We investigate a one-dimensional Rabi-Hubbard type of model, arranged such that a quantum dot is sandwiched between every cavity. The role of the quantum dot is twofold, to transmit photons between neighboring cavities and simultaneously act as an effective photon nonlinearity. We consider three-level quantum dots in the A configuration, where the left and right leg couple exclusively to the left or right cavity. This noncommuting interaction leads to two highly entangled incompressible phases, separated by a second-order quantum phase transition; the degrees of freedom of the quantum dots can be viewed as a dynamical lattice for the photons which spontaneously breaks Z(2) symmetry due to a bosonic Peierls instability, leading to a phase with dimerized order. Additionally, we find a normal insulating phase and a superfluid phase that acts as a quantum many-body superradiant phase. In the superradiant phase, a Z(2) symmetry is broken and the phase transition falls within the universality class of the transverse-field Ising model. Finally, we show that the model can be interpreted as a Z(2) lattice gauge theory in the absence of a dipolar field on the lower qutrit levels.