Berke Moore Co. v. Lumbermens Mut. Cas. Co.

• Decision Date: 02 November 1962
• Citation: 345 Mass. 66,185 N.E.2d 637
• Parties: BERKE MOORE COMPANY, Inc. v. LUMBERMENS MUTUAL CASUALTY COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 637

185 N.E.2d 637

345 Mass. 66

BERKE MOORE COMPANY, Inc. v. LUMBERMENS MUTUAL CASUALTY COMPANY.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Oct. 3, 1962.

Decided Nov. 2, 1962.

Alan J. Dimond, Boston (Ira N. Nottonson, Boston, with him), for plaintiff.

David H. Fulton and Robert Fulton, Boston, for defendant.

Before WILKINS, C. J., and SPALDING, WHITTEMORE, CUTTER, KIRK, and SPIEGEL, JJ.

WILKINS, Chief Justice.

The plaintiff (Berke), a contractor, was insured by the defendant under a general liability policy, in which the defendant agreed to pay all sums that Berke might become 'legally obligated to pay as damages because of injury to or destruction of property * * * caused by accident and arising out of the ownership, maintenance or use of premises, and all operations' in the performance of a certain highway construction contract, and to 'defend any suit against the insured alleging such injury * * * or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent * * *.'

This action of contract is to recover (1) the sum of $1,250 paid in settlement of a suit brought against Berke by one Strachan which the defendant refused to defend and (2) the sum of $500 paid to an attorney for services in that suit, which was settled without trial. The defendant's answer contains a general denial and alleges that the settled claim was not based on an 'accident' and does not come within the coverage of the policy, and that if the damage to Strachan 'arose through its [Berke's] own negligent omission, rather than from any 'accident' the defendant is not liable to the plaintiff [Berke].'

The case at bar was tried before a judge, who found for Berke in the amount of $300, which was 'the fair value of professional services to defend the suit.' He refused to allow recovery for the sum paid in settlement or for an attorney's fee paid for services in the settlement. He based his refusal upon paragraph 11 of the policy, which reads, 'No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company.' Berke contends that this provision has no application to this situation where it was, as the judge found, 'the defendant's duty to defend the action,' and the defendant company failed in that duty.

In October, 1957, Berke under a contract with the Commonwealth was engaged in the construction of a public highway in Everett. One phase of the work was changing the grade of School Street to conform with the new grade of an overpass leading from Main Street. By writ dated November 6, 1958, with an ad damnum of $5,000, Rena A. Strachan brought an action of tort against Berke returnable and entered in the Municipal Court of the City of Boston on November 22, 1958. Her declaration alleged 'that she occupied a store and cellar at 81 Main Street, Everett, Massachusetts, and had in said store substantial quantities of merchandise which she used in connection with her business as a banquet caterer; that as a result of the defendant's negligence surface water was channeled and diverted into the premises of the plaintiff * * * and caused damage to the plaintiff's property * * *.'

Upon service Berke sent the summons to the defendant insurance company, which returned it reporting that it had obtained a copy of the declaration, and stating, 'Obviously, the damage in this instance was caused by the necessary change in the terrain presumably as specified in the contract under which you were working and in no way accidental. Therefore, no coverage is afforded to you in this matter, and we can take no action therein in your behalf.' Berke then retained its own attorney, and the case was removed to the Superior Court, where Berke claimed a trial by jury. Thereupon Bertram A. Sugarman, Esquire, a lawyer experienced in tort litigation, was engaged to represent Berke.

On January 15, 1960, Mr. Sugarman wrote the defendant: 'In view of the allegations of the plaintiff and the information that we have concerning the occurrence, this damage did not occur as a result of the necessary change in the terrain, but if the plaintiff's contentions are correct, it occurred as the result of negligent omission on the part of the defendant. We therefore once again call upon you to take over the defence of this action and to pay all damages and costs, including legal services, that may arise from the preparation for and trial of said case.' Following receipt of this letter the defendant continued to refuse to defend.

Upon the payment of $1,250 by Berke to Strachan the case was disposed of by an agreement for judgment for Berke. The insurance company did not participate in the settlement or in the agreement. For the legal services of Mr. Sugarman and his office Berke paid $500.

Sumner H. Rogers, Esquire, called as a witness by Berke, testified that he was an attorney associated with Mr. Sugarman and worked with him in the defence of the Strachan action; that as a result of his investigation he was of the opinion that it could have been determined that Berke was responsible for the collection of water, that it could have been found that Berke did not properly provide for the running off of excess water during the construction period, and that there was a reasonable chance that a verdict could have been returned for Strachan; and that in his opinion the sum of $1,250 paid in settlement was fair and reasonable, and that $500 was a reasonable charge for the legal services of Mr. Sugarman and his office.

In answer to interrogatories Strachan stated that her premises 'were flooded with water which reached a height of about three feet'; that Berke 'had negligently performed work and had blocked the drains used to discharge surface water, as a result of which the water was diverted into the building which I occupy as a tenant'; and that her itemized damage was $3,038.80.

In the case at bar, Berke submitted nine requests for rulings. In addition to denying them all the judge made the following 'written determinations': I find that the original plaintiff Strachan suffered no damages due to the present plaintiff's conduct. I find that the present plaintiff was not justified, legally or on the facts, to make a settlement with Strachan. I find and rule that it was the defendant's duty to defend the action and is, therefore, liable for the fair value of professional services to defend the suit. I find a reasonable attorney's fee to be three hundred dollars. I find for the plaintiff in ths sum of three hundred dollars.'

The judge's ruling in determination that it was the duty of the defendant to defend the Strachan action has become the law of the case. He must have thought that the defendant's analysis of liability as contained in its correspondence, was not a controlling interpretation of the allegations of the declaration. See Fessenden School, Inc. v. American Mut. Liab. Ins. Co., 289 Mass. 124, 130, 193 N.E. 558, and cases cited in 50 A.L.R.2d 465 et seq.

In the terms of the policy the judge has ruled that this was a 'suit against the insured alleging such injury * * * or destruction,' 'such injury * * * or destruction' being 'injury to or destruction of property...