Posts tagged "Company"

D & H Distributing Company v. Commissioner of Revenue (Lawyers Weekly No. 10-124-17)

Posted by Stephen Sandberg - August 1, 2017 at 2:18 am

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Philadelphia Indemnity Insurance Company v. National Union Fire Insurance Company of Pittsburgh, PA (Lawyers Weekly No. 12-083-17)

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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 2016-00045 BLS1
PHILADELPHIA INDEMNITY INSURANCE COMPANY
vs.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
MEMORANDUM OF DECISION AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
Plaintiff Philadelphia Indemnity Insurance Company (PIIC) and defendant National Union Fire Insurance Company (National Union) each issued insurance policies to North Suffolk Mental Health Associated, Inc. (North Suffolk). PIIC issued a Commercial General Liability (CGL) policy; and National Union issued a Workers’ Compensation and General Liability (Workers’ Comp.) policy. In a case filed in the Middlesex Superior Court in 2011, captioned Estate of Stephanie Moulton v. Nicholas Puopolo, et al. (the Underlying Action), the plaintiff estate brought suit against eighteen directors of North Suffolk (the Director Defendants) asserting claims arising out of the work related death of Ms. Moulton, a North Suffolk employee. The Director Defendants tendered the claim to both PIIC and National Union. PIIC defended the claim (under a reservation of right) and National Union declined coverage. The Director Defendants’ motion to dismiss the Underlying Action was eventually allowed, after appeal to the Supreme Judicial Court (SJC). See Estate of Moulton v. Puopolo, 467 Mass. 478 (2014) (Moulton). In this action, PIIC has filed suit against National Union asserting claims for
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declaratory judgment and equitable subordination and seeking to recover the cost of its successful defense of the Underlying Action. The case is now before the court on the parties’ cross-motions for summary judgment. For the reasons that follow, National Union’s motion is ALLOWED, and PIIC’s motion is DENIED.
ADDITIONAL FACTS
The following additional facts are undisputed.
Ms. Moulton was an employee of North Suffolk, a charitable corporation that provides mental health and rehabilitation services. She was assaulted and killed by a patient while performing her job. As explained in Moulton, her estate (the Estate) filed the Underlying Action against the directors of North Suffolk and others. It alleged claims for willful, wanton, reckless, malicious and grossly negligent conduct and, also, as to the Director Defendants, breach of fiduciary duty. The complaint alleged that the Director Defendants “effectuated” policies and failed to “effectuate” other policies that caused Ms. Moulton’s death. Id. at 480. They “moved to dismiss the complaint chiefly on the grounds that, with respect to the wrongful death action, they are immune from suit, as Ms. Moulton’s employer, under the exclusive remedy provision, G.L.c. 152, § 24 of the Workers’ Compensation Act (act), and, with respect to the breach of fiduciary duty claim, they owed Moulton no such duty.” Id. The Superior Court denied the motion to dismiss; the director defendants sought interlocutory review under the doctrine of present execution; and the case was transferred to the SJC.
As relevant to this case, the SJC found that: “The complaint, fairly read, alleges that the Director Defendants, acting qua directors rather than in any other capacity, set and enforced misguided and wrongful corporate policies that resulted in Mouton’s death while in the course of
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her employment. There is no allegation that the directors undertook any action without a formal board meeting or vote, . . . to the extent that the complaint alleges that Moulton’s death arose from the adoption of or failure to adopt corporate policies, it alleges conduct by the charitable corporation that could have been occasioned only by the vote of its directors acting collectively as a board.” Id. at 488-489. It then held that, “we conclude that the director defendants were Moulton’s employer for purposes of the exclusivity provision of the act. As Moulton’s employer, the director defendants are therefore immune from suit for workplace injuries due to actions taken by the board.” Id. at 490-491.1
The Worker’s Comp. Policy
The National Union Workers’ Comp. policy was in effect when the Moulton claim was asserted. It is a standard form of Worker’s Comp. policy issued in Massachusetts. It has two coverage parts. Part One provides for payment of any benefits “required of you by the workers compensation law;” and that National Union has “the right and duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this insurance. . . . We have no duty to defend a claim, proceeding or suit that is not covered by this insurance.”
Part Two provides Employers’ Liability Insurance. As explained by the SJC in HDH Corporation v. Atlantic Charter Ins. Co., 425 Mass. 433, (1997) (Atlantic Charter), the seminal decision addressing the coverage provided under a workers’ compensation policy, discussed at greater length infra: “Part Two, the employers’ liability portion of the insurance policy, is intended to provide coverage in the rare circumstance in which an employee who has affirmatively opted out [of the workers’ compensation benefits system at the time of hire] brings a tort action for personal injuries.” Id. at 439 n.11.
1 The SJC also held that, “as Moulton’s employer, the director defendants, acting as a board, had no fiduciary duty to her.” Id. at 493.
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The declarations page of the Workers’ Comp. policy identifies North Suffolk as the named insured. There are no policy provisions or endorsements that broaden the definition of named insured to include directors, officers, or employees.
DISCUSSION
PIIC first argues that since, in Moulton, the SJC held that “the director defendants were Moulton’s employer for purposes of the exclusivity provision of the act,” they might also be insureds under the Workers’ Comp. policy, even though the policy terms do not extend coverage to them; or, at least, there is a “possibility” that they would be held to be insureds in a declaratory judgment action addressing coverage issues under the Workers’ Comp. policy. PIIC next argues that there then also exists a “possibility” that the claims asserted by the Estate in the Underlying Action were covered under either Part One or Part Two of the Workers’ Comp. policy coverage provisions. PIIC then goes on to cite Billings v. Commerce Ins. Co., 458 Mass. 194, 200-201 (2010) for the long established principle that: “In order for the duty of defense to arise, the underlying complaint need only show through general allegations, a possibility that the liability claim falls within the insurance coverage.” (Emphasis supplied.) According to PIIC, given this possibility of coverage, National Union had a duty to defend the Director Defendants in the Underlying Action.
The court finds it doubtful that the SJC’s holding that, under the “so-called exclusivity provision of the act,” the directors of a corporation cannot be sued for work place injuries in the Superior Court, when they were alleged to have done nothing more than vote on corporate policies, could be interpreted to mean that the directors were additional insureds under a workers’ compensation policy. However, the court declines to address that argument. This is
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because the SJC’s decision in Atlantic Charter clearly establishes that National Union’s Workers’ Comp. policy did not provide coverage for the claims asserted by the Estate in the Underlying Action.
Claims Asserted under Part One of the Workers’ Comp. Policy
In Atlantic Charter, an employee sued its former employer HDH Corporation (HDH) for personal injuries arising from her allegedly wrongful termination; her husband also asserted claims for loss of consortium. HDH tendered the claim to its workers’ compensation carrier, Atlantic Charter, which declined coverage. The case went to arbitration and the plaintiff employee recovered. HDH then sued Atlantic Charter, claiming coverage under Part One of the policy. The SJC explained the extent of coverage provided under Part One of a workers’ compensation policy as follows:
The terms of Part One of the policy clearly limit defense and indemnity of the employer to claims for benefits required by the workers’ compensation statute. However, the employee brought a civil action seeking monetary damages, and made no claim for workers’ compensation benefits. Indeed, no matter what the allegations of the complaint, as a matter of law, workers’ compensation benefits cannot be recovered by instituting a civil action. A claim for benefits must be brought before the department and adjudicated through the statutorily prescribed workers’ compensation system. See Neff v. Commissioner of the Dep’t of Indus. Accs., 421 Mass. 70, 74 (1995) (describing procedural course for the adjudication of workers’ compensation dispute through the Department of Industrial Accidents). See also Alecks’ Case, 301 Mass. 403, 404 (1938) (under the workers’ compensation statute, an employee “acquires a right to compensation for personal injury as provided in that act, to be enforced by claim against the insurer filed with the Industrial Accident Board…. [T]he policy of the act is to deprive [the employee] of all right of action in tort against his employer for damages for an injury within the scope of the [workers’] compensation act”).
The record demonstrates that a claim for benefits was never initiated by the employee, as mandated by G.L. c. 152, § 10. Accordingly, Atlantic is correct that it had no duty to defend the civil action because the complaint did not state a claim that could result in liability which Atlantic would be obligated to pay under any reasonable interpretation of Part One of the policy. See, e.g., Jimmy’s Diner, Inc. v. Liquor Liab. Joint Underwriting Ass’n of Mass., 410 Mass. 61, 65 (1991).
425 Mass. at 433.
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In Atlantic Charter, the SJC also explained the important public policy considerations underlying the legislation that it was interpreting:
Public policy also supports our decision. The fundamental purpose of the workers’ compensation system is to make funds more readily available to injured employees. Accordingly, the Commonwealth requires all employers to provide workers’ compensation benefits to their employees. See G.L. c. 152, § 25A. As amici point out, the cost of mandatory workers’ compensation insurance is a significant aspect of the business climate of the Commonwealth. Recent legislative reforms have sought to lower the insurance rates employers must pay to provide the security of workers’ compensation benefits to their employees. See St.1991, c. 398. Requiring workers’ compensation insurers to defend civil actions outside the workers’ compensation system would represent an unwarranted expansion of coverage historically understood as provided under this mandatory form of insurance, a result which would increase insurance costs for employers, and could gut the legislative scheme for workers’ compensation. See, e.g., La Jolla Beach & Tennis Club, Inc., supra at 44, 36 Cal.Rptr.2d 100, 884 P.2d 1048.
Id. at 440.
In the present case, Moulton’s estate made no claim to recover workers’ compensation benefits2; indeed, it did not sue North Suffolk, but rather its directors, in an obvious and unsuccessful attempt to recover damages and not the benefits provided under the act.3 PIIC’s argument that the SJC’s decision in Moulton overruled the express holding in Atlantic Charter that Part One of a workers’ compensation policy only provides coverage for workers’
2 The workers’ compensation act has long been held to provide the exclusive remedy by which the estate of deceased employee can recover from his employer. See McDonnell v. Berkshire St. Ry. Co., 243 Mass. 94, 95
(1922) (“The employer who is insured under the workmen’s compensation act is relieved of all
statutory liability, including that for death of an employee under the employers’ liability act”);
Cozzo v. Atlantic Refining Co., 299 Mass. 260, 262 (1938) (“Nor can an action at law be
maintained against such employer [i.e., one who is insured under the workers’ compensation law] to recover for the death of an employee resulting from such injury [i.e., one arising out of and in
the course of his employment],” citing G. L. c. 152, 68); Ferriter v. Daniel O’Connell’s Sons,
Inc., 381 Mass. at 528 (“We acknowledge that G. L. c. 152, 1[4] and 68, bar a deceased
employee’s dependents from recovering under G. L. c. 229, 2 and 2B, for loss of consortium,
as against an employer covered by G. L. c. 152”).
3 In Peerless Ins. Co. v. Hartford Ins. Co., 48 Mass. App. Ct. 561 (2000), decided shortly after Atlantic Charter, the Appeals Court addressed a coverage dispute between an employer’s general liability insurer and its workers’ compensation insurer very much like the dispute presented by this case. There the estate of a deceased employee sued the employer. The workers compensation carrier denied coverage and the general liability carrier defended the claim. The Appeals Court held that because the estate could not bring a claim against the employer for workers compensation benefits or for wrongful death, the workers’ compensation carrier had no duty to defend and no obligations to the general liability carrier.
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compensation benefits, and those benefits can only be claimed in the Department of Industrial Accidents, simply does not parse. In holding that the Estate could not bring an action against the Director Defendants based on allegations that they had voted to adopt corporate policies that allegedly contributed to Ms. Moulton’s death, the SJC was clearly not expanding the coverage provided by workers’ compensation policies. It was also not seeking to “gut” the public policy considerations underlying the statutory scheme, which were intended to reduce the costs of this mandatory insurance coverage, by saddling workers compensation insurers with potential additional costs unrelated to the employee benefits mandated by the act. Indeed, in Moulton, the SJC was not addressing insurance at all. It was only concerned with whether the Director Defendants were subject to suit at common law by an injured employee.
In a somewhat round about argument, PIIC suggests that the Appeals Court’s decision in Norfolk & Dedham Mutual Fire Ins. Co. v. Cleary Consultants, Inc., 81 Mass. App. Ct. 40 (2011) (Norfolk & Dedham) supports its position. In furtherance of its arguments that the claims asserted in the Underlying Action were not covered, National Union quoted the following sentence from Atlantic Charter: “Indeed, no matter what the allegations of the complaint, as a matter of law, workers’ compensation benefits cannot be recovered by instituting a civil action.” 425 Mass. at 439. PIIC argues that in Norfolk & Dedham, the Appeals Court noted that an insurer that provided coverage for slander, libel, and invasion of privacy could not disclaim coverage just because these common law claims were asserted together with claims for sexual harassment before the Massachusetts Commission Against Discrimination (MCAD). In fact, in that case, the Appeals Court held that those claims could be asserted as part of a claim for sexual harassment, because they are compensable under an award for emotional distress. The Court did go on to comment that even if the claims were “viewed as a misguided effort to adjudicate
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claims of slander and invasion of privacy in an improper forum, that would not affect Norfolk’s duty to defend. An insurer’s obligation to defend is not limited to valid claims; it extends even to claims potentially dismissible for lack of subject matter jurisdiction.” 81 Mass. App. Ct. at 48-49. This comment, of course, has no bearing on the statutory scheme for workers’ compensation benefits, in which a workers compensation policy insures only those benefits provided by the act, benefits that can only be awarded by the Department of Industrial Accidents. Obviously, a covered claim filed in the wrong court still gives rise to a duty to defend. An insurer could not disclaim a duty to defend because a plaintiff mistakenly filed an action in federal court, when there was no federal jurisdiction, but the policy covered the injury alleged in the complaint. A worker’s compensation insurer does not have a duty to defend a claim filed in Superior Court for damages that are expressly not covered under the workers’ compensation system.
Claims Asserted under Part Two of the Workers’ Comp. Policy
At oral argument, PIIC acknowledged that its principle argument that the “possibility” of coverage existed and this triggered National Union’s duty to defend was based on Part One of the coverage provisions. It nonetheless also asserted that a duty to defend arose under Part Two. Here, PIIC does not argue that Moulton overturned that part of Atlantic Charter in which the SJC stated that: “Part Two, the employers’ liability portion of the insurance policy, is intended to provide coverage in the rare circumstance in which an employee who has affirmatively opted out brings a tort action for personal injuries.” Rather, PIIC argues that the Estate’s amended complaint “included claims for funeral expenses, as well as for wrongful death and pain and suffering without reference to the Wrongful Death Act, and did not indicate whether Moulton’s parents were dependent upon her for financial support. Those claims arguably fell within the
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scope of claims subject to G.L. c. 152, §§ 33, 31 and/or 32, respectively, but were presumably intended to circumnavigate the Workers’ Compensation statute entirely and therefore [because there was no allegation that Moulton had waived her rights to workers’ compensation benefits] left open the question whether Moulton had preserved her common law rights in lieu of accepting Worker’s Compensation benefits.” In consequence, until it could be established that Ms. Moulton had not affirmatively opted out of workers’ compensation coverage when she began work at North Suffolk, the possibility that claims asserted in the amended complaint were covered by the Workers’ Comp. policy existed.
However, in Moulton, the SJC summarily dismissed the suggestion that an employer/defendant had to assert non-waiver of workers’ compensation benefits as an affirmative defense. It explained that the statute (G.L. c. 152, § 24) expressly provides that the employee “shall be held to have waived his right of action at common law,” if he does not provide a written notice that he is claiming his right to opt out at the beginning of his employment. Therefore, non-waiver is not an affirmative defense, but rather it is the plaintiff that must allege in the complaint that the “right to payment under the act” was waived. 467 Mass. at 484 n. 12. This was not pled in the Estate’s amended complaint (nor could it be,) and therefore the complaint alleged no facts even suggesting a claim covered by workers’ compensation insurance. “When the allegations in the underlying complaint lie expressly outside the policy coverage and its purpose, the insurer is relieved of the duty to investigate and defend the claimant.” Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass 387, 394-395 (2003) (Internal citations and quotations omitted.)
Moreover, the issue now before the court is not whether the Estate stated a cause of action against the Director Defendants that could possibly survive a motion to dismiss. This is a
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coverage case between two insurers. PIIC issued a comprehensive general liability policy to its insured, North Suffolk. It is claiming a right to equitable subrogation or contribution from National Union in its capacity as North Suffolk’s workers’ compensation carrier. Its rights to recover against National Union are no greater than North Suffolk’s rights to demand that National Union defend the Underlying Action. Clearly, North Suffolk could not demand coverage based on the absence of an allegation that Ms. Moulton had affirmatively opted out of her rights for workers’ compensation benefits, knowing full well that she had not.
ORDER
For the foregoing reasons, National Union’s motion for summary judgment is ALLOWED and PIIC’s moiton for summary judgment is DENIED. Final judgment shall enter dismissing the complaint.
_______________________
Mitchell H. Kaplan Justice of the Superior Court
Dated: June, 13 2017 read more

Posted by Stephen Sandberg - July 3, 2017 at 10:06 pm

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George, et al. v. National Water Main Cleaning Company, et al. (Lawyers Weekly No. 10-110-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12191

ROBERT GEORGE & others[1]  vs.  NATIONAL WATER MAIN CLEANING COMPANY & others.[2]

Suffolk.     February 14, 2017. – June 26, 2017.

Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd, JJ.

Supreme Judicial Court, Certification of questions of law.  Massachusetts Wage Act.  Labor, Wages, Failure to pay wages, Damages.  Damages, Interest.  Interest.  Judgment, Interest.  Practice, Civil, Interest, Judgment, Damages.

Certification of a question of law to the Supreme Judicial Court by the United States District Court for the District of Massachusetts. read more

Posted by Stephen Sandberg - June 26, 2017 at 2:48 pm

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Mount Vernon Fire Insurance Company v. Visionaid, Inc. (Lawyers Weekly No. 10-108-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12142

MOUNT VERNON FIRE INSURANCE COMPANY  vs.  VISIONAID, INC.[1]

Suffolk.     December 5, 2016. – June 22, 2017.

Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, Budd, & Cypher, JJ.

Insurance, Insurer’s obligation to defend.

Certification of questions of law to the Supreme Judicial Court by the United States Court of Appeals for the First Circuit.

Kenneth R. Berman (Heather B. Repicky also present) for the defendant.

James J. Duane, III (Scarlett M. Rajbanshi also present) for the plaintiff. read more

Posted by Stephen Sandberg - June 22, 2017 at 5:46 pm

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The Gillette Company v. Provost, et al. (Lawyers Weekly No. 12-071-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1584CV00149-BLS2
____________________
THE GILLETTE COMPANY
v.
CRAIG PROVOST, JOHN GRIFFIN, WILLIAM TUCKER, DOUGLAS KOHRING, and SHAVELOGIC, INC.
____________________
MEMORANDUM AND ORDER DENYING PLAINTIFF’S MOTION TO REPORT SUMMARY JUDGMENT DECISION PURSUANT TO RULE 64
In prior rulings, the Court dismissed or granted partial summary judgment against all of The Gillette Company’s claims. Most recently the Court decided that the remaining Defendants are entitled to summary judgment on Gillette’s claims that four of its former employees helped ShaveLogic, Inc., develop a new disposable cartridge shaving razor using Gillette’s confidential information. The only remaining claims to be decided are ShaveLogic’s counterclaims that Gillette intentionally interfered with prospective business relations and violated c. 93A, by threatening to bring and then filing baseless legal claims in an attempt to keep ShaveLogic from entering the market for so-called wet-shaving products.
When the Court granted partial summary judgment in Defendants’ favor on Gillette’s “confidential information” claims, it did not enter separate and final judgment under Mass. R. Civ. P. 54(b) because doing so would be inconsistent with the appellate courts’ strong policy against piecemeal appeals.1 Gillette therefore has no right to appeal the Court’s interlocutory decision granting partial summary judgment in Defendants’ favor on what had been Gillette’s remaining claims.2
Gillette has now asked the Court to report its summary judgment decision for interlocutory appellate review under Mass. R. Civ. P. 64(a). The Court will DENY this request for the reasons discussed below.
1 See Long v. Wichett, 50 Mass. App. Ct. 380, 388-404 (2000) (separate judgment held inconsistent with “bedrock policy against premature and piecemeal appeals”).
2 See Morrissey v. New England Deaconess Ass’n—Abundant Life Communities, Inc., 458 Mass. 580, 594 (2010) (in absence of separate and final judgment, “no appeal can be taken from a trial judge’s partial ‘judgment’ on a claim prior to entry of a final judgment disposing of all claims against all parties to the action”).
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Rule 64(a) authorizes a trial court to report an interlocutory order to the appeals court for immediate review. However, “[s]uch a report should be reserved for novel and difficult issues, the appellate decision of which may expedite resolution of the case.” Morrison v. Lennett, 415 Mass. 857, 859 (1993). “Interlocutory matters should be reported only where it appears that they present serious questions likely to be material in the ultimate decision, and that subsequent proceedings in the trial court will be substantially facilitated by so doing.” Globe Newspaper Co. v. Massachusetts Bay Transp. Auth. Ret. Bd., 412 Mass. 770, 772 (1992), quoting John Gilbert Jr. Co. v. C.M. Fauci Co., 309 Mass. 271, 273 (1941).
Gillette argues that the summary judgment decision in this case turned on the resolution of two unsettled questions of law that should be reviewed by the Appeals Court before ShaveLogic’s counterclaims go to trial. The Court is not convinced.
1. Third-Party Patent Disclosures. Gillette believes that the Court erred in ruling that disclosure of a design concept by a third-party in a patent establishes that the concept is not confidential. Although Gillette concedes that a third-party patent disclosure defeats any claim of confidentiality if the disclosure is well known to others, it argues that information can still be protected as confidential if it is disclosed in an obscure third-party patent that is not generally known in the relevant field.
This issue does not warrant an interlocutory report and review for two reasons.
To begin with, the principle that a business cannot seek to protect as confidential any information that is known by someone outside the business, even if it is not generally known in the industry, is well established under Massachusetts law. See, e.g., Augat, Inc. v. Aegis, Inc., 409 Mass. 165, 170 (1991) (sales volume “known outside the business” by several securities analysts was not confidential). For example, an employee is free to carry away his or her memory of customers’ names, needs, and habits and to use that information to solicit business from those very customers. Such “remembered information” is not confidential because the information itself, as distinguished from an employer’s compilation of such information into a list or database, is known to the customers and thus not kept secret by the employer. American Window Cleaning Co. of Springfield, Mass. v. Cohen, 343 Mass. 195, 199 (1961) (“Remembered information as to the plaintiff’s prices, the
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frequency of service, and the specific needs and business habits of particular customers was not confidential.”); accord Woolley’s Laundry v. Silva, 304 Mass. 383, 391-392 (1939); May v. Angoff, 272 Mass. 317, 320 (1930). There is no good reason why the sharing of information with a few securities analysts as in Augat, or between one customer and one service provider as in American Window, would destroy any claim of confidentiality but disclosure of information in a public patent would not.
In any case, the legal question flagged by Gillette regarding third-party patent disclosures is immaterial because Gillette concedes that the general concepts of designing razors using a front-loading engagement, a magnetic attachment, or an elastomeric pivot are not confidential to Gillette. In its prior decision, the Court noted that Gillette had made this concession during the summary judgment oral argument. It nonetheless went on to explain why the undisputed summary judgment record was consistent with Gillette’s concession. The Court discussed third-party patent disclosures only as part of its explanation of why it made sense for Gillette to concede that these three general design concepts were not confidential. Those parts of the Court’s decision played no other role in its analysis. More recently, during oral argument on Gillette’s motion for a report under Rule 64, Gillette expressly reiterated its concession that these general design concepts are not confidential as a matter of fact. It therefore does not matter whether the Court’s prior discussion of third-party patent disclosures was correct or incorrect as a matter of law.
As the Court explained in its prior summary judgment ruling, the ShaveLogic defendants were entitled to judgment in their favor as a matter of law because Gillette could not muster any evidence any evidence that ShaveLogic used any Gillette confidential information in developing any product. That prior ruling did not turn on any novel and difficult issue of law. It turned Gillette’s inability to any present evidence to support its claims.
Gillette reiterates its prior argument that the expert opinion of its expert witness, that misuse of Gillette confidential information gave ShaveLogic a head start in designing its razor, creates a triable jury question. That argument is still incorrect for the reasons that the Court discussed in its prior decision. Although Gillette’s expert opined that Defendants must have used Gillette confidential
– 4 –
information to design ShaveLogic’s razors, he reached that conclusion based on his mistaken assumption that the general design concepts of front-loading engagements, magnetic attachments, and an elastomeric pivot or loop are confidential information that belong to Gillette. That assumption was incorrect, as Gillette again conceded during oral argument on its Rule 64 motion for a report.
In sum, since Gillette’s arguments regarding the legal significance of third-party patent disclosures are completely immaterial—in light of Gillette’s repeated concession that the concepts of front-loading engagements, magnetic attachments, and elastomeric pivots are not confidential—they provide no reason to report the summary judgment decision for interlocutory appellate review. See Globe Newspaper Co., 412 Mass. at 772-773 (discharging report because appeal from interlocutory decision would not dispose of central issue material to ultimate decision).
2. Obvious Combination of Disclosed Razor Design Features. The second issue that Gillette believes merits interlocutory appellate review concerns the Court’s prior ruling that, given the evidence that the ideas of designing a razor using a front-loading engagement with the razor cartridge or of attaching the cartridge to the handle at a single point were both well-known in the industry, it would have been obvious to anyone skilled in the art that one could combine the two concepts and design a front-end loading razor that attaches to the cartridge at a single point.
Gillette contends that the Court made an error of law because obviousness plays no part in whether information is confidential under Massachusetts law. It also contends that the Court made an error of fact because no record evidence demonstrated that such a combination was obvious. Neither of these contentions justifies interlocutory review of the summary judgment decision.
With respect to the first point, the principle that obvious concepts are not confidential does not raise any novel or difficult question of law that would merit interlocutory review. Obvious engineering or design concepts are not confidential information. See Dynamics Research Corp. v. Analytic Sciences Corp., 9 Mass. App. Ct. 254, 267 (1980) (concepts that would be obvious to an inertial guidance engineer were not protectable as trade secrets). Since obvious concepts are not confidential, obvious combinations of them are not confidential either. See Strategic Directions
– 5 –
Grp., Inc. v. Bristol-Myers Squibb Co., 293 F.3d 1062, 1065 (8th Cir. 2002) (obvious combination of known elements not a trade secret); Julie Research Labs., Inc. v. Select Photographic Eng’g, Inc., 998 F.2d 65, 67 (2d Cir. 1993) (particular combination of design choices not a trade secret if “obvious, widely known, easy for others to discover legitimately, or disclosed” publicly by manufacturer).
With respect to the second point, the Court’s prior opinion was not as clear and precise as it should have been. The issue before the court was not whether the summary judgment record demonstrated that combining front-loading engagements and a single point of attachment was an obvious design option. Rather, the issue was whether Gillette could present any evidence that such a combination was not obvious.
This is not a patent infringement case, in which a defendant charged with infringement would have the burden of proving that a particular patent claim was obvious and thus not patentable. Instead, Gillette had the burden of proving its claims that Defendants misused Gillette’s confidential information, which includes the burden of proving that any concepts reflected in ShaveLogic’s razor designs would not have been obvious to someone skilled in the art.
As a result, Gillette’s failure to muster any evidence that a combination of the well-known concepts of front-loading engagements and single points of attachment was not obvious means that Defendants were entitled to summary judgment on that aspect of Gillette’s claims. See Kourouvacilis v. General Motors Corp., 410 Mass. 706, 715 (1991) (“If the nonmoving party cannot muster sufficient evidence to make out its claim, a trial would be useless and the moving party is entitled to summary judgment as a matter of law.” (quoting Celotex Corp. v. Catret, 477 U.S. 317, 328 (1986) (White, J., concurring)).
ORDER
Plaintiff’s motion to report the recent summary judgment decision under Mass. R. Civ. P. 64 is DENIED.
June 9, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - June 16, 2017 at 4:21 am

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Bay Colony Property Development Company, et al. v. Headlands Realty Corporation, et al. (Lawyers Weekly No. 12-069-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1784CV00936-BLS2
____________________
BAY COLONY PROPERTY DEVELOPMENT COMPANY and WILLIAM E. LOCKE, JR.
v.
HEADLANDS REALTY CORPORATION; PROLOGIS LOGISTICS SERVICES INC.; AMB PROPERTY II, L.P.; AMB PROPERTY CORPORATION; and PROLOGIS, INC.
____________________
MEMORANDUM AND ORDER DENYING DEFENDANTS’ MOTION TO DISMISS AND DENYING PLAINTIFFS’ CROSS-MOTION TO STRIKE
Bay Colony Property Development Company and William E. Locke, Jr., claim that Defendants hired them to plan, coordinate, and supervise the development of two different properties in Pennsylvania. They allege that Defendants promised to pay Bay Colony two percent of the development costs (the “Base Fee”) plus ten percent of the profits (the “Incentive Fee”) for its work on one site, and promised to pay the same percentage amounts to Locke for his work on the other site. Plaintiffs allege they have not been paid and are owed part of the Base Fees and all of the Incentive Fees for the two projects. Plaintiffs assert claims for breach of contract, unjust enrichment, and declaratory judgment as to enforceability of the alleged contracts.
Defendants have moved to dismiss on the ground that all claims are time barred. They argue that the statutory limitations period began to run on October 29, 2010, when AMB Property Corporation (“AMB”) sent a letter disputing whether it had any binding contract with Bay Colony. If that were correct, then all claims would be time barred—whether the Massachusetts six-year limitations period or the Pennsylvania four-year limitations period controlled—because this action was not filed in Middlesex Superior Court until November 14, 2016, more than six years later.
The Court concludes that it may consider the October 2010 letter in deciding the motion to dismiss, but that it must DENY the motion because that letter did not put Plaintiffs on notice of any actual or anticipated breach of contract.
1. Considering the 2010 Letter. Plaintiffs ask the Court to strike or at least disregard the October 29, 2010, letter that is attached to Defendants’ motion to dismiss. They argue that the Court may not consider this letter without converting
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the motion to dismiss into a motion for summary judgment because Plaintiffs did not attach the letter to, reference the letter in, or rely on the letter in drafting the complaint. The Court disagrees.
The authenticity of this letter and the fact that it was sent to Plaintiffs are not in dispute, as Plaintiffs acknowledged at oral argument.
It is therefore permissible and appropriate for the Court to consider the letter in deciding Defendants’ motion to dismiss. When deciding a motion to dismiss under Rule 12(b)(6), a court may consider “documents the authenticity of which is not disputed by the parties” without converting the motion into one for summary judgment.1 Town of Barnstable v. O’Connor, 786 F.3d 130, 141 n.12 (1st Cir. 2015), quoting Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993); accord, e.g., SFM Holdings, Ltd. v. Banc of America Securities, LLC, 600 F.3d 1334, 1337 (11th Cir. 2010); cf. Smaland Beach Ass’n, Inc. v. Genova, 461 Mass. 214, 228 (2012) (judicial construction of federal rules of civil procedure applies to parallel state rules). No affidavit authenticating the document is needed because the authenticity of the copy provided by Defendants has been conceded. See City of Boston v. Roxbury Action Program, Inc., 68 Mass. App. Ct. 468, 469 n.3, rev. denied, 449 Mass. 1101 (2007) (summary judgment record).
2. No Actual Breach or Unequivocal Repudiation. The October 29, 2010, did not trigger the statute of limitations, however, because it did not constitute a breach of the contractual terms alleged in the complaint, did not put Plaintiffs on notice of an actual breach of contract, and was not an unequivocal repudiation of any future contractual obligations.
This letter put Defendants on notice that “AMB disputes that there is any binding agreement between it and [Bay Colony] with respect to either project. But the letter does not assert that AMB was refusing to pay any amounts that Bay Colony
1 This makes perfect sense. If the rule were otherwise, a defendant could instead attach an undisputed document to their answer and seek judgment on the pleadings based on that document. Since a Rule 12(c) motion for judgment on the pleadings is subject to the same standard as a Rule 12(b)(6) motion to dismiss, see Boston Med. Ctr. Corp. v. Secretary of the Exec. Office of Health and Human Svcs., 463 Mass. 447, 450 (2012), such a motion for judgment on the pleadings would be indistinguishable from Defendants’ motion to dismiss in this case.
– 3 –
claims it was owed for services rendered. Instead, AMB wrote that “[w]e will respond in writing to you shortly detailing AMB’s position.” The letter went on to direct Bay Colony and Locke not to do any further work on either project, and not to have any contact with AMB except through its legal counsel.
Defendants are not entitled to dismissal of this action on the ground that the termination of any contractual arrangement between AMB and Plaintiffs triggered the statute of limitations. The complaint does not allege that AMB had no right to terminate the alleged contract. As a result, nothing in the complaint suggests that contract termination was in and of itself a contract breach that would start the limitations period.
Nor are Defendants entitled to dismissal on the ground that the October 2010 letter constituted a repudiation of AMB’s future contractual obligations and thus gave rise to a claim for breach of contract.
It is not at all clear that Plaintiffs could have brought a claim under Massachusetts law for anticipatory breach of contract, even assuming that this letter was an unequivocal repudiation.2 “With few exceptions, … ‘Massachusetts has not generally recognized the doctrine of anticipatory repudiation, which permits a party to a contract to bring an action for damages prior to the time performance is due if the other party repudiates.’ ” KGM Custom Homes, Inc. v. Prosky, 468 Mass. 247, 253 (2014), quoting Cavanagh v. Cavanagh, 33 Mass. App. Ct. 240, 243 (1992), rev. denied, 413 Mass. 1107 (1992). One of the exceptions applies where there has been “an actual breach accompanied by an anticipatory breach.” Cavanagh, supra, at 243 n.5; accord Parker v. Russell, 133 Mass. 74 (1882) (where defendant promised to support plaintiff for his entire life, and stopped doing so, plaintiff could sue for past and future damages). For example, if a defendant has an alleged obligation to make period payments to the plaintiff, refuses to pay the amounts currently owed, and makes “a clear and unequivocal repudiation” of its obligation to make future payments, “the statute of limitations begins to run from the date of the repudiation”
2 Plaintiffs raise this argument under Massachusetts law. Defendants have not, at those point, asserted or made any showing that the claims asserted in this action are instead governed by Pennsylvania law.
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with respect to both past and future damages. Callender v. Suffolk Cty., 57 Mass. App. Ct. 361, 364 (2003). But the complaint does not allege, and the letter proffered by Defendants does not reveal, any actual breach of contract as of October 2010.
On the other hand, if AMB had unequivocally repudiated its alleged future contractual obligations, Defendants could have sued immediately on a quantum meruit or unjust enrichment theory. See Cavanagh, supra, at 243 n.5. Where one party contracts to provide services in exchange for future compensation, and the other party refuses to make any further payments, the party that provided the services and is seeking payment is “entitled to treat the contract as rescinded” and bring an action in quantum meruit without waiting for the time when the compensation was supposed to be paid. Johnson v. Starr, 321 Mass. 566, 569-570 (1947).
In this case, however, none of Plaintiffs claims is time-barred (assuming, as Defendants do, that the Massachusetts six-year statute of limitations applies) because the October 29, 2010, letter was not a “clear and unequivocal repudiation” of Defendants’ alleged obligation to pay the Base Fees and Incentive Fees claimed by Plaintiffs. Cf. Callender, 57 Mass. App. Ct. 364.
AMB did not assert in the 2010 letter that it would not pay any part of the amounts that Plaintiffs claim they are owed. Instead, it merely stated that AMB “disputes that there is any binding agreement” and that AMB would explain its position in more detail later on.
This letter is not a repudiation of the alleged contract because it is not “a definite and unequivocal manifestation of intention [not to render performance]” (bracketed material in original). Coviello v. Richardson, 76 Mass. App. Ct. 603, 609 (2010), quoting Thermo Electron Corp. v. Schiavone Constr. Co., 958 F.2d 1158, 1164 (1st Cir. 1992); see also Nortek, Inc. v. Liberty Mut. Ins. Co., 65 Mass. App. Ct. 764, 766 & 769-770 (2006) (statute of limitations on contract claim did not begin to run when insurer responded to question about retrospective premiums by stating “that it would investigate the situation and get back to insured, because insurer took no “final or definitive position” as to whether insured must pay disputed amount).
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ORDER
Defendants’ motion to dismiss the complaint is DENIED. Plaintiffs’ cross-motion to strike exhibit B to the motion to dismiss is also DENIED.
7 June 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - June 15, 2017 at 2:03 pm

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Chamberland v. Arbella Mutual Insurance Company (Lawyers Weekly No. 11-077-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

16-P-861                                        Appeals Court

HEATHER CHAMBERLAND  vs.  ARBELLA MUTUAL INSURANCE COMPANY.

No. 16-P-861.

Bristol.     February 1, 2017. – June 9, 2017.

Present:  Carhart, Massing, & Henry, JJ.[1]

Insurance, Underinsured motorist, Arbitration.  Contract, Insurance, Arbitration.  Waiver.  Collateral Estoppel.  Judgment, Preclusive effect.  Arbitration.  Practice, Civil, Summary judgment, Waiver.

Civil action commenced in the Superior Court Department on March 4, 2015. read more

Posted by Stephen Sandberg - June 12, 2017 at 6:04 pm

Categories: News   Tags: , , , , , , ,

Chamberland v. Arbella Mutual Insurance Company (Lawyers Weekly No. 11-077-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

16-P-861                                        Appeals Court

HEATHER CHAMBERLAND  vs.  ARBELLA MUTUAL INSURANCE COMPANY.

No. 16-P-861.

Bristol.     February 1, 2017. – June 9, 2017.

Present:  Carhart, Massing, & Henry, JJ.[1]

Insurance, Underinsured motorist, Arbitration.  Contract, Insurance, Arbitration.  Waiver.  Collateral Estoppel.  Judgment, Preclusive effect.  Arbitration.  Practice, Civil, Summary judgment, Waiver.

Civil action commenced in the Superior Court Department on March 4, 2015. read more

Posted by Stephen Sandberg - June 9, 2017 at 10:07 pm

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Rockland Trust Company v. Langone (Lawyers Weekly No. 10-098-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12129

ROCKLAND TRUST COMPANY  vs.  ROBERT J. LANGONE.

Suffolk.     February 7, 2017. – June 1, 2017.

Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, & Budd, JJ.

Supreme Judicial Court, Superintendence of inferior courts.  Practice, Civil, Counterclaim and cross-claim, Motion to dismiss.  District Court, Jurisdiction, One-trial system.

Civil action commenced in the Supreme Judicial Court for the county of Suffolk on January 6, 2016.

The case was considered by Spina, J. read more

Posted by Stephen Sandberg - June 2, 2017 at 7:38 am

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Williamson-Green v. Interstate Fire and Casualty Company (Lawyers Weekly No. 12-062-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV03141-BLS2
____________________
MICHELLE WILLIAMSON-GREEN, as Administratrix of the Estate of James W. Williamson IV
v.
INTERSTATE FIRE AND CASUALTY COMPANY
____________________
MEMORANDUM AND ORDER DENYING DEFENDANT’S MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS
James W. Williamson IV died from injuries sustained while he was inspecting a roof from a bucket lift that tipped over. His estate brought a wrongful death action against both the lift manufacturer and the company that had had rented out the lift, Equipment 4 Rent, Inc. (“E4R”). The jury found that the manufacturer and E4R were both negligent and awarded compensatory damages of $ 4.3 million. It also found that “E4R’s conduct was grossly negligent, willful, wanton, or reckless” and awarded additional punitive damages of $ 5.9 million, as allowed under G.L. c. 229, § 2. Interstate Fire and Casualty Company had insured E4R. It paid E4R’s share of the compensatory damages but refused to pay any part of the punitive damage award.
In this action Plaintiff claims that Interstate failed to settle the claims against E4R after its liability had become reasonably clear. She asserts one claim on behalf of Mr. Williamson’s estate and four claims as E4R’s assignee. The assigned claims allege that E4R’s damages include “being exposed to an uncovered punitive damages award that would have been avoided had Interstate settled the Underlying Action.”
Interstate has moved for judgment on the pleadings on the assigned claims. It argues that requiring an insurer to pay any part of a punitive damages award, even as consequential damages arising from the insurer’s failure to settle a meritorious claim, would be against public policy. The Court must DENY Interstate’s motion because Massachusetts law does not insulate an insurer from liability for damages incurred because its insured caused bodily injury, engaged in reckless or grossly negligent misconduct, or did both. The limitation on insurers’ liability sought by Interstate would be inconsistent with G.L. c. 175, § 47, cl. Sixth (b), which “codifies the entire public policy” of Massachusetts regarding the insurability of losses
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resulting from reckless misconduct. Andover Newton Theological Sch., Inc. v. Cont’l Cas. Co., 409 Mass. 350, 353 n.2 (1991).1
1. Insurers’ Liability for Failing to Settle Claims. Once an insured’s liability for a particular claim has become reasonably clear, the insurer has a duty under Massachusetts law to make a fair offer to settle the claim and to do so promptly. This duty is imposed on all insurers by statute. See G.L. c. 176D, § 3(9)(f); Hopkins v. Liberty Mut. Ins. Co., 434 Mass. 556, 566-567 (2001). In many cases it is also an implicit part of the insurer’s contractual obligations. When an insurance policy imposes a duty to defend on an insurer, that duty carries with it an implicit obligation “to make reasonable, prudent efforts to settle” the claims against the insured. Boyle v. Zurich American Ins. Co., 472 Mass. 649, 659 (2015); accord Murach v. Massachusetts Bonding & Ins. Co., 339 Mass. 184, 186-187 (1959) (duty to defend includes duty “to act in good faith” to settle claims). Thus, where liability has become reasonably clear, an insurer with a duty to defend also has a duty “to settle the case within the … policy limits when it had the opportunity to do so.” Medical Malpractice Joint Underwriting Ass’n of Massachusetts v. Goldberg, 425 Mass. 46, 60 n.33 (1997).
An insurer that violates its duty to make reasonable efforts to settle a claim may be sued in contract for breaching the insurance policy, in tort for negligently breaching its duty to settle, or for violating G.L. c. 93A by committing an unfair claims settlement practice in violation of G.L. c. 176D. See generally Boyle, supra, at 654-655 & 659 (contract claim); Hartford Cas. Ins. Co. v. New Hampshire Ins. Co., 417 Mass. 116, 120-121 (1994) (negligence claim); Rhodes v. AIG Domestic Claims,
1 Plaintiff did not argue that Interstate’s public policy argument cannot be squared with G.L. c. 175, § 47, cl. Sixth (b), as construed in Andover Newton. Nonetheless, the Court cannot ignore that statute and precedent in deciding whether an insurer may be held liable for punitive damages under Massachusetts law. Since “important public policy interests are implicated,” it is appropriate for the Court to “raise and resolve the issue sua sponte.” Long v. Wickett, 50 Mass. App. Ct. 380, 385 n.6 (2000); accord Quincy Trust Co. v. Taylor, 317 Mass. 195, 198 (1944) (“Where a court has once taken jurisdiction and has become responsible to the public for the exercise of its judicial power so as to do justice, it is sometimes the right and even the duty of the court to act in some particular sua sponte.”).
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Inc., 461 Mass. 486, 494 (2012) (claim under G.L. c. 93A, § 9); Silva v. Steadfast Ins. Co., 87 Mass. App. Ct. 800, 803-804 (2015) (claim under G.L. c. 93A, § 11).2
If an insurer breaches its duty to settle a claim, the insured party may recover from the insurer for “all losses” that were “foreseeable consequences” of the failure to settle, even if those losses exceed what is covered by the insurance policy. DiMarzo v. American Mut. Ins. Co., 389 Mass. 85, 101-102 (1983). For example, “[i]f the insurer violated the law in failing to settle for the policy limits, then the insurer will be liable to the insured for the damages exceeding the policy limit.” Gore v. Arbella Mut. Ins. Co., 77 Mass. App. Ct. 518, 526 (2010); accord Boyle, 472 Mass. at 654 & 660. The losses recoverable by the insured include all consequential damages caused by the insurer’s breach of its duty to settle; the insured’s recovery is not limited to compensatory damages awarded against it in the underlying tort action. See, e.g., Rivera v. Commerce Ins. Co., 84 Mass. App. Ct. 146, 149 (2013) (insurer liable for litigation expenses incurred by insured after breach of duty to settle).
This rule, that an insurer that breaches a duty to settle a claim is liable for all consequential damages suffered by its insured, applies whether the insurer is found liable for breach of contract or for engaging in unfair or deceptive conduct in violation of G.L. c. 93A. See Boyle, 472 Mass. at 659-660 & n.15 (breach of contract damages); Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747, 762-764 (1993) (breach of contract damages); DiMarzo, supra (c. 93A damages).3
2 Where the claimant is a private individual, an insurer that breaches its duty under c. 176D to settle claims is automatically liable under G.L. c. 93A, § 9. See Hopkins, 434 Mass. at 564-565. Where the claimant is itself engaged in trade or commerce, and thus must bring suit under G.L. c. 93A, § 11, such liability will only attach if the claimant can prove that the insurer’s settlement practices constituted “unfair or deceptive acts or practices” in violation of G.L. c. 93A, § 2. See Boyle, 472 Mass. at 661-662.
3 There is some uncertainty as to what damages are recoverable in tort for an insurer’s negligent failure to settle a claim. Although Hartford recognized the validity of such a claim, see 417 Mass. at 120-121 it remains an open question whether the “economic loss” rule bars recovery of damages under such a theory in the absence of personal injury or property damage. See Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 439 Mass. 387, 413 (2003).
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2. No Public Policy Exception for Reckless Misconduct. Plaintiff claims that Interstate failed to settle the underlying tort claims after E4R’s liability had become reasonably clear, that E4R would not have been ordered to pay punitive damages if Interstate had settled the case, and that as E4R’s assignee Plaintiff is therefore entitled to recover the $ 5.9 million punitive damage award as consequential damages for Interstate’s breach of its duty to settle the case. The amount of damages recoverable under the assigned claims is not affected by whether E4R has paid or is able to pay any or all of the punitive damage award. See Boyle, 472 Mass. at 660; DiMarzo, 389 Mass. at 95 n.9; Jenkins, 349 Mass. at 702-703.
Interstate argues that allowing an insured (or its assignee) to seek compensation for punitive damages imposed as a result of the insurer’s unreasonable failure to settle a claim “would defeat the socially useful purpose of punitive damages—to punish and deter—and would violate Massachusetts’ public policy prohibiting a party from obtaining indemnity for a punitive damages award.” It asks the Court to recognize a public policy exception to the rule that an insurer is liable for foreseeable damage caused by a breach of its duty to settle a claim against its insured. Specifically, Interstate argues that Plaintiff “should be precluded from recovering damages, as E4R’s assignee, to compensate E4R for the punitive damages imposed against it.”
The highest courts in California, Colorado, and New York, plus a federal appeals court applying Pennsylvania law, have adopted some version of the rule advocated by Interstate.4 These courts all held that allowing insureds to obtain
4 See PPG Industries, Inc. v. Transamerica Ins. Co., 975 P.2d 652, 658 & 654 (Cal. 1999) (holding “that an insured may not shift to its insurance company, and ultimately to the public, the payment of punitive damages awarded in the third party lawsuit against the insured as a result of the insured’s intentional, morally blameworthy behavior against the third party,” after explaining that punitive damages were awarded in underlying case based on insured’s “wanton and reckless conduct”); Lira v. Shelter Ins. Co., 913 P.2d 514, 516 (Colo. 1996) (“We hold that in an action by an insured against his insurer for bad faith failure to settle, the insured may not collect as compensatory damages the punitive damages awarded against him in the underlying lawsuit.”); Soto v. State Farm Ins. Co., 635 N.E.2d 1222, 1225 (N.Y. 1994) (“we hold that the punitive damages awarded against an insured in a civil suit are not a proper element of the compensatory damages recoverable in a suit against an insurer for a bad-faith refusal to settle”); Wolfe v. Allstate Property & Cas. Ins.
– 5 –
compensation from their insurer for a punitive damage award that could have been avoided if the insurer had not breached its duty to settle the case would violate those State’s public policies against allowing insurers to indemnify for punitive damages.5
Interstate urges the Court to read a similar public policy exception into Massachusetts law. In response, Plaintiff argues that these four out-of-State decisions “are all distinguishable because the holdings in each are based on the clear law of their respective states that punitive damages are not insurable—a prohibition that Massachusetts does not have.”
The Court agrees with Plaintiff that Massachusetts law does not reflect any public policy against an insurer indemnifying its insured for punitive damages awarded in a wrongful death case based on a finding that reckless or grossly negligent conduct caused bodily injury and thus death.6
The common law rule in Massachusetts had long been that an insurance policy indemnifying an insured against liability due to an intentional wrong was void as against public policy. Sheehan v. Goriansky, 321 Mass. 200, 203 (1947) (collecting cases). But the Supreme Judicial Court held that liability arising from harm caused by reckless misconduct is insurable, and that there is not “any public policy against” a policy indemnifying an insured against liability for recklessness. Id. at 205.
Co., 790 F.3d 487, 492 (3d Cir. 2015) (“We predict that the Pennsylvania Supreme Court would conclude that, in an action by an insured against his insurer for bad faith, the insured may not collect as compensatory damages the punitive damages awarded against it in the underlying lawsuit.”).
5 PPG Industries, 975 P.2d at 658 (“To require Transamerica to make good the loss PPG incurred as punitive damages in the third party lawsuit would impose on Transamerica an obligation to indemnify, a violation of the [California] public policy against indemnification for punitive damages.”); Lira, 913 P.2d at (“To allow the petitioner in this case to recover compensatory damages which derive from his own wrongful conduct undercuts the public policy of [Colorado] against the insurability of punitive damages.”); Soto, 635 N.E.2d at 724 (New York’s “public policy clearly precludes indemnification for punitive damages”); Wolfe, 790 F.3d at 492 (“Our prediction is a logical extension of Pennsylvania’s policy regarding the uninsurability of punitive damages. It is *493 Pennsylvania’s longstanding rule that a claim for punitive damages against a tortfeasor who is personally guilty of outrageous and wanton misconduct is excluded from insurance coverage as a matter of law.”).
6 The Court therefore need not reach Plaintiff’s alternative argument that parts of the assigned claims would survive even if Massachusetts public policy barred any claim against Interstate for the punitive damages awarded against E4R.
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This common law rule has been modified and superseded by statute. See Andover Newton, 409 Mass. at 353 & n.2. The general insurance statute now provides “that no company may insure any person against legal liability for causing injury, other than bodily injury, by his deliberate or intentional crime or wrongdoing.” G.L. c. 175, § 47, cl. Sixth (b).
The claims against Interstate that were assigned to Plaintiff by E4R do not violate the public policy reflected in this statute for several reasons.
First, cl. Sixth (b) expressly permits insurers to cover all liability for misconduct causing “bodily injury,” even if that misconduct was undertaken deliberately or intentionally. See Andover Newton, 409 Mass. at 353. Punitive damages were assessed against E4R for causing bodily injury that resulted in death.
Second, this statute allows insurers to indemnify insureds for liability arising from grossly negligent or reckless misconduct, and thus would allow insurers to pay for punitive damages based on a defendant’s gross negligence or recklessness even if there was no special provision for damages arising from bodily injury. See id. at 352. The SJC has narrowly construed the statutory prohibition against insuring “deliberate or intentional” misconduct. “The fact that a wrongful act was committed intentionally … does not alone bar coverage. That bar arises only if an intentionally committed, wrongful act was also done deliberately or intentionally, in the sense that the actor knew that the act was wrongful.” Id. “In other words, Massachusetts law only proscribes coverage of acts committed with the specific intent to do something the law forbids.” Andover Newton Theological Sch., Inc. v. Cont’l Cas. Co., 930 F.2d 89, 92 n. 3 (1st Cir.1991). Reckless or grossly negligent conduct is not intentional wrongdoing in this sense. Cf. Manning v. Nobile, 411 Mass. 382, 387 (1991) (recklessness is “intentional conduct [that] involves a high degree of likelihood that substantial harm will result to another”); Aleo v. SLB Toys USA, Inc., 466 Mass. 398, 410 (2013) (gross negligence “is very great negligence, or the absence of slight diligence, or the want of even scant care”) (quoting Altman v. Aronson, 231 Mass. 588, 591-592 (1919)).
The SJC has stressed that cl. Sixth (b) “codifies the entire public policy of the Commonwealth that would bear on the insurability of losses caused by a reckless
– 7 –
disregard of the lawfulness of conduct” and supersedes all common law on the subject. Andover Newton, 409 Mass. at 353 n.2.
Since G.L. c. 175, § 47, cl. Sixth (b), allows insurers to pay for punitive and other damages assessed due to reckless misconduct, and the SJC has construed this provision as stating the entire public policy of Massachusetts regarding this issue, the Court may not deem the claims assigned by E4R to plaintiff to be barred by public policy. The Court has no power to “read into the statute a provision which the Legislature did not see fit to put there, whether the omission came from inadvertence or of set purpose.” Provencal v. Commonwealth Health Ins. Connector Auth., 456 Mass. 506, 516 (2010), (quoting General Elec. Co. v. Department of Envtl. Protection, 429 Mass. 798, 803 (1999).
Nothing in Santos v. Lumbermens Mut. Cas. Co., 408 Mass. 70 (1990), is to the contrary. Santos holds that punitive damages imposed under the wrongful death act are not recoverable under the underinsured motorist provisions of each automobile insurance policy. Id. at 80-84. But the SJC carefully limited its holding to the underinsurance context, and stressed that it was not deciding “whether a tortfeasor’s insurer may be obliged to pay for punitive damages.” Id. at 84 n.17. In any case, whether an insurance policy covers punitive damages does not control the scope of the insurer’s liability for consequential damages if it mishandles settlement of a claim. If an insurance policy excludes coverage for punitive damages, that does not absolve an insurer from liability for all losses flowing from a breach of its duty to settle a claim, including for a foreseeable award of punitive damages against the insured. See Carpenter v. Automobile Club Interinsurance, 58 F.3d 1296, 1302-1303 (8th Cir. 1995) (applying Arkansas law).
ORDER
Defendant’s motion for partial judgment on the pleadings is DENIED.
May 26, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - May 31, 2017 at 7:51 pm

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