Scottsdale Ins. Co. v. United Rentals (N. Am.), Inc.

• Decision Date: 23 December 2015
• Docket Number: CIVIL ACTION NO. 13-12824-DPW
• Citation: 152 F.Supp.3d 15
• Parties: Scottsdale Insurance Company, Plaintiff, v. United Rentals (North America), Inc., Defendant.
• Court: U.S. District Court — District of Massachusetts

152 F.Supp.3d 15

Scottsdale Insurance Company, Plaintiff,

v.United Rentals (North America), Inc., Defendant.

CIVIL ACTION NO. 13-12824-DPW

United States District Court, D. Massachusetts.

Signed December 23, 2015

Douglas J. Steinke, Joanna Lyn Young, Carroll McNulty & Kull LLC, New York, NY, Gary S. Kull, Carroll, McNulty & Kull LLC, Basking Ridge, NJ, Bradford N. Louison, Louison, Costello, Condon & Pfaff, LLP, Boston, MA, for Plaintiff.

David E. Schroeder, Tribler Orpett & Meyer PC, Chicago, IL, Barbara A. O'Donnell, Suzanne M. Whitehead, Zelle Mcdonough & Cohen LLP, Boston, MA, for Defendant.

MEMORANDUM AND ORDER

DOUGLAS P. WOODLOCK, UNITED STATES DISTRICT JUDGE

This is an insurance coverage declaratory action arising from personal injury litigation. Before me are cross motions for summary judgment on the question whether plaintiff Scottsdale Insurance Company (“Scottsdale”) must provide defendant United Rentals (North America), Inc. (“United Rentals”) with coverage as an additional insured on the policy at issue.

I. FACTUAL BACKGROUND

In a contract dated June 22, 2007, Gomes Services, Inc. (“Gomes”) rented an electric boom lift from United Rentals. Gomes used that lift at a trade show held at the Rhode Island Convention Center, where on June 26, 2007 an accident occurred. Guy Ayotte, the plaintiff in the underlying action, was struck and injured by the lift, which was then being operated by Gomes employee Mario Perez. At that time, Gomes was insured by Scottsdale. United Rentals had its own insurance policies, two of which are at issue in this litigation and now asserts that it was an additional insured on the Scottsdale policy as well. The relevant features of these contracts and policies will be described as they arise in the analysis of the legal questions presented.

After the accident, Ayotte and his wife filed suit in Rhode Island state court against United Rentals, Gomes, and others.¹ Ayotte ex. rel. Ayotte v. Perez , C.A. No. 10-2164 (R.I. Super. Ct., amended complaint filed Mar. 11, 2011). Three counts in the amended complaint assert causes of action against United Rentals and are relevant here: Negligent Operation and Ownership Liability (Count I); Negligent Maintenance of a Dangerous Instrumentality (Count V), and Negligent Hiring of a Dangerous Instrumentality (Count VI). At the heart of the claims against United Rentals is the allegation that the lift should have been properly equipped with an alarm which warned bystanders of the lift's approach, but that the lift emitted no audible sounds at the time.

On August 24, 2011, United Rentals requested that Scottsdale defend and indemnify it against the claims raised in the state litigation, based on its status as an additional insured. Although there was significant correspondence on the matter, both between Scottsdale and United Rentals and internally within Scottsdale—including a September 25, 2012 letter from Scottsdale to United Rentals that could be understood as offering United Rentals a defense—Scottsdale has at no point paid for United Rentals' defense in the underlying suit.

II. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 56, summary judgment is appropriate where there “is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). Cross-motions for summary judgment do not alter this standard, but rather require a determination of whether either party can show an entitlement to judgment as a matter of law based on the undisputed facts. Adria Int'l Grp., Inc. v. Ferre Dev., Inc. , 241 F.3d 103, 107 (1st Cir.2001). The interpretation of an insurance contract is a question of law. Cody v. Connecticut Gen. Life Ins. Co. , 387 Mass. 142, 439 N.E.2d 234, 237 (1982).

III. CHOICE OF LAW

The threshold question in this case is what law is to be applied. The accident and litigation occurred in Rhode Island, but Gomes is located in Massachusetts and its insurance contract was negotiated there. A federal court sitting in diversity applies the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In determining what state's law applies to a particular matter, Massachusetts uses a “functional” approach that is informed by the Restatement (Second) of Conflict of Laws. Taylor v. E. Connection Operating, Inc. , 465 Mass. 191, 988 N.E.2d 408, 411 (2013), citing Bushkin Assocs., Inc. v. Raytheon Co. , 393 Mass. 622, 473 N.E.2d 662 (1985). The first step in this analysis is to determine whether there is an actual conflict between the laws of the states involved. Cohen v. McDonnell Douglas Corp. , 389 Mass. 327, 450 N.E.2d 581, 584 n. 7 (1983). Where both parties agree on the proper substantive law to be applied, there is generally no need to engage in further choice-of-law analysis. See, e.g., Williams v. Astra USA, Inc. , 68 F.Supp.2d 29, 36 (D.Mass.1999) (“neither party has raised the substantive law of any jurisdiction other than Massachusetts, and for that reason this Court does not opine on the law of Michigan”).

Here, both parties agree that if a choice-of-laws analysis were to be undertaken, Massachusetts would provide the substantive law to be applied in this action, although they disagree as to why. Moreover, the parties acknowledged during the hearing in this matter that as concerns an insurer's duty to defend—the core issue for this summary judgment motion—Rhode Island and Massachusetts employ substantially the same test, which compares the pleadings in the underlying suit with the insurance policy. Compare Derderian v. Essex Ins. Co. , 44 A.3d 122, 127 (R.I.2012) (“if the pleadings recite facts bringing the injury complained of within the coverage of the insurance policy, the insurer must defend irrespective of the insured's ultimate liability to the plaintiff”) with Sterilite Corp. v. Cont'l Cas. Co. , 17 Mass.App.Ct. 316, 458 N.E.2d 338, 340 (1983) (“if the allegations of the complaint are ‘reasonably susceptible’ of an interpretation that they state or adumbrate a claim covered by the policy terms, the insurer must undertake the defense”). See also Mount Vernon Fire Ins. Co. v. Stagebands, Inc. , 636 F.Supp.2d 143, 147 (D.R.I.2009) (applying Rhode Island law and citing the Massachusetts Sterilite case). While the Massachusetts standard perhaps allows for a looser fit between pleadings and policies, the difference is slight enough in the absence of disagreement between the parties, that further analysis of choice of law is unwarranted. Massachusetts law will govern this summary judgment motion. Apart from this default approach, it also is my own tentative independent view on the merits that Massachusetts law should apply. However, if an issue is raised on which a material conflict exists between Massachusetts and Rhode Island law, the parties may raise additional choice-of-law concerns at that point in the litigation.

IV. ANALYSIS

A. Indemnification

Both Scottsdale and United Rentals seek declarations concerning Scottsdale's duty to defend and indemnify United Rentals. A declaration regarding indemnification, however, is untimely and must wait until the underlying action has been resolved. Whereas an insurer's duty to defend is “measured by the allegations of the underlying complaint,” the duty to indemnify is “determined by the facts, which are usually established at trial.” Travelers Ins. Co. v. Waltham Indus. Labs. Corp., 883 F.2d 1092, 1099 (1st Cir.1989), citing Newell–Blais Post No. 443 v. Shelby Mut. Ins. , 396 Mass. 633, 487 N.E.2d 1371, 1374 (1986).

Accordingly, a declaratory judgment is not yet ripe for consideration regarding the duty to indemnify where, as here, the underlying action has not determined liability or adjudicated factual disputes. Currently, there is no trial date in the Ayotte suit. “[A]ny determination as to the obligation of the insurer to indemnify its insured would now be premature and must await the resolution of the underlying claim.” Spoor–Lasher Company, Inc. v. Aetna Casualty and Surety Co. , 39 N.Y.2d 875, 386 N.Y.S.2d 221, 352 N.E.2d 139 (1976) (relied upon in Sterilite Corporation v. Continental Casualty Company , 458 N.E.2d at 341 ); see also John Beaudette, Inc. v. Sentry Ins. A Mut. Co. , 94 F.Supp.2d 77, 103 (D.Mass.1999). For that reason, I will dismiss the claims seeking declaratory judgment regarding indemnification without prejudice to the filing of a new action should subsequent developments justify it. Many of parties' arguments about the scope of coverage are immaterial in determining Scottsdale's duty to defend and must wait until the state litigation is resolved and questions of indemnification are fully framed and timely.

B. Duty to Defend

1. Legal Standards

Under Massachusetts law, an insurer's duty to defend is triggered when the allegations of the complaint are “reasonably susceptible” of an interpretation that “roughly sketches a claim covered by the policy terms.” Billings v. Commerce Ins. Co. , 458 Mass. 194, 936 N.E.2d 408, 414 (2010). This duty extends broadly, and the insured party bears only the burden of showing a “possibility” that the liability is covered. Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co. , 439 Mass. 387, 788 N.E.2d 522, 531 (2003). In contrast, the insurer is excused from the duty to defend when “the allegations in the underlying complaint lie expressly outside the policy coverage and its purpose.” Id. In comparing the allegations to the policy's coverage, the court must look beyond the causes of action pled in the underlying complaint and to the facts and injuries alleged. Global NAPs, Inc. v. Fed. Ins. Co. , 336 F.3d 59, 62 (1st Cir.2003).

Where an insured is covered as an additional insured, the complaint is properly matched to the additional insured provision to determine the potential for coverage. See Great N. Ins. Co. v. Paino Associates , 369 F.Supp.2d 177, 186 (D.Mass.2005). Insurance policies, like all...