Tocci v. Commonwealth Summary Judgment Ruling

Robins, Kaplan, Miller & Ciresi L.L.P. recently won a summary judgment ruling in favor of its client, Commonwealth Insurance Company, upholding and applying the plain language of code upgrade and faulty workmanship policy provisions.

On May 10, 2007 the Massachusetts Superior Court, Middlesex County, found that Commonwealth had no obligation to pay for the cost of bringing a 1,200 foot retaining wall into compliance with local building codes. The court also held that Commonwealth was not required to pay for claimed business interruption losses from a delay in the issuance of occupancy permits while the wall was brought into compliance with the building code.

The plaintiff, Tocci Building Corporation, was the general contractor for a new hotel project. Towards the end of construction but before occupancy of the hotel, a massive rainstorm washed away approximately 100 feet of the placed-stone retaining wall. The building inspector found that the wall's construction method was not up to code. The inspector refused to issue an occupancy permit until after grouting was added to the wall's entire length. Tocci claimed this delayed the hotel opening by over three months.

Commonwealth paid for the cost of repairing the rain damage to the 100 foot section of wall, associated cleanup and other expenses, and for two weeks of business interruption – for the period of time required to repair the 100 foot section of wall.

In its suit, Tocci argued variously that policy exclusions pertaining to faulty workmanship and code upgrades were ambiguous, that the business interruption period included the full time to upgrade the wall (not only time required to repair the 100 foot section), and that the retaining wall was within the meaning of the word “building” in an endorsement that added back limited code upgrade coverage. Tocci also argued that Commonwealth breached Massachusetts General Laws chapter 93A, the Unfair and Deceptive Trade Practices statute.

The court rejected each of Tocci's arguments. It found no ambiguity in the policy, and applied the plain language of the policy's faulty workmanship and enforcement of local ordinance exclusions. Also applying the ordinary meaning of the word “building,” the court found it not to include a retaining wall. Finally, the court agreed that the proper length of the business interruption loss was only the time needed to repair the 100-foot section of wall damaged by the rainstorm. The court observed that:

The plaintiffs are incorrect in their assertion that the policy covers expenses incurred in remedying ordinance violations. If this were true, businesses could disregard building codes – negligently or intentionally – secure in the knowledge that their insurers will compensate them for remedying such defects.  Neither Commonwealth nor any other insurer is in the business of insuring against noncompliance with the law.