You Only Get the Insurance You Ask For

While renovating a historic Masonic Temple in Quincy, Massachusetts, workers sparked a fire that nearly burned the structure to the ground. At the time of the fire. Jay Patel, the president and sole owner of Dipika, Inc. (Dipika), was holder of a purchase and sale agreement to buy the Temple. The Supreme Judicial Court was  called upon to decide, among other things, whether Dipika’s putative liabilities arising from the fire are covered by its general liability insurance policy that only named Patel’s hotel as insured.

In Masonic Temple Association Of Quincy, Inc. v. Jay Patel & another; Leo Martin & others, third-party defendants (and two companion cases, No. SJC-13109, Supreme Judicial Court of Massachusetts, Norfolk (April 27, 2022) resolved the dispute.

BACKGROUND

Faced with financial pressure, the members of the Quincy Rural Masonic Lodge decided to sell their Temple building (Masonic Temple or Temple), a 1926 neoclassical edifice located on Hancock Street in Quincy. Title to the property was held by an affiliated charitable corporation. Masonic Temple Association of Quincy, Inc. (Masons). The Masons entered into a purchase and sale agreement with the Grossman Munroe Trust (Grossman Trust), under which the Grossman Trust would develop the building into two condominium units. The basement unit would be retained by the Masons to use as their lodge, while the Grossman Trust would become owner of the two-story upstairs unit.

Partway into the renovation, the Grossman Trust concluded that the project was not financially viable and assigned its interest in the purchase and sale agreement to Patel. Neither the purchase and sale agreement nor the assignment reference Dipika. Patel was the president and sole owner of Dipika, which operated a Super 8 motel in Weymouth. Patel also had prior experience, separate and distinct from his interest in Dipika, owning and operating several other hotels. He intended to convert the upstairs condominium unit in the Masonic Temple into a “boutique hotel.”

During Patel’s stewardship of the renovation, the Masons requested that he provide them with proof of insurance for the work. In response, Patel contacted Roblin Insurance Agency, Inc. (Roblin), which had acted as Dipika’s agent in acquiring its existing commercial property and general liability insurance policy for the Weymouth Super 8 motel from Union Insurance Company (Union). On July 25, 2013, Patel left a voicemail message with Dipika’s account manager at Roblin, stating: “I need to do a name, loss payee of Quincy Masonic Temple Associates, and this is something I need right away.” One minute later, he also sent Roblin an e-mail message, which read: “I need ryder [sic] for dipika inc name quincy masonic Temple association loss payee.”

Roblin responded to Patel’s e-mail message within one-half hour, transmitting a certificate of insurance for Dipika’s current policy. A Roblin account manager also followed up the next day, sending an e-mail message to Patel asking, “What is the relationship between Quincy Masonic Temple Association and Dipika? Are they asking you for a certificate?” Patel received that message but never responded to it.

The Fire

Several months later, two workers were on site, cutting metal, when a fire broke out. The damage was extensive; the Masons, through their public adjuster, submitted a claim to their property insurer for over $12 million, only about one-half of which was paid out. Shortly after the fire, Patel notified Union and requested coverage under the Dipika policy.

Union and Roblin filed motions for summary judgment against the Masons, Dipika, and Patel. A Superior Court judge granted summary judgment in favor of Union and Roblin on all counts.

DISCUSSION

Dipika’s policy contains a commercial property part and a commercial general liability part. The disagreement is over whether the insurance applies to those losses. The heart of the parties’ dispute over the scope of coverage is the designation of the named insured as “Dipika Inc. dba Super 8.”

According to Dipika and the Masons, the named insured’s designation that Dipika “dba Super 8” merely clarifies that the Weymouth Super 8 business was included within the broader Dipika coverage. Union’s stance is that the identification of the named insured as “Dipika Inc. dba Super 8” means that the policy covers only liability arising from Dipika’s activities doing business as the Super 8.

The interpretation of an insurance policy is a question of law. If the language is clear and unambiguous, courts must give effect to that language, without considering the underlying intent of the parties.

Although “dba Super 8” may not be determinative on its own, its plain meaning is not an important consideration in the court’s analysis. Here, the ordinary understanding of the phrase “doing business as Super 8” suggests that the policy covers only liability arising from Dipika’s activities that it undertakes doing business as a Super 8. For example,  the policy declarations Dipika’s “Business Description” is given as “Motel.”

Every phrase and clause must be presumed to have been designedly employed, and must be given meaning and effect. The Masons’ and Dipika’s interpretation, conversely, requires the court to render “dba Super 8” wholly superfluous, which it cannot do.

ENDORSEMENTS

The Masons and Dipika also argue that two endorsements to the commercial general liability policy expand coverage to include the Masonic Temple fire losses, pointing to schedules applying the endorsements to “ALL PROJECTS” and “ALL LOCATIONS.” The endorsements unambiguously raise the maximum dollar amount recoverable under the policy in certain circumstances, but — equally unambiguously — they do not affect what losses are covered in the first instance.

A careful reading of the endorsements reveals that they do not expand the scope of coverage to encompass occurrences not otherwise covered. Rather, the endorsements operate exactly as advertised in their titles: they create separate general aggregate limits for occurrences at different locations or involving different construction projects.

The endorsements do not, either by plain language or implication, affect what losses are covered in the first instance, and therefore do not extend coverage to include the Masonic Temple losses.

DUTY TO DEFEND

Dipika argued that, whatever the ultimate determination of indemnity. Union was at least obligated to defend it against fire-related lawsuits.

Although an insurer’s duty to defend is independent from, and broader than, its duty to indemnify, Union had no duty to defend. The factual allegations against Patel all concern the fire at the Masonic Temple. When matched to the policy’s terms unambiguously do not extend coverage to Dipika’s activities at the Temple — the allegations cannot reasonably supply even a rough sketch of a claim.

DIPIKA’S CLAIMS AGAINST ROBLIN

Dipika insists that, should it be unable to recover from Union, its losses should instead fall upon Roblin. All Dipika’s claims against Roblin, however, suffer from the same fundamental flaw: they are all premised on Patel requesting additional insurance for Dipika from Roblin. But even viewed in the light most favorable to Dipika, Patel’s asking to add the Masons as a “loss payee” was not a request for insurance.  Brokers have a duty to obtain insurance coverage that their client asks them to obtain. Roblin cannot be liable for failing to procure insurance when there was no intelligible request for it to do so.

THE MASONS’ CLAIMS AGAINST ROBLIN

The Masons asserted claims for misrepresentation and negligence against Roblin, premised on Roblin’s sending of the certificate of insurance to Patel.

In the context of a liability policy like Dipika’s, a certificate of insurance is simply a form that is completed by an insurance broker or agent at the request of a policyholder to document the fact that an insurance policy has been written. The one-page certificate furnished to Patel accurately describes his commercial general liability policy, lists the Masons as the “Certificate Holder,” and states on its face: “This Certificate Is Issued As A Matter Of Information Only And Confers No Rights Upon The Certificate Holder…”

Summary judgment was properly entered in favor of Union and Roblin, and the denial of the Masons’ motion to amend their complaint was proper. The judgments are therefore affirmed. The judgments of dismissal in the two companion cases are also affirmed.

The only interpretation that appropriately lends meaning to the choice of the insurer and insured to include the “dba Super 8” language when designating the named insured is that they intended to only insure against the risks of loss faced by the Super 8 motel. A professional like Mr. Patel, who owned and operated several commercial properties should have understood the need to insure against the risks he faced in the remodeling of a structure and the need of the seller for evidence that he had insurance protecting against the risk of loss faced by a structure under construction. He failed to obtain that coverage and tried to place the blame for his error on his agent and his motel’s insurer. It didn’t work.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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