Opinion
C.A. No. KC-2016-1281
03-11-2020
DUTCHMAN DENTAL LLC, Plaintiff, v. THE PROVIDENCE MUTUAL FIRE INSURANCE COMPANY, Defendant.
ATTORNEYS: For Plaintiff: Kevin J. Holley, Esq. For Defendant: Robert P. Corrigan, Esq.
DECISION LANPHEAR , J. Before this Court is Plaintiff Dutchman Dental LLC's (Plaintiff) Motion for Partial Summary Judgment. Plaintiff seeks summary judgment as to liability on all counts of the Complaint. The motion was argued before this Court on January 13, 2020. For the reasons set forth herein, this Court grants summary judgment in part and denies it in part.
I
Facts and Travel
Plaintiff entered into an insurance contract with Defendant The Providence Mutual Fire Insurance Company (Defendant), identified as Insurance Policy No. BOP0092782 00 (the Policy), for the period of January 16, 2016 through January 16, 2017. Compl. ¶ 3; Answer ¶ 1. DMV Holding Company LLC (DMV) is also a "named insured" on the Policy. Am. Compl. ¶ 35; Am. Answer ¶ 32. The Policy states, "[w]e will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations [clause] by or resulting from any Covered Cause of Loss." Answer ¶ 2.
In October 2016, Defendant unilaterally reformed the Policy and removed DMV Holding Co. LLC as a named insured. Am. Compl. ¶ 36; Am. Answer ¶ 33; Am. Compl. Exs. 1, 3. Although there are many issues regarding Defendant's ability to do so, those issues are not relevant to the within motion.
On October 28, 2016, Mike's Oil poured hundreds of gallons of home heating oil through a disconnected fill pipe into the basement of 1359 Main Road, Tiverton, Rhode Island, where Plaintiff operated its dental practice. Compl. ¶ 5; Answer ¶ 3; Am. Compl., Ex. 1; Pl.'s Mot. Summ. J., Ex. B. The oil was meant to be delivered to the house next door, 1353 Main Road, also owned by JP Van Regenmorter. Pl.'s Mot. Summ. J., Exs. B, C. The fill pipe at the dentist office had been disconnected in 2008, eight years before the accident. Am. Compl., Ex. 1. The operator did not realize his mistake until after he had already delivered 366 gallons of oil into the pipe. Pl.'s Mot. Summ. J., Ex. B. This oil was then expelled from the basement by a sump pump into the soil below and beside the building. Def.'s Mem. Opp'n Mot. Summ. J., Ex. C. Both the Tiverton Fire Department and the Rhode Island Department of Environmental Management (RIDEM) responded to the scene. Id. RIDEM then coordinated clean-up and remediation of the site. Id. at Ex. D.
Plaintiff then filed claims with Defendant for loss of business income and continuing business operating expenses such as payroll and repairs. On January 27, 2017, Defendant denied coverage to Plaintiff under the liability section of the policy. Am. Compl. ¶ 8; Am. Answer ¶ 5; Am. Compl., Ex. 1. Defendant stated that "[t]he discharged oil in the basement is a 'pollutant' under the policy and thus any claim for damages 'arising out of' the discharge of the oil into the basement is excluded." Am. Compl., Ex 1.
The "pollution exclusion" states: "We will not pay for loss or damage caused by or resulting from the discharge, dispersal, seepage, migration, release or escape of 'pollutants' unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the 'specified causes of loss.' But if the discharge, dispersal, seepage, migration, release or escape of 'pollutants' results in a 'specified cause of loss,' we will pay for the loss or damage caused by that 'specified cause of loss.'" Def.'s Mem. Opp'n Mot. Summ. J., Ex. A at 18.
Plaintiff then commenced both this civil action and an action against Mike's Oil. Mike's Oil had previously placed its liability insurer, EMC Insurance Company (EMC), on notice. Pl.'s Mot. Summ. J., Ex. C. That umbrella policy has coverage limits of $1,000,000. Id. EMC, on behalf of Mike's Oil, hired remediation services from Andy Barber Environmental Remediation to implement the remediation and excavation of the oil at the property. Id.
Mike's Oil then filed a third-party claim against DMV seeking contribution and indemnification for allegedly failing to close the oil delivery pipe that caused the oil mishap. Upon receiving the third-party complaint, DMV requested a defense from Defendant pursuant to the liability coverage contained in the Policy. Defendant then allegedly removed DMV as a named insured from the Policy and denied a duty to defend.
Plaintiff has now moved for partial summary judgment as to the breach of Defendant's obligations under the Policy by failing to provide Plaintiff with first-party coverage for the damages flowing from the negligent oil delivery. Plaintiff seeks the Court to find liability on all counts of the Complaint. Defendant has objected to the Court finding liability on all counts at this stage in the litigation.
II
Standard of Review
When deciding a motion for summary judgment, the trial justice must keep in mind that it '"is a drastic remedy and should be cautiously applied."' Steinberg v. State, 427 A.2d 338, 339-40 (R.I. 1981) (quoting Ardente v. Horan, 117 R.I. 254, 256-57, 366 A.2d 162, 164 (1976)). This Court will grant summary judgment '"only if, after reviewing the admissible evidence in the light most favorable to the nonmoving party, [the Court] conclude[s] that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law."' Rhode Island American Federation of Teachers/Retired Local 8037 v. Johnston School Committee, 212 A.3d 156, 158-59 (R.I. 2019) (quoting Newstone Development, LLC v. East Pacific, LLC, 140 A.3d 100, 103 (R.I. 2016)). However, only when the facts reliably and indisputably point to a single permissible inference can this process be treated as a matter of law. Steinberg, 427 A.2d at 340. '"Furthermore, the nonmoving party bears the burden of proving by competent evidence the existence of a disputed issue of material fact and cannot rest upon mere allegations or denials in the pleadings, mere conclusions or mere legal opinions."' JHRW, LLC v. Seaport Studios, Inc., 212 A.3d 168, 175 (R.I. 2019) (quoting Cancel v. City of Providence, 187 A.3d 347, 350 (R.I. 2018) (quoting Newstone Development, LLC, 140 A.3d at 103)).
III
Analysis
A
Applicable Pollution Exclusion
As a preliminary issue, the Court does not believe that either party seriously questions whether home heating oil, released from holding into a building, is a pollutant. Several laws of this state consider expelled oil to be a pollutant, and RIDEM imposes civil penalties when oil is not handled properly. See G.L. 1956 §§ 46-12.5.1-1, -3, and -6. The nearby jurisdictions of Massachusetts, Connecticut, New Hampshire, and Maine have also concluded that oil was a pollutant under similar circumstances. Thus, this Court concludes that oil is a pollutant under the Policy.
Under the Policy, pollutants are defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed." Policy section I(H)(10).
The Court can also easily conclude that the applicable policy exclusion here is section B(2)(j). However, Defendant admits that it quoted the incorrect preamble to this exclusion in its denial letter to Plaintiff. Defendant now concedes that section B(2)(j) is applicable here.
That section reads,
"B. Exclusions
. . . .
"2. We will not pay for loss or damage caused by or resulting from any of the following:
. . . .
"j. Pollution
"We will not pay for loss or damage caused by or resulting from the discharge, dispersal, seepage, migration, release or escape of 'pollutants' unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the 'specified causes of loss'. But if the discharge, dispersal, seepage, migration, release or escape of 'pollutants' results in a 'specified cause of loss', we will pay for the loss or damage caused by that 'specified cause of loss'."
The quoted preamble states,
"1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area." Pl.'s Mot. Summ. J., Ex. C.
The Court is concerned about Defendant's failure to reference the correct limitation in its denial letter. However, denial letters must merely be "sufficient to give plaintiffs notice of [the insurer's] intent to raise the [applicable] exclusion contained in the policy." Rueschemeyer v. Liberty Mutual Insurance Co., 673 A.2d 448, 451 (R.I. 1996). At this stage in the litigation, the Court cannot conclude that failing to include the correct preamble to the exclusion in Defendant's denial letter alone constitutes bad faith as alleged in Count IV of the Amended Complaint. Initially it is Plaintiff's burden to '"show the absence of a reasonable basis for denying benefits of the policy and the defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim."' Skaling v. Aetna Insurance Co., 799 A.2d 997, 1004 (R.I. 2002) (quoting Bibeault v. Hanover Insurance Co., 417 A.2d 313, 319 (R.I. 1980) (internal citations omitted)). Plaintiff has not yet met this heavy burden on its bad faith claim as there are remaining questions of fact. See Skaling, 799 A.2d at 1004 ("the question of whether or not an insurer has acted in bad faith in refusing to settle a claim shall be a question to be determined by the trier of fact") (internal quotation omitted).
The Court notes that "the insurer is not required to produce its claim file until the breach-of-contract claim has been resolved." Skaling, 799 A.2d at 1004. Thus, even if Plaintiff had met its burden here and the burden shifted to Defendant, the bad faith claim may be severed from the breach of contract claim.
Accordingly, the Court concludes that section B(2)(j) of the Policy is the appropriate exclusion here; however, the Court denies summary judgment as to the bad faith claim because questions of fact remain.
B
Coverage Under the Exclusion
To succeed on a breach of contract claim, a plaintiff must establish (1) the existence of a contract, (2) a breach of that contract, and (3) that the defendant's breach caused the plaintiff damages. Fogarty v. Palumbo, 163 A.3d 526, 541 (R.I. 2017); Petrarca v. Fidelity and Casualty Insurance Co., 884 A.2d 406, 410 (R.I. 2005). An insurance policy is interpreted through the "rules established for the construction of contracts generally." Nunez v. Merrimack Mutual Fire Insurance Co., 88 A.3d 1146, 1149 (R.I. 2014). If the policy is not ambiguous, then the Court will not depart from the literal language of the policy. Id. "Indeed, as this Court often has said, we shall 'refrain from engaging in mental gymnastics or from stretching the imagination to read ambiguity into a policy where none is present.'" Id. (quoting Koziol v. Peerless Insurance Co., 41 A.3d 647, 651 (R.I. 2012) (quoting Bliss Mine Road Condominium Association v. Nationwide Property and Casualty Insurance Co., 11 A.3d 1078, 1083 (R.I. 2010))).
An '"insured seeking to establish coverage bears the burden of proving a prima facie case, including but not limited to the existence and validity of a policy, the loss as within the policy coverage, and the insurer's refusal to make payments as required by the terms of the policy."' Insurance Co. of North America v. Kayser-Roth Corp., 770 A.2d 403, 416-17 (R.I. 2001) (quoting General Accident Insurance Co. of America v. American National Fireproofing, Inc., 716 A.2d 751, 757 (R.I. 1998)). "Once the insured makes a prima facie showing of coverage, '[t]he insurer then bears the burden of proving the applicability of policy exclusions and limitations in order to avoid an adverse judgment.'" Id. at 417 (quoting General Accident Insurance Co., 716 A.2d at 757).
Here, the parties agree that a contract exists with respect to the Policy. Further, the parties agree that the appropriate exclusion to be analyzed by the Court is subsection B(2)(j) of the exclusions section. Because the Policy has been established, Defendant bears the burden of proving the pollution exclusion applies. See Insurance Co. of North America, 770 A.2d at 416-17.
The Supreme Court of Rhode Island has yet to address a case on point with the issues present here. Textron, Inc. v. Aetna Casualty & Surety Co. discusses a pollution exclusion clause in an insurance contract and its applicability to an accidental release of toxic chemical wastes. 754 A.2d 742 (R.I. 2000). However, Textron is distinguishable from the facts here. There, the insured was admittedly responsible for releasing pollutants and for resulting damage; however, the insured believed there may have been other causes contributing to the damage. Id. at 755-56. The Court needed to do fact finding to determine the different pollutions and their effects. Id. at 756. Here, Plaintiff has not taken any affirmative action or caused any of the damage, and there are no competing causes of damage. Rather, the damage was caused by a singular chain of events starting with the potential negligence of third parties: the tank was removed by a prior owner that never capped or removed the fill pipe; the pipe remained uncapped for several years; the oil company delivered the oil to the wrong address.
Because the High Court has yet to speak on the issue here, this Court looks to sister jurisdictions for guidance. The Supreme Judicial Court of Massachusetts held that "where the excluded event is not the cause of the loss, but rather the result of a covered risk, [such as the negligence of a third party,] the insured may recover." Jussim v. Massachusetts Bay Insurance Co., 610 N.E.2d 954, 957 (Mass. 1993). The Massachusetts high court also looked to other exclusionary language in the policy and compared it to the less limiting exclusion at issue there. Id. Therefore, it is clear that under Massachusetts law, limited exclusions may still allow coverage for losses when the event was triggered by a covered risk.
More specifically, the Massachusetts courts have also previously decided against this particular defendant when defendant attempted to deny coverage under a similar exclusion. The Massachusetts trial court found that while one event may be expressly excluded, it will not be where it is "the end of a direct causal chain emanating from a covered risk of loss expressed." Driscoll v. Providence Mutual Fire Insurance Co., No. 199702269, 2004 WL 1109821, at *3 (Super. Ct. Mass. Apr. 9, 2004). In affirming the trial court, the Appeals Court of Massachusetts noted that unlike other exclusion subsections, the applicable subsection there did "not include an anticoncurrent cause provision, which would bar coverage for damage due to certain causes regardless of otherwise covered causes of damage." Driscoll v. Providence Mutual Fire Insurance Co., 867 N.E.2d 806, 811 (Mass. App. Ct. 2007).
The Court finds coverage here. The damage to Plaintiff was caused by an unbroken chain of events, initiated by the negligence of a third party—a covered risk. The applicable preamble to the exclusion at issue does not include the same limiting language of the preamble in the prior exclusions subsection, section B(1) of the Policy. Where section B(1) contains language limiting coverage for those excluded events that occur even with concurrent covered causes, section B(2) contains no such language. Accordingly, the Court grants summary judgment as to liability on Count I, Plaintiff's breach of contract claim.
See Norman J. Singer & Shambie Singer, Statutes and Statutory Construction § 47:23 (7th ed. 2014) (speaking to the statutory construction rule of expression unius est exclusion alterius and noting that "where a [legislature] includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed [the legislature] acts intentionally and purposely in the disparate inclusion or exclusion" (quoting Tarrant Regional Water District v. Herrmann, 133 S. Ct. 2120, 2131 (2013))). As the insurer, Defendant has the ability to change the language in its policies or move the pollution exclusion into section B(1). However, because it has not done so, the ambiguity created is held strictly against the insurer, and this Court finds that the lack of such language in section B(2) allows for coverage where there is a concurrent covered risk. Textron, Inc., 754 A.2d at 748 (finding ambiguity in the language of the policy and the meaning of the term "sudden" in the applicable exclusion).
IV
Other Issues
Although Plaintiff requests a finding of liability on all counts of the Complaint, such liability has not been established. It is the moving party's obligation to point the Court to the undisputed material facts that support a finding in favor of that party, see Steinberg, 427 A.2d at 339; the Court should not be left to scour the record for such evidence. See McMahon v. Deutsche Bank National Trust Co., 131 A.3d 175, 176 (R.I. 2016) (holding that when a "plaintiff has failed to present any argument grounded in specific facts and law to support his claim that the Superior Court justice erred in granting the summary judgment," the Supreme Court will not "scour the record to identify facts in support of the plaintiff's broad claims" and "will not give life to arguments that the plaintiff has failed to develop on his own").
V
Conclusion
For the foregoing reasons, this Court grants Plaintiff's Motion for Partial Summary Judgment as to liability on Count I and denies the motion as to Counts II, III, IV, and V.
ATTORNEYS:
For Plaintiff: Kevin J. Holley, Esq.
For Defendant: Robert P. Corrigan, Esq.