Mass. appeals court says trial judge lacked jurisdiction in Wesco Insurance case
The case involved a Massachusetts contractor, a NYC building project and faulty work by a New York-based subcontractor.
The Massachusetts Appeals Court vacated a trial court’s entry of summary judgment in favor of Wesco Insurance Co. in a coverage dispute and remanded the case to instead be dismissed for a lack of personal jurisdiction over the complaint.
The plaintiff, Massachusetts-based general contractor D.F. Pray, was selected to renovate and repair a 13-floor corporate office in New York City for $5.9 million. Pray subcontracted Xtreme Drywall & Acoustics, a New York corporation, for the drywall portion of the project for an estimated $265,000.
Xtreme was required to indemnify Pray for any losses caused by Xtreme’s negligence and its commercial general liability policy included an insurance rider on which Pray would be an additional insured. Xtreme had commercial general liability coverage through Wesco Insurance Co., a Delaware corporation with administrative offices in New York, according to the appellate court’s opinion filed Sept. 14.
Pray encountered problems when Xtreme was allegedly not completing its part of the project on schedule; Pray filed an action against Xtreme in Massachusetts Suffolk Superior Court to recover the costs.
In February 2016, Pray discovered that the work allegedly completed by Xtreme was also faulty, and asked Wesco to indemnify it for certain “property damage” caused by Xtreme’s negligence. Wesco denied the claim, asserting that Pray “sought indemnification merely for an economic loss, not for ‘property damage’ caused by an ‘occurrence’ as the policy defined those terms,’” the opinion said.
Pray filed lawsuit against Wesco in Suffolk Superior Court in August 2016. Wesco moved to dismiss the complaint for lack of personal jurisdiction, among other reasons.
The plaintiff argued that Wesco had more than 100 licensed agents in Massachusetts in 2016 and generated $30 million in direct insurance premiums in the state.
Wesco’s personal jurisdiction motion was denied by Justice Edward P. Leibensperger in February 2017.
However, Justice Catherine Ham later allowed Wesco’s motion for summary judgment on the merits of the coverage dispute: That Xtreme’s faulty work did not qualify under the policy as “property damage” caused by an “occurrence,” and that the policy “included multiple ‘[b]usiness [r]isk’ exclusions that precluded coverage for faulty work” — which Pray appealed, according to the opinion.
But in an opinion filed Sept. 14, 2023, a three-judge appellate panel concluded that Leibensperger erred in rejecting the jurisdictional issue.
“On appeal, Wesco renews its personal jurisdiction defense and asks us to rule on that basis. We first conclude that, contrary to Pray’s argument, Wesco did not forfeit the defense by later seeking summary judgment on the merits,” Associate Justice Peter Sacks wrote for the unanimous panel. “We also conclude that the first motion judge erred in rejecting the defense. We therefore vacate the judgment and remand for the entry of a new judgment dismissing the complaint, not on the merits but instead for lack of personal jurisdiction over Wesco.”
While the appellate court acknowledged Pray’s argument that Wesco sold insurance policies in Massachusetts, the burden is on the plaintiff to establish the facts in showing personal jurisdiction.
“Pray offered no evidence that Wesco, when contracting with Xtreme, knew of Xtreme’s contract with Massachusetts-based Pray. Xtreme’s act of entering the contract with Pray does not constitute a contract that Wesco created with Massachusetts,” Sacks wrote, further citing the U.S. Supreme Court’s 2021 ruling in Ford Motor v. Montana Eighth Judicial District Court, in which “the contacts must be the defendant’s own choice and not ‘random, isolated or fortuitous.’”
Additionally, Pray failed to make a “connection between the forum and the specific claims at issue,” referencing the U.S. Supreme Court’s 2017 opinion in Bristol-Myers Squibb v. Superior Court of California, San Francisco County, which held that “rejecting ‘sliding scale approach’ under which ‘strength of the requisite connection between the forum of the specific claims at issue is relaxed if the defendant has extensive forum contacts that are unrelated to those claims.’”
Pray did not pay premiums to Wesco and the insurance contract was Xtreme’s work in New York — not in Massachusetts, the court held, with Associate Justices Sookyoung Shin and Andrew M. D’Angelo concurring.
“Here, we have concluded that Wesco’s contacts with Massachusetts are unrelated to the claims in this case, and that whatever indirect contact (if any) Wesco had with Massachusetts related to Pray’s claims is insufficient to satisfy due process. It is therefore unnecessary to address whether the exercise of jurisdiction by Massachusetts courts would comport with traditional notions of fair play and substantial justice,” Sacks wrote.
Max W. Gershweir, a partner at Gunnercooke in New York, and William A. Schneider, a Boston-based partner at Morrison & Mahoney, represented Wesco. Gershweir declined to comment.
Pray was represented by Richard E. Briansky and Amy B. Hackett, both partners at Peckar & Abramson in Boston. A message seeking comment from the attorneys was not immediately returned.
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