Gorelick v Star Markets Company Inc.

Mass Appeals Court 2023

FACTS                  Supermarket (Shaws, a part of Star Markets) bought automatic doors from the manufacturer and installer (Stanley) under a Purchase Order.A customer (Gorelick) sued both Shaws and Stanley saying the door swing injured him. The negligence claims were – against Shaws – failure to maintain, and against Stanley – for improper installation.

Stanley defended itself but refused to defend Shaws. Shaws and Stanley defended themselves separately at trial. The jury gave the plaintiff nothing.  The jury slip said Shaw’s was negligent but its carelessness wasn’t a substantial cause of the injuries. The jury said Stanley was not negligent.

Shaws brought claims against Stanley arguing that the PO required Stanley to answer (with defense lawyers) for claims brought against Shaws for problems with the doors. The legal fees for Shaw’s defense were $237,438.37.

Text of the PO terms

Supplier hereby indemnifies, defends  . . . from and against any and all claims, actions, …costs and expenses (including, without limitation, costs and expenses for investigation and litigation and reasonable attorneys’ fees) which arise out of or in connection with Supplier or any of its employees’, agents’, subcontractors’, or independent contractors’ breach of any covenants, warranties or representations…”

Warranties in the PO

warranties by the “Supplier” (i.e., Stanley), including that “all services shall be performed in a good workmanlike manner,” that “all Goods delivered hereunder are free from defects in design, material and workmanship,” and that “the Goods will be merchantable and suitable for the purposes intended.”

ISSUE                   Did the PO require Stanley to defend claims against Shaws? 

RULING               Stanley had no obligation to defend negligence claims against Shaws.

REASONS            GL insurers have to defend all claims if any are covered (the ‘in for one, in for all” rule). But Stanley is not an insurer. Coverage rules are different under insurance policies than the rules of coverage under a construction contract indemnity.

This was a simple transaction to buy and install automatic doors.  The “fine print” duty to defend is limited to Stanley’s breach of its warranties.

Nothing shows an intent that Stanley agreed to defend against claims unrelated to the breach of its own warranties.  A claim that Shaws was negligent in maintaining the doors does not arise out of any Stanley breach of its warranties.

COMMENT         Wild (unsupported) accusations often lead to big court costs. Worth trying to have someone else pay for the defense.

Court cases take forever. 2009 PO, 2012 injury, 2014 lawsuit, 2016 trial, 2019 judgment, 2022 appeal, 2023 appeals court decision.  Will there be another appeal to the SJC?