The 285 Lynn Shore Drive Condo. Tr. v. Seneca Ins. Co.

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THE 285 LYNN SHORE DRIVE CONDOMINIUM TRUST, Plaintiff, v. SENECA INSURANCE COMPANY and ENGLE MARTIN &ASSOCIATES, Defendants.

No. 1:24-cv-10049-JEK

United States District Court, D. Massachusetts

July 18, 2024

MEMORANDUM AND ORDER ON SENECA INSURANCE COMPANY'S MOTION TO DISMISS COUNT I OF THE COMPLAINT OR ALTERNATIVELY TO COMPEL APPRAISAL

JULIA E. KOBICK, UNITED STATES DISTRICT JUDGE

This insurance dispute arises from damage caused by the bursting of frozen water pipes at a residential property in Lynn Massachusetts. The 285 Lynn Shore Drive Condominium Trust sued Seneca Insurance Company and its adjuster, Engle Martin & Associates, alleging that Seneca breached the operative insurance policy and that both defendants engaged in unfair trade practices under M.G.L. c. 93A and 176D by improperly undervaluing, and inadequately compensating for, the property's extensive water damage. Pending before the Court is Seneca's partial motion to dismiss or alternatively to compel appraisal pursuant to the parties' insurance policy and M.G.L. c. 175, § 99. Seneca contends that the Condominium Trust failed to comply with a condition precedent to this lawsuit-namely, that it participate with Seneca in the “referral” or “appraisal” process outlined in the insurance policy and required by Section 99, whereby an objective panel of referees resolves the parties' dispute over the amount of the loss. Concluding that appraisal is a condition precedent to litigation required both by Section 99 and the governing insurance policy, the Court will grant Seneca's motion to compel appraisal.

BACKGROUND

Seneca's motion, styled as a partial motion to dismiss or alternatively to compel appraisal, was filed two weeks after Seneca filed its answer. ECF 4, 7-8. The Court thus alerted the parties that it would treat Seneca's motion as a partial motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) or, in the alternative, a motion to compel appraisal. ECF 9 (citing Villeneuve v Avon Prod., Inc., 919 F.3d 40, 49 (1st Cir. 2019) (when a defendant files a Rule 12(b) motion after filing its answer to the plaintiff's complaint, the court should “trea[t] the motion as a Rule 12(c) motion”). This “does not affect [the Court's] analysis inasmuch as the two motions are ordinarily accorded much the same treatment.” Aponte-Torres v. Univ. of Puerto Rico, 445 F.3d 50, 54 (1st Cir. 2006). In considering a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), the Court accepts as true all well pleaded facts in the complaint. See Doe v. Brown Univ., 896 F.3d 127, 130 (1st Cir. 2018). Where appropriate, the Court also “‘supplement[s] those facts by reference to documents incorporated in the pleadings.'” Kando v. R.I. State Bd. of Elections, 880 F.3d 53, 56 (1st Cir. 2018) (quoting Jardm de las Catalinas Ltd. P'ship v. Joyner 766 F.3d 127, 130 (1st Cir. 2014)).

The property located at 285 Lynn Shore Drive in Lynn, Massachusetts, was originally built in 1893 as a hotel before it was converted into 82 residential units. ECF 1-1, ¶¶ 4-5. The Condominium Trust, which represents the owners of those units, purchased a Master Common and Property Insurance Policy for the building from a New York insurer, Seneca, effective October 10, 2022 through October 10, 2023. Id. ¶¶ 2, 6, 8-9. The policy insured the building against casualty losses, including, subject to certain exclusions, physical loss or damage to the property. Id. ¶ 8; ECF 8-1. Due to a cold snap in early February 2023, the property's pipes froze and then burst, causing water damage in 22 units and certain common areas. ECF 1-1, ¶¶ 10-13.

In response, the Condominium Trust claimed the loss with Seneca and hired JRM Restoration to remediate the damage. Id. ¶¶ 14, 16. The Condominium Trust also engaged a public adjuster, Robert Gillete, while Seneca retained its own adjuster, Engle Martin. Id. ¶¶ 3, 16, 19. Gillete estimated that the cost of rebuilding would be $3.4 million, whereas Engle Martin proposed an adjustment of $731,273.30 to rebuild the 22 affected units and associated common areas. Id. ¶¶ 24, 32.

The parties' disagreement about the amount of the loss and the scope of Seneca's liability is reflected in their correspondence in the summer and fall of 2023, attached as exhibits to the complaint. ECF 1-1, Exs. B-D. In July 2023, Seneca sent a letter to the Condominium Trust “find[ing] coverage for the repair of the freeze damage piping and resultant water damage” and estimating that “the undisputed replacement cost” of those repairs is $851,990.35. ECF 1-1, Ex. B, at 2. The letter denied coverage, however, for the mold remediation and the associated replacement costs because “the mold observed is unrelated and preexists this [February 2023] loss.” Id. at 1.

The Condominium Trust responded in October 2023 with a “Demand for Unfair and Deceptive Insurance Practices, M.G.L. c. 176D and G.L. c. 93A” letter claiming that Seneca and Engle Martin engaged in unfair and deceptive insurance claim settlement practices by, among other actions, “lowballing and stalling the rebuild” and unreasonably rejecting specific line items, including the replacement of doorknobs, hinges, millwork, door jambs, and baseboards. ECF 1-1, Ex. C, at 2-4. The letter also stated that the cost to rebuild is $3.3 million and that Seneca's adjustment of $700,000 “does not even pass the smell test it is so low” and “ignores certain necessary work in various of the damaged units and associated common areas.” Id. at 2, 4.

In November 2023, Seneca rejected those claims, replying that it “has . . . complied fully with its statutory and contractual obligations” by “conduct[ing] a reasonable investigation with reputable consultants and adjusters” and by “undertak[ing] to find a pathway for resolution and agreement concerning the insured's claimed losses.” ECF 1-1, Ex. D, at 1. Seneca's reply further explained that “the insurance policy provides a mechanism to resolve disputes concerning the amount of loss,” so if the Condominium Trust “disagrees with Seneca's adjustment of the loss, it is free to demand Appraisal, also known as Reference.” Id. at 5. In an appraisal or reference, a neutral panel of three referees resolves the parties' dispute over the amount of the loss. Id.

In December 2023, the Condominium Trust filed this action in Essex County Superior Court. The complaint asserts two claims: breach of contract against Seneca (Count I), ECF 1-1, ¶¶ 62-70, and violation of M.G.L. c. 93A and 176D against Seneca and Engle Martin (Count II), id. ¶¶ 71-80. The defendants timely removed the case to this Court, invoking diversity jurisdiction. ECF 1, ¶¶ 2-3. After the defendants filed their answer, Seneca moved to dismiss Count I pursuant to Federal Rule of Civil Procedure 12(b)(6) or alternatively to compel appraisal. ECF 7. The Court explained that it would treat Seneca's motion as a motion for judgment on the pleadings under Rule 12(c). ECF 9.

STANDARD OF REVIEW

“After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). A motion for judgment on the pleadings under Rule 12(c) “is treated much like a Rule 12(b)(6) motion to dismiss.” Perez-Acevedo v. Rivero-Cubano, 520 F.3d 26, 29 (1st Cir. 2008) (citing Curran v. Cousins, 509 F.3d 36, 43-44 (1st Cir. 2007)). Accordingly, “‘the court must view the facts contained in the pleadings in the light most favorable to the nonmovant and draw all reasonable inferences therefrom.'” Id. (quoting R.G. Fin. Corp. v. Vergara-Nunez, 446 F.3d 178, 182 (1st Cir. 2006)). “[T]o survive a 12(b)(6) motion (and, by extension, a Rule 12(c) motion) a complaint must contain factual allegations that ‘raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true.'” Id. (quoting Bell Atl. v. Twombly, 550 U.S. 544, 555-56 (2007)). The Court must examine whether the complaint “pleads factual content that allows [it] to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

DISCUSSION

Seneca and the Condominium Trust agree that Massachusetts law governs this dispute and rely on Massachusetts law in supporting and opposing the motion. Guided by “the parties' reasonable agreement,” the Court will apply Massachusetts law. Martins v. Vermont Mut. Ins Co., 92 F.4th 325, 328 (1st Cir. 2024); see NextSun Energy Littleton, LLC v. Acadia Ins. Co., 494 F.Supp.3d 1, 13 n.7 (D. Mass. 2020) (applying Massachusetts law where “[t]he parties both acknowledge that Massachusetts law applies” and “[t]he policy in dispute was issued in Massachusetts to a Massachusetts company, and the underlying suit was filed in Massachusetts courts asserting violations of Massachusetts state laws”).

“Under Massachusetts law, ‘[t]he proper interpretation of an insurance policy is a matter of law to be decided by a court not a jury.'” U.S. Liab. Ins. Co. v. Benchmark Constr. Servs., Inc., 797 F.3d 116, 119 (1st Cir. 2015) (quoting Boazova v. Safety Ins. Co., 462 Mass. 346, 350 (2012)). “[T]he court ‘must construe the words of the policy in their usual and ordinary sense.'” Id. (quoting Bos. Gas Co. v. Century Indem. Co., 454 Mass. 337, 355 (2009)). If the policy language is ambiguous, “‘doubts as to the intended meaning of the words must be resolved against the insurance company that employed them and in favor of the insured.'” Boazova, 462 Mass. at 35051 (quoting August A. Busch & Co. of Mass. v. Liberty Mut. Ins. Co., 339 Mass. 239, 243 (1959)). “An ambiguity arises when there is more than one rational interpretation of the relevant policy language” but “‘is not created simply...