Nextsun Energy Littleton, LLC v. Acadia Ins. Co.

494 F.Supp.3d 1

NEXTSUN ENERGY LITTLETON, LLC, Plaintiff,

v.ACADIA INSURANCE COMPANY, Defendant.

Civil Action No. 18-11180-FDS

United States District Court, D. Massachusetts.

Signed September 30, 2020

Steven J. Torres, Torres, Scammon & Day, LLP, Boston, MA, for Plaintiff.

Michael F. Aylward, William A. Schneider, Morrison Mahoney LLP, Boston, MA, for Defendant.

MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

SAYLOR, C.J.

This is an action to recover under an insurance policy. Jurisdiction is based on diversity of citizenship. Plaintiff NextSun Energy Littleton, LLC, is a company that operates solar panel arrays. A NextSun array experienced a fire on May 31, 2016, that damaged 88 solar panels. The Town of Littleton ordered that more than 11,000 of NextSun's undamaged solar panels be suspended from operation until they were thoroughly tested, inspected, and repaired where necessary. NextSun seeks to recover lost energy-generating income for the period of the mandated shutdown of all of its solar panels, pursuant to an insurance policy issued by defendant Acadia Insurance Company. Acadia maintains that the policy only covers the lost income from the 88 fire-damaged solar panels.

NextSun has brought this suit asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair and deceptive trade practices in violation of Mass. Gen. Laws ch. 93A and 176D. Acadia has moved for summary judgment on all counts. NextSun has opposed the motion and moved for partial summary judgment on its breach of contract claim. For the reasons set forth below, Acadia's motion will be granted in part and denied in part, and NextSun's motion will be granted.

I. Background

The following facts are as set forth in the record and are undisputed except as noted.

A. Factual Background

1. NextSun

NextSun Energy Littleton, LLC, is a Massachusetts company that operates solar panel arrays. (Pl. SMF ¶¶ 1-2). Jacob Laskin is its registered agent, sole member, and manager. (Def. Statement Concerning Diversity Jurisdiction).

NextSun owns and operates two rooftop solar panel arrays at Distribution Circle in Littleton, Massachusetts. (Pl. SMF ¶ 4). Array No. 1 has 5,742 panels, and Array No. 2 has 6,050 panels. (Id. ). NextSun sells the electricity generated by the solar panel arrays to the Town of Littleton's Electric Department. (Pl. Ex. 5, Lawler Dep. at 10-15; Pl. Ex. 20, MDD Loss Estimate; Pl. Ex. 21, MDD Revised Loss Estimate).

2. The Insurance Policy

From October 10, 2015, to October 10, 2016, NextSun was insured under a Commercial Inland Marine Insurance Policy issued by Acadia Insurance Company. (Def. SMF ¶ 3; Def. SMF Ex. 2, Policy).

Form IM 8060-07-11 of the policy is captioned "Renewable Energy Generating Equipment Coverage," and generally insures the risks of direct physical loss or damage to NextSun's solar panels. (Policy at 16, 20, 31). The policy also provides coverage for "Energy Generating Income," an optional coverage that NextSun purchased separately. (Policy at 17-18; Pl. SMF ¶ 39; Def. SMF ¶ 4).¹

This lawsuit arises from a dispute over the "Energy Generating Income" provision, which provides as follows:

When direct physical loss or damage caused by a covered peril occurs to "renewable energy generating equipment" at a location described on the "schedule of coverages," and that direct physical loss or damage causes an "interruption" of "your" "renewable energy generating equipment," "we" pay for the actual loss of surplus power income (including loss of credits and rebates) incurred during the "interruption period" applicable to the "renewable energy generating equipment."

(Policy at 17).

The "Energy Generating Income" provision contains an "Ordinance or Law" sub-section, which provides:

1) Coverage for Energy Generating Income is extended for the increased time of "interruption" caused by the enforcement of any ordinance, law, or decree that:

(a) regulates the construction, use, or repair of covered "renewable energy generating equipment"; or

(b) requires the demolition of covered "renewable energy generating equipment," in part or in whole, not damaged by a covered peril.

2) Coverage is not extended to include "interruption" caused by the enforcement of any ordinance, law, or decree that:

a) is not in force at the time of loss ....

(Id. ).

In addition, the policy contains an "Additional Time Exclusion" that limits Acadia's Energy Generating Income coverage, as follows:

"We" do not pay for any loss or additional expenses due to any increase in the ‘interruption period’ caused directly or indirectly by ...

a. Additional Time—Additional time that would be required to replace or repair any part of covered "renewable energy generating equipment" due to:

.... 4) improvements necessary to correct deficiencies of original construction, erection, or installation.

(Id. at 23-24).

The parties do not dispute that NextSun's solar panels are covered "renewable energy generating equipment" and that the fire is a "covered peril" that, in this case, caused "direct physical loss or damage" to the insured equipment. (Pl. SMF ¶¶ 43-44).

3. The Fire and Subsequent Action by the Town of Littleton

On May 31, 2016, a fire occurred on the roof of the NextSun facility at 1-3 Distribution Center Circle in Littleton. The fire damaged approximately 88 of the 6,050 solar panels in Array No. 2. (Def. SMF ¶¶ 8, 9, 21). The fire was confined to a limited area, called a "string," which is one section of connected solar panels. (Pl. Ex. 5, Lawler Dep. at 36-37; Pl. Ex. 7, Morehouse Dep. at 16-17). The fire caused no damage to the 5,742 solar panels within Array No. 1. (Def. SMF ¶ 9).

On June 1, 2016, officials from the Town of Littleton, including Bill Morehouse, the Wiring Inspector of the Littleton Building Department; Scott Wodzinski, the Littleton Fire Chief; and Nick Lawler, the Littleton Electric Light and Water Department ("LELWD") Assistant General Manager, came to the site to investigate the cause of the fire and meet with representatives of NextSun on site. (Pl. SMF ¶¶ 7-9).² As a result of that initial investigation and meeting, the LELWD ordered NextSun to halt all energy-generating activity on both arrays. (Id. ¶ 9). This is known as a "red-tag" order and it signals that the equipment may not be operated. (Lawler Dep. at 47-48, 62-64). Compliance with a red-tag order is mandatory, not discretionary. (Id. 62-64). The Fire Chief, Town Inspectors, and the LELWD all have the authority to issue such an order. (Id. ).

On June 1, Town officials and NextSun developed a preliminary plan for the testing and inspection steps that would need to be completed before the LELWD would remove the red-tag order from each array. (Pl. Ex. 4, June 1 and 9, 2016 Lawler E-mails). On June 9, 2016, the LELWD removed its red-tag order from Array No. 1 and permitted NextSun to resume energy-generating activity on that array. (Id. ; see also Pl. Ex. 3, NextSun's Answers to Acadia's Interrogatories ¶ 9).

The LELWD did not remove the red-tag order from Array No. 2 on June 9. Instead, it ordered that Array No. 2 undergo comprehensive testing, inspection, and repairs (if necessary) on all its panels and connectors before the red tag could be removed and the prohibition on energy-generating activity lifted. (Pl. SMF ¶¶ 12-13). Among other things, the LELWD required (1) notification from the Building Department that all the requirements of the Wiring Inspector had been satisfied, (2) notification from the Fire Chief that all his "issues had been resolved," (3) approval from the building owner to re-energize the array, and (4) assurances from NextSun that it had completed all the remedies required by the Fire and Building Departments and that the array was safe to re-energize. (Id. ; see also Pl. Ex. 4, June 9, 2016 Lawler E-mail).

Bill Morehouse, the Wiring Inspector, required NextSun to evaluate every single electrical connection, and replace faulty connections if necessary, before the panels in Array No. 2 could be re-energized. (Pl. SMF ¶ 15). According to him, he issued that order because he "was told that [the connectors] were the probable cause of the original fire ... so ... these connectors on the other parts of the roof were a major concern." (Pl. Ex. 7, Morehouse Dep. at 20-21). As the Wiring Inspector, he had the legal authority to order the suspension of power-generating activity. (Id. at 43-44). In a later letter, he summarized his actions as follows:

As [a] result of the fire on the Littleton Distribution Center and damage to the rooftop solar generating equipment I ordered all the panels, electrical connections and associated systems be tested and a full re-commissioning of the system and associated documentation to be provided to me before I would allow the red tag to be removed from the utility transformer. This transformer is the one which would provide service to the solar system and allow it to return to operation. I also noted that the panels that were to replace the ones damage[d] in the fire had to be up to current electrical codes.

(Def. Ex. 11, Mar. 7, 2017 Morehouse Letter).

Scott Wodzinski, the Fire Chief, required NextSun to repair every connector on the rooftop that had shown signs of "arcing and burn" before he would permit the resumption of energy-generating activities on Array No. 2. (Pl. SMF ¶ 14; Pl. Ex 6, Wodzinski Dep. at 28).³ Until those issues had been addressed, Wodzinski indicated he would assert his lawful authority as fire chief, pursuant to state fire regulations, to enforce the stoppage order prohibiting energy-generating activities at the array. (Pl. SMF ¶ 14; Wodzinski Dep. at 29-30).⁴

As part of the investigation of the fire, at least two outside vendors evaluated the NextSun site. Acadia hired Loss Solutions Group ("LSG"), an expert in electrical equipment with experience in solar panels, to assess the cause of loss and the likely cost of repair. (P...