Admiral Ins. Co. v. Tocci Bldg. Corp.

594 F.Supp.3d 201

ADMIRAL INSURANCE COMPANY, Plaintiff,

v.TOCCI BUILDING CORPORATION, et al., Defendants.

Civil Action No. 21-10388-PBS

United States District Court, D. Massachusetts.

Filed March 28, 2022

Eric B. Hermanson, Austin D. Moody, White & Williams LLP, Boston, MA, for Plaintiff.

Jeffrey J. Vita, Kerianne E. Kane, Saxe Doernberger & Vita, P.C., Trumbull, CT, for Defendants.

MEMORANDUM AND ORDER

Saris, D.J.

INTRODUCTION

This case arises from an insurance coverage dispute. Between December 27, 2013, and October 31, 2016, defendants Tocci Building Corporation ("Tocci Building"), Tocci Residential LLC ("Tocci Residential"), and John L. Tocci, Sr. ("John Tocci") (collectively, "Tocci" or "Defendant") entered into independent agreements with Toll JM EM Residential Urban Renewal LLC ("Toll"), Connell Hospitality LLC ("Connell"), and Boston Harbor Industrial Development LLC ("BHID") to serve as the construction manager and/or general contractor for three separate construction projects (collectively, "Projects"). In 2016, 2017, and 2020, respectively, Toll filed suit against Tocci in New Jersey Superior Court ("Toll Action"), Connell filed a counterclaim against Tocci in the parties’ arbitration proceeding ("Connell Counterclaim"), and BHID filed a counterclaim against Tocci ("BHID Counterclaim") in response to a complaint Tocci filed. Plaintiff Admiral Insurance Company ("Admiral") issued annual policies of primary commercial general liability insurance ("Policies") to Tocci between 2012 and 2020. In January 2020, Tocci tendered the Toll Action, Connell Counterclaim, and BHID Counterclaim to Admiral, seeking defense and indemnity coverage from Admiral.

Admiral has moved for partial summary judgment as to Count I, seeking declaratory judgment that Admiral is not obligated to defend Defendants in the Toll Action. Defendant brought a cross motion for partial summary judgment seeking declaratory judgment that Admiral is obligated to defend and indemnify Defendant in the Toll Action.

Concluding that Admiral has no duty to defend the Toll Action, the Court ALLOWS Admiral's motion for partial summary judgment (Dkt. 10) and DENIES Tocci's motion for partial summary judgment (Dkt. 88).

FACTUAL BACKGROUND

I. The Parties

Tocci Building is a construction company incorporated and headquartered in Massachusetts. It is the first named insured under each of the Policies, with a "Mailing Address" of 660 Main Street, Woburn, Massachusetts. The Policy applications refer to Tocci as "operating in the Northeast," and refer to "various job sites" in Connecticut, New Hampshire, New Jersey, New York, and Georgia.

Tocci Residential is a Massachusetts-based limited liability company, with its principal place of business in Woburn, Massachusetts.

John Tocci is an individual who resides in Lexington, Massachusetts.

Admiral is an insurance company incorporated in Delaware with its corporate headquarters in New Jersey. Between October 2012 and October 2020, Admiral issued primary commercial general liability insurance policies to Tocci.

II. The Toll Project and Toll Action

In December 2013, Toll and Tocci entered into a Construction Management Agreement. In that agreement, Tocci agreed to provide Toll with pre-construction and construction services for its apartment complex project in East Brunswick, New Jersey (the "Project"). As construction manager, Tocci was responsible for managing all aspects of Project construction, including hiring and overseeing various subcontractors to perform work on the Project.

On March 2, 2016, Toll terminated Tocci, citing "countless delays to the Project schedule, each of which was caused [or] exacerbated by [Tocci's] failure to [properly] prosecute and manage the work." Dkt. 12 ¶¶ 26, 28. On July 21, 2016, Toll filed suit against Tocci in New Jersey Superior Court.

The Toll Amended Complaint laid out a series of deficient work and supervision claims. Toll alleged "significant workmanship issues, including, but not limited to, the Construction Manager's failure to properly install the building envelope due to deficient installation of the primary weather resistive barrier (Zip System) and deficient installation and sealing of the windows in all five buildings constructed at the time." Dkt. 12 Ex. B ¶ 23. Toll further alleged that Tocci missed permitting deadlines, failed to install required perimeter drains in basement areas, and failed to backfill basement walls with proper structural bracing, leading to slab settlement. Toll issued Stop Work Orders for portions of two of the buildings "due to settlement and damaged underground utilities." Id. ¶ 25. Tocci allegedly failed to install sprinklers in the attic areas and "failed to provide Toll with the necessary information to obtain a full building permit in a timely manner." Id. ¶¶ 26, 27. Toll also claimed that Tocci breached its obligation to review documents and comply with building codes, failed to deliver a qualified team capable of managing the Project, and failed to properly manage the work to ensure that it was free of defects. Id. ¶¶ 28, 29.

Toll cited numerous alleged failures to keep the Project free from defects: [1] the wire mesh was not installed correctly in concrete slabs; [2] secondary electrical conduit discharged water onto electrical equipment; [3] a unit balcony membrane was never installed; [4] RC channels were installed upside down; [5] a shaft was incorrectly installed in Building 1; [6] a duct was not installed in Building 2; and [7] temporary weather protection was not installed. Toll alleged that, after failing to comply with a Stop Work Order, Tocci "began to demobilize and abandon the Project in early February 2016." Id. ¶ 35.

III. Coverage Communications between Admiral and Tocci

Though Toll filed its initial complaint in 2016, Tocci did not notify Admiral of the pending lawsuit until January 9, 2020. Around February 13, 2020, a Tocci employee provided a copy of Toll's initial complaint and referred to two failed mediations Tocci participated in for the Toll Action.

On March 17, 2020, Admiral denied coverage for the Toll Action, reasoning that the underlying lawsuit "does not include any allegations that Tocci is liable for property damage caused by an occurrence, as those terms are defined in the policy." Dkt. 15-7, at 6. The letter continued, "even if the Lawsuit had alleged that Tocci was liable for property damage caused by an occurrence, the exclusion ‘Damage to Property’ bars coverage for property damage arising out of Tocci's operations or ‘your work.’ " Id.

Tocci's previous coverage counsel responded on May 7, 2020. Tocci's counsel wrote,

although Toll's Complaint does not specifically allege resultant property damage, during the deposition of Toll's corporate designee on damages, Eric Cohen, there was testimony that alleged defective workmanship of Tocci's subcontractors caused resultant property damage, which is an element of damages that Toll is seeking from Tocci in the Lawsuit.

Dkt. 15-18 at 3. Tocci's counsel's letter included excerpts from the deposition, which Tocci's counsel characterized as showing the following additional damage: (1) "a roof leak [that] resulted in damage to sheetrock in Unit 3302 of Building 3 on the Project"; (2) "[i]nadequate sheathing [that] resulted in water getting into the building and led to mold formation that required remediation"; (3) "[s]oil settlement [that] resulted in damage to a pipe and the pipe was replaced"; and (4) "[s]oil settlement [that] resulted in damage to a concrete slab and wood framing." Id.

Admiral and Tocci exchanged a series of letters pertaining to another insurer's coverage of one of Tocci's subcontractors, culminating with a comprehensive letter on January 8, 2021, in which Admiral summarized the disagreement, agreed to provisionally defend Tocci, and informed Tocci it would seek a court order that it had no duty to defend and would seek recoupment of defense costs.

LEGAL STANDARD

Summary judgment is appropriate when there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine issue exists where the evidence "is such that a reasonable jury could resolve the point in the favor of the non-moving party." Rivera-Rivera v. Medina & Medina, Inc., 898 F.3d 77, 87 (1st Cir. 2018) (quoting Cherkaoui v. City of Quincy, 877 F.3d 14, 23-24 (1st Cir. 2017) ). A material fact is one with the "potential of changing a case's outcome." Doe v. Trs. of Bos. Coll., 892 F.3d 67, 79 (1st Cir. 2018). "The court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in [its] favor." Carlson v. Univ. of New Eng., 899 F.3d 36, 43 (1st Cir. 2018). When the parties cross-move for summary judgment, the court must evaluate each motion "separately, drawing inferences against each movant in turn." Lawless v. Steward Health Care Sys., LLC, 894 F.3d 9, 21 (1st Cir. 2018) (quoting EEOC v. Steamship Clerks Union, 48 F.3d 594, 603 n.8 (1st Cir. 1995) ).

DISCUSSION

I. Choice of Law

As an initial matter, the parties strongly dispute which state's law should apply. Admiral argues that the law of Massachusetts should govern, while Tocci contends that the Court should apply New Jersey law.

A. An Actual Conflict of Substantive Law Exists

When sitting in diversity, the Court must use the choice of law principles of the forum state. See Reicher v. Berkshire Life Ins. Co. of Am., 360 F.3d 1, 4 (1st Cir. 2004). The threshold question in the Court's choice of law analysis is whether an actual conflict of substantive law exists between the possible jurisdictions. See id.

One of the relevant substantive issues is whether defective workmanship constitutes an occurrence under the policies. Accordingly, this Court must determine whether there is an actual conflict between what Massachusetts and New Jersey consider to be an occurrence. See id. New Jersey insurance law recognizes faulty...