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14-P-422                                            Appeals Court

   MORONEY BODY WORKS, INC.    vs.   CENTRAL INSURANCE COMPANIES.


                            No. 14-P-422.

       Worcester.       January 12, 2015. - August 6, 2015.

           Present:   Fecteau, Wolohojian, & Massing, JJ.


Insurance, Fire, Property damage, Construction of policy,
     Coverage, Amount of recovery for loss. Contract,
     Insurance. Damages, Breach of contract, Repairs.
     Practice, Civil, Damages.



     Civil action commenced in the Superior Court Department on
February 13, 2012.

     The case was heard by Richard T. Tucker, J., on motions for
summary judgment.


    William A. Schneider for the defendant.
    David K. McCay for the plaintiff.


    WOLOHOJIAN, J.     We consider whether a commercial property

insurance policy issued by Central Insurance Companies (Central)

provides coverage and, if so, to what extent, for damage to a

bookmobile caused by a fire at its insured, Moroney Body Works,

Inc. (Moroney).   Central relies principally on two provisions of
                                                                        2


its policy to support its denial of coverage.       First, it

contends that the "other insurance" provision means that

Central's coverage does not come into play until the policy

limit of a Massachusetts garage insurance policy issued to

Moroney by Pilgrim Insurance Company (Pilgrim) is exhausted.1

Second, Central argues, in the alternative, that its liability

is limited to the cost of repairing the bookmobile.       We conclude

that because the two policies insured the same interest in the

same property against the same risk, Central's "other insurance"

provision applies.   We also conclude that the "loss payment"

provision of Central's policy limits its liability, at its

election, to the cost of repair.    We accordingly reverse the

summary judgment in favor of Moroney on its breach of contract

claim.

     1.   Background.   The facts are undisputed.     Moroney

manufactures specialized truck bodies in Worcester.      On April 7,

2011, a fire began in one vehicle at Moroney's facility and

spread to a custom-built bookmobile that had just been completed

for the city of Beverly (city).    The city refused to accept

delivery of the bookmobile after the fire.

     Moroney had two insurance policies at the time of the fire:

a commercial property policy issued by Central, and a garage


     1
       Pilgrim entered into a settlement with the plaintiff and
is no longer a party in this case.
                                                                    3


insurance policy issued by Pilgrim.     Moroney demanded payment

under both.   Central denied liability.    Pilgrim's policy

provided primary coverage, and Pilgrim agreed that its policy

covered the cost of repairing the bookmobile.      It paid

$12,449.82 based on its appraiser's estimate of the repair costs

-- an amount Moroney thought inadequate given its own estimate

of the repair costs.

     Moroney sued both insurers.    The claims against Pilgrim

were resolved when it paid an additional amount which, in

combination with Pilgrim's earlier payment, resulted in Moroney

receiving more than the repair costs.     Central, on the other

hand, persisted in denying liability.     Ultimately, Central and

Moroney cross-moved for summary judgment, and those motions were

decided in favor of Moroney on its breach of contract claim.2

     2.   Discussion.   a.   Other insurance.   Central does not

dispute that the damage to the bookmobile was "direct physical

loss of or damage to Covered Property at [Moroney's] premises,"

as covered by its policy.    Instead, Central argues that its

coverage is excess to coverage under Pilgrim's garage insurance

policy and that it (Central) therefore has no liability unless

the loss exceeds the coverage limit of Pilgrim's policy.


     2
       Moroney also made claims for breach of the covenant of
good faith and fair dealing and a violation of G. L. c. 93A.
The motion judge allowed Central's motion on these claims, and
there is no appeal from that decision.
                                                                   4


Central relies on the following "Other Insurance" provision of

its policy:

         "2. If there is other insurance covering same loss
            or damage, . . . we will pay only for the amount
            of covered loss or damage in excess of the amount
            due from that other insurance, whether you can
            collect on it or not. But we will not pay more
            than the applicable limit of insurance"
            (emphasis added).

     "'Other insurance' clauses, clauses designed to establish a

policy's relationship with other policies covering a loss, were

first developed in the real property fire insurance field in

order to prevent owners from overinsuring."   Mission Ins. Co. v.

United States Fire Ins. Co., 401 Mass. 492, 495 (1988).     Such

clauses apply where there are two or more concurrent policies

that "insure the same risk and the same interest, for the

benefit of the same person, during the same period."3   Boston Gas

Co. v. Century Indem. Co., 454 Mass. 337, 361 n.36 (2009),

quoting from 23 Holmes, Appleman on Insurance § 145.4[C], at 34


     3
       "In general, there are three types of 'other insurance'
clauses -- pro rata, escape, and excess." Mission Ins. Co. v.
United States Fire Ins. Co., supra. "Pro rata clauses provide
that, if other insurance is available to the insured, the policy
containing the pro rata clause will contribute to the loss in
the proportion that its policy limit bears to the total limit of
all available policies. Escape clauses provide that, if there
is other insurance available to the insured, the policy
containing the escape clause will pay no benefits. Excess
clauses provide that, if there is other insurance available to
the insured, the policy containing the excess clause will pay no
benefits until such other insurance is exhausted." Id. at 495
n.3. The "other insurance" clause in this case made Central's
coverage excess to "the amount due" under the Pilgrim policy.
                                                                       5


(2d ed. 2003).   "It is generally held that in order for an other

insurance clause to operate in the insurer's favor, there must

be both an identity of the insured interest and an identity of

risk."4   15 Couch, Insurance § 219:14 (3d ed. 2005).

     Our cases have not previously addressed what it means for

the insured interests of two different policies to be the same.5

We begin by noting that although Pilgrim's policy was a garage

liability policy, and Central's was a commercial property

policy, that distinction alone is not dispositive.      Instead, the

inquiry turns on the terms of the respective policies.

     Although the record does not explicitly disclose the basis

upon which Pilgrim made payment, coverage under the Pilgrim

policy apparently lay under Section VII (Physical Damage

     4
       "The rule that the risks be identical in order for an
'other insurance' clause to apply does not mean that the total
possible coverage under each policy be the same, but merely that
with respect to the harm which has been sustained there be
coverage under both policies." 15 Couch, Insurance § 219:14.
There is no dispute that the same risk (fire) in this case was
covered under both policies. Cf. McCormick v. Travelers Indem.
Co., 22 Mass. App. Ct. 636, 639 (1986) (pro rata "other
insurance" clause did not apply where the two policies insured
against different risks, specifically, one insured against
damage caused solely by windstorms and one against damage caused
by water). See also Liquor Liab. Joint Underwriting Assn. of
Mass. v. Hermitage Ins. Co., 419 Mass. 316, 324 n.6 (1995),
citing 8A Appleman, Insurance § 4907.65, at 367-368 (1981).
     5
       Cases involving "other insurance" clauses often arise when
two policies have competing other insurance provisions and the
question is how to allocate or divide liability between the two
carriers. See, e.g., Mission Ins. Co. v. United States Fire
Ins. Co., 401 Mass. 492 (1988). We are not presented with such
a situation here.
                                                                 6


Coverage), which provided comprehensive coverage for covered

"autos" damaged by fire.6   Covered "autos" included vehicles

owned by Moroney, such as the bookmobile.   The Central policy

covered "direct physical loss of or damage to Covered Property

at the premises."   "Covered Property" included Moroney's

building, fixtures, machinery, equipment, personal property

owned by Moroney to maintain or service the building, and




     6
       We have inferred the basis of coverage from the fact that
the joint statement of undisputed facts states that Moroney
owned the bookmobile. Had ownership of the bookmobile not been
admitted, or if the city were the owner, then our analysis would
have been different. In that case, Moroney's interest in the
bookmobile would have been as a bailee for hire, see Wright v.
Heil Equip. Co., 357 Mass. 74 (1970) (repairer was bailee for
hire of tractor left in its custody for repairs); Black's Law
Dictionary 141 (6th ed. 1990) ("a mechanic to whom an automobile
is entrusted for repairs is a bailee for hire"), and coverage
would lie under a different provision of the Pilgrim policy.
Bailees generally have been held to have an insurable interest
in the bailed property that is separate from the interest of the
bailor. See, e.g., 43 Am. Jur. 2d Insurance § 186 (2013); 44
Am. Jur. 2d Insurance § 939 (2013). In those circumstances, the
insured interest under the Pilgrim and Central policies would
not have been the same, and Central would not have been entitled
to the benefit of the "other insurance" provision in its policy.
See Atlantic Mut. Ins. Co. v. Cooney, 303 F.2d 253, 268 (9th
Cir. 1962); Employers' Mut. Cas. Ins. Co. v. Hughes, 780 F.
Supp. 2d 1204, 1208 (N.D. Ala. 2011) (insured's interest in
value of her property is not the same as her interest in making
her mortgage payment in event home becomes uninhabitable, and
thus other insurance clause does not apply); De Foor v.
Northbrook Excess & Surplus Ins. Co., 128 Ill. App. 3d 929, 936
(1984) (vendor's legal interest in property is distinct and
different from vendee's equitable interest in insured property).
See also generally the discussion in United Natl. Ins. Co. v.
Mundell Terminal Servs., Inc., 915 F. Supp. 2d 809, 823-825
(W.D. Tex. 2012).
                                                                      7


business personal property.7    Thus, although employing different

language, both policies insured Moroney's interest as owner of

the bookmobile from the risk of fire.     Because both policies

insure the same insured's interest (Moroney's ownership) in the

same property (bookmobile) against the same risk (fire),

Central's "other insurance" provision applies.     Accordingly,

Central's liability does not begin until Pilgrim's policy limit

is exhausted.8

     b.    Loss payment.   Even if Central were not entitled to the

benefit of its "other insurance" provision, Moroney would fare

no better because of Central's loss payment provision:

     "4.    Loss Payment

     "a.    In the event of loss or damage . . . at our
           option, we will either:

           "1) Pay the value of lost or damaged property;
           "2) Pay the cost of repairing or replacing the
              lost or damaged property . . . ;
           "3) Take all or any part of the property at an
              agreed or appraised value; or
           "4) Repair, rebuild or replace the property with
              other property of like kind and quality . . . .

           "We will determine the value of lost or damaged
           property, or the cost of its repair or replacement,

     7
       Although we need not decide the question, within the
category of business personal property, coverage for the
bookmobile could be found either as "personal property owned by
you and used in your business," or as "stock," defined as
"merchandise held in storage or for sale, raw materials and in-
process or finished goods."
     8
       It is undisputed that Pilgrim's policy limit has not been
reached.
                                                                     8


        in accordance with the applicable terms of the
        Valuation Condition in this Coverage Form or any
        applicable provision which amends or supersedes the
        Valuation Condition."

    The function of this provision is unambiguous.      See Olson

v. Le Mars Mut. Ins. Co., 269 Neb. 800, 807-808 (2005); Colorado

Cas. Ins. Co. v. Sammons, 157 P.3d 460, 465, 466 (Wyo. 2007).

Compare Society of St. Vincent De Paul in the Archdiocese of

Detroit v. Mt. Hawley Ins. Co., 49 F. Supp. 2d 1011, 1018 (E.D.

Mich. 1999).   By its terms, the provision allows Central to

select whichever payment option it prefers, "effectively

insur[ing] the property for the lesser of actual cash value or

the cost to repair or replace the damaged property."    Olson v.

Le Mars Mut. Ins. Co., supra at 808.    See Colorado Cas. Ins. Co.

v. Sammons, supra.   The judge accordingly erred when he awarded

Moroney $126,232.20, representing the difference between the

original contract price for the bookmobile ($156,900) and the

amounts received in settlement with Pilgrim (totaling

$30,667.80).   Moroney was not entitled to receive anything more

than its repair costs.

    Contrary to Moroney's argument, the last paragraph of the

quoted loss payment provision does not alter Central's right to

choose the lesser measure of damages.   Instead, it pertains only

to the method of valuing the loss.   In other words, Central

retained the right to choose whether to pay to replace or repair
                                                                     9


the bookmobile, but the value of those repair or replacement

costs was subject to the valuation provision of the policy.9

Moroney is also not helped by the valuation provision in the

premier plus endorsement, which states that finished stock will

be valued at the selling price.10    That provision modifies the

valuation provision of the policy, not the loss payment

provision.

     3.   Conclusion.   For these reasons, we conclude that

Central is relieved of liability under the other insurance

provision of its policy, and that, even were that not the case,

its exposure would be limited to Moroney's repair costs.

     That portion of the judgment that entered in Moroney's

favor on its breach of contract claim is reversed.    In all other

respects the judgment is affirmed.

                                     So ordered.




     9
       The valuation provision provided: "We will determine the
value of Covered Property in the event of loss or damage as
follows: . . . At actual cash value as of the time of loss or
damage." This provision does not apply because Central chose to
compensate Moroney only for its repair costs.
     10
       "We will determine the value of finished 'stock' you
manufacture, in the event of loss or damage, at: (1) The
selling price, as if no loss or damage occurred; (2) Less
discounts and expenses you otherwise would have had."
