Capitol Specialty Ins. Corp. v. Dello Russo Enters.

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CAPITOL SPECIALTY INSURANCE CORPORATION, Plaintiff, v. DELLO RUSSO ENTERPRISES, LLC, and MICHAEL DELLO RUSSO, Defendants.

Civil Action No. 21-10939-FDS

United States District Court, D. Massachusetts

January 24, 2023

MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

F Dennis Saylor IV Chief Judge, United States District Court

This is an insurance-coverage dispute. The central question is whether an insurer is obligated to defend and indemnify a contractor accused of negligently causing the collapse of a four-story brick building during renovations. Jurisdiction is based on diversity of citizenship.

Defendants Dello Russo Enterprises, LLC, and Michael Dello Russo are insured by plaintiff Capitol Specialty Insurance Corporation. Capitol seeks a declaratory judgment stating that it has no duty to defend or indemnify defendants in an action pending against them in Massachusetts Superior Court for property-damage claims arising out of a building collapse. Defendants have counterclaimed, seeking a declaration that Capitol has such a duty to defend and indemnify. Capitol is defending in the underlying matter subject to a reservation of rights.

The parties have cross-moved for partial summary judgment on the issue of Capitol's duty to defend. Capitol has also moved for summary judgment on its duty to indemnify. For the following reasons, the Court concludes that Capitol has a duty to defend, and that the issue of indemnity is not ripe for resolution. Accordingly defendants' motion for partial summary judgment will be granted, and Capitol's motion for summary judgment will be denied without prejudice.

I. Background

A. Factual Background

The following facts are as set forth in the record and appear to be undisputed.

1. The Parties

Dello Russo Enterprises, LLC is a limited liability company located in Boston, Massachusetts. All members of the LLC are residents of Massachusetts.

Michael Dello Russo is a Massachusetts resident and home-improvement contractor. (See Maselek Aff. Ex. C (“Home Improvement Contract”) at 1).

Capitol Specialty Insurance Corporation is a Wisconsin insurance corporation. From November 1, 2018, through November 1, 2019, Capitol insured Dello Russo Enterprises and Michael Dello Russo (collectively, “Dello Russo”) under a commercial general liability policy. (See Compl. Ex. B (“Insurance Policy”)).^[1]

2. The Insurance Policy

Under the policy, Capitol is obligated to pay “those sums that [Dello Russo] becomes legally obligated to pay as damages because of . . . ‘property damage' to which this insurance applies.” (Id. at 20).^[2] The policy also provides that Capitol has a duty to defend Dello Russo “against any ‘suit' seeking those damages.” (Id.). “Property damage” is defined in the policy as follows:

17. “Property damage” means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.

(Id. at 34). The policy applies to “property damage” only if it is caused by an “occurrence,” which the policy defines as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (Id. at 20, 34).

In addition, as relevant here, the policy excludes coverage for “property damage” to “[t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage' arises out of those operations,” or to “[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work' was incorrectly performed on it.” (Id. at 23-24). Under the policy, “your work” means “[w]ork or operations performed by you or on your behalf,” and “[m]aterials, parts or equipment furnished in connection with such work or operations.” (Id. at 35).

3. The Underlying Claims

On February 10, 2021, Certain Underwriters at Lloyd's, London filed a complaint for money damages in Massachusetts Superior Court, as subrogees of Peta-Gaye and Michael Prinn. The complaint alleges that a building owned by the Prinns had collapsed as a result of the actions of one or more of the underlying defendants, including Dello Russo.^[3]The following facts appear as alleged in that complaint in the underlying state action (the “Underlying Complaint”):

14. At all times relevant to this action, the Prinns owned the real property and improvements located at 279 North Street, Boston, Massachusetts 02109 (the “Property”). The improvements on the Property included a four-story brick masonry building built in or prior to 1900 (the “Building”).

15. On March 16, 2018, the Prinns entered a contract with Dello Russo....

16. Pursuant to the Contract, Dello Russo agreed to provide general contractor services for extensive remodeling and renovation of the Building.^[4] At all times relevant to this Complaint, John Does 1 through 5 were employees of or independent contractors hired by and working on behalf of Dello Russo.

17. Choo [& Company] designed and prepared architectural and structural construction documents (the “Plans”). The Plans called for, among other things, the removal of all or a portion of the roof framing, floor framing, partition walls and structural load-bearing walls.

18. Upon information and belief, Dello Russo contracted with Isaac Blair to provide shoring services during the demolition and renovation of the Building. At all times relevant to this Complaint, John Does 6 through 10 were employees of or independent contractors hired by and working on behalf of Isaac Blair.

19. Beginning in or around March 2019, the construction project progressed to a second phase of demolition, which required the removal of all interior finishes and non-structural partition walls, removal of a stairway and the roof structure over the stairway from the first to second floors of the Building, and removal of a bathroom and roof immediately adjacent to the removed stairway.

20. The structural support for the roof extended from the south wall of the Building to an adjacent building.

21. As of the date of the events described herein, the foregoing demolition was complete. Demolition and replacement of flooring in accordance with the Choo Plans was underway, and at all times relevant to this action, the subfloor planks had been removed on the second, third and fourth floors of the Building.

22. The Choo Plans further called for the removal of certain structural load-bearing walls, including a portion of an exterior brick and masonry wall on the south side of the Building (the “Masonry Wall”). At all times relevant to this action, that portion of the Masonry Wall identified for demolition within the Choo Plans had been removed.

23. Upon information and belief, Dello Russo, Isaac Blair or John Does 1 through 10, working on behalf and at the direction of their respective employers or pursuant to engagement as independent contractors by Dello Russo or Isaac Blair, performed the demolition work herein described, including removal of a portion of the Masonry Wall.

24. Upon information and belief, John Does 5 through 10 designed and installed shoring to stabilize the Building as demolition progressed.

25. The components of the Building earmarked for demolition or removal provided out of plane lateral bracing to certain walls, including the Masonry Wall. Removing the components in the order and manner in which they were, in fact, removed reduced the structural integrity of the Building.

26. The shoring of the remaining components of the Building to avoid collapse was incomplete or improperly installed.

27. On the morning of June 28, 2019, one or more of John Does 1 through 5 arrived at the Building and discovered vertical cracks in the bricks of which the Masonry Wall was comprised. One or more of John Does 1 through 5 vacated the Building and notified Dello Russo.

28. Throughout the day on June 28, 2019, the cracks in the Masonry Wall grew larger.

29. During the evening of June 28, 2019 or early morning hours of June 29, 2019, the Masonry Wall failed, causing some or all of the Building to suddenly collapse (the “Collapse”).

30. On July 2, 2019, the City of Boston determined the Building was dangerous and that salvage of undamaged portions was not feasible. In accordance with the determination, the Building was demolished.

31. The demolition of components of the Building required for structural integrity and the absence of sufficient or proper shoring caused the Collapse.

32. The demolition of the components of the Building as herein described either (i) comported with the demolition as directed by the Choo Plans and yet still failed to comply with accepted practices, industry standards, applicable ordinances, law, rules or regulations or in such a manner as to create a reasonably foreseeable risk of collapse of the Building or (ii) alternatively, diverged from the Choo Plans in a manner that failed to comply [with] accepted practices, industry standards, applicable ordinances, law, rules or regulations or that otherwise created a reasonably foreseeable risk of collapse of the Building.

33. As a result of the actions of one or more of Choo, Dello Russo, Isaac Blair or John Does 1 through 10, the Building collapsed, and the Collapse rendered the Building unsalvageable.

(Underlying Complaint at 4-7).^[5]The Underlying Complaint further alleges that as a result of the building's collapse “the Prinns incurred expenses or losses including both property damage and loss of business...