Shealey v. Federal Insurance
946 F. Supp. 2d 193
D. Mass.2012Background
- In Oct. 2006 Glenn Shealey’s guest house suffered water damage from a burst pipe; Federal Insurance Co. insured the property under a Masterpiece homeowner policy.
- Shealey’s claim was not denied on liability but disputed as to loss amount; a Mass. Gen. Laws ch. 175, § 99 panel awarded $513,454.65, paid in full.
- Plaintiff alleged breach of contract and breach of the implied covenant of good faith and fair dealing; sought declaratory relief interpreting policy provisions.
- The panel’s award denied certain losses (e.g., $105,000 for loss of use) and landscaping; paid balance within 30 days of award.
- Shealey filed suit Jan. 9, 2012, naming Federal and Chubb; the action challenged the amount paid and the insurer’s settlement methods.
- Court later bifurcated issues, addressing motion for judgment on the pleadings, then summary judgment and reconsideration for related claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the implied covenant claim survives under Massachusetts law | Shealey argues breach of the covenant due to delays and conduct in settling. | Defendants contend the covenant cannot create duties beyond the contract. | Dismissed; covenant cannot compensate beyond contract terms. |
| Whether the reference panel’s amount-of-loss findings are reviewable in court | Plaintiff contends panel miscalculated/erred in loss amount. | Panel findings are generally binding on amount of loss; only policy-term interpretations reviewable. | Claims challenging the panel’s factual loss calculation dismissed; only interpretation of policy terms preserved for court review. |
| Whether the panel’s interpretation of policy terms related to ‘rent’ and ‘house’ is reviewable | The term ‘rent’ should include caretaker arrangement; other term interpretations are challengeable. | Interpretation of terms is a matter of law and limited review. | Rent interpretation viable for challenge; house/landscaping interpretations dismissed as to non-interpretive grounds. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for pleading a claim)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (U.S. 2007) (heightened pleading standard for plausibility)
- Augenstein v. Insurance Co. of North America, 372 Mass. 30 (Mass. 1977) (preclusion limited to policy-term interpretation; award reviewable for law)
- Fox v. Employers’ Fire Ins. Co., 330 Mass. 283 (Mass. 1953) (review of panel awards limited to legal mistakes)
- Audubon Hill S. Condo. Ass’n v. Cmty. Ass’n Underwriters of Am., 82 Mass.App.Ct. 461 (Mass. App. Ct. 2012) (interpretation of unambiguous policy terms is a matter of law)
- Murphy v. Nat’l Union Fire Ins. Co., 438 Mass. 529 (Mass. 2003) (93A claim arising from insurance practices; cross-reference to statutory framework)