LUCIA SALVATI, INDIVIDUALLY, AND AS THE ASSIGNEE OF ROBERT EASTON, AJAX INVESTMENT PARTNERS, LLC, LOVEJOY WHARF, LLC, BEVERLY WHARF, LLC, NORTH WASHINGTON WHARF, LLC, AND AB WHARF, LLC, Plaintiff, Appellant,
AMERICAN INSURANCE COMPANY, Defendant, Appellee.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS [Hon. Rya W. Zobel, U.S. District Judge]
R. Grady, Jr., with whom Frank J. Federico, Jr., Susan E.
Bochnak, and Sheff Law Offices, P.C. were on brief, for
Gregory P. Varga, with whom Linda L. Morkan, Jonathan E.
Small, and Robinson & Cole LLP were on brief, for
Barron, Stahl, and Lipez, Circuit Judges.
insurance dispute, we must decide whether the plaintiff in a
wrongful death action, who reached a settlement with the
defendants and their primary insurance carrier, can recover
the amount exceeding the primary policy limits from the
defendants' excess insurer. The district court concluded
that the settlement agreement did not trigger the excess
policy because the agreement was not accompanied by a court
judgment. Hence, it granted the excess insurer's motion
to dismiss the plaintiff's claims under the policy. While
we disagree with the district court's interpretation of
the pertinent policy language, we affirm the dismissal
because the plaintiff has not presented a plausible argument
that the settlement agreement triggered the excess
insurer's duty to indemnify.
17, 2010, Gerardo Salvati died as a result of injuries he
sustained while doing maintenance work for Ajax Management
Partners, LLC at the Lovejoy Wharf building in Boston. On
that day, Mr. Salvati was asked to examine the condition of
the brick facade of the building. While he was standing on a
ladder inspecting the building, a sizable chunk of brickwork
came loose and suddenly fell from the building, crashing into
him and causing him to fall to his death. According to the
operative complaint before the district court, the building
had been in a state of disrepair for years, and the owners of
the property were aware that the building's loose and
decaying brickwork was in need of repair.
September 2011, Gerardo Salvati's wife, Lucia
(hereinafter referred to as "Salvati"), filed a
lawsuit in Suffolk County Superior Court, seeking damages for
wrongful death and loss of consortium individually and in her
capacity as executrix of her husband's estate. The
defendants in that action (the "Underlying
Defendants") were Robert Easton, Gerardo Salvati's
supervisor at the time of his death and the person holding
the ladder when the accident occurred, and a group of
individuals and limited liability companies who owned the
building where the accident occurred. The Underlying Defendants
had two insurance policies: a primary policy through Western
World Insurance Company ("Western World") in the
amount of $1 million and an excess policy through the
American Insurance Company ("AIC") in the amount of
$9 million (the "Excess Policy"). The Underlying
Defendants informed both insurance companies of Salvati's
October 2012, AIC informed the Underlying Defendants that it
would not defend them against, or indemnify them for damages
from, Salvati's suit. AIC's disavowal of coverage
effectively left the Underlying Defendants with only the
primary policy from Western World. The Underlying Defendants
thus initially told Salvati that they were insured for only
$1 million, although Salvati later learned of the Excess
Policy. The parties attempted mediation, during which Salvati
requested damages in excess of the primary insurance
coverage, but within the coverage amount of the Excess
Policy. Despite AIC's refusal to defend the Underlying
Defendants, a representative and an attorney from AIC were
present at the mediation sessions. The parties failed to
reach an accord during mediation. In November 2014, Salvati
sent a demand letter to AIC seeking payment under the Excess
Policy, but AIC once again refused to provide coverage.
The Settlement Agreement
and the Underlying Defendants finally reached a $6 million
settlement agreement (the "Settlement Agreement")
in December 2014. The Settlement Agreement has three key
elements relevant to this appeal. First, as the district
court observed, it "provided for the total payment of
$6, 000, 000 to Salvati." Salvati v.
Am. Ins. Co., No. 1:15-cv-13136-RWZ, slip op. at 2
(D. Mass. Mar. 15, 2016) (Memorandum of Decision and Order).
Second, in exchange for tendering the full $1 million of the
Western World primary insurance policy, the Agreement
released both Western World and the Underlying Defendants
from any further liability. Third, the Agreement assigned all
rights previously held by the Underlying Defendants against
AIC to Salvati, allowing her to seek recovery of the
remaining $5 million from the Excess Policy. However, the
Agreement also stipulated that the settlement was not
contingent on the ultimate availability of the excess
coverage, and specified that the Underlying Defendants did
not represent that excess coverage was necessarily available.
Moreover, the Underlying Defendants expressly disclaimed
wrongdoing in the Agreement.
to Massachusetts law, which requires court approval of
settlements of cases in which workers' compensation
benefits have been paid, see Mass. Gen. Laws ch.
152, § 15, the Superior Court approved the Settlement
Agreement, and the case was dismissed with prejudice.
The Present Case
April 2015 Salvati, acting as the assignee of the Underlying
Defendants, filed a two-count complaint against AIC in
Suffolk County Superior Court. In Count I, she alleged that
AIC had breached its contract (i.e. the Excess Policy
agreement) with the Underlying Defendants by refusing to
indemnify them for the liability they had incurred through
the Settlement Agreement. In Count II, she sought a
declaratory judgment that she was entitled to collect the
remainder of the settlement amount from AIC under the Excess
removed the case to federal court and filed a motion to
dismiss, which the district court denied. Meanwhile, Salvati
filed an amended complaint in which she added claims under
Massachusetts General Laws chapter 93A (Count III, consumer
protection) and chapter 176D (Count IV, unfair and deceptive
acts in insurance), as well as two counts of professional
negligence based on AIC's failure to settle her claims
against the insureds (Counts V and VI). AIC responded with a
second motion to dismiss.
district court granted this motion, holding that the amended
complaint failed to state a cognizable claim for breach of
contract (Count I) and declaratory judgment (Count II). The
court reasoned that AIC's duty to indemnify could only be
triggered when the Underlying Defendants became legally
obligated to pay Salvati. Here, however, the Underlying
Defendants had not incurred such an obligation "because
the Underlying Action was dismissed with prejudice and no
judgment entered against the Underlying Defendants, AIC's
insured." Moreover, the court noted that "AIC was
not a party to the underlying settlement and thus never
agreed or became contractually bound to pay the $5, 000,
000." Salvati, No. 1:15-cv-13136-RWZ, slip op.
court also concluded that, because AIC's obligation to
pay under the terms of the Excess Policy was a necessary
condition to the Chapter 93A consumer protection claim (Count
IV) and the professional negligence claims (Counts V and VI),
it was appropriate to dismiss those claims. Finally, the
court dismissed Count III, which alleged a violation of
Massachusetts General Laws chapter 176D for failure to settle
an insurance claim in which liability has become reasonably
clear, on the ground that Chapter 176D "provides no
private cause of action and is enforceable only by the
commissioner of insurance." Id. at 6 (quoting
Metro. Prop. & Cas. Ins. Co. v.
Bos. Reg'l Physical Therapy, Inc., 538 F.Supp.2d
338, 343 (D. Mass. 2008)). On appeal, Salvati argues that the
district court erred in dismissing each of her claims.
review a district court's dismissal for failure to state
a claim de novo. Coll. Hill Props., LLC v.
City of Worcester, 821 F.3d 193, 195 (1st Cir.
2016). As this case comes to us through diversity
jurisdiction, we look to state law to determine the
substantive rules of decision. See Erie R.R. Co.
v. Tompkins, 304 U.S. 64, 78 (1938). It is
undisputed that Massachusetts law applies in this case. The
insured risk was located in Massachusetts, and the underlying
accident occurred in Massachusetts. See Bushkin Assocs.,
Inc. v. Raytheon Co., 473 N.E.2d 662,
669 (Mass. 1985).
Count One: Breach of Contract
begin with the breach of contract claim because the
determination of AIC's contractual obligation will in
turn affect our review of most of the remaining claims. We
review de novo the district court's interpretation of the
excess insurance ...