744 F.Supp.3d 124
D. Mass.2024Background
- Life Skills, Inc., a non-profit in Massachusetts, sustained significant damage to a basement classroom floor at its insured property, discovering severe structural decay and partial detachment from the exterior wall.
- Life Skills had a commercial insurance policy with Harleysville Insurance Co., which included “Additional Coverage – Collapse” for certain types of building failures.
- Harleysville initially acknowledged coverage and issued partial payment, but reversed course after an engineering report concluded the damage was due to long-term decay and did not constitute “collapse” per policy.
- Life Skills submitted higher repair estimates; Harleysville denied further coverage, stating exclusions in the policy applied.
- Life Skills sued for breach of contract (seeking coverage for repairs) and bad faith claims handling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether damage was an "abrupt collapse" covered by policy | Floor suffered a sudden, partial collapse due to hidden decay and the room became unusable | Floor only sagged significantly but remained standing, thus not a collapse under policy | Ambiguity exists; summary judgment denied for insurer |
| Applicability of policy exclusions | Additional Collapse Coverage provision reinstates coverage for hidden decay-induced collapse | General exclusions (e.g., long-term moisture, decay) preclude coverage | If collapse coverage is ambiguous or applies, general exclusions do not bar coverage |
| Whether insurer acted in bad faith under Mass. law | Harleysville’s investigation and coverage denial was improper and forced unnecessary litigation | Denied coverage based on a reasonable interpretation; no "rascality" or bad faith | 93A claim previously dismissed; no independent 176D claim allowed for businesses |
Key Cases Cited
- Hakim v. Massachusetts Insurers’ Insolvency Fund, 424 Mass. 275 (Mass. 1997) (ambiguous insurance policy terms construed in favor of insured)
- Easthampton Congregational Church v. Church Mut. Ins. Co., 916 F.3d 86 (1st Cir. 2019) (collapse provision ambiguity and relationship to exclusions)
- Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747 (Mass. 1993) (176D violations alone insufficient for business 93A §11 claim)
- Minturn v. Monrad, 64 F.4th 9 (1st Cir. 2023) (ambiguous contract terms are factual issues for trial)
- Cummings Props., LLC v. Pub. Serv. Ins. Co., 343 F. Supp. 3d 1 (D. Mass. 2018) (insurance contract interpretation standard at summary judgment)