Preferred Mut. Ins. Co. v. Travelers Co., Civil Action No. 95-11931-MAP.

• Decision Date: 24 February 1997
• Docket Number: Civil Action No. 95-11931-MAP.
• Citation: 955 F.Supp. 9
• Parties: PREFERRED MUTUAL INSURANCE COMPANY v. The TRAVELERS COMPANIES.
• Court: U.S. District Court — District of Massachusetts

955 F.Supp. 9

PREFERRED MUTUAL INSURANCE COMPANY v. The TRAVELERS COMPANIES.

Civil Action No. 95-11931-MAP.

United States District Court, D. Massachusetts.

February 24, 1997.

Roger A. Emanuelson, Marie Cheung-Truslow, Lecomte, Emanuelson, Motejunas & Doyle, Quincy, MA, for plaintiff.

David C. Boch, Bingham, Dana & Gould, Boston, MA, Michael J. Eisele, The Travelers Indemnity Company of Illinois, Hartford, CT, for defendant.

MEMORANDUM REGARDING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

(Docket Nos. 34 & 29)

PONSOR, District Judge.

I. INTRODUCTION

In January, 1995, a fire broke out in the boiler room at the Kimball Towers Condominium Association ("Kimball Towers"). The resulting heat and smoke caused extensive damage throughout the building. The plaintiff, Preferred Mutual Insurance Company ("Preferred"), insured Kimball Towers under an "all risk" policy and paid for the entire loss assessed to Kimball Towers.

Defendant, Travelers Indemnity Company of Illinois ("Travelers"), also provided insurance for Kimball Towers under a "Boiler & Machinery" policy. Preferred has brought this lawsuit, contending that Travelers' policy also covered the fire loss and that Preferred is therefore entitled to reimbursement for some or all of the monies it paid.

Both parties have moved for summary judgment, each arguing that the undisputed facts require judgment in its favor. Because the exclusionary language in the "Boiler & Machinery" policy clearly relieved Travelers of any obligation to cover this loss, the court will allow Travelers' motion and order entry of judgment for the defendant.¹

II. FACTUAL BACKGROUND

On January 20, 1995, a fire in the boiler room of the Kimball Towers condominium complex caused heat and smoke damage throughout the building. Preferred recognized its liability, adjusted the loss, and paid $357,278.99 in complete satisfaction of Kimball Towers' claim. Preferred subsequently demanded that Travelers, make a partial reimbursement in accordance with Travelers' "Boiler & Machinery" insurance contract with Kimball Towers. Travelers rejected Preferred's demand and this suit followed.

The precise origin of the fire is disputed. However, for the purposes of these motions the court accepts Preferred's version of events. Preferred contends that a faulty seal on a mechanical fuel pump attached to the burner leaked oil. This fuel pump was manufactured by a different company from the other parts of the burner and was attached to the burner by screws.

The oil leaking from the fuel pump entered the burner tube, which attached the oil burner to the boiler. This fuel then ignited. The resulting fire destroyed the oil burner, and it fell away from the burner tube. The separation of the burner tube from the oil burner severed a fuel line and allowed the fire to escape from the burner. The fire was then fed by the broken fuel line and burned for several hours causing extensive damage to the condominium building.

III. STANDARD OF REVIEW

Summary judgment is appropriate only "... if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A disputed fact is genuinely at issue if "the evidence about the fact is such that a reasonable jury could resolve the point in favor of the non-moving party." Rivera-Muriente v. Agosto-Alicea, 959 F.2d 349, 352 (1st Cir.1992) (quoting United States v. One Parcel of Real Property, Etc., 960 F.2d 200, 204 (1st Cir.1992)). A fact is material if it "carries with it the potential to affect the outcome of the suit under the applicable law." One National Bank v. Antonellis, 80 F.3d 606, 608 (1st Cir.1996) (quoting Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703 (1st Cir.1993)).

IV. DISCUSSION

After accepting the facts as Preferred offers them, the only issue before the court is the proper interpretation of Travelers' Boiler and Machinery insurance contract with Kimball Towers.

As an initial matter, defendant argues that its policy does not apply because its general coverage provision limits Travelers' responsibility to losses resulting from "direct damage" and that the fire in question does not constitute "direct damage." The policy, however, offers no definition of "direct damage." Given this uncertainty, the court will rely on Travelers' alternate argument to preclude application of the policy. The following discussion, therefore, assumes the general application of the policy and instead focuses on Travelers' more persuasive contention: namely, that the policy's fire exclusion clause effectively exempts Travelers from any obligation to cover the Kimball Towers loss.

A. Travelers' Fire Exclusions

Massachusetts generally recognizes a "chain of events" rule that permits plaintiffs to recover for an excluded loss if the efficient proximate cause of that loss was covered. Jussim v. Massachusetts Bay Ins. Co., 415 Mass. 24, 26-30, 610 N.E.2d 954 (1993); Standard Elec. Supply Co. v. Norfolk & Dedham Mut. Fire Ins. Co., 1 Mass.App.Ct. 762, 765-766, 307 N.E.2d 11 (1973). The Supreme Judicial Court in Jussim, however, suggested language that, if adopted by an insurer, would foreclose the application of the "chain of events" rule and effectively exclude a certain type of loss.

The Jussim court suggested that to exclude a loss that might result from a chain of events, the insurer could state that the policy does not apply to losses resulting "directly or indirectly" from a particular proximate cause (in Jussim, a release of contaminants) and that "such [a] loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss." Id. at 30-31, 610 N.E.2d 954.

The preamble to Travelers' fire exclusion clause adopts the language suggested by Jussim virtually verbatim and applies it to fires. The effect of this language is that the "chain of events" rule is avoided and liability for the fire loss in this case is effectively excluded without regard to the efficient proximate cause of the fire. The key section in the Travelers' policy entitled "Exclusions" states that Travelers will not pay for loss or damage caused "directly or indirectly" for any of the reasons specified "regardless of any other cause or event that contributes concurrently or in any sequence to the loss." The fire-related exclusion, listed thereafter in subsection B.4(a), reads:

Loss caused by or resulting from:

a. Fire or combustion explosion that occurs at the same time as an "accident" or that ensues from an "accident." With respect to any electrical equipment forming a part of an "object," this exclusion is changed to read:

Fire or explosion outside the "object" that occurs at the same time as an "accident" or ensues from an "accident."

The clear intent of these two paragraphs is to distinguish between exclusions related to fire in two different circumstances.

First, damage caused by a fire that occurs at the same time as, or ensues from, an "accident" will not be covered. An "accident" is defined in the policy as "a sudden and accidental breakdown of the `object' or a part of the `object.'" "Object" is defined as "any boiler, including its piping and accessory equipment."

Combining this language makes the policy's intent reasonably clear: damage caused by a fire that occurs at the same time as, or ensues from, a sudden and accidental breakdown of any boiler or part of the boiler (including its piping and accessory equipment) is excluded from coverage under the policy.

Second, with respect to any electrical equipment forming part of an "object," coverage will be excluded for any fire or explosion that occurs outside the "object." That is to say, Travelers is not required to pay for any damage outside the boiler, its piping or accessory parts, caused by a fire that occurs as a result of a sudden or accidental breakdown of any electrical equipment forming part of the boiler, its piping or accessory parts.

Since this fire did not occur as a result of the failure of any electrical equipment, the first sentence of paragraph B.4(a) controls. The undisputed facts establish that the Kimball Towers fire broke out as a result of the accidental breakdown of the fuel pump, an independent "part of the boiler." This fuel pump was manufactured by a different company from the other components of the oil burner and was attached to the oil burner by screws. The faulty seal on the fuel pump is the only equipment alleged to have malfunctioned, and therefore the fuel pump is the "part" of the boiler and its accessory equipment relevant to this court's analysis. Since this "part" of the "object" was in no way electrical, the flat exclusion covering damage from a fire that occurs at the same time as, or ensues from, the sudden or accidental breakdown of a part of the boiler (here, the non-electrical fuel pump) applies and Travelers must prevail.

Preferred attempts to argue that the relevant "part," whose sudden and accidental breakdown caused the fire, was the oil burner, which both parties agree happened to have some electrical components not implicated in the loss. This effort is a noble attempt, but it fails for two reasons. First, the argument twists the language of the policy out of any reasonable construction. It arbitrarily ignores the fact that the fuel pump is a "part of the boiler." Second, Preferred's argument disregards the facts of the case, particularly the fact that the fuel pump has all the characteristics of a discrete part, being manufactured independently and screwed on to the oil burner separately.

In short, the fuel pump was the relevant part of the "object."...