Pacific Indemnity Co. v. Deming
140 F. Supp. 3d 152
D. Mass.2015Background
- On May 27, 2013 John Deming (a tenant in Unit 1801) left his bathtub running, which overflowed and damaged Unit 1601 below. Pacific Indemnity insured Unit 1601 and paid $351,159.01 for the damage as subrogee of its insured.
- Condominium governing documents (Master Deed, Declaration/Trust, and By‑Laws) required unit owners to carry insurance that "shall" include waivers of subrogation and required tenants to comply with applicable provisions.
- Deming executed lease addendum/letter acknowledging he would comply with the condominium documents. Deming’s insurer (State Farm) policy language allowed an insured to waive rights in writing before a loss.
- Pacific filed suit in subrogation against Deming for the loss. Deming moved for summary judgment arguing Pacific’s subrogation rights are waived by the condominium by‑laws; Pacific cross‑moved arguing the waiver does not apply to Deming/the insurer because Deming (or the unit owner) did not actually procure a policy containing a waiver.
- The district court found the by‑laws unambiguous, running with the land, binding tenants in privity of estate, and concluded the insurer (Pacific) is barred from subrogation; Deming’s motion was granted and Pacific’s denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pacific’s subrogation rights are barred by condominium by‑laws requiring unit owner policies to contain waivers of subrogation | Pacific: insured did not actually secure a policy with a subrogation waiver so insurer’s subrogation should survive | Deming: by‑laws run with the land and bind tenants; waiver prevents insurer recovery | Waiver applies; Pacific cannot subrogate — summary judgment for Deming |
| Whether a tenant (Deming) is bound by by‑laws requiring waivers of subrogation | Pacific: tenant cannot assert a contractual impediment binding insurer | Deming: tenant is in privity of estate and subject to covenants running with the land | Tenant is bound by the by‑laws via privity of estate; holds benefit and burden |
| Whether the by‑laws’ requirement is "self‑effectuating" (i.e., effective even if owner didn’t procure the specified policy) | Pacific: requirement isn’t self‑effectuating; absence of an actual waiver means insurer may subrogate | Deming: purchasers/tenants take subject to the by‑laws; insurer stands in insured’s shoes and cannot benefit from insured’s breach | Court adopts analogous authority and Massachusetts contract principles: insurer cannot benefit from insured’s breach; waiver bars recovery |
| Whether cited contrary authority (e.g., McGillick) governs here | Pacific: relies on cases allowing subrogation where tenants not bound | Deming: distinguishes those cases by pointing to different by‑law language here | McGillick and similar cases are distinguishable; court enforces the condominium’s unambiguous provisions |
Key Cases Cited
- Liberty Mut. Ins. Co. v. Nat’l Consol. Warehouses, Inc., 34 Mass. App. Ct. 293 (Mass. App. Ct.) (insurer succeeds to insured’s rights by subrogation)
- Haemonetics Corp. v. Brophy & Phillips Co., 23 Mass. App. Ct. 254 (Mass. App. Ct.) (insured waiver of subrogation bars insurer’s recovery)
- Noble v. Murphy, 34 Mass. App. Ct. 452 (Mass. App. Ct.) (restrictions in master deed/by‑laws are covenants running with the land)
- Franklin v. Spadafora, 388 Mass. 764 (Mass.) (unit purchasers accept restrictions required by condominium documents)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S.) (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S.) (summary judgment and genuine issue standard)