Opinion
No. 12–P–1905.
2013-07-29
TITEFLEX CORPORATION v. LIBERTY MUTUAL FIRE INSURANCE COMPANY.
By the Court (GRASSO, SIKORA & MALDONADO, JJ.).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
This is a cross appeal from a judgment in an action by an insured, Titeflex Corporation (Titeflex), against its insurer, Liberty Mutual Fire Insurance Company (Liberty), for failure to provide a defense in a class action. A judge of the Superior Court concluded that (1) as established in Omega Flex, Inc. v. Pacific Employers Ins. Co., 78 Mass.App.Ct. 262, 267–268 (2010) ( Omega Flex ), the applicable commercial general liability (CGL) policies
required Liberty to provide Titeflex a defense, (2) Massachusetts' statutory rate of prejudgment interest applies to the attorney's fees and costs owing to Titeflex for its defense, and (3) Liberty is not liable under the “supplementary payments” provision of the policies for Titeflex's share of common fund attorney's fees and administrative costs awarded as part of the class action settlement. We affirm for the reasons set forth in the judge's comprehensive and well-reasoned memorandum of decision, which we explicitly acknowledge. See Kirschbaum v. Wennett, 60 Mass.App.Ct. 807, 809 (2004) (where judgment under review is the product of such comprehensive and well-reasoned decision we can affirm for substantially the reasons set forth in judge's memorandum of decision).
Liberty issued CGL policies to Smiths Group North America, Inc. that list over sixty insureds, including Titeflex.
1. Background. In November, 2004, Larry Berry and other plaintiffs filed a class action in Arkansas (the Berry action) against Titeflex and other manufacturers and distributors of corrugated stainless steel tubing (CSST). As noted by the judge, “The plaintiffs claimed that the CSST installed in their properties had been designed, manufactured and sold without sufficient thickness to protect against combustion after a lightning strike. Among other prayers for relief, the plaintiffs sought damages to provide protection from the alleged defect in the tubing, as well as an injunction requiring that notice be provided to class members whose properties already had been damaged so that they could seek additional payment for their loss.”
“Specifically, both the First Amended Complaint ... and the Second Amended Complaint ... included prayers for relief requesting that the court ‘award an amount equal to the cost to install lightning strike protection and insulation to stop lightning strikes from contacting the premises and/or install appropriate grounding of the pipes, thereby preventing the CSST piping from causing fires,’ and further ... grant ‘an injunction requiring Defendants to notify all Class Members that they are entitled to submit an additional or supplemental request for payment in connection with their prior loss and/or damage to their structure and/or premises.’ “
As pertinent here, after Liberty refused to provide Titeflex a defense under the applicable CGL policies, Titeflex retained counsel and, along with the other defendants, reached a class-wide settlement in the Berry action. The judgment incorporating that settlement directed that Titeflex pay approximately $11.6 million in “costs, including attorneys' fees and expenses to Class Counsel.”
At issue is whether Liberty is liable to Titeflex under the applicable CGL policies for (1) its costs of defense and (2) the common fund attorney's fees and administrative costs awarded to class counsel as part of the settlement of the Berry action.
Under those policies, Liberty promised to “pay those sums that the insured becomes legally obligated to pay as damages because of ... ‘property damage’ to which this insurance applies.” The policies provided that Liberty had “the right and duty to defend the insured against any ‘suit’ seeking those damages” but that Liberty had “no duty to defend the insured against any ‘suit’ seeking damages for ... ‘property damage’ to which this insurance does not apply.” The policies defined “property damage” as “[p]hysical injury to tangible property, including all resulting loss of use of that property.” The policies covered such property damage only if the damage was caused by an “occurrence,” defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
Titeflex does not appeal from the determination that Liberty does not have a duty to indemnify under the policies.
2. Duty to defend. In her memorandum of decision, the Superior Court judge rejected Liberty's contention that Pennsylvania rather than Massachusetts law controlled and that Pennsylvania law would preclude coverage under CGL policies like those issued to Titeflex because the underlying claim against the insured alleged property damage caused by the insured's faulty workmanship. See Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 335–336 (2006) ( Kvaerner ). The judge concluded that under both Massachusetts
and Pennsylvania law the determinative question is whether the allegations of the complaint in the Berry action are “reasonably susceptible of an interpretation that they state or adumbrate a claim covered by the policy terms.” Trustees of Tufts Univ. v. Commercial Union Ins. Co., 415 Mass. 844, 847 (1993). Compare Cadwallader v. New Amsterdam Cas. Co., 396 Pa. 582, 590 (1959) (insurer has duty to defend “[w]hen ... complaint comprehends an injury which may be within the policy” [emphasis omitted] ). We agree that whether analyzed under Massachusetts or Pennsylvania law the determinative question is whether the underlying complaint states a claim that gives rise to a possibility of recovery under the policy, and under the reasoning of Omega Flex, 78 Mass.App.Ct. at 267–268, such a possibility of recovery exists here.
Liberty concedes that if Massachusetts law governs it owes Titeflex a duty to defend.
We agree with the judge's analysis that “ Kvaerner dictates a result no different than the result that would obtain if Massachusetts law were applied” because the allegations in Kvaerner addressed only a claim of faulty workmanship and not damage to another's property. We are in particular agreement with the judge's assessment that Liberty owes Titeflex a duty to defend for precisely the reasons set forth in Omega Flex, 78 Mass.App.Ct. at 267–268: “The duty to defend against the claims alleged in the Berry action is triggered by the request for relief on behalf of class members who have sustained property damage to their premises—property other than the product itself.... [T]he complaint also sought injunctive relief for class members whose properties had already been damaged; it was not necessary that the complaint specifically allege that lightning strikes ... had already occurred.... [R]egardless whether Pennsylvania or Massachusetts law applies, Liberty owed a duty to defend Titeflex in the Berry action.”
Omega Flex resolved whether one of Titeflex's codefendants in the Berry action was entitled to a defense under a CGL policy substantially identical to Liberty's. See Omega Flex, 78 Mass.App.Ct. at 264, 267.
Discerning no conflict between Massachusetts and Pennsylvania law, we apply Massachusetts law. See Bushkin Assocs., Inc. v. Raytheon Co., 393 Mass. 622, 631 (1985); Lou v. Otis Elevator Co ., 77 Mass.App.Ct. 571, 577 n.11 (2010).
3. Prejudgment interest. Liberty's appellate challenge to the judge's determination that Massachusetts law controls the rate of prejudgment interest to be applied to Titeflex's damages for its defense costs does not rise to the level of adequate appellate argument. See M.R.A.P. 16(a)(4), as amended, 367 Mass. 921 (1975). Even were that not the case, we agree with, and need not repeat, the reasoning and authorities relied upon by the judge. See Kirschbaum v. Wennett, 60 Mass.App.Ct. at 809. We conclude that Massachusetts' statutory rate of twelve percent interest applies rather than Pennsylvania's rate of six percent. Compare G.L. c. 231, § 6C, with 41 Pa. Cons.Stat. § 202 (1999).
4. “ Supplementary Payments.” Titeflex maintains that the judge erred in concluding that the common fund attorney's fees and administrative costs awarded in the Berry action
do not fall within the ambit of “ ‘costs taxed’ against the insured” in the “supplementary payments provision” of the policy.
The final judgment states, “Titeflex shall be responsible for payment of costs, including attorneys' fees and expenses to Class Counsel in the amount of $11,611,111.00, as this Fee Award represents a fair, reasonable and adequate amount for the benefit achieved for the Class by Class Counsel ” (emphasis added).
The policy promises that Liberty “will pay, with respect to ... any ‘suit’ against an insured ... [a]ll costs taxed against the insured in the ‘suit.’ “
We reject Titeflex's contention that Liberty is estopped from asserting that the common fund attorney's fees are not costs that fall within the supplementary payments provision of the policies by virtue of Prichard v. Liberty Mut. Ins. Co., 84 Cal.App. 4th 890 (2000), which the judge's decision correctly distinguished as inapplicable to the circumstances here.
“Words in an agreement are given their ordinary and usual sense ‘unless it appears that [the words] are to be given a peculiar or technical meaning.’ “ Springfield v. Department of Telecommunications & Cable, 457 Mass. 562, 568 (2010) (citation omitted). Whether analyzed technically or from the perspective of a reasonable insured, the common fund attorney's fees and administrative costs awarded in the Berry action are not “costs” within the meaning of the supplementary payments provision of the policies. See Cody v. Connecticut Gen. Life Ins. Co., 387 Mass. 142, 146 (1982); Lodge Corp. v. Assurance Co. of America, 56 Mass.App.Ct. 195, 197 (2002). That the court in the Berry action described these amounts as part of “costs” is not determinative. As noted by the judge:
“The legal context (‘suit’) in which the Supplementary Payments provisions require Liberty to pay ‘costs taxed’ against its insured indicates that those ‘costs taxed’ should be given the meaning applied to proceedings in court. See Burrage v. Bristol County, 210 Mass. 299, 300 (1911). Such legal or taxable costs do not include attorney's fees, except in accordance with specific statutory provisions or court rules. See, e.g., Bournewood Hosp., Inc. v. Massachusetts Comm'n Against Discrimination, 371 Mass. 303, 311–312 (1976) .... The ‘costs, including attorney's fees,’ Titeflex was required to pay by the Arkansas court's Final Order and Judgment in the Berry action were not ‘costs taxed’ in this technical, legal sense. The Berry action class counsel fees apportioned to Titeflex by the Arkansas court are therefore not covered by the Supplementary Payments provisions in the Liberty policies.”
The common fund attorney's fees and administrative costs awarded by the Arkansas court were not “costs” associated with the defense of the Berry action, but part of the “benefit achieved for the Class by Class Counsel” under the “common fund or common benefit” approach. So viewed, the court-ordered payment of class counsel fees is more akin to a damage award than to fees or costs of defense. Indeed, the effect of making the common fund fees part of “supplementary payments” would transform Liberty's obligation into a duty of indemnification where none exists.
In sum, we agree the supplementary payments provision of the Liberty policies does not cover the attorney's fees and administrative costs awarded in the Berry action.
Judgment affirmed.