Graf v. Hospitality Mut. Ins. Co.

Decision Date26 July 2013
Docket NumberCivil Action No. 13–30070–KPN.
Citation956 F.Supp.2d 337
CourtU.S. District Court — District of Massachusetts


Mark J. Albano, Dalsey & Albano, Springfield, MA, for Plaintiff.

John F. Brosnan, James E. Harvey, O'Malley and Harvey, LLP, Boston, MA, for Defendant.


NEIMAN, United States Magistrate Judge.

This case arises out of prior state court litigation in which Katie Graf (Plaintiff) sued Torcia & Sons, Inc. (“Torcia”) and Ronald Lindsey, an employee of a restaurant operated by Torcia, for injuries she sustained there. Plaintiff received a judgment in her favor. The court then attached Torcia's liquor license (“Attachment”) in order to secure payment of pre-judgment interest to Plaintiff. Torcia requested that its insurer, Hospitality Mutual Insurance Company (Defendant), pay the cost of a bond to discharge the attachment, but Defendant refused. Now, in the case at bar, Plaintiff, as assignee of the rights of Torcia against Defendant, asserts that Defendant's refusal to pay the cost of the bond constituted a breach of the Liquor Liability Insurance Policy (“Policy”) which insured Torcia. Defendant disagrees and has moved to dismiss, arguing that Plaintiff has failed to state a claim upon which relief may be granted.

The parties have consented to this court's jurisdiction. See28 U.S.C. § 636(c); Fed.R.Civ.P. 73. For the reasons which follow, the court will grant Defendant's motion.

I. Standard of Review

When faced with a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court must accept the allegations of the complaint as true, drawing all reasonable inferences in favor of the plaintiff. See Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994); Coyne v. City of Somerville, 972 F.2d 440, 442–43 (1st Cir.1992). Federal Rule of Civil Procedure 8(a)(2) requires only a ‘short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ Sepulveda–Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 28 (1st Cir.2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Recently, the Supreme Court made clear that, under Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), a complaint that states a plausible claim for relief, on its face, will survive a motion to dismiss. See Ashcroft v. Iqbal, 556 U.S. 662, 663, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The Court explained that [a] claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

II. Background

The following facts come mainly from Plaintiff's complaint. However, the court has also considered the Liquor Liability Insurance Policy (“Policy”) and certain documents related to the prior state litigation underlying this suit, because Plaintiff's complaint explicitly refers to these documents. See Trans–Spec Truck Service, Inc. v. Caterpillar Inc., 524 F.3d 315, 321 (1st Cir.2008) (“ ‘[W]hen ... a complaint's factual allegations are expressly linked to-and admittedly dependent upon-a document (the authenticity of which is not challenged), that document effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6).’ ”) (quoting Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 16–17 (1st Cir.1998)). The facts and all reasonable inferences are stated in a light most favorable to Plaintiff as the party opposing dismissal. Young v. Lepone, 305 F.3d 1, 8 (1st Cir.2002).

A. The Prior Litigation Underlying the Present Suit

After a jury trial and a verdict in favor of Plaintiff in the prior litigation, the court awarded $500,000 together with pre-judgment interest of $111,124.26. (Compl. ¶¶ 11–12.) Defendant informed Torcia and Lindsey of its contention that the pre-judgment interest was not covered by the Policy. ( Id. at ¶ 13.) Plaintiff then sought and obtained the Attachment on Torcia's liquor license in the amount of $115,000. The state trial court issued the attachment because no insurance coverage was available to pay the pre-judgment interest of $111,124.26. (Id. at ¶ 15–16.) Both Plaintiff and Torcia then made demand upon Defendant to pay the cost to obtain a bond to discharge the Attachment. (Id. at ¶ 19.) Torcia's demand letter dated August 3, 2010 alleged that the bond was needed in order to prevent Plaintiff from securing a “keeper attachment” and seizing Torcia's “daily/weekly assets,” which would force Torcia “to go out of business.” (Exhibit A (attached to Plaintiff's Memorandum).)

In October, 2010, Plaintiff, Torcia, Lindsey and Defendant entered into a written settlement agreement (“Agreement”) providing that (1) Plaintiff would discharge the Attachment; (2) Torcia and Lindsey would assign their rights against Defendant to Plaintiff; (3) Lindsey and Torcia would withdraw their pending appeal; (4) Defendant would pay $552,007.05 including costs and post-judgment interest to Plaintiff; (5) Plaintiff would reserve her rights against Defendant for the pre-judgment interest, (id. at ¶ 22–23); and (6) Plaintiff and Defendant would litigate their dispute over pre-judgment interest in separate litigation and, if Plaintiff were successful, Defendant would pay damages as though the Attachment were still in effect. (Exhibit 8 (attached to Defendant's Memorandum) ¶ 5.)

In February of 2013, Plaintiff, having been assigned Torcia and Lindsey's rights, filed the present action against Defendant alleging breach of contract and unfair and deceptive acts and practices in violation of Massachusetts General Laws, Ch. 93A and 176D, arising out of Defendant's refusal to pay the cost of the bond. In her complaint, Plaintiff alleges that:

the bond requested ... is and was at all times material readily available on the market and, in order to procure the bond requested, Hospitality was required to simply file an application and to post $115,000 in either cash or letter of credit collateral and to pay an annual premium of $2,300, which is 2% of the amount of the bond.

(Compl. ¶ 20.)

B. The Limits of Liability under the Policy

The maximum amount (“Limits of Insurance”) Defendant was required to pay for damages due to bodily injury (“Damages”) under the Policy is $500,000 per person. (Exhibit 1 (attached to Defendant's Memorandum) at Declarations, § 111(A), (B).) Damages is defined by the Policy as including “pre-judgement interest awarded against an Insured.” (Id. at § 5(C).) With regard to a third party's right to sue, the Policy states: [a] person or organization may sue us to recover ... on a final judgment against an Insured ... but we will not be liable for ‘damages' that are not payable under the terms of this Policy that are in excess of the applicable limit of insurance.” (Id. at § 4(B).)

Aside from the $500,000 Limit of Insurance for Damages, Defendant was also obligated to make payments “explicitly provided for under Supplementary Payments.” (Id. at § 1(A).) The Supplementary Payments section provides as follows:

We will pay with respect to any claim or “suit” we defend:

1. All expenses we incur.

2. The cost of bonds to release attachments, but only for bond amounts within the applicable limit of insurance. We do not have to furnish these bonds.

3. All reasonable expenses incurred by the Insured at our request to assist us in the investigation or defense of the claim or “suit”, including actual loss of earnings up to $100 a day because of time off from work.

4. All costs taxed against the Insured in the “suit”.

5. All interest on that portion of any judgement we owe that accrues after entry of the judgement and before we have paid, offered to pay, or deposited in court the part of the judgement that is within the applicable limit of insurance.

6. Expenses incurred by the insured for first aid to others at the time of an occurrence to which this insurance applies.

These payments will not reduce the limits of insurance of this Policy.

( Id. at § 1(C).)

After removing the action to this court under 28 U.S.C. § 1446(a), Defendant filed a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), arguing that it is not obligated to pay the cost of the bond under the Policy. For the reasons that follow, the court agrees.

III. Plaintiff's Complaint

Plaintiffs complaint contains three counts: breach of contract for refusal to pay the cost to obtain a bond to release the Attachment (Count One), unfair and deceptive acts and practices prohibited by Massachusetts General Laws, Ch. 93A §§ 2 and 11, and Massachusetts General Laws, Ch. 176D, § 3 (Count Two), and unfair and deceptive acts and practices prohibited by Massachusetts General Laws, Ch. 93A, §§ 2 and 9 (Count Three). All three counts are predicated on the allegation that Defendant breached its obligations under the Policy by refusing to pay the cost of the bond. Thus, if the Policy does not require that Defendant pay the cost of the bond, all three counts must be dismissed for failure to state a claim.

IV. Standard of Contract Interpretation

“The interpretation of an insurance contract is a question of law ...” Metropolitan Life Ins. Co. v. Cotter, 464 Mass. 623, 984 N.E.2d 835, 844 (2013). The [i]nterpretation of language an insurance contract ‘is no different from the interpretation of any other contract, and we must construe the words of the policy in their usual and ordinary sense.’ Id. (quoting Metropolitan Prop. & Cas. Ins. Co. v. Morrison, 460 Mass. 352, 951 N.E.2d 662, 671 (2011)). Although “ambiguities in the language of the contract are interpreted against the insurer,” id., “a policy provision ‘is ambiguous only...

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