Robinson Donovan received a favorable decision from the Massachusetts Appeals Court affirming a judgment in favor of an insurer dismissing a claim for unfair settlement practices pursuant to M.G.L. c. 93A and c. 176D.  The decision addressed, for the first time, whether an insurer violates the requirement to effectuate prompt, fair and equitable settlements of claims in which liability is reasonably clear by failing to make a settlement offer where there are reasonable disputes about whether the insurer’s policy of insurance provides coverage for the alleged loss.

This action arises out of an claim for damages incurred as a result of costs incurred to remediate a parcel of property in Berkshire County.  The property owners, who were building a vacation home, had contracted with a landscaper for work on the property, including the removal of trees as provided by an Order of Conditions from the local conservation commission.  The conservation commission found that too many trees were removed, thereby endangering a nearby lake, and ordered the property owners to remediate the property.  The landscaper, or an agent thereof, allegedly admitted that it had exceeded the Order of Conditions.  The property owners and their insurer paid for the remediation, and then made a claim for the costs to the landscaper’s insurer.  The property owners and their insurer then filed an action against the landscaper’s insurer, and asserted a claim for violation of Chapter 93A and Chapter 176D against the landscaper’s insurer.  The complaint alleged that because the landscaper had admitted to liability, its insurer had a duty to make a reasonable settlement offer and failed to do so.

The action against the landscaper’s insurer was severed and stayed.  During the trial between the property owners, their insurer and the landscaper, the matter settled with the landscaper’s insurer paying the settlement. The property owners and their insurer then filed a motion seeking to lift the stay as to the landscaper’s insurer. Robinson Donovan, representing the landscaper’s insurer, agreed to lift the stay but asked for time to file a Motion for Judgment on the Pleadings.  The Trial Court allowed Robinson Donovan to file the motion.

Robinson Donovan’s Motion for Judgment on the Pleadings argued the insurer did not commit any violations of Chapter 93A, as a matter of law, because its policy of insurance did not afford coverage for the claims against the landscaper.  In support thereof, Robinson Donovan argued that the loss was not an occurrence, or, alternatively, the damages claimed were not covered based on the business risk exclusions to the commercial general liability policy.

The Trial Court agreed with Robinson Donovan’s arguments, and entered judgment in favor of the landscaper’s insurer, and the property owners and their insurer appealed.  The Appeals Court’s decision affirmed the Trial Court’s decision, finding that the landscaper’s policy of insurance with Robinson Donovan’s client did not provide coverage as the loss was not an “occurrence”.  The Appeals Court also concluded that two of the policy’s exclusions, commonly referred to Exclusion (j)(5) and (j)(6), also applied and barred coverage.  The Appeals Court also concluded, with respect to the allegations that it acted in bad faith, that since the landscaper’s insurer did not have a duty to settle the claim, there could be no liability under M.G.L. c. 176D, 3(9)(f), which is the duty to effectuate prompt, fair and equitable settlements of claims in which liability is reasonably clear.

The Appeals Court wrote that while liability against the tortfeasor may be clear, there is a difference between identifying a responsible tortfeasor and asserting a successful claim for indemnification, and the fact that the alleged tortfeasor may be liable for damages does not resolve the question of the insurer’s duty to indemnify.

Finally, the decision also provided clear guidance of the scope of the business risk exceptions and coverage for damages to one’s own property by a contractor of that party.