Consigli Constr. Co. v. Travelers Indem. Co.

Decision Date21 June 2017
Docket NumberCIVIL ACTION NO. 16-40041-DPW.
Citation256 F.Supp.3d 62
Parties CONSIGLI CONSTRUCTION CO., INC., Plaintiff v. TRAVELERS INDEMNITY CO. and United Specialty Insurance Co., Defendants.
CourtU.S. District Court — District of Massachusetts

Brian Doherty, John F. Toomey, Jr., Toomey & Associates PC, Emily Lanza Dwyer, Toomey & Yudysky, LLP, Boston, MA, David J. Crowley, Toomey & Associates, P.C., Stoneham, MA, for Plaintiff.

Brian P. McDonough, Zelle McDonough & Cohen LLP, Boston, MA, David W. Zizik, Sulloway & Hollis, PLLC, Canton, MA, for Defendant.

MEMORANDUM AND ORDER

DOUGLAS P. WOODLOCK, UNITED STATES DISTRICT JUDGE

Consigli Construction Co., Inc. and Travelers Indemnity Company have each filed dispositive motions to resolve whether Travelers has a duty to defend Consigli in a state tort action brought by a subcontractor's worker injured at one of Consigli's project sites. Meanwhile, Consigli has moved to remand the case to state court. As a matter of procedure, I find removal of the case has not been shown to have been inconsistent with this court's diversity jurisdiction and will deny Consigli's motion to remand.

As a matter of substance, I find that Consigli did not in a timely fashion properly make Travelers aware of facts that would be sufficient to bring Consigli within the scope of an insured under the Travelers insurance agreement at issue; consequently, Travelers has no duty to defend Consigli in the state court action during the time period in dispute. As a result, I will grant summary judgment to Travelers.

I. BACKGROUND
A. Facts1

Consigli was the general contractor for a renovation project at Methuen High School. Consigli engaged several subcontractors to work on the project, including American Environmental, Inc. and Costa Brothers Masonry of Fairhaven, Inc. American Environmental was responsible for demolishing concrete floors within the existing structures on the project; Costa Brothers provided masonry work. Wellington M. Ely, Jr. was an employee of Costa Brothers and worked as a mason on the project.

Costa Brothers had a commercial general liability insurance policy issued to it by Travelers. In order to work on the Methuen High School project as a subcontractor for Consigli, Costa Brothers agreed to name Consigli as an additional insured on its Travelers policy.

On October 22, 2013, Ely was walking inside a building on the project where the concrete floor had been broken up when he tripped and fell over exposed wire. He injured his knees, neck, and left shoulder. He also experienced headaches in the aftermath of the fall. American Environmental had demolished the concrete floor in the area where Ely fell, allegedly without removing protruding wires or warning workers of the potential tripping hazard. Ely alleged American Environmental and Consigli were both responsible for his injuries because American Environmental performed its demolition work negligently and Consigli failed to maintain a safe working environment. Ely made no specific allegations that Costa Brothers caused his injuries.

B. Procedural History

Ely filed suit against American Environmental and Consigli on July 1, 2015. Consigli mailed a written demand to Travelers on July 17, 2015, requesting that Travelers defend Consigli against Ely's action. On July 22, 2015, Consigli, for its part, filed a third-party complaint against Costa Brothers and American Environmental in which it alleged that Ely's injuries were the result of the work by Costa Brothers and American Environmental on the project. Travelers informed Consigli on August 12, 2015 that it would not defend it in the state action because Costa Brothers "was not the cause of this loss."

Consigli filed the instant coverage action against Travelers and Century Surety Company, American Environmental's insurer, in state court on March 18, 2016, seeking a declaration that the defendants were obligated to defend Consigli and seeking damages for breach of contract. The defendants removed the case to this court. I have since granted Consigli's motion to amend the complaint to substitute United Specialty Insurance Company for Century Surety as a defendant because United Specialty had replaced Century Surety as American Environmental's insurer. On February 3, 2017, Consigli and United Specialty reported they had reached an agreement in principle to settle the action against United Specialty and on April 24, 2017, they filed a stipulation of dismissal of Consigli's claims against United Specialty. The dispute between Consigli and Travelers remains and is now framed by the remand and summary judgment motion practice the parties have pressed.

II. MOTION TO REMAND

Before considering the cross-motions for summary judgment, I must at the threshold address Consigli's motion to remand this case to state court for resolution. Consigli contends that the amount in controversy is below the jurisdictional requirement for diversity claims in federal court. 28 U.S.C. § 1332. Consigli states that as of January 13, 2017, it had incurred only $60,000.45 in attorney's fees and defense costs, below the necessary $75,000 threshold.

After filing its motion to remand, Consigli agreed to settle its claims against United Specialty. In light of the settlement with United Specialty, Consigli now asserts Travelers owes only the defense costs of $17,143.80 Consigli incurred from July 20, 2015 to December 7, 2015, together with the costs Consigli incurred in pursuing the instant coverage case against Travelers. As of November 29, 2016, these amounted to $10,000.

Because Travelers has invoked federal jurisdiction by removing the case from state court on diversity grounds, it "bears the burden of demonstrating that the court has subject-matter jurisdiction over the case" and "must show that the amount in controversy exceeds $75,000." Milford–Bennington R. Co., Inc. v. Pan Am Rys., Inc. , 695 F.3d 175, 178 (1st Cir. 2012).2 "The amount in controversy in actions seeking declaratory relief ‘is the value of the right or the viability of the legal claim to be declared, such as a right to indemnification or a duty to defend.’ " CE Design Ltd. v. Am. Econ. Ins. Co. , 755 F.3d 39, 43 (1st Cir. 2014) (quoting 14AA Wright & Miller, Federal Practice and Procedure Jurisdiction § 3708 (4th ed.) ).

In calculating the amount in controversy, Consigli references immaterial events that have occurred after removal. It is well-settled that "[f]or the purposes of establishing diversity jurisdiction, the amount in controversy is determined by looking to the circumstances at the time the complaint is filed." Coventry Sewage Assoc. v. Dworkin Realty Co. , 71 F.3d 1, 4 (1st Cir. 1995). For cases removed from state court, "satisfaction of the amount-in-controversy requirement generally is determined on the basis of the record existing at the time the notice of removal ... is filed with the district court." 14C Wright & Miller, Federal Practice and Procedure Jurisdiction § 3725.1 (4th ed.). "Thus, events occurring subsequent to removal which reduce the amount recoverable ... do not oust the district court's jurisdiction once it has attached." St. Paul Mercury Indem. Co. , 303 U.S. at 293, 58 S.Ct. 586.

At the time the case was removed from state court, the jurisdictional threshold was met. The notice of removal claimed the amount in controversy exceeded $75,000 because Consigli sought a declaration of a duty to defend that would cover the attorney's fees and defense costs incurred in defending the state court action, prosecuting a third-party complaint and cross-claim in the state court action, and prosecuting the instant case. Such costs can be included in determining the amount in controversy here. Velez v. Crown Life Ins. Co. , 599 F.2d 471, 474 (1st Cir. 1979) (attorney's fees may be included in calculating amount in controversy if "the fees are provided for by contract"); see also Auto–Owners Ins. Co. v. Stevens & Ricci Inc. , 835 F.3d 388, 396 (3d Cir. 2016) (where an insurance policy imposes a duty to defend its insured, attorney's fees and defense costs are "properly included in determining the amount in controversy").

As Travelers notes in its opposition to remand, there was in any event a reasonable probability at the time of removal that these attorney's fees and defense costs would exceed $75,000. Even if the attorney's fees and defense costs have not yet reached the jurisdictional threshold, it bears emphasizing that Consigli also sought indemnification for the potential damages that could be awarded to Ely in the state court action, which Ely represented could total at least $147,034.33. Consigli's post-removal settlement agreement with United Specialty does not divest me of the power to resolve this case on the merits. I will deny the motion to remand.

III. SUMMARY JUDGMENT AS TO DUTY TO DEFEND

Turning the merits, I must observe that I am obligated to grant summary judgment if the moving party "shows that there is no genuine dispute as to any material fact" and the moving party "is entitled to judgment as a matter of law." Fed R. Civ. P. 56. When I am faced with cross-motions for summary judgment, I must "consider each motion separately, drawing inferences against each movant in turn." Reich v. John Alden Life Ins. Co. , 126 F.3d 1, 6 (1st Cir. 1997). "Under Massachusetts law the interpretation of an insurance policy and the determination of the policy-dictated rights and obligations are questions of law, appropriate grist for the summary judgment mill." Merchants Ins. Co. of N.H., Inc. v. U.S. Fidelity and Guar. Co. , 143 F.3d 5, 8 (1st Cir. 1998) (citing Assetta v. Safety Ins. Co. , 43 Mass.App.Ct. 317, 682 N.E.2d 931, 932 (1997) ).

1. Mootness

Travelers has moved for summary judgment on the grounds that Consigli's settlement with United Specialty renders moot Consigli's claims against Travelers. Travelers contends Consigli's declaratory judgment claim is moot because United Specialty has agreed to defend Consigli going forward in the state...

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