A Massachusetts state court has ruled that, when a policy does not define materials “of like kind and quality,” matching is required. The case is New England Property Services Group, LLC v. Bunker Hill Preferred Insurance Company, No. 2284CV2019 (Mass. Super. Ct. 2024).
A Massachusetts couple suffered property damage when a motorcycle rammed into their house. They had purchased homeowners coverage from Bunker Hill Preferred Insurance Company. A claim was filed and opened. After inspecting the property, Bunker Hill came back with a property repair estimate of $57,300.15.
Shortly after the incident, the homeowners had executed an assignment of benefits for the claim with the New England Property Services Group, LLC (NEPSG). One month after the damage occurred, NEPSG submitted documents concerning the scope of work required to Bunker Hill and estimated it would cost $139,883.55 to resolve the entire claim. Bunker Hill paid a total of $57,695.14 to NEPSG.
Early the next year, NEPSG demanded Bunker Hill submit to reference–a claim resolution process similar to appraisal–in order to determine the amount of the loss. Bunker Hill refused, stating the company “had no obligation to participate in a reference proceeding requested by NEPSG or acknowledge NEPSG’s demand for reference in relation to the claim.”
NEPSG filed suit against Bunker Hill. Each party filed a motion for summary judgment in its favor.
A Question of Matching
Some, but not all, of the siding on the homeowners’ dwelling had been damaged in the incident and needed substantial repairs. NEPSG asserted the homeowners’ Bunker Hill policy was a “matching policy,” which required the materials used for repairs to be both of like kind and quality and an exact match to the existing, undamaged siding. Bunker Hill rejected this assertion and argued it was only obligated to replace the damaged siding with materials of like kind and quality to the damaged siding. NEPSG asked the court to declare that the policy was a matching policy, that no matching material of like kind and quality could be found, and that Bunker Hill was therefore obligated to replace all of the siding on the house.
The court tackled the matching policy issue first. The homeowners’ policy stated that Bunker Hill would “pay no more than the smallest of the following amounts: a. The replacement cost of that part of the building damaged with material of like kind and quality and for like use; b. The necessary amount actually spent to repair or replace the damaged building; or c. The limit of liability under this policy that applies to the building, increased in accordance with Paragraphs B.1. and B.2. of this endorsement” (emphasis added). As the homeowners had chosen to replace the damaged siding, the first option was appropriate. However, the policy did not define what it meant for materials to be “of like kind and quality.”
The court said each party had asserted a reasonable interpretation of the phrase. When a single phrase may be interpreted in more than one reasonable manner, it is called “ambiguous.” When a policy term is found to be ambiguous, insurance law generally favors using the interpretation proposed by the insured. Therefore, said the judges, the Bunker Hill policy was indeed a matching policy, which would require all of the siding on the house to be replaced if a matching material of like kind and quality could not be located. Whether such a material existed, however, was a factual question that had to be answered by a jury, not the judiciary.
NEPSG’s motion was granted concerning whether the homeowners’ policy was a matching policy, but denied regarding the actual existence of a like kind and quality match.
The Right to Reference
NEPSG claimed Bunker Hill’s refusal to engage in the reference process amounted to a prohibited unfair trade practice. Bunker Hill argued NEPSG was not entitled to demand reference because the homeowners’ assignment of the claim to NEPSG was invalid; the homeowners coverage could not be assigned without Bunker Hill’s permission, and the homeowners had not requested permission before making the assignment.
The judges said the homeowners had assigned only the particular claim, not the entire policy. This intent could be inferred because the homeowners had included the specific number for the claim on the assignment. Simply because the phrase “and/or” appeared after the claim number did not mean the assignment applied to the entire policy. Since the homeowners were not required to seek Bunker Hill’s permission to assign a claim, the assignment was ruled valid.
An assignment, said the court, puts the assignee–NEPSG–into the shoes of the assignor–the Homeowners–and treats the assignee as it would the assignor regarding that particular claim. The policy’s appraisal clause specifically stated that the homeowners could submit a written request for reference in the event they disagreed with Bunker Hill’s assessment of a loss. The court therefore found that, since the policy granted the homeowners the right to demand reference of Bunker Hill, NEPSG also had the same right.
Breach of Contract
NEPSG also asserted that Bunker Hill’s refusal to engage in reference amounted to a breach of contract. A successful claim for breach requires the existence of an agreement between the parties, supported by consideration, that was breached by one party, and the other, non-breaching party was both ready to uphold its end of the agreement and suffered harm as a result of the breaching party’s conduct.
As stated above, there was a contract between NEPSG and Bunker Hill based on the homeowners’ valid assignment of the claim to NEPSG. NEPSG’s request to conduct the reference is evidence of the company’s intent to honor the process. When Bunker Hill refused to do so, it was a breach. The court, however, said evidence was lacking on the final element of the breach claim–that NEPSG suffered harm as a result of the breach. This question was one of material fact and therefore inappropriate for the court to answer through summary judgment.
Other Claims
NEPSG had also filed claims against Bunker Hill for violations of unfair trade practices and tortious interference with business relationships. Though these claims were separate and distinct from one another and from the claim for breach, they all had one thing in common: NEPSG had to have suffered some harm as a result of Bunker Hill’s allegedly bad conduct.
Regarding the violations of unfair trade practices and tortious interference, there was simply no evidence that showed Bunker Hill’s refusal of NEPSG’s demand for reference had been made in bad faith. The question of whether the assignee of an insurance claim was granted the right to demand reference under the policy had never been addressed by any Massachusetts state court. The court, therefore, had no standard by which it could determine the severity of Bunker Hill’s breach. There was no evidence that Bunker Hill’s refusal of NEPSG’s request for reference had been made in bad faith, or that the breach was so egregious that it violated an unfair trade practice. The court said that, even though Bunker Hill had breached the policy’s arbitration clause, a breach of contract, standing alone, is not necessarily a violation of unfair trade practices.
Conclusion
Both motions for summary judgment were granted in part and denied in part. The court agreed with NEPSG that the policy required matching and that NEPSG had a right to demand reference of Bunker Hill. However, the court denied the motion in regards to the actual lack of matching like kind and quality materials and said it was a factual question that could only be answered by a jury.
The judges granted Bunker Hill’s motion for summary judgment that the insurer neither violated any unfair trade practices nor caused tortious interference with NEPSG’s business relationships. Summary judgment on the breach of contract claim was denied because there was also a question of material fact that only a jury could answer: whether NEPSG had suffered any harm as a result of Bunker Hill’s breach.
Editor’s Note: Matching is one of the hot-button issues in insurance. Adding vinyl siding, bricks, or roofing shingles that don’t match what is already there is mainly a superficial issue, but the mismatched appearance has a negative impact on the property’s value for the homeowner. Though it may be as easy as looking up the name of the manufacturer and color, it can be much harder when seeking a match for custom-made materials, or materials that were made by a company that has gone out of business. If the repaired property does not match, the insured has not been restored to his preloss condition, which was that of matching property.
Some states have laws that require repair materials be a reasonable match for existing, undamaged property. Take, for example, Connecticut. Under Conn. Gen. Stat. §38a-316e(a), it states that “When a covered loss for real property requires the replacement of an item or items and the replacement item or items do not match adjacent items in quality, color or size, the insurer shall replace all such items with material of like kind and quality so as to conform to a reasonably uniform appearance. This provision shall apply to interior and exterior covered losses.” (emphasis added). Other states rely on court cases that have ruled for or against matching. In North American Land Development v. Higginbotham, et al., (771 So. 2d 245, La. Ct. App. 2000), the Court of Appeal of Louisiana said that “[r]equiring full rather than partial replacement is not manifestly unreasonable” (emphasis added).
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