Per-Claimant Occurrence Controls Known-Loss Exclusion: First Circuit Requires Defense of Class Action Where Post-Inception Damages Are Separate Occurrences Under Massachusetts Law

Introduction

In Federated Mutual Insurance Company v. Peterson's Oil Service, Inc., the First Circuit affirmed that an insurer must defend its insured in a Massachusetts class action notwithstanding “known loss” and “loss-in-progress” provisions, when at least some class members’ alleged property damage commenced during the policy period and constitutes separate occurrences from any pre-policy damages. The decision clarifies how these provisions operate in multi-claimant suits under occurrence-based Commercial General Liability (CGL) policies governed by Massachusetts law.

The underlying dispute arose from allegations that Peterson’s Oil Service sold home heating oil with biodiesel levels exceeding industry standards, causing damage to customers’ heating equipment. After the insured received a pre-suit demand and complaint in March 2019, it later procured coverage from Federated beginning July 5, 2019. The class action was ultimately certified into two temporal subclasses: pre-February 2019 and March 2019 to the “present.” When Federated declined to defend, citing the policy’s known-loss and related provisions, the insured sought a defense. The district court compelled a defense based on post-inception claimants and the “in for one, in for all” defense rule. The First Circuit affirmed.

Summary of the Opinion

The First Circuit, assuming without deciding statutory appellate jurisdiction (so-called “hypothetical jurisdiction”), affirmed the district court’s ruling that Federated owes a duty to defend Peterson’s Oil in the state class action. Applying Massachusetts law:

• Duty to Defend Standard: If any allegations are reasonably susceptible to coverage, the insurer must defend, and, if obligated to defend one claim, must defend the entire suit (“in for one, in for all”).
• Policy Interpretation: “Property damage” is covered if caused by an “occurrence,” defined as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
• Known-Loss/Loss-in-Progress: The policy excludes property damage occurring during the policy period if, prior to the period, the insured knew the damage had occurred. The “deemer” clause imputes knowledge upon receipt of a claim or other awareness that damage has occurred.
• Key Holding: Each delivery of the allegedly defective oil causing damage to a particular customer’s heating equipment constitutes a separate “occurrence.” Knowledge of pre-policy damages to some customers does not bar coverage for separate, later property damage to different customers occurring for the first time within the policy period. Thus, claims by class members whose damage began after July 5, 2019 remain potentially covered, triggering the duty to defend the entire action.
• Rejection of Insurer’s Classwide “Monolith” Theory: The court rejected the argument that pre-policy receipt of a class action complaint “deems” knowledge of all past, present, and future damages within the class period, when those future damages had not yet occurred to different customers’ property.

Analysis

Precedents Cited and Their Influence

• Massachusetts duty-to-defend framework. The court anchors its analysis in settled principles:
  • Metropolitan Property & Casualty Ins. Co. v. Morrison, 951 N.E.2d 662 (Mass. 2011), and Billings v. Commerce Ins. Co., 936 N.E.2d 408 (Mass. 2010): The duty to defend arises if the complaint is reasonably susceptible of coverage; conversely, no duty exists only when the allegations lie “expressly outside” coverage and purpose.
  • Mount Vernon Fire Ins. Co. v. Visionaid, Inc., 76 N.E.3d 204 (Mass. 2017): If the insurer must defend any count, it must defend all counts (“in for one, in for all”).
  • Holyoke Mutual Ins. Co. in Salem v. Vibram USA, Inc., 106 N.E.3d 572 (Mass. 2018): Ambiguities and uncertainties in the coverage analysis are resolved in favor of the insured.
• Policy construction cases.
  • Zurich Am. Ins. Co. v. Medical Properties Trust, Inc., 237 N.E.3d 733 (Mass. 2024); Ken’s Foods, Inc. v. Steadfast Ins. Co., 199 N.E.3d 1286 (Mass. 2023); Vermont Mutual Ins. Co. v. Poirier, 189 N.E.3d 306 (Mass. 2022): Massachusetts enforces plain meaning of unambiguous terms and construes ambiguities in favor of insureds.
  • Quincy Mutual Fire Ins. Co. v. Abernathy, 469 N.E.2d 797 (Mass. 1984) and Beacon Textiles Corp. v. Employers’ Mutual Liability Ins. Co., 246 N.E.2d 671 (Mass. 1969): “Accident” means an unexpected happening without intention or design—informing the definition of “occurrence.”
• Occurrence characterization in repeated-harm scenarios.
  • Liberty Mutual Ins. Co. v. Black & Decker Corp., 383 F. Supp. 2d 200 (D. Mass. 2004): Distinguishes a single continuous exposure from multiple discrete injurious incidents; when repeated acts cause distinct injuries over time, “there is not one accident, but many.” This buttresses the court’s per-customer, per-delivery “occurrence” framing.
  • Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178 (2d Cir. 1995): Known-loss doctrine did not bar coverage for later claimants where the insured did not know their identities, types, or extent of damages—supporting the notion that future claimants’ harms are distinct risks appropriately financed through premiums.
• Distinguished authorities invoked by the insurer.
  • Bartholomew v. Appalachian Ins. Co., 655 F.2d 27 (1st Cir. 1981): Identified the “occurrence” as the insured’s discovery of a defect (pre-policy), precluding coverage. The court notes this does not control how to define the occurrence in the present multi-claimant, multi-delivery context.
  • Clarendon National Ins. Co. v. Philadelphia Indemnity Ins. Co., 954 F.3d 397 (1st Cir. 2020), and Arch Specialty Ins. Co. v. Colony Ins. Co., 590 F. Supp. 3d 395 (D. Mass. 2022): Both involved continuing water damage from a pre-policy leak without allegations of new, distinct leaks arising during the policy period. Unlike those continuous-harm cases, this case involves separate deliveries allegedly causing new, discrete property damage to different customers post-inception.
• Appellate jurisdiction and hypothetical jurisdiction.
  • In re Financial Oversight & Management Board for Puerto Rico, 91 F.4th 501 (1st Cir. 2024) and Johansen v. Liberty Mutual Group, Inc., 118 F.4th 142 (1st Cir. 2024): Authorize assuming statutory jurisdiction where the merits favor the party challenging jurisdiction and the issue is one of statutory, not Article III, jurisdiction.
  • Zurn Industries, LLC v. Allstate Ins. Co., 75 F.4th 321 (3d Cir. 2023): Informs the court’s hesitance to treat a duty-to-defend ruling as an appealable injunction absent an enforceable order.
  • Other jurisdictional guideposts: Watchtower Bible & Tract Soc. of N.Y., Inc. v. Colombani, 712 F.3d 6 (1st Cir. 2013); WM Capital Partners 53, LLC v. Barreras, 975 F.3d 68 (1st Cir. 2020); Catlin v. United States, 324 U.S. 229 (1945); Akebia Therapeutics, Inc. v. Azar, 976 F.3d 86 (1st Cir. 2020); Privitera v. Curran (In re Curran), 855 F.3d 19 (1st Cir. 2017); Nisselson v. Lernout, 469 F.3d 143 (1st Cir. 2006).

Legal Reasoning

The court’s analysis proceeds from the text of the policy rather than a global “classwide” characterization:

• What is the “occurrence” here? The policy covers “property damage” caused by an “occurrence,” defined as an accident including repeated exposure to the same harmful conditions. The court reasons that, in common usage, an occurrence is an event or incident—time-bound and concrete. Each delivery of allegedly nonconforming biodiesel-enriched heating oil to a particular customer, resulting in damage to that customer’s equipment, is a separate occurrence. This interpretation is reinforced by:
  • Ordinary meaning: occurrence as “event/incident/happening” with discrete temporal quality.
  • Black & Decker’s distinction between continuing exposure (single occurrence) and repeated distinct incidents (multiple occurrences).
  • Ambiguity canon: If “occurrence” is ambiguous in this setting, Massachusetts law requires construal in favor of the insured.
• Known-loss and loss-in-progress provisions do not collapse separate occurrences into one. The known-loss exclusion bars coverage for property damage occurring during the policy period if the insured knew prior to the period that the property damage had already occurred. Because each post-inception customer’s damage stems from a separate occurrence, the insured’s pre-inception knowledge of earlier customers’ damage is not knowledge of later, distinct property damage to different customers’ equipment that had not yet occurred.
• Deemer clause’s limited reach. The policy “deems” knowledge upon receipt of a demand or claim for damages, or otherwise becoming aware that property damage has occurred. The insurer argued that receipt of a class complaint in March 2019 “deemed” knowledge of all class damages—past, present, and future. The court rejected this expansive view because:
  • At pre-inception service, the later damages had not occurred.
  • The exclusion applies to knowledge of the property damage itself, not merely knowledge of a theory or type of harm.
  • Class definitions that extend “to the present” do not retroactively transform unmanifested, future injuries into known pre-inception property damage.
• Duty to defend is triggered by any potentially covered segment. Because at least the claims of customers whose property damage began after July 5, 2019 are potentially covered, Massachusetts’ “in for one, in for all” rule compels defense of the entire action, including pre-inception subclass claims that are not covered.
• Jurisdictional posture. Without deciding the statutory basis for appellate jurisdiction under 28 U.S.C. §§ 1291 or 1292(a)(1), the court exercised “hypothetical jurisdiction,” a permissible approach for statutory jurisdiction questions where the merits favor the party contesting jurisdiction (the insureds here). This preserved judicial economy without creating precedent on tricky interlocutory-appeal questions in duty-to-defend disputes.

Impact

This decision meaningfully shapes insurance practice and litigation in Massachusetts and potentially beyond:

• Coverage for multi-claimant suits. Insurers cannot rely on pre-inception knowledge of similar harm to bar coverage for later-occurring damages to different claimants in the absence of policy language expressly aggregating such claims. Where later-occurring harms to different property are plausibly separate occurrences, the known-loss/loss-in-progress provisions will not preclude a defense.
• Class actions are not a “monolith.” For occurrence-based policies, courts may analyze coverage by claimant or by discrete happening rather than by the class as a single risk event. Plaintiffs’ counsel may structure subclasses by time periods; if any subclass captures first-occurring, post-inception damage, the insurer’s defense obligation likely attaches to the entire action under Massachusetts law.
• Underwriting and policy drafting. Carriers seeking to avoid this result may consider:
  • Adding “batch,” “related acts,” or “interrelated wrongful acts” provisions that aggregate related injuries or deliveries into a single occurrence for all purposes, including known-loss analysis and limits.
  • Using endorsements explicitly addressing “known loss,” “loss in progress,” and “prior knowledge” at a more granular level, e.g., deeming knowledge of a product defect or systemic condition to be knowledge of all related resulting harms.
  • In claims-made forms, more robust “prior knowledge” conditions or “notice of circumstances” provisions may address similar risks (though this case involved an occurrence-based CGL, not claims-made coverage).
• Claims handling and defense strategy.
  • When a complaint includes both pre- and post-inception allegations, insurers should carefully assess whether any distinct harms began during the policy period. If yes, the Massachusetts “in for one, in for all” rule likely obligates a full defense.
  • Reservation of rights remains essential, particularly to preserve indemnity positions and occurrence/limits arguments for later phases.
  • Allocation of defense costs among multiple insurers/policy years may become a contested issue; this decision primarily addresses the duty to defend, not indemnity allocation or number-of-occurrences for limits.
• Doctrinal clarification in Massachusetts.
  • The opinion provides a workable template for distinguishing continuous harm to the same property (often one occurrence) from repeated, discrete events harming different property (separate occurrences), aligning with Black & Decker.
  • It refines the application of known-loss and deemer clauses: knowledge of a general hazard or of earlier similar harms does not necessarily translate to knowledge of later distinct property damage.
• Appellate practice note. The court’s resort to hypothetical jurisdiction underscores that insurers may not reliably obtain interlocutory review of duty-to-defend rulings unless a district court issues an enforceable injunction. Counsel should plan for the possibility that such appeals will be deferred until final judgment or that merits may be reached without jurisdictional clarification.

Complex Concepts Simplified

• Duty to defend vs. duty to indemnify. The duty to defend is broader: if a complaint’s allegations could be covered, the insurer must defend, even if it later turns out no coverage exists for indemnity. Indemnity depends on facts proven and coverage determinations after adjudication.
• “In for one, in for all.” Under Massachusetts law, if any claim in the suit is potentially covered, the insurer must defend the entire suit, including non-covered claims.
• Known-loss and loss-in-progress. These provisions prevent insuring a loss that is already in progress or already known before policy inception. They bar coverage for damage the insured knew had occurred before the policy period, including any continuation of that same damage.
• Deemer clause. A policy clause that “deems” the insured to have knowledge of property damage upon certain events, like receipt of a demand or claim, or otherwise becoming aware that damages have begun. It cannot deem knowledge of damages that have not yet occurred.
• Occurrence. In occurrence-based policies, coverage attaches to “accidents” or “events” causing damage during the policy period. Where harms arise from separate acts (e.g., discrete product deliveries to different customers), each can be a distinct occurrence. By contrast, a single continuous harmful condition (e.g., an unrepaired leak damaging the same property over time) may be treated as one occurrence.
• Cause vs. effect tests (number of occurrences). Some jurisdictions count occurrences by the cause (single course of conduct) while others consider each effect (injury) separately. Although not framed as a “number of occurrences” limits dispute, the First Circuit’s analysis here aligns with treating discrete deliveries/injuries as separate occurrences for known-loss purposes under the policy’s language.
• Hypothetical jurisdiction. A federal appellate court may, in narrow circumstances, assume statutory jurisdiction (not Article III) to reach the merits where the outcome favors the party contesting jurisdiction, thereby avoiding an unnecessary decision on a thorny jurisdictional question.

Unresolved Questions and Cautions

• Indemnity remains unripe: The court did not decide whether Federated ultimately owes indemnity; that depends on factual determinations in the underlying state action and potentially on aggregation/limits issues not addressed here.
• Number-of-occurrences for limits: The opinion’s occurrence analysis was tailored to known-loss/deemer issues and the duty to defend. It does not definitively resolve how “occurrences” will be counted for limits or retentions across policy years.
• Policy drafting matters: The outcome could differ under policies with robust “batch,” “related claims,” or “interrelated wrongful acts” language aggregating related injuries into a single occurrence or claim, or with different known-loss/knowledge formulations.
• Jurisdictional precedent: Because the court relied on hypothetical jurisdiction, this opinion does not settle whether, or when, duty-to-defend rulings are immediately appealable under §§ 1291 or 1292(a)(1).

Conclusion

Federated Mutual v. Peterson’s Oil delivers a clear rule for occurrence-based CGL policies under Massachusetts law: where a class action includes claimants whose first property damage occurs during the policy period, and those damages stem from separate, discrete events (here, deliveries to different customers), the policy’s known-loss and loss-in-progress provisions do not bar coverage for those post-inception claims. Because at least some claims are potentially covered, the insurer must defend the entire action under the “in for one, in for all” doctrine.

The court’s focus on the policy’s text, ordinary meaning of “occurrence,” and the distinction between continuous harm versus repeated discrete incidents, provides a practical roadmap for courts and practitioners confronting class and mass actions with staggered injury timelines. For insurers, the decision underscores the importance of policy drafting (e.g., aggregation clauses) and careful claims analysis before disclaiming a defense. For insureds, it reinforces the breadth of the defense obligation and the benefit of Massachusetts’ insured-friendly duty-to-defend standards.