disputes. Without showing an insurer was party to an agreement or provided consideration, a plaintiff cannot maintain claims for breach of contract or violation of the implied covenant of good faith and fair dealing.