Auto Flat Car Crushers, Inc. v. Hanover Ins. Co.

Decision Date15 October 2014
Docket NumberSJC–11477.
Citation17 N.E.3d 1066,469 Mass. 813
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

Donald V. Jernberg (John J. McMaster, Northborough, with him) for the plaintiff.

Aaron R. White, Boston, for the defendant.

The following submitted briefs for amici curiae:

John P. Ryan & Harry A. Pierce, Boston, for Massachusetts Insurance Federation, Inc.

Jonathan M. Feigenbaum, Boston, for United Policyholders.

J. Michael Conley, Braintree, Hans R. Hailey, Boston, Thomas R. Murphy, Salem, & Danielle M. Spang, Woburn, for Massachusetts Academy of Trial Attorneys.




, J.

The plaintiff's insurer refused to defend or to indemnify the plaintiff in connection with an environmental dispute involving the Department of Environmental Protection (DEP). Several years later, the plaintiff, having by then funded both its own defense and the environmental remediation ordered, brought suit against the insurer, alleging breach of contract and seeking declaratory relief; on a motion for partial summary judgment, the plaintiff obtained declaratory relief establishing the insurer's duty to defend. The plaintiff then amended its complaint to assert a claim under G.L. c. 93A, § 11

(§ 11 ), arising out of the insurer's failure to defend; the insurer did not avail itself of the statutory mechanism permitting a defendant to limit its liability to single damages by tendering with its answer a written offer of settlement. See G.L. c. 93A, § 11, fifth par. Thereafter, and while reserving its rights as to its pending claims, the plaintiff accepted reimbursement from the insurer, with interest, for its expenses in litigating and resolving the DEP matter. It is the consequence of having done so that gives rise to this appeal.2

The essential question before us is whether the plaintiff, having been thus compensated for its losses, may nonetheless continue to press its pending claims, particularly under G.L. c. 93A. The insurer maintains that, because the plaintiff has no uncompensated losses, its contract claims must fail as a matter of law, as must its G.L. c. 93A claim, since, as to the latter, the plaintiff no longer can establish the requisite “loss of money or property”

constituting actual damages for purposes of § 11

. The insurer also asserts that the G.L. c. 93A claim must fail for the separate reason that, absent a judgment on the plaintiff's breach of contract claims establishing an amount of actual damages, and where the plaintiff has been made whole, there is no predicate for calculating multiple damages under G.L. c. 93A.

We conclude that, because the statute does not require a plaintiff to demonstrate uncompensated loss or to obtain a judgment on an underlying claim in order to proceed, neither the plaintiff's acceptance of full reimbursement of its expenses nor the absence of a judgment establishing contract damages precludes the plaintiff from pursuing a claim under G.L. c. 93A. In the circumstances here, however, the plaintiff may not press its remaining contract and declaratory judgment claims.

1. Background and prior proceedings. a. Factual background. The plaintiff, Auto Flat Car Crushers, Inc. (Auto Flat), operates a vehicle-crushing service in Millis. At all relevant times, it has been insured under a garage insurance policy3 issued by the defendant, Hanover Insurance Company (Hanover). In February, 2004, Auto Flat was hired to remove 600 vehicles from an automobile salvage yard in Spencer. The removal process entailed detaching the vehicles' fuel tanks and emptying their contents into large drums before crushing the vehicles.

In March of that year, Auto Flat received a notice of responsibility from the DEP, pursuant to G.L. c. 21E, informing it that a release of oil or other hazardous material had occurred at the salvage yard in Spencer. DEP identified Auto Flat as “a party with potential liability” and ordered it to take various responsive actions.

Auto Flat advised Hanover of the notice and sought defense and indemnification in the matter. By letter dated June 4, 2004, Hanover denied coverage, claiming that the loss “did not arise out of the ownership, maintenance or use of the garage location,” nor was it “a result of operations incidental to a garage business.” Hanover also cited the policy's pollution exclusion as barring coverage for Auto Flat's losses. After Auto Flat renewed its request for coverage, Hanover issued another denial letter, dated November 9, 2004, referring to exclusions not mentioned in its first letter.

In August, 2008, having incurred considerable legal expenses and remediation costs in connection with the then-concluded DEP matter, Auto Flat again contacted Hanover, asserting its “conclusion that Hanover improperly denied both defense and indemnity coverage.” After Hanover reaffirmed its denial of coverage, citing the reasons given in its first letter of denial, Auto Flat commenced its action in the Superior Court.

Auto Flat's four-count complaint (1) sought a declaration that Hanover had a duty to defend Auto Flat against DEP allegations that it had released hazardous materials into the environment; (2) alleged breach of contract by virtue of Hanover's failure so to defend; (3) sought a declaration that Hanover had a duty to indemnify Auto Flat for the costs of complying with DEP's cleanup directives; and (4) alleged breach of contract by virtue of Hanover's failure so to indemnify. Hanover filed counterclaims seeking a declaratory judgment on the claims concerning the duty to defend and the duty to indemnify. Three entries of partial summary judgment followed, which we discuss in turn.

b. Partial summary judgment on duty to defend (count 1) and subsequent correspondence between parties. In December, 2009, a Superior Court judge allowed Auto Flat's motion for partial summary judgment on count 1, the duty to defend, ruling that the policy provided Auto Flat with coverage for a defense against the DEP allegations. In March, 2010, Auto Flat amended its complaint to add a fifth count alleging that Hanover's denial of such defense constituted a violation of G.L. c. 93A.4

On May 6, 2010, at Hanover's request, Auto Flat sent Hanover an accounting of its expenses to that point. The accounting included legal fees incurred in connection with the DEP matter and in establishing Hanover's duty to defend, and cleanup costs incurred at the behest of DEP. A few days later, and approximately six years after Auto Flat first made a claim for insurance coverage, Hanover agreed to reimburse Auto Flat for all of its expenses, less certain downward adjustments where it stated that Auto Flat's figures were legally unwarranted or insufficiently documented. Hanover enclosed a check for $449,924.47 with its letter; the check included both $314,170.70 for payment of expenses

incurred5 and $135,753.77 in interest. Hanover stated that it would “consider making additional reimbursement upon the receipt of additional documentation.”

Auto Flat did not agree that the amount paid represented the full amount owed, but accepted the payment “without prejudice to either the insured's right [to] pursue additional amounts owed for defense and indemnity or to pursue damages under [G.L. c.] 93A.” Auto Flat thereafter submitted additional invoices, and Hanover responded with two more checks. In total, Hanover paid Auto Flat $539,757.48.

By letter dated October 20, 2010, Auto Flat acknowledged Hanover's payment of expenses incurred in the DEP matter. Noting, however, the “remaining issues” of postjudgment legal fees6 incurred after the entry of partial summary judgment establishing the duty to defend, and the pending G.L. c. 93A claim, Auto Flat indicated its “willing[ness] at [that] time to make a final settlement of the remaining claims,” and made a demand for settlement in the amount of $246,007.71. Asserting that it was undisputed that “Hanover [had] fully reimbursed Auto Flat for its defense and indemnification of the claim with interest,” Hanover “denie[d] any allegation that it violated [G.L.] c. 93A,” and declined to offer any additional payment.

c. Partial summary judgment on counts 2 through 5. In April, 2011, Hanover moved for partial summary judgment on counts 2 through 4 of Auto Flat's complaint, which sought contract damages for breach of the already-adjudicated duty to defend, a declaration that Hanover had a duty to indemnify Auto Flat, and contract damages for breach of the duty to indemnify.7 Hanover argued that, even if Auto Flat could establish a breach of contract as to either duty, Auto Flat already had been made whole by Hanover's reimbursement of all expenses incurred in the DEP matter, plus twelve per cent interest per annum. Accordingly, Hanover maintained, Auto Flat could not demonstrate that it continued to suffer damages, and its breach of contract claims therefore failed as a matter of law. Hanover asserted also that

Auto Flat was not entitled to a declaration regarding Hanover's duty to indemnify because “there [was] simply nothing to indemnify.” A different judge allowed Hanover's motion, incorporating by reference the rationale offered in Hanover's supporting memorandum.

Hanover thereafter sought summary judgment on count 5 of Auto Flat's complaint, which alleged a violation of G.L. c. 93A by virtue of Hanover's failure to defend Auto Flat in the DEP litigation. Hanover made much the same argument as it had in its memorandum in support of its motion for summary judgment on the breach of contract and indemnification claims, namely that Hanover's reimbursement of Auto Flat's expenses precluded a finding that Auto Flat had suffered a loss of money or property, as required to establish a violation of G.L. c. 93A, § 11


A third judge denied Hanover's motion, concluding that Auto Flat had suffered a monetary loss “as a matter of historical fact,”...

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