BOSTON — In a multi-million-dollar insurance dispute, a Suffolk Superior Court Business Litigation Session judge has reinforced the long-standing principle that when parties disagree on the amount of a property loss, they must complete a statutory reference proceeding before they can ask a court to rule on coverage liability. The decision stays a lawsuit brought by a scrap metal company against its insurer over damages from a catastrophic explosion, ordering the parties back to the appraisal process to value the loss under two competing theories: repair and replacement.
The ruling, in Joseph Freedman Co., Inc. v. The Ohio Casualty Insurance Company, Civil Action No. 2484CV03205-BLS2, serves as a significant reminder for Massachusetts insurance professionals that the reference process mandated by M.G.L. c. 175, § 99 is a formidable “condition precedent to any right of action.” The court found that even a fundamental disagreement over the nature of the loss—whether a demolished building could have been repaired or must be replaced—does not allow an insured to bypass the mandatory valuation process.
The Loss and the Policy
The case arises from a “sonic dust metal explosion” on April 25, 2023, at the Joseph Freedman Co., Inc. (“Freedman”) facility at 40, 58-60 Albany Street in Springfield. The blast caused severe damage to the 30,000-square-foot structure, causing walls to bulge, breaking windows and doors, and dislodging the roof from its supports. Following the event, the City of Springfield’s Building Department inspected the property, deemed it damaged “beyond repair” and an “unsafe structure,” and ordered it to be demolished “forthwith as an emergency to protect the public.” Freedman complied with the city’s directive and the facility was razed.
Freedman was insured by The Ohio Casualty Insurance Company (“Ohio Casualty”), a Liberty Mutual subsidiary, under an all-risk commercial property policy (No. BKO (23) 54 27 51 54). The policy covered direct physical loss to the building and personal property, as well as lost business income and extra expenses.
The policy contained two critical provisions at the center of the dispute:
Loss Payment Options: In the event of a covered loss, the policy gave Ohio Casualty the option to “(1) Pay the value of lost or damaged property; (2) Pay the cost of repairing or replacing the lost or damaged property…; or (4) Repair, rebuild or replace the property with other property of like kind or quality.”
Reference Clause: Mirroring state law, the policy mandated that if the parties “fail…to agree as to the amount of loss,” the amount “shall be referred to three disinterested men” whose award “shall be conclusive and final upon the parties as to the amount of loss or damage.” It explicitly stated this reference “shall be a condition precedent to any right of action in law or equity to recover for such loss.”
The Dispute: A $13 Million Difference
The disagreement between the insurer and its insured was stark. Freedman, viewing the government-ordered demolition as the final word on the building’s condition, submitted proofs of loss seeking the full replacement value, which it estimated at approximately $14.6 million.
Ohio Casualty, however, maintained its own engineering reports showed the building could have been repaired prior to its demolition. It provided Freedman with a repair cost estimate of $1,646,928.61 and issued payment based on that figure’s actual cash value. The insurer simultaneously challenged the City of Springfield’s demolition order in separate court actions.
In April 2024, after Ohio Casualty rejected Freedman’s replacement cost valuation, the parties initially agreed to submit their dispute to a reference proceeding. However, Freedman later withdrew, arguing that the fundamental disagreement over repair versus replacement was a coverage issue, not a valuation dispute, making reference inappropriate. Freedman then filed its suit for declaratory judgment, breach of contract, and violation of G.L. c. 93A.
The Arguments: Coverage vs. Quantum
Ohio Casualty moved to stay or dismiss the lawsuit, arguing it was premature. Its position was straightforward: the policy and Massachusetts law are unmistakable that reference must be completed before any lawsuit can proceed when there is a dispute over the amount of loss. Ohio Casualty contended that disagreements clearly existed over both the repair and replacement values. In a letter to Freedman’s counsel, Ohio Casualty’s attorney stated their view of the proper legal sequence:
“We understand that Freedman disputes Ohio Casualty’s coverage position under the Policy that the building could have been repaired. However, this coverage dispute and Freedman’s coverage arguments will be determined by a Court at a later point after the Reference has been completed.”
Freedman countered that Ohio Casualty was attempting to force a “wasteful and inefficient” process to value something—a repair to a non-existent building—that had no relevance to its loss. The company argued that the core issue was one of coverage—whether the policy required payment for repair or replacement—and that no true “amount of loss” dispute could exist until that predicate question was answered. In its opposition, Freedman’s counsel used a memorable analogy to no avail:
“The parties here are valuing puppies and pigs. Ohio Casualty is simply putting lipstick on the pig. At base, the pig, while perhaps more appealing, is still not a puppy, and this dispute, while broken down to its cost elements, remains a coverage dispute.”
The Court’s Decision
In her July 2025 decision, Judge Debra A. Squires-Lee sided with the insurer on the procedural question, allowing the motion to stay the lawsuit and compelling the parties to complete the reference.
The court flatly rejected Freedman’s argument that there was no dispute over the “amount of loss”. Judge Squires-Lee wrote, “While the parties contest the proper measure of the loss under the Policy – i.e., replacement value vs. repair value – they also plainly disagree as to the amount of loss under either metric.” She noted that Ohio Casualty disputed Freedman’s $14 million replacement valuation while Freedman never stipulated to the insurer’s $1.6 million repair estimate.
Crucially, the decision holds that a pending coverage dispute is not grounds to bypass the reference requirement. The court pointed out that the statute anticipates this exact scenario.
“Indeed, the statute explicitly contemplates that disputes regarding coverage will be adjudicated after a reference panel has determined the quantum of loss at issue… That potential eventuality does not excuse the contractual requirement that there be a reference before there be a lawsuit.”
The court was also unpersuaded by the argument that valuing both metrics would be inefficient, stating that the two awards could “facilitate settlement by informing ‘the parties [of] how much money is at stake.'” The judge concluded that the Legislature has prescribed a specific order of events for over 150 years, and the court had “no authority to invent” an exception.
The matter is now stayed pending the completion of the reference, where the panel has been ordered to determine “awards as to both the replacement value and the repair value of the loss at issue… unless the Parties otherwise stipulate to any such amount(s).”
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.
Connect with me directly, by calling me at 617-598-3801.
