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14-P-917                                             Appeals Court

     LINDA HAWLEY & another1     vs. PREFERRED MUTUAL INSURANCE
                                COMPANY.


                             No. 14-P-917.

        Hampden.       April 10, 2015. - September 16, 2015.

            Present:     Cypher, Trainor, & Katzmann, JJ.


Insurance, Reference process, Arbitration, Coverage, Water
     damage. Contract, Insurance. Consumer Protection Act,
     Insurance, Unfair act or practice. Limitations, Statute
     of. Practice, Civil, Statute of limitations, Consumer
     protection case.



     Civil action commenced in the Superior Court Department on
June 2, 2008.

    The case was heard by Cornelius J. Moriarty, II, J.


    James E. Grumbach for the plaintiffs.
    Jeffrey L. McCormick for the defendant.


    KATZMANN, J.    This appeal arises from a dispute between an

insurer and its insured, based on a denial of coverage for water

damage, and largely concerns the question whether the insured's

    1
        Robert Hawley.
                                                                   2


mere request for a reference for arbitration pursuant to G. L.

c. 175, § 99, Twelfth, as appearing in St. 1951, c. 478, § 1,

operates to toll the statute of limitations period contained in

§ 99 and incorporated by the insurance policy.2   We conclude that

it does not.

     On November 12, 2012, after a seven-day bench trial, a

Superior Court judge issued a ruling in favor of the defendant,

Preferred Mutual Insurance Company (Preferred), on a breach of

contract claim and an unfair and deceptive insurance practices

claim under G. L. c. 93A and G. L. c. 176D.   The decision was

based on the grounds that the breach of contract claim was

barred by the statute of limitations and that there were no

facts to support the claim that Preferred acted unfairly or

deceptively in denying the insurance claim or in its failure to

proceed to reference.   A second amended judgment entered on

February 11, 2013, and the insureds, Linda and Robert Hawley

(the Hawleys), appealed.   We affirm on the grounds that (1) the

breach of contract claim was filed outside the statute of

limitations, as the request for reference did not toll the

statute of limitations, and, even if it had, the complaint was


     2
       Reference is a form of arbitration used to determine the
value of the loss. See G. L. c. 175, § 99, Twelfth. For
further interpretation of the statutory term "reference," see
Augenstein v. Insurance Co. of N. America, 372 Mass. 30, 34-37
(1977).
                                                                      3


not filed within a reasonable time after the denial of the

request for reference; and (2) because the loss at issue did not

fall within the policy, the c. 93A and c. 176D claims also fail.

     Background.     The facts as found by the Superior Court judge

are as follows.    Linda Hawley owns the dwelling at issue and

Robert Hawley manages it.     The dwelling is a three-family house

which the Hawleys use as a rental property, not as their

personal residence.3    Preferred issued a dwelling insurance

policy covering the property from November 14, 2003, to November

14, 2004.   Both Linda and Robert4 are named insureds on the

policy.

     On or about June 11, 2004, a water loss occurred in the

dwelling at issue.     The son of the Hawleys' first-floor tenant,

Sylvia Horton, called to report a leak coming from the ceiling

above the bathtub.     Shortly thereafter, the ceiling collapsed.

Robert promptly contacted his insurance agent to report the

loss, and the agent, in turn, notified Preferred.     Preferred

retained Richard Zak, an outside independent adjuster, who

inspected the property some thirteen days later, on June 24,


     3
       The Hawleys' involvement in the business of leasing and
managing residential units is categorized as "conduct of . . .
trade or commerce" within the meaning of G. L. c. 93A, § 11.
See G. L. c. 93A, § 1(b), as appearing in St. 1972, c. 123.
     4
       For the sake of clarity, we refer to the plaintiffs by
their first names.
                                                                      4


2004.   On June 29, 2004, Zak forwarded a report to Elvie Smith,

Preferred's inside claim representative, informing Smith of

water and mold damage to the first and second floor bathrooms

and noting that the cause of the damage appeared to be a broken

shower head pipe.   On July 11, 2004, Robert discovered that the

leak was actually the result of the second-floor shower door

falling into the bathtub, creating a hairline crack in the

bathtub.   He informed Preferred of the update.    After further

investigation, Preferred concluded that continued use of the

bathtub after the crack developed had allowed more water to

leak, resulting in dangerous levels of mold.      Over the next few

months there was debate and further investigation concerning the

necessary remediation and whether Preferred would be covering

any damages.   Zak noted that the tenants would need to relocate,

and Smith stated that Preferred would help pay for the loss of

rent, but would not pay the tenants' relocation expenses.

Preferred made some payments, including, on July 24, 2004, a

$5,000 advance check for repairs and cleaning.     The Hawleys

neither cashed the check nor started repairs.

    On November 8, 2004, Preferred notified the Hawleys that it

was denying the claim.     The denial was based on the Hawleys'

failure to make repairs.    Preferred also implied in its denial

that the leak had been ongoing for over a month, and expressly

reserved the right to deny coverage based on the policy's
                                                                    5


exclusions.   Some one and one-half years later, on May 26, 2006,

the Hawleys, through counsel, sent Preferred a thirty-day c. 93A

demand letter alleging violations of c. 93A and c. 176D.       On

June 5, 2006, five days before the two-year statute of

limitations provided by G. L. c. 175, § 99, was set to expire,

the Hawleys sent Preferred a request for reference.     Thirty-four

days later, on July 10, 2006, Preferred responded with a letter

declining the request for reference.   That same day it also

responded to the demand letter, denying any violation of c. 93A

or c. 176D, and accordingly declined to make an offer of

settlement.   Before filing suit, the Hawleys made three

additional demands for reference.   Preferred's repeated and

final response, made on August 31, 2006, was to decline to

proceed to reference.   The Hawleys also sent a second demand

letter under c. 93A, in response to which Preferred again denied

liability and refused relief.   On June 2, 2008, nearly four

years after the loss, the Hawleys filed suit.

    Discussion.   1.    Standard of review.   "We accept the

judge's findings in a bench trial unless they are clearly

erroneous."   Weiler v. PortfolioScope, Inc., 469 Mass. 75, 81

(2014), quoting from Makrigiannis v. Nintendo of America, Inc.,

442 Mass. 675, 677 (2004).   "On the other hand, to ensure that

the ultimate findings and conclusions are consistent with the

law, we scrutinize without deference the legal standard which
                                                                        6


the judge applied to the facts."     Makrigiannis, supra at 677-

678.

       2.   Breach of contract claim.   a.   Statute of limitations.5

The Hawleys argue that their request for reference tolled the

statute of limitations.6    We disagree.

       The relevant statute governing the interface of reference

and the tolling of the statute of limitations for insurance

claims, G. L. c. 175, § 99, Twelfth, provides in pertinent part:

       "No suit or action against this company for the recovery of
       any claim by virtue of this policy shall be sustained in
       any court of law or equity in this commonwealth unless
       commenced within two years from the time the loss occurred;
       provided, however, that if, within said two years, in
       accordance with the provisions of the preceding paragraph,
       the amount of the loss shall have been referred to
       arbitration after failure of the parties to agree thereon,
       the limitation of time for bringing such suit or action
       shall in no event be less than ninety days after a valid
       award has been made upon such reference or after such
       reference or award has been expressly waived by the
       parties."

       5
       We address the statute of limitations only as to the
breach of contract claim because the two-year statute of
limitations under the policy and c. 175, § 99, Twelfth, does not
apply to c. 93A claims grounded in c. 176D. See Schwartz v.
Travelers Indem. Co., 50 Mass. App. Ct. 672, 676-677 (2001)
(four-year statute of limitations applies to actions under c.
93A and c. 176D).
       6
       Both in their brief and at oral argument, the Hawleys
purported to quote from McDowell v. Aetna Ins. Co., 164 Mass.
444, 447 (1895) ("[i]n this case, the policy, . . . as mandated
by Mass. Gen. L. c. 175, § 99, allows for a tolling of the
limitations period if the insured initiated the reference
process timely, which the plaintiff generally did"). However,
that quote does not appear in McDowell; nor does it appear in
any appellate decision.
                                                                    7



The language of the policy tracks the statute and provides

in pertinent part:

    "No action can be brought unless the policy provisions have
    been complied with and the action is started within two
    years after the date loss or damage occurs. . . . If a
    disagreement about the amount of loss has been referred to
    a board of referees within two years of the date of loss,
    any action against us must be started within 90 days after
    the board's decision."

The Hawleys filed their complaint after the two-year statute of

limitations, governed both by c. 175, § 99, and the insurance

policy at issue, had expired.    See G. L. c. 175, § 99, Twelfth.

    To begin with, we note that it is well settled that the

statute of limitations starts to run at the time the loss

occurred.   See   J. & T. Enterprises, Inc. v. Liberty Mut. Ins.

Co., 384 Mass. 586, 586-587 (1981) (barring suit brought more

than two years after property was damaged by fire).    See also

Gallant v. Federal Mut. Ins. Co., 354 Mass. 146, 147 (1968)

(date of the loss was the day plaintiffs' store was struck by a

motor vehicle).    See generally Nunheimer v. Continental Ins.

Co., 68 F. Supp. 2d 75, 78 (D. Mass. 1999) ("loss" means the

"incident causing the damage to the property").    In this case,

the loss occurred on June 11, 2004, and the statute of

limitations expired on June 10, 2006, nearly two years before

the Hawleys filed a complaint.
                                                                   8


    While, pursuant to G. L. c. 175, § 99, Twelfth, the statute

of limitations may be tolled in circumstances in which the

matter has been referred to arbitration through the reference

procedure, § 99 does not provide for tolling where the reference

procedure has not yet begun.   Here, the Hawleys' request for

reference was made on June 5, 2006, some five days before the

statute of limitations expired.     We note, however, that G. L.

c. 175, § 100, allows the insurer ten days to respond to a

request for reference, and another ten days thereafter for the

insured to reply.   Section 100 provides, in pertinent part:

    "[I]f the parties fail to agree as to the amount of loss,
    the company shall, within ten days after receiving a
    written demand from the insured for the reference of the
    amount of loss . . . submit in writing the names and
    addresses of three persons to the insured, who shall,
    within ten days after receiving such names notify the
    company in writing of his choice of one of the said persons
    to act as one of said referees."

Knowing that their belated request for reference might well take

them past the two-year statute of limitations, it was open to

the Hawleys to file their complaint timely, while requesting,

under the provisions of § 99 and the policy, that the court

delay commencement of the action.    General Laws c. 175, § 99,

Twelfth, provides, in pertinent part:

    "If suit or action upon this policy is enjoined or abated,
    suit or action may be commenced at any time within one year
    after the dissolution of such injunction, or the abatement
    of such suit or action, to the same extent as would be
    possible if there was no limitation of time provided herein
    for the bringing of such suit or action."
                                                                     9



Section 11 of the policy provides, in pertinent part:

     "[I]f a court prevents the start or continuance of the
     action, but at a later date allows the action to resume, it
     must be resumed within one year of the court order."

     We conclude that where § 99 has provided a specific

mechanism to allow for the delay of an action when deemed

appropriate by the court, there is no need for us to provide any

additional vehicle for tolling the statute of limitations.

Therefore, the Hawleys' mere request for a reference did not

operate to toll the limitations period contained in G. L.

c. 175, § 99, Twelfth.7

     b.   Not filed reasonably promptly.   Even if we had

concluded that the request for reference did toll the statute of

limitations, the Hawleys waited nearly another two years after

being denied reference before filing the complaint.     Relying on

the determination in Trust Ins. Co. v. Commissioner of Ins., 48

Mass. App. Ct. 617, 625 (2000) (citation omitted), that when we

determine what qualifies as a reasonable amount of time for

commencing a suit, we look at the "facts and circumstances of

each particular case," the Hawleys argue that we must consider


     7
       We note also that while count II of the Hawleys' complaint
sought an order requiring Preferred to comply with the policy's
reference procedure, this was a "claim by virtue of [the]
policy," G. L. c. 175, § 99, Twelfth. It thus was subject to
the two-year limitations period, and, hence, was untimely. In
any event, the Hawleys subsequently waived this claim.
                                                                   10


that Preferred's conduct "lulled the Hawleys into a reasonable

belief, over a protracted period of time, that there was no

urgency in their filing suit."   Preferred argues, and we agree,

that while it did engage in an investigation to determine

whether there was a loss under the policy, and made some

payments prior to determining the actual cause of the loss, it

consistently denied liability, and, further, the fact that the

Hawleys repeatedly submitted requests and demands did not mean

that Preferred accepted the loss.

    "We perceive no conduct by the compan[y] or [its] agents

. . . which gives basis for a contention that the compan[y] had

permanently estopped [itself] to rely on the provisions of the

polic[y]."   Gallant v. Federal Mut. Ins. Co., 354 Mass. at 150.

As the judge noted below, although the Supreme Judicial Court in

Gallant acknowledged that where insurers have not conclusively

denied coverage until after the statute of limitations has

passed, they may be equitably estopped from raising a statute of

limitations defense, the plaintiffs still must commence the case

within a reasonable time.   See id. at 151.   Similarly, in our

view, even under the Hawleys' theory of tolling based on their

request for reference, they cannot recover because they did not

commence the action reasonably promptly after July 10, 2006,

when Preferred sent its first denial of the demand for

reference.   Compare ibid. (plaintiffs barred from recovery
                                                                     11


because they did not commence action "reasonably promptly" after

the insurance companies denied liability, waiting some eleven

months to do so; "even if it be assumed that they were not

already barred by the two year limitation, it became plain that

the [insurers] denied all liability and that it would be

necessary to sue the [insurers] if the plaintiffs were to obtain

any settlements of the loss").     As such, commencing suit nearly

two years after denial of the request for reference was not

within a reasonable amount of time.

    c.      Loss not covered.   Although we have determined that the

Hawleys' breach of contract claim is barred by the statute of

limitations, we consider the merits of the claim, as it forms

the basis of the c. 93A and c. 176D claims.

    We agree with the judge's interpretation and application of

the insurance policy, concluding that the loss here was

excluded.    The policy provides in relevant part that Preferred

does not cover a loss that is caused by "constant or repeated

seepage or leakage of water or steam over a period of weeks,

months or years from within a plumbing, heating, air

conditioning or automatic fire protection sprinkler system or

from within a household appliance."      In their brief, the Hawleys

argue that the bathtub was not a part of the plumbing system, a

point the judge explicitly rejected, and that therefore the loss

resulting from the bathtub leaking was not excluded.     However,
                                                                   12


at oral argument, the Hawleys' counsel acknowledged that the

bathtub was part of the plumbing system.   Because the loss here

was caused by a consistent leak over a period of weeks "from

within [the] plumbing . . . system," we agree with the judge

that the loss is specifically excluded by the policy.

    The Hawleys also contest the conclusion that the loss was

caused by a consistent leak rather than being a sudden loss.

They argue that one of Preferred's reasons for denying the

claim, that the leak "may have been on-going for approximately

one month," is contrary to evidence provided by Robert, Zak,

Kevin Davis (Preferred's engineer), and Mark Doughty, an

environmental hygienist retained by Robert.   Doughty reported or

testified to information consistent with "sudden event"

coverage, the sudden event being the breaking of the shower

door, rather than "constant or repeated seepage or leakage,"

which is excluded from coverage.   We conclude that, even if the

initial event was "sudden," evidence showed that the leak that

caused the loss at issue was ongoing.   The judge did not err in

concluding that there was a reasonable factual basis to support

this determination.   This factual basis included, among other

evidence, Doughty's testimony in response to the judge's

question whether the concentration of mold found could have come

about as a result of a one-time sudden event or if it was more

likely than not that the mold was the result of persistent
                                                                 13


seepage into the area.   Doughty testified that either time frame

was possible, but also stated, "I don't think this existed

months; I think maybe weeks."8

     3.   Claims under c. 93A and c. 176D.   Because we have

concluded that the Hawleys' loss was not covered, and thus

liability was not reasonably clear, the Hawleys' c. 93A and

c. 176D claims must also fail; these claims are predicated on

Preferred's breach of the underlying insurance policy.9   Even if


     8
       Zak's report indicated that the crack may have been due to
the shower door falling into the tub approximately one month
before the loss occurred, which caused consistent leaking.
Horton, the first-floor tenant, reported to Zak that she had
noticed the leaking, in the form of condensation on the ceiling,
for about a month prior to the ceiling collapse. The
condensation was followed by a steady flow of water and the
ceiling collapse.   After Horton's report, Zak examined the area
and saw evidence of water on the floor and stains on the
ceiling. Davis's report also supported the position that the
leak was ongoing. The report states:

     "The cause of the mold is likely due to the water leak
     found at the tub on the second floor. This was the only
     source of water found in the second floor bathroom. By the
     staining found on the wood it appears that the water leak
     has been ongoing for a long period of time however it would
     be difficult to estimate the length of time that the leak
     has been in existence."
     9
       "General Laws c. 93A, § 2(a), [inserted by St. 1967, c.
813, § 1,] states that '[u]nfair methods of competition and
unfair or deceptive acts or practices in the conduct of any
trade or commerce are hereby declared unlawful.' General Laws
c. 176D, § 3, in turn, prohibits 'unfair or deceptive acts or
practices in the business of insurance,' including,
in subsection (9)(f), the failure 'to effectuate prompt, fair
and equitable settlements of claims in which liability has
become reasonably clear.' . . . '[T]he former statute
incorporates the latter, and [accordingly] an insurer that has
                                                                   14


the policy covered the loss of June 11, the Hawleys have not

established a claim under c. 93A.   While "[t]here is no binding

definition of what constitutes an unfair practice under c. 93A,"

Green v. Blue Cross & Blue Shield of Mass., Inc., 47 Mass. App.

Ct. 443, 447 (1999), this appears to be a mere contract dispute,

"without conduct that was unethical, immoral, [or] oppressive."

Kobayashi v. Orion Ventures, Inc., 42 Mass. App. Ct. 492, 505

(1997).   "[A] good faith dispute as to whether money is owed, or

performance of some kind is due, is not the stuff of which a

c. 93A claim is made."   Duclersaint v. Federal Natl. Mort.

Assn., 427 Mass. 809, 814 (1998).   We agree with the judge's

determination that "Preferred's denial of the claim was based,

at least in part, on its belief that the seepage or leakage had



violated G. L. c. 176D, § 3(9)(f), by failing to
"effectuate prompt, fair and equitable settlements of claims in
which liability has become reasonably clear," by definition, has
violated the prohibition in G. L.
c. 93A, § 2, against the commission of unfair or deceptive acts
or practices.'" Bobick v. United States Fid. & Guar. Co., 439
Mass. 652, 658-659 (2003), quoting from Hopkins v. Liberty Mut.
Ins. Co., 434 Mass. 556, 564 (2001). "Those claiming injury by
virtue of an insurance practice prohibited by G. L. c. 176D,
§ 3(9)(f), may sue under G. L. c. 93A." Bolden v. O'Connor Café
of Worcester, Inc., 50 Mass. App. Ct. 56, 59 n.8 (2000). We
note that because the Hawleys engage in the "conduct of . . .
trade or commerce," see note 3, supra, and therefore must assert
their rights under c. 93A, § 11, a violation of G. L. c. 176D
does not necessarily translate into a violation of c. 93A, but
can serve as persuasive evidence of such a violation. See
Federal Ins. Co. v. HPSC, Inc., 480 F.3d 26, 35 (1st Cir. 2007),
citing Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747,
754 (1993).
                                                                15


been ongoing for a month."   See Pacific Indem. Co. v. Lampro, 86

Mass. App. Ct. 60, 68 (2014), quoting from Clegg v. Butler, 424

Mass. 413, 421 (1997) ("[o]ur decisions . . . in no way penalize

insurers who delay in good faith when liability is not clear and

requires further investigation"); ibid. (where insurer had no

duty to indemnify, no liability under G. L. c. 176D,

§ 3[9][f]).10

                                   Second amended judgment
                                     affirmed.




     10
       Nor, in these circumstances, do we think Preferred's late
reply to the first request for reference constituted a c. 93A
violation. Compare Trempe v. Aetna Cas. & Sur. Co., 20 Mass.
App. Ct. 448, 453-455 (1985).
