954 F.3d 397
1st Cir.2020Background
- Clarendon insured Lundgren in 2004–2005; Philadelphia insured Lundgren for 9/1/2007–9/1/2008 under a policy excluding (a) property damage known prior to the policy period and (b) "fungi" (mold) damage.
- Doherty sued Lundgren in 2009 alleging roof leaks and water infiltration beginning in 2004, continuing thereafter, resulting in mold and personal/property injury; amended complaint described chronic dampness and mold testing in 2006 and evacuation in 2008.
- Lundgren tendered defense to Philadelphia; Philadelphia denied coverage in 2009 citing no allegations during its policy period and the mold exclusion; Clarendon financed Lundgren’s defense under reservation of rights and later obtained Lundgren’s assignment of claims.
- Clarendon sued Philadelphia (state court → removed) asserting contribution, breach of contract (duty to defend/indemnify), and violations of Mass. Gen. Laws chs. 93A and 176D; district court granted summary judgment to Philadelphia, finding no duty to defend because the underlying complaint alleged damage beginning in 2004 and continuing, thus excluded as known prior damage.
- Clarendon appealed; First Circuit reviewed de novo and affirmed the district court on all counts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Philadelphia had a duty to defend Lundgren | Clarendon: underlying complaint is "reasonably susceptible" to an interpretation of coverage (could infer new leaks during Philadelphia's policy); insurer must draw inferences for insured | Philadelphia: complaint alleges continuous damage beginning in 2004 (before policy); policy excludes damage known prior to policy period, so no duty | No duty to defend — complaint unambiguously alleges pre-policy, continuous damage and policy's prior‑knowledge exclusion applies |
| Whether Philadelphia had independent duty to investigate / estoppel from changing denial rationale | Clarendon: insurer must investigate, speak to insured, obtain records; Philadelphia is estopped from invoking a different denial ground later | Philadelphia: no duty to investigate where complaint lies outside coverage; estoppel argument was not preserved below | No independent duty to investigate here; estoppel argument waived on appeal and not adjudicated on the merits |
| Contribution (equitable contribution) | Clarendon: having defended, Clarendon may seek pro rata contribution from Philadelphia | Philadelphia: contribution only arises if Philadelphia had a duty to defend/indemnify | Waived on appeal; on the merits fails because no duty to defend, so no obligation to contribute |
| 93A / 176D bad-faith claim | Clarendon: denial and failure to investigate constitute unfair/deceptive practices | Philadelphia: denial rested on a plausible policy interpretation (mold and/or prior‑loss exclusion); not unfair or in bad faith | Affirmed dismissal — denial was supported by exclusions and plausible interpretation; no 93A/176D violation |
Key Cases Cited
- Metropolitan Property and Casualty Insurance Co. v. Morrison, 951 N.E.2d 662 (Mass. 2011) (standard for insurer's duty to defend: complaint reasonably susceptible of a covered claim)
- Billings v. Commerce Ins. Co., 936 N.E.2d 408 (Mass. 2010) (possibility-of-coverage rule; general allegations can trigger duty to defend)
- Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 545 N.E.2d 1156 (Mass. 1989) (insurer denial based on plausible interpretation is not necessarily bad faith)
- Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 788 N.E.2d 522 (Mass. 2003) (amended complaints and extrinsic facts can defeat duty to defend if they show claim lies outside coverage)
- Deutsche Bank Nat'l Ass'n v. First Am. Title Ins. Co., 991 N.E.2d 638 (Mass. 2013) (resolve ambiguities for insured; extrinsic, readily knowable facts may negate duty to defend)
- Ins. Co. of the State of Pa. v. Great N. Ins. Co., 45 N.E.3d 1283 (Mass. 2016) (doctrine of equitable contribution among insurers)
- Manganella v. Evanston Ins. Co., 700 F.3d 585 (1st Cir. 2012) (insurer denial justified by exclusion prevents 93A/176D claim)
- Brazas Sporting Arms, Inc. v. American Empire Surplus Lines Ins. Co., 220 F.3d 1 (1st Cir. 2000) (relationship between ch. 176D and ch. 93A claims)