Tri-Town Transcript
Boxford-Middleton-Topsfield
Vol. 39, No. 27
Thursday, July 9, 1998
“The house from hell”
BY ETHAN FORMAN
TRANSCRIPT STAFF
Cheryl Varney points to a kitchen radiator cover to show
why she and her family want to rip down what they call the “house
from hell.” The inside of the cover is blackened by soot.
“No. 2 fuel oil,” she says. “that’s what we’ve been breathing in
since last August.”
The Varneys have moved into a trailer in their front yard and
want to demolish their Brookside Road home rather than spend
one more night in a house they claim has been contaminated with
soot and solvents.
“We won’t have long-term damage from living in this house,”
says Cheryl Varney. She and her husband, Robert, fear for their
health of their children, ages 12, 10, 8, 6. The family also includes
two ferrets, an Akita dog, a parrot, a cat and a number of tropical
fish in a large tank.
The Varneys claim they had a lax home inspection, and the
seller failed to disclose the soot that the Varneys suspect was the
result of a furnace blow-back in 1997, in which the exhaust pipe
was blown off the furnace by an internal explosion in the furnace.
The house was filled with soot that plumed out of the furnace, they
claim, which, despite cleaning, permeated into the walls and
insulation.
The family plans to file a multi-million dollar lawsuit this week,
Cheryl Varney says. An attempt to reach the Varneys attorney
was unsuccessful, but the family blames the home inspection
company, the realty company and the previous owner.
“They all came here, stood in this cellar, and denied it to my face”
that the home had a problem, Varney says of a visit last October
by the former owner, an attorney for the real estate company and
the two listing brokers. Varney says representatives for the home
inspection service declined to attend that meeting.
To make their case, the Varneys have compiled a binder full
of documents, have had an air quality test done on their home
and have stored sponges used to clean their walls in plastic bags.
The sponges appear to be blackened by soot.
But some on the other side of the case, including the home
inspection company and attorneys for the former owner and the
real estate agency, say there is no compelling reason to tear
down the structure, except to make headlines.
The Varneys want their case heard in the newspapers, rather
than in court, says William Hunt, a Cambridge attorney for the
former owner Janice Scibelli. He denies there was any problem
with the home that would require it be torn down.
“This is silly,,,that didn’t happen” says Hunt, of the law firm
Clark, Hunt and Embry of Cambridge, when asked if there had
been a blow-back of the furnace. Hunt, who said he has read one
newspaper article on the subject, said,” Everything I have read I
am under whelmed by.” Local officials do not believe the house
should be destroyed, he added. “I think everyone is jumping the
gun on this like crazy,” Hunt said.
Elizabeth Lampus, the vice president of Middleton Real Estate,
which handled the sale, referred all calls to the company’s
attorney, Owen R.O’Neil of Cogavin and Waystack of Boston. O’
Neil charges the Varneys with attempting to extort money from the
company “by threatening it with frivolous litigation,” in a June 12
letter provided by the Varneys.
The real estate company did not entice the seller “to make any
false or misleading statements.” O’Neil wrote.
Robert Varney said he is “neither a liar, an extortionist or a
thief.”
“There is absolutely no evidence, no evidence, Middleton
Estate new about any problem with that house, whether caused by
the furnace or otherwise. “They were simply real estate brokers,”
O’Neil said. The Varneys have not provided “one ounce of
evidence otherwise,” he said.
From what he has read, he said the Varneys are
“overreacting.” The broker and the seller had a business
relationship. and O’Neil said, he has no reason to doubt the
former owner’s claim that nothing ever happened in the house
that would have contaminated it.
Matt Simpson, president of Black Paw Home Inspection, said
the Varneys “haven’t given us any evidence” as to why they have
to tear their home down. Black Paws air quality test showed “no
harmful levels” of chemicals, and he said there is “no cancer
problems in this house,” as the Varneys claim.
Simpson said his inspectors cannot see through walls. “We don’t
have x-ray vision; we are not supermen.”
The agreement the Varneys signed with his company stated
the inspectors do not inspect air, soil, or water. They do “a visual
examination.”
Simpson said he feels bad about the Varneys plight. But they
had six weeks before the closing to read the report, which
mentioned a scorch mark behind the furnace. Simpson said. The
Varneys claimed that the mark showed a problem with the house
that should have been found during the inspection.
42 Brookside Road
According to the Topsfield Assessor’s office, 42 Brookside
Road is assessed at $273,000, has four bedrooms, two and half
bathrooms and was built in 1978.
It was previously owned by Anthony and Janice Scibelli, town
records show. Anthony Scibelli is deceased. A woman identified
herself as Janice Scibelli’s daughter said in a phone conversation
from Maine that neither her mother nor the family would comment
on the matter, and referred all questions to their attorney.
The Varneys, who moved to the home last August from
Peabody, are awaiting bank approval on a loan to build a new
home before tearing down the structure. A six-month trailer permit
was issued to Robert Varney on Thursday, July 2, according to
the Topsfield Building Inspector’s Office. A note on the trailer
permit declares it invalid if a demolition permit is not issued within
two weeks. The building inspector is expected to issue the permit
July 13.
The Varneys are not sure when they can tear down their
home. O’Neil wrote the Varneys July 2 informing them an air
quality consultant would inspect the home July 8.
Plumber finds soot first
It all started, the Varneys said, when a plumber, who is also a
Danvers firefighter, noticed evidence of a scorched beam in the
ceiling above the furnace in the basement while installing a water
tank on August 11,1997, the day the family moved in. The couple
closed on the house July 31.
The plumber, who did not want to be named but works for
Wells Plumbing & Heating of Topsfield, says he found evidence of
what appeared to be a burner blow-back. Henry Wells, his boss,
says it looked as though the exhaust pipe of the furnace fell off.
The Varneys say they do not know the full truth about what may
have happened to the home.
The seller’s description of the property, a standard form
provided by the Massachusetts Association of Realtors, signed by
Scibelli, states there is no problem with the oil furnace. The
Varneys claim there is no permit on record for the furnace.
The Varneys then got information from a local plumbing
contractor, not Wells, who gave them a receipt showing that he
was there to “unplug soot” on May 18, 1997. Scibelli’s attorney
said he was unaware of this receipt.
The Varneys’ insurance company paid $10,000 to clean the
house. Cheryl Varney says the insurance company refused to pay
any more when it discovered the soot was a pre-existing condition.
“I’ll never feel safe in this house, this is what is seeping through
the walls,” said Robert Varney. The Varneys said they learned the
extent of the problem when they remodeled the bathroom last fall
and found the insulation there inundated with soot. After punching
holes in the walls around their home, they say they found
evidence of the soot had traveled from the basement to the attic.
The Varneys paid for an air quality test and, two of the four
gasess detected were dichloromethane, which is found in
solvents, and xylene, a component of fuel oil. The level of
dichloromethane was more than 100 times the workplace standard
for an eight-hour exposure, said Robert Varney, who owns his
own high tech manufacturing business.
Topsfield health agent Leo Cormier inspected the home. It
appears the burner was repaired in May with no notice to the Fire
Department or an insurance company, he said. Cormier found a
piece of charred insulation and a glove buried at the back of the
property, the Varneys said. Cormier said the information about the
air quality has been forwarded to the department of public Health,
and the state has said there is not enough evidence to render a
judgment as to whether the home is a hazard.
Cheryl Varney said her goal is not to win a big settlement. It is
to get laws regarding home inspectors changed and to get
answers about what went on in the home. “The truth will come out
in court,” she said.
Varneys sue for $500,000-plus
Begin to demolish home
BY ETHAN FORMAN
TRANSCRIPT STAFF
Robert and Cheryl Varney filed a lawsuit in Essex Superior
Court July 15 against the former owner, the home inspection
company, and the real estate agency they allege sold them a
contaminated home on 42 Brookside Road in Topsfield.
The Varneys, who now live in a trailer in their front yard, have
started tearing down their home, after obtaining the necessary
demolition permits from the town.
The Varneys are seeking in their lawsuit more than a half
million dollars in damages to replace the home, remove toxic
waste, and take care of their living expenses. They also hope to
be compensated for personal injuries and emotional distress, they
said.
Two of the attorneys for the defendants in the case argue
there is no need to tear down the home, and the lawsuit is
frivolous with scant supporting evidence, The attorneys say they
have yet to be served formally with the civil suit.
The house, which the Varneys bought for $300,000 on July
31, 1997, is contaminated, the Varneys say, with soot and
solvents from a prior furnace blow back that filled the house with
oily soot in May 1997 or before.
The Varneys say solvents were used to clean the home and
cover up the damage. Their own air quality results showed
elevated levels of a solvent, dichloromethane, also known as
methylene chloride, in their home.
The U.S. Environmental Protection Agency list the chemical as
a “probable human carcinogen,” according to a letter contained in
the lawsuit from the Howard S. Wensley, director of the
Department of Public Health’s Division of Community Sanitation.
The reported concentration of methylene chloride in the Varney
home was 100 times lower than the reported concentration “that
produces effects in either animals or humans,” Wensley wrote.
The Varney’s lawsuit states soot and smoke damage “had
been negligently covered with chemicals that included
carcinogens.”
Home Inspection
Company stands by work
The home inspection company, Black Paw Home Inspection
Inc., is charged with negligence in their inspection of the property.
Black Paw is also being charged with breach of contract, the
negligent infliction of emotional distress and the violation of state
law regarding deceptive trade practices.
Black Paw Home Inspection, Inc. attorney James Rogal said
his client requested the Varneys not tear down the home, but he
had not sought a court order
“My client believes it’s totally without merit,” Rogal said of the
lawsuit. The home inspection company owner “stands by his
work” and has a good reputation within the home inspection
industry, he added.
It appears the Varneys have other motives, Roagal said. The
attorney, who lives in Topsfield, said he has heard the Varneys
wanted to put an addition on their home, and for a number of
reasons, could not. “They would like to build another house and
would like someone to pay for it other than themselves,” said
Rogal, who said he could not reveal his sources.
“That is altogether false. If this was caused by us, our
insurance company would pay for it,” Robert Varney said. Varney
said his insurance company found the damage to their home and
been preexisting.
Robert Varney said he had a plan to remodel the basement,
bathroom and garage, but that was put on hold when the extent of
the damage was discovered.
The bank as agreed to fund “80 percent of what I need,”
Robert Varney said. The Varneys intend to borrow against their
children’s $150,000 college fund to pay for the rest of the home’s
reconstruction.
The lawsuit filed by the Varneys’ attorney, David Rifkin, on
July 15 charges the former owner, Janice Scibelli, with deceit,
breach of warranty in a misstatement about the home’s condition,
and the intentional and negligent infliction of emotional distress.
An attempt to reach Scibelli’s attorney was unsuccessful. Rifkin
was reportedly out of the country until July 27.
The suit charges Middleton Real Estate Co., Inc.’s employees
“conspired with (former owner) Janice Scibelli to hide said damage.
The suit also charges Middleton Real Estate with negligent
and intentional infliction of emotional distress, negligence, and
violation of state law regarding deceptive trade practices. Under
state law, damages awarded could be tripled.
Middleton Real Estate attorney Owen O’Neil said he has seen
a copy of the suit, but his client has not been formally served.
He said the wording of the suit is vague. “There is nothing
specific. Look at the language, there is no factual basis for their
claims,” O’Neil said.
If the Varneys are relying on a seller’s disclosure form, which
states there had been no problems with the furnace, then that is
scant evidence against the broker, O’Neil said.
Real estate brokers rely on other parties to make a
disclosure. There is no evidence Mrs. Scibelli did anything
wrong,” O’Neil said.
“I haven’t seen any reports, which show this drastic demolition of
their house was necessary and I think it’s a shame, a wasteful
shame,” O’Neil said.
Robert Varney said the opposing attorneys’ “eyes will pop out
of their heads” when they see the evidence.
Claims add up to more than $500,000
In the Varney lawsuit, the largest claim for damage is the
$365,000 cost to replace the home. In all, the damages sought
total $548,260.
The Varneys are also seeking $12,000 for moving and
storage fees; $46,500 to pay for improvements on the home to
date, such as plumbing, fencing, and bathrooms, until the
discovery of damage; $15,200 for a partial remodeling of the
basement; $30,000 for “substitute living” in Topsfield ----a trailer
parked in their front yard; $9,800 for moving in and out of the
trailer; $28,785 for the removal of toxic waste; $3,800 for permits
to remove and replace the home; $2,500 for a storage trailer ;
$2,455 for new electrical service ; $1,880 for a five day hotel stay
; $500 for the removal and reinstallation of a satellite dish ; $8,000
for the cleaning of contents removed from the home ; $400 to
remove and reinstall an ISDN phone line ; $8,890 to install,
remove, and then reinstall an alarm system, and $500 to have the
home’s flue pipes cleaned.
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Couple sue home
inspector over unseen fire
damage
By JULIE MANGANIS
News staff
SALEM -- A Topsfield couple is suing a home
inspector who allegedly failed to notice that the
house they bought on Brookside Road two years
ago had been extensively damaged by fire, and that
that damage had been covered up with potentially
dangerous chemicals.
Robert and Cheryl Varney bought the house after
an inspection by Matthew Simpson of Black Paw
Home Inspection, in July, 1997.
They have already filed a suit against the former
owner of the house, who also allegedly assured
them that there had never been any fire damage to
the property.
Soon after moving in, the suit alleges, the couple
discovered that the house was contaminated with
soot and smoke damage throughout, and that it had
been covered over with carcinogenic chemicals.
The Varneys now believe that there was more than
one fire at the home, one as recently as May 1997,
when the house was on the market.
When they contacted Simpson about the situation,
they allege in the suit, they expected him to file a
claim with his insurance company, and that they
would quickly be reimbursed for the cost of having
the house cleaned and repaired.
However, according to a letter filed along with the
suit, Monticello Insurance Company told them they
would not honor the claim because Simpson never
notified them when the Varneys originally
complained, two years ago.
The Varneys' attorney, David Rifkin, also tried to
resolve the matter with Simpson in April, apparently
without success. In a letter to Simpson, also
attached to the suit, Rifkin put the estimated
damages at more than $500,000.
A message left for Rifkin was not immediately
returned, and the Varneys could not be reached for
comment.
Suit Over home called Groundless
By JULIE MANGANIS
News staff
TOPSFIELD ---- While the attorney for a home inspector who is
being sued over his alleged failure to notice smoke and fire
damage in a Brookside Road home is saying the suit is
groundless, the Owner of the home said she and her husband
have no other recourse by court.
Last week, Robert and Cheryl Varney of 42 Brookside Road, filed
suit in Salem Superior Court
against Matthew Simpson, the owner of Black Paw Home
Inspection Inc., a Wakefield
home inspection service.
The Varneys had already filed suit against the company, as well
as the former owner of the home
and the real estate agency that sold the house, which has since
been demolished and replaced.
Those suits are still pending.
The newest suit alleges that Simpson’s inspector failed to discover
that the walls of the home contained high amounts of soot, which
had been cleaned from the outside with allegedly carcinogenic
chemicals.
The inspector also allegedly did not point out charred
joists in the basement of the house.
Simpson never filed a claim with his insurance company when he
was notified of the problems. Now,
the insurance company is denying coverage of the incident
because Simpson did not immediately report the claim.
The Varneys believe the sot and the charring were the result of at
least one fire.
Simpson, through his attorney, James Rogal, said the cause of
the soot was a faulty furnace, and the
charring is due to a plumber’s torch used to repair the furnace
and heating system.
“There was never any fire at the house.” said Rogal. “Nothing in
that suit is true as far as we’re
concerned.”
While Rogal concedes there was soot inside the house, he says
there is no proof as to when that happened.
As for the chemicals, Rogal said there is no evidence that the
levels of chemicals such as
Methylene chloride, were dangerous to anyone living in the
house, and no evidence that the family has
become ill.
Cheryl Varney disagrees. She said the couple and their attorney
have experts who will testify that the
house was dangerously contaminated by the chemicals used to
clean it. “It’ll all be proven in court,” said Cheryl Varney.
As for why Simpson never notified his insurance company of the
Varney’s initial claim, Rogal said that is because Simpson did not
consider the claim to be legitimate and did not want his insurance
rates to rise.
“They receive enormous amounts of merit less claims,” said
Rogal. “To report every one of them would affect his rates
negatively.”
But Cheryl Varney believes that is what insurance is for.
“His client is the one who chose not to put the claim in on his
insurance,” said Varney.
Rogal said the Varneys have “a personal vendetta, it seems to me
against Simpson”.
Cheryl Varney said she was threatened by Simpson shortly after
testifying last year at the State House hearing on legislation that
would regulate home inspections in the state. As a result of that
alleged threat, Varney said, she obtained a restraining order.
Rogal said that the allegations of threats are also groundless and
that the Varneys have simply overreacted to the situation.
Cheryl Varney disagrees.
“If you can’t live in your home and feel safe, where can you feel
safe?”
New law requires licenses for home
inspectors
By STEVE LANDWEHR
News correspondent
Their ads cover nearly an entire sheet of the Yellow
Pages. Some tout their professional affiliations,
years of experience or quality of work. Others
simply provide their company name and the service
they offer: home inspections.
Until now, that ad may have been their only
qualification to perform a competent physical
examination of the single largest investment most
people make in their lifetime.
No statute forced them to register with the state.
No uniform standards of practice or licensing
requirements existed. No law required them to
carry insurance to protect homebuyers if their
inspections failed to disclose defects.
Worst of all, even if their negligent inspections had
disastrous results for the buyer, nothing prevented a
home inspector from declaring bankruptcy to avoid
paying a judgment against him. In one case, a home
in Shirley judged to be in "normal" condition for its
age by a home inspector had to be demolished nine
months after its purchase because it was in an
advanced stage of decay.
But homebuyers will finally have some protection
from such fly-by-night operations.
At a ceremonial Statehouse signing on Tuesday
afternoon, Gov. Paul Cellucci made Massachusetts
just the seventh state in the nation to require home
inspectors to be licensed by the state.
The four major provisions of the law will:
Establish a board of registration of home
inspectors within the Division of Registration.
Require home inspectors to carry at least
$250,000 in errors and omissions insurance.
Prohibit direct referrals by real estate brokers.
Develop a public education campaign about the
home inspection industry through the Office of
Consumer Affairs.
State Sen. Cheryl Jacques, D-Needham,
chairwoman of the Senate Post Audit and Oversight
Committee, was the lead sponsor of the bill. The
problem with lack of regulation was brought to her
attention by a constituent in Natick.
"Ironically, he was a home seller, not a buyer,"
Jacques said. "He told me he had lost the sale of his
house when an inspector came up with a long list of
problems. He lost a second sale when another
inspector dismissed most of the problems the first
inspector found, but came up with another long list
of completely different problems.
"He asked if the state had any regulations
governing home inspectors, so I went back to the committee
and we began a seven-month review of the
industry. We were stunned to find out that anyone
could call themselves a home inspector; even me,
and I know nothing about home construction."
During its review, the oversight committee heard
numerous harrowing tales from homebuyers who
were burned by unscrupulous or unqualified
inspectors.
One of those buyers was Robert Varney of
Topsfield. Varney and his wife, Cheryl, purchased a
home on Brookside Road in July of 1997, and
were assured by an inspector that it was in good
condition. But as soon as the couple moved in, it
was obvious there was something very wrong with
the house.
"Literally, as the moving truck was driving away, we
knew we had a serious problem," Cheryl Varney
said. "The basement had been, conveniently, very
dark when we had been in the house earlier. When
we started moving in, we saw all of the walls were
covered with soot."
When the Varneys began tearing out walls for a
bathroom renovation the following year, the extent
of their problem became clear: The insides of the
walls were also covered with soot, from what
Cheryl Varney believes was a "catastrophic event"
with the oil burner.
Although their insurance company paid for a
massive cleanup, the Varneys were still finding soot
oozing out of the walls after it was completed.
And when an air-quality test disclosed the presence
of xylene and benzene in their home, and
dichloromethane, (a chemical commonly found in
solvents that are used to break down oil) -- at 100
times the level the DEP considers safe -- the couple
razed their home in July of 1998 and built a new
one.
"The system failed us; it's too late for us," Cheryl
Varney said. "We can't ever foresee buying another
house as long as we live and I'm serious about that.
This was such a nightmare. Unfortunately, we're not
alone in facing this dilemma; ours was just the
extreme case. That house was never a home, it was
just a house -- the house from hell."
The Varneys have filed a lawsuit against the home
inspector and the president of the company where
he worked.
Insider support
Many home inspectors are glad the state will be
overseeing their industry, believing it will lend
credibility to a profession that has been unregulated
for too long.
"There are a lot more inspectors out there than I'd
like to name who don't have the experience or the
background they need," said Bill Goddard, owner
of Goddard Associates Home Inspections of
Marblehead.
Goddard is treasurer of the New England Chapter
of the American Society of Home Inspectors, the
oldest professional association of home inspectors
in North America. The state's new law was
patterned in part on ASHI's standards, which
Goddard called "the toughest out there.
"We have about a 40 percent failure rate on our
exam, it's not an easy test, by any means."
Before issuing a license to its members, ASHI
requires they conduct 250 inspections under the
supervision of a licensed inspector, and pass a
rigorous test covering all phases of a home
inspection. Members also have to take continuing
education courses to maintain their license in good
standing.
Under the new state guidelines, there will be a
provision for grandfathering current inspectors. The
board of registration will set general requirements
for those licenses.
Anyone new to the business must pass an exam,
keep up with changes in the industry, and complete
100 inspections under the supervision of a licensed
inspector.
Goddard said he's disappointed the state is only
requiring prospective inspectors to complete 100
inspections instead of 250. He also thinks everyone
should take the test instead of grandfathering some.
"I don't think that's stringent enough to protect the
public," Goddard said.
Jacques said the lower standard of 100 inspections
was adopted because many inspectors in western
Massachusetts, where real-estate transfers occur
less frequently, only work part time, and they would
have had difficulty meeting the tougher requirement.
Real estate agents are also happy to have licensing
requirements set by the state, said Joan Logan,
manager of the Beverly, Gloucester, Manchester
and Hamilton offices of Coldwell
Banker-Hunneman.
"This won't impact the people who do a good job,
and it weeds out people who shouldn't be in the
business, she said. "Anytime anyone gets licensed,
it's a good thing."
The board of registration is scheduled to be named
by next September, and the law will go into effect in
May 2001. Until then, Cheryl Varney advises
homebuyers to be very cautious when selecting a
home inspector.
"Don't accept a referral from a real estate agent;
talk to other people who have had homes inspected
recently," she said. "Our Realtor handed us a
brochure and we just called that company. The
owner of the company was licensed by ASHI, but
the inspector who looked at our home wasn't --
make sure the person who is in your home is
licensed by ASHI.
"But if any good can come of our problems, this bill
is it. We're thankful other people won't have to go
through what we went through."
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Docket No.:
99-2159-D
Parties:
CHERYL VARNEY and ROBERT
VARNEY,
Plaintiffs vs. MATTHEW SIMPSON,
Defendants
County:
ESSEX, ss.
MEMORANDUM OF DECISION AND ORDER ON
DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
In July 1997, the plaintiffs, Cheryl and Robert Varney (“the
Varneys”), purchased a home in Topsfield from Janice Scibelli.
Before
closing on the purchase of their home, the Varneys retained Black
Paw Home Inspection, Inc. (“Black Paw”) to perform a home
inspection. The Varneys allege that, after they purchased this
home, they discovered that there was soot and smoke damage
throughout
the house that had been covered up through the use of chemicals
containing carcinogens. The Varneys subsequently filed suit in
July
1998 against Scibelli, Black Paw, and Scibelli’s real estate broker
– Middleton Real Estate Co., Inc.– to recover the damages
resulting
from their purchase of an allegedly damaged and contaminated
home (“Varney I”). The defendant Matthew Simpson (“Simpson”),
the
President of Black Paw, was not originally named as a defendant
in Varney I. On August 4, 1999, the Varneys moved to amend their
complaint in Varney I to add Simpson as a defendant, and to add
claims against him alleging fraud and breach of contract. On
September
8, 1999, Judge Nancy Merrick denied the motion to amend on two
grounds: (1) the untimeliness of the motion; and (2) that
“allowance
of this motion is futile since amended complaint fails to state a
claim.”
Unable as a result of Judge Merrick’s Order to add Simpson as a
defendant in Varney I, the Varneys filed a second complaint with
Simpson as the lone defendant (“Varney II”), alleging fraud and
breach of contract as they had in Varney I and adding a third
claim of
violation of G.L. c. 93A. The defendant Simpson now moves for
summary judgment as to the three claims in Varney II. For the
reasons
stated below, Simpson’s motion for summary judgment is
ALLOWED as to the fraud and breach of contract claims and
DENIED as to
the G.L. c. 93A claim.
DISCUSSION
The gist of the allegations in Varney II is that Simpson advertised
Black Paw to be a “fully insured” home inspection company.
However,
when the Varneys brought claims against Black Paw in Varney I,
Simpson refused to submit the claim to Black Paw’s insurer or to
give
the insurer notice of the existence of these claims. As a result,
Black Paw’s insurer disclaimed coverage because of Black Paw’s
alleged
failure to comply with its Insuring Agreement, which required timely
notice of such claims. The Varneys claim that Black Paw, without
such insurance coverage, will be unable to pay the anticipated
judgment from Varney I because Black Paw is “a vastly
undercapitalized
entity” and seeks damages from Simpson equal to the
uncollectible amount.
The facts regarding insurance coverage are not greatly in
dispute. Simpson admits that Black Paw advertised in several
newspapers in
1997 that it was “fully insured.” He also admits that “Black Paw did
not submit the claims made in Varney I to its insurance company
because [he] made the determination that it was a frivolous and
meritless claim that did not require an insurance claim.” He also
admits
that, as a result of his failure to report this claim, insurance is not
available in this case. The only fact materially in dispute is whether
Black Paw is “a vastly undercapitalized entity,” as the Varneys
contend, or “a fully capitalized, profitable business,” as Simpson
contends, but, as shown below, the resolution of this fact is not
necessary to the disposition of this motion or even this case.
The Varneys, although they disagree with Judge Merrick’s ruling
in Varney I that their fraud and breach of contract allegations fail to
state a claim, wisely recognize that the doctrine of claim preclusion
forecloses reconsideration of her ruling and do not press these
claims
in the face of this motion for summary judgment. This Court,
consequently, allows Simpson’s motion for summary judgment as
to the
fraud and breach of contract claims in Varney II. It should be
emphasized that the sole ground for allowing the motion as to
these counts
is claim preclusion: a plaintiff whose motion to amend a complaint
has been denied because the new claims fail to state a claim may
not
simply file a new complaint with these claims and seek an
independent determination from another judge on the same issue.
See, e.g.,
Heacock v. Heacock, 402 Mass. 21, 23 (1988).
The Varneys, however, did not seek to add a Chapter 93A claim
in their motion to amend in Varney I, and therefore Judge Merrick’s
ruling does not preclude this claim from going forward in a new
complaint. With regard to the Chapter 93A claim, the issue is
whether it
may constitute an unfair or deceptive act or practice in the
conduct of trade or commerce, in violation of G.L. c. 93A, § 2(a),
for the
president of a home inspection company to advertise that his
company is fully insured and then, when a claim is brought against
the home
inspection company alleging negligence, to intentionally decide
not to submit the claim to the insurer, resulting in the denial of any
insurance coverage on that claim. This Court concludes that
these facts may indeed support such a claim under G.L. c. 93A.
This is a case of first impression in that no case has been cited by
any party (and none found by the Court) that addresses whether
the
failure to file an insurance claim, under some circumstances, may
itself constitute an unfair act or practice in violation of Chapter
93A. As
a result, this Court must look to the meaning and purpose of
Chapter 93A to determine whether this conduct falls within its
rubric. The
Supreme Judicial Court has stated “that the following are ?
considerations to be used in determining whether a practice is to
be deemed
unfair: (1) whether the practice ... is within at least the penumbra
of some common-law, statutory, or other established concept of
unfairness; (2) ... is immoral, unethical, oppressive, or
unscrupulous; (3) ... causes substantial injury [to] ... competitors
or other
businessmen.’” Datacomm Interface, Inc. v. Computerworld, Inc.,
396 Mass. 760, 778 (1986) quoting PMP Assocs., Inc. v. Globe
Newspaper Co., 366 Mass. 593, 596 (1975), quoting 29 Fed. Reg.
8325, 8355 (1964). An act or practice that is deceptive or
fraudulent
is certainly in violation of c. 93A, but an act or practice need not
be deceptive or fraudulent to be found to be “unfair.” See
Massachusetts Farm Bureau Federation, Inc. v. Blue Cross of
Massachusetts, Inc., 403 Mass. 722, 729 (1989).
When a home inspection company advertises that it is “fully
insured,” it reasonably conveys two messages to potential
customers: (1) that
it is reputable enough to obtain insurance; and, more importantly,
(2) that if the customer were to bring any claim of negligence
against
the home inspection service, there will be a “deep pocket” – an
insurance company – to ensure full payment of any judgment or
settlement. Implicit in the second message is that the home
inspection company will extend the benefits of its insurance
coverage to its
customers by reporting negligence claims to its insurer and
complying with all other conditions necessary to ensure coverage.
By choosing
not to submit a negligence claim to its insurer, the home
inspection company is effectively negating the second message
because there will
be no insurance (and consequently no “deep pocket”) in the
absence of timely submission. It does a customer no good for his
home
inspection company to have insurance if that insurance will not be
available to that customer. In other words, while the home
inspection
company’s advertisement represents that it is fully insured, it
effectively negates or diminishes that representation when it acts
to deny a
customer the benefits of that full insurance coverage.
“Fragmentary information may be as misleading ... as active
misrepresentation, and
half-truths may be as actionable as whole lies ....” Kannavos v.
Annino, 356 Mass. 42, 48 (1969) quoting Harper & Jones, Torts, §
7.14.
Therefore, this Court concludes that it may be deceptive and
certainly would be unfair for a home inspection company who
advertises
that it is fully insured to knowingly engage in conduct that would
prevent a customer’s claim from being insured.(1)
Having declared that a Chapter 93A claim is cognizable on the
facts set forth in this record, it is important to set forth the limits of
such a
claim. Damages from this alleged Chapter 93A violation arise only
in the event that the Varneys prevail in Varney I against Black Paw
and Black Paw is unable to pay its judgment in full. In that event,
compensatory damages under Chapter 93A against Simpson
would
equal the difference between the amount of the judgment against
Black Paw and the amount collected from Black Paw. Since the
disposition of the Chapter 93A claim against Simpson in Varney II
must await the disposition of the claims against Black Paw in
Varney I
and the claims in these two cases are inherently interwoven, this
Court hereby consolidates these two actions.
ORDER
For the reasons stated above, this Court ORDERS that:
1.The defendant’s motion for summary judgment is ALLOWED as
to the fraud and breach of contract claims and DENIED as to
the G.L. c. 93A claim.
2.Varney I (Essex County Superior Court Civil Action No. 98-1337)
and Varney II (the above-entitled action) are hereby
consolidated.
______________________________
Ralph D. Gants
Justice of the Superior Court
DATED: September 27, 2000
Footnotes
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‘Contamination’ suit lost
By Julie Manganis
Staff writer
Salem- A Salem Superior Court jury yesterday rejected all but one
of the claims made by a Topsfield couple who said they were
tricked into buying a house contaminated with
Chemicals and soot five years ago, and decided to tear it down.
Robert and Cheryl Varney sued the former owner of the
Brookside Road home, the real estate agency that sold it to them
in 1997, and the home inspection company that
found no problems with the 20-year old home.
But yesterday, they were awarded just $12,500 for what the jury
decided was
negligent infliction of emotional distress by the home’s former
owner, Janice Scibelli-
and Scibelli’s lawyer says he may appeal that finding.
The decision came following a six-week trial before a jury and
Judge David Lowy.
Scibelli, a widow who was selling her home after the death of her
husband, and
Middleton Real Estate, the agency that handled the sale, were
accused of making false
statements on a disclosure form.
Black Paw Home Inspection, a Stoneham-based company, was
accused of negligently missing the damage the Varney’s say they
later found.
The Varney’s contended that the house they bought in 1997 had
been damaged by fire or by an oil furnace “blow back.” They said
they found fire damage on a beam
in the cellar, near a hot water heater; soot in the insulation in the
walls; and traces of
methylene chloride, an industrial solvent, and other chemicals in
the air. They claimed that those chemicals were used to clean up
the damage.
They decided in 1998 to demolish the house and rebuild in the
same site, and then
went to court seeking damages for the cost of both homes plus
emotional distress.
Lawyers for the three defendants in the suit quickly challenged
their claims, noting that there was no record of any fire call at the
home. They said there had been a
minor problem with the furnace backing up after Scibelli had filled
out the disclosure form, but that it would not have caused the kind
of contamination claimed by the Varney’s.
They also argued that there was no contamination within the
house, and what they thought was soot from a fire was most likely
simply what was blown into the walls
from the house’s own chimney.
Jurors returned their verdict yesterday afternoon.
Scibelli’s lawyer, William Hunt, said he is considering an appeal,
but declined further comment. Lawyers for Middleton Real Estate
and Black Paw said they were pleased with the outcome.
Robert Varney, who said his children are still sick from the
exposure, was angry at the outcome.
“We lost before we even started,” said Varney, who contends that
the law was manipulated by what he feels were politically
connected lawyers in the case.
“They all knew about the damage and they all conspired to get us
to buy the house,” said
Varney. “We were like sheep being led to the slaughter.”
Varney said the home they built to replace the one they bought is
now about to be
foreclosed, and the couple’s vehicles are being repossessed.
The Varney’s decision to tear down their house made local
headlines back in 1998, as did their lawsuit.
The couple told reporters that they saw no other choice. They
said they were told
they could no longer stay in a trailer on the property, and they
wanted to rebuild.
They launched a Web site, Housefromhell.com, where they posted
news accounts and other commentary on their ongoing legal case.
That led Black Paw to file a counterclaim for defamation. Lawyers
for Black Paw argued that the increasing number of people
searching the Internet for a home inspector would find the site and
avoid doing business with the company.
The jury rejected that claim, however.
