A homebuyer's nightmare

The plaintiffs discovered heating oil had contaminated a residential property they had just purchased.  They sued the sellers, alleging that they had concealed the spill.  A default judgment entered.  The plaintiffs then sued Arbella, the sellers' homeowner's insurer. 

Arbella denied the claim, asserting that the source of the plaintiffs' injury was the sellers' concealment of the oil, which is not an occurrence under the policy.  The Superior Court agreed with Arbella. 

In Creamer v. Arbella Insurance Company, 95 Mass. App. Ct. 56 (2019), the Massachusetts Appeals Court remanded the case to the Superior Court for further analysis.  The Appeals Court held that the spill itself was the occurrence with respect to a claim under Mass. Gen. Laws ch. 21E (which sets forth responsibility among various parties for environmental contamination), because ch. 21E imposes liability based on ownership status without regard to fault. 

However, the Appeals Court held that there was a genuine issue of material fact as to whether the loss was excluded by an exclusion for property damage expected or intended by the insured.  The court noted that for the exclusion to apply the sellers must have intended the damage itself, not just the act causing the damage.  To have expected it, they must have known with substantial certainty that the damage would result. 

The court held that once the sellers discovered the oil spill, they must have known with substantial certainty that property damage would result.  From that point forward, any further property damage came within the exclusion.  However, the record did not establish when the sellers discovered the spill or whether the period of concealment caused additional property damage.  The court remanded the case for further proceedings on that issue. 

US District Court holds no coverage for intentional torts, and insurer not estopped to deny coverage after insurance defense counsel states he will defend throughout course of action

Kenneth and Donna Kaplan were sued by their neighbors, William and Mary Costello.  The Costellos alleged ongoing harassment by the Kaplans in an attempt to enlarge their own yard at the Costellos' expense.  They alleged that the Kaplans filed five lawsuits involving the Costellos, initiated a number of complaints and appeals to town and state agencies, and wrote many aggressive emails about the matter to public officials and local media.  The Costellos sued for abuse of process, intentional infliction of emotional distress, and violation of the Massachusetts Civil Rights Act. 

The Kaplans had homeowner's insurance with Narragansett Bay Insurance Company.  Narragansett provided a defense.  It then filed a declaratory judgment action, asserting that it has no duty to defend or indemnify.

In Narragansett Bay Ins. Co. v. Kaplan, __ F. Supp. 3d __, 2015 WL 7295462 (D. Mass.), the United States District Court for the District of Massachusetts held that there is no coverage for bodily injury or property damage for two reasons.  First, that policy part has an exclusion for injuries "expected or intended" by an insured.  The elements of causes of action for abuse of process, intentional infliction of emotional distress, and the violation of the Massachusetts Civil Rights Act each include intentional acts.  Second, no bodily injury or property damage within the meaning of the policy was alleged. 

The policy also had a personal injury endorsement that covers five enumerated intentional torts.  They do not include the causes of action alleged by the Costellos. 

Although the court granted summary judgment to Narragansett on the duty to defend it oddly declined to do so on the duty to indemnify, on the ground that such a duty could not be determined until the underlying case is resolved.  The judge did note, "I observe at this point, however, that having determined there is no duty to defend, there is necessarily no demonstrated basis for a duty to indemnify."

The Kaplans had filed a counterclaim in the declaratory judgment action asserting that Narragansett was estopped from halting coverage even though it was defending under a reservation of rights. 

The Kaplans relied on a letter from insurance defense counsel stating that he would provide a defense "throughout the course of this action."  The court held that that letter was insufficient to create estoppel.  In the face of the reservation of rights letter the Kaplans could not have reasonably relied on the statement of counsel.  Nor was their reliance detrimental. 

The Kaplans have filed an appeal of the ruling.