Jet Line Services, Inc. v. American Employers Ins. Co.

• Decision Date: 24 April 1989
• Citation: 537 N.E.2d 107,404 Mass. 706
• Parties: JET LINE SERVICES, INC. v. AMERICAN EMPLOYERS INSURANCE CO., et al. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 107

537 N.E.2d 107

404 Mass. 706

JET LINE SERVICES, INC. v. AMERICAN EMPLOYERS INSURANCE CO., et al. ¹

Supreme Judicial Court of Massachusetts Suffolk.

Argued Jan. 5, 1989.

Decided April 24, 1989.

Richard L. Neumeier, Boston, for American Employers Ins. Co.

Alice E. Richmond & Edward Notis-McConarty (Claude J. Kazanski, Boston, with them), for plaintiff.

Mark P. Harty (John J. Davis, Boston, with him), for J. Barry Driscoll Ins. Agency, Inc.

Timothy P. Wickstrom, Whitinsville, for Mission Ins. Co.

Before WILKINS, LIACOS, ABRAMS and LYNCH, JJ.

WILKINS, Justice.

The plaintiff (Jet Line) was in the business, among other things, of cleaning large petroleum storage tanks. On June 26, 1980, while Jet Line employees were working on a tank of the Mobil Oil Company in New Haven, Connecticut, an explosion caused substantial damage to the tank. At that time, Jet Line was insured to the limit of $500,000 under a comprehensive general liability insurance policy, with a broad form endorsement, issued by the defendant American Employers Insurance Co. (American). On April 29, 1981, shortly after the comprehensive general liability insurance policy had been renewed at a higher premium, an explosion caused $400,000 in damage to a large underground tank owned by the United States Air Force in Newington, New Hampshire, in which Jet Line employees were working.

This appeal by American largely concerns the question whether it is liable to Jet Line for the damage to the Air Force tank caused by the Newington explosion. A judgment was entered in the Superior Court declaring that the damage to the Air Force tank was covered under the general liability policy. In answer to a question, the jury also determined that, in any event, American was estopped to deny coverage for that damage. ² Jet Line also obtained a judgment that it was entitled to attorneys' fees under G.L. c. 93A, § 11 (1986 ed.), in connection with its claims against American. American argues that the award of attorneys' fees was not warranted and that, if such an award was warranted, the amount awarded was excessive.

We shall explain in the first numbered section of this opinion that the general liability policy did not provide coverage for damage that Jet Line may have caused to the Air Force tank in New Hampshire. In the second numbered section, we shall explain, however, that the jury were warranted in finding that American's conduct estopped it from denying coverage for that damage. As we shall see in more extensive detail when we discuss the estoppel issue, American's conduct in handling the New Haven claim and in renewing the coverage in 1981 led Jet Line reasonably to rely to its detriment on the existence of coverage. We recognize that, because we decide that American is estopped to deny coverage of the damage in New Hampshire, our discussion of the coverage question is unnecessary to our decision. We would not, however, regard an estoppel basis for liability to be worth consideration unless the policy were first determined not to provide coverage.

We shall finally consider the award of attorneys' fees to Jet Line under G.L. c. 93A, § 11. We conclude that an award was appropriate as to Jet Line's claim of estoppel, but not as to its claim of policy coverage of the Newington explosion. The attorneys' fees award must be adjusted to reflect this difference. American, which did not disclaim coverage of the New Haven damages until over a year after the Newington explosion, has accepted liability for the damage to Mobil's tank in New Haven by not appealing from a judgment obliging it to pay for that damage (up to the policy limits). We reject American's argument that, because it alone is liable for (and has now paid) the entire New Haven damage claim, Jet Line can have no right to attorneys' fees in connection with its claim that American is liable for the New Haven damages. American's willingness to pay the Mobil claim, even though it asserts that such a loss was not covered under the policy, appears to be based on its conclusion that its disclaimer of coverage of the damage to Mobil's tank came unacceptably late. Such a late disclaimer could be an unfair or deceptive act under G.L. c. 93A, § 2 (1986 ed.). We think that the judge, who ruled that the damage to the Mobil tank was covered under the policy, should, in light of this opinion, reconsider the question whether American engaged in an unfair or deceptive act as to the Mobil claim so as to entitle Jet Line to recover attorneys' fees for its claim that American had to provide coverage of the Mobil loss. ³

As a brief background, we recite uncontroverted facts. After the New Haven accident, employees of American in Connecticut received an opinion of outside counsel that the damage to the Mobil tank was covered under Jet Line's policy. It developed much later that the Connecticut attorney who had given that opinion may have considered the wrong policy language. In any event, American investigated the accident, established a reserve of $300,000, and entered into discussion with Mobil concerning a possible settlement. Jet Line knew of these activities when in early April, 1981, it renewed its general liability coverage with American for another year. The premium for the new policy year was about fifty percent higher than the premium for the previous year, largely because of the reserve established as a consequence of the New Haven explosion.

Also sometime during April, 1981, Jet Line agreed to perform cleaning and repair services on the Air Force tank in Newington, New Hampshire. Late in the same month, the Newington explosion occurred causing damage to the tank in the amount of $400,000. ⁴ Advised by New Hampshire counsel, American promptly reserved its rights concerning whether its policy covered any damage negligently caused by Jet Line in Newington. In March, 1982, American disclaimed coverage as to the Newington incident.

In June, 1982, Mobil brought an action in Connecticut. In the same month, Jet Line brought this action seeking a determination that American's general liability policy covered damage that Jet Line may have negligently caused to the Air Force tank in Newington. Ultimately, American's outside counsel in Massachusetts learned about the inconsistent positions that American was taking, i.e., denying coverage in New Hampshire while acting as if there were coverage in Connecticut, as to two incidents of substantially the same character. On December 6, 1982, approximately twenty-nine months after the New Haven explosion, American disclaimed coverage as to the damage allegedly caused by Jet Line to the Mobil tank. Shortly thereafter, Jet Line amended its complaint in order also to assert rights against American with respect to the New Haven incident.

We are now in a position to consider (1) whether Jet Line's general liability policy covered damage it negligently caused to the Air Force tank, (2) whether, in any event, American is estopped to deny coverage of that damage, and (3) Jet Line's claims for attorneys' fees under G.L. c. 93A.

1. The comprehensive general liability insurance policy, with the broad form comprehensive general liability endorsement, does not provide coverage for the damage to the Air Force tank in Newington, New Hampshire. ⁵

The broad form endorsement (Section VI[A][d][i] ) excludes coverage for damage "to that particular part of any property ... upon which operations are being performed" by the insured "at the time of the property damage arising out of such operations." We conclude that the words "that particular part of any property ... on which operations are being performed" refers to the entire tank and not just to the bottom of the tank that Jet Line personnel were cleaning at the moment of the explosion. Jet Line was retained to clean the entire tank, and it was the entire tank on which operations were being performed within the meaning of the policy language. ⁶

The restrictive view that the trial judge and Jet Line have taken of the scope of the exclusion involved in this case is inconsistent with the position that courts elsewhere have taken. The Court of Appeals for the Fifth Circuit has held that operations were "being performed" within the meaning of the exclusion when one night, while a job was in progress but no employee of the insured was working, a fire damaged an electric motor the insured was repairing. Advance Elec., Inc. v. United States Fidelity & Guar. Co., 818 F.2d 378, 379 (5th Cir.1987). Whether at the time of the property damage an employee of the insured is or is not in one area or another of the property on which the insured has agreed to perform operations is not significant to the coverage question. See Vandivort Constr. Co. v. Seattle Tennis Club, 11 Wash.App. 303, 308, 522 P.2d 198 (1974) (insured "was performing operations on the property and the injury here for which damages are claimed arose out of those operations"). Even in cases in which damage occurred to property on only part of which the insured was retained to work, courts have held that the exclusion applies to the entire property. See Goldsberry Operating Co. v. Cassity, Inc., 367 So.2d 133, 135 (La.App.1979) (damage to extensive portion of well tubing on only ten-foot portion of which insured was hired to work not covered); ⁷ Vinsant Elec. Contrs. v. Aetna Casualty & Sur. Co., 530 S.W.2d 76, 78 (Tenn.1975) (damage to entire switchboard on which insured was engaged to install two circuit breakers not covered). ⁸ Cf. Continental Graphic Servs. v. Continental Casualty Co., 681 F.2d 743, 744 (11th Cir.1982) (coverage excluded for damage to printing press and not just to gears that caused damage). Where, as here, the insured was retained to perform work on an entire unit of property, and not just a portion of it, the applicability of the exclusion to damage to the entire unit is even more apparent than in cases in which the insured was retained to work on...