BOWLER, United States Magistrate Judge.
Pending before this court is a motion for summary judgment on counts II through IX filed by defendants American Guarantee and Liability Insurance Company ("American Guarantee") and Zurich North America Company ("Zurich North"). (Docket Entry # 46). Adopting the arguments in the American Guarantee and Zurich
The claims subject to the alleged coverage under which American Guarantee and Zurich North had a duty to defend and indemnify originate from a November 2004 civil action ("the Indianapolis action") filed in this district by Indianapolis Life Insurance Company ("Indianapolis Life") against Herman, Caplitz, Rudy K. Meiselman, M.D. ("Meiselman") and his wife, Hope E. Meiselman, ("the Meiselmans") and the Financial Resources Network Plan and Trust ("FRN Plan"). A final judgment issued in January 2006 on the claims in the complaint as well as those in a crossclaim filed by Meiselman. The final judgment ordered inter alia the rescission of life insurance policies on Meiselman and his wife and a return of a $650,297.01 commission previously paid to Caplitz.
Count I in this proceeding sets out claims against B & B, BBC and Calsurance for breach of a contract "by estoppel." (Docket Entry # 28, ¶ 53). Counts II through V consist of claims against Zurich North and American Guarantee for breach of contract. Respectively, they set out claims for breach of an express contract to defend and indemnify (Count II), breach of an oral contract (Count III), breach of an implied in fact contract (Count IV) and breach of a contract by estoppel (Count V). Count VI includes claims against all defendants for breach of the implied covenant of good faith and fair dealing. Counts VII, VIII and IX are claims against all defendants for fraud, negligent misrepresentation and violation of section two of Massachusetts General Laws chapter 93A ("chapter 93A").
Plaintiffs filed this action in June 2009 in Massachusetts Superior Court (Suffolk County). (Docket Entry # 6). In August 2009, American Guarantee, Zurich North, B & B, BBC and Calsurance (collectively "defendants") filed a timely notice of removal. Shortly after removal, B & B, BBC and Calsurance filed a motion to dismiss the claims lodged against them in the original complaint pursuant to Rule 9(b), Fed.R.Civ.P., and Rule 12(b)(6), Fed. R.Civ.P. ("Rule 12(b)(6)").
In particular, B & B, BBC and Calsurance moved to dismiss the claims for breach of an oral contract to provide insurance (Count I), breach of an implied in fact contract to provide insurance (Count II), breach of contract by estoppel (Count III) and breach of the implied covenant of good faith and fair dealing (Count VIII) due to the absence of an allegation of a contract. In addition to asserting the untimeliness of the contract claims, B & B, BBC and Calsurance moved to dismiss the negligent misrepresentation, fraud and chapter 93A claims as untimely and the fraud claim due to the lack of particularity. They also sought to dismiss the claims brought by plaintiffs, except those asserted by Caplitz, because Caplitz was the only plaintiff seeking the errors and omission insurance at issue. (Docket Entry #8 & 9).
On February 9, 2010, this court allowed a motion to amend and denied a motion for reconsideration. In the latter motion, B & B, BBC and Calsurance sought reconsideration of the denial of the motion to dismiss the negligent misrepresentation and chapter 93A counts as untimely and the breach of the implied covenant of good faith and fair dealing count as lacking an enforceable contract. In denying reconsideration, this court advised the parties that:
Currently before this court are the summary judgment motions filed by American Guarantee and Zurich North (Docket Entry # 46) and B & B, BBC and Calsurance (Docket Entry # 54) as well as the partial summary judgment motion filed by plaintiffs (Docket entry # 60). After conducting a hearing on June 9, 2010, this court took the motions under advisement.
Summary judgment is designed "`to pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required.'" Davila v. Corporacion De Puerto Rico Para La Difusion Publica, 498 F.3d 9, 12 (1st Cir.2007). It is appropriate when the summary judgment record shows "there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. "A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party." American Steel Erectors, Inc. v. Local Union No. 7, Int'l Ass'n of Bridge, Structural, Ornamental & Reinforcing Iron Workers, 536 F.3d 68, 75 (1st Cir.2008). "A fact is material if it carries with it the potential to affect the outcome of the suit under the applicable law." Id. Facts are viewed in favor of the non-moving party. See Noonan v. Staples, Inc., 556 F.3d 20, 23 (1st Cir.2009). Cross-motions for summary judgment do not alter the summary judgment standard, but instead simply require a determination of "whether either of the parties deserves judgment as a matter of law on the facts that are not disputed." Adria Int'l Group, Inc. v. Ferré Development, Inc., 241 F.3d 103, 107 (1st Cir.2001).
Financial Resources is a Massachusetts corporation that administers and maintains the FRN Plan, a qualified 401(k) pension plan for Financial Resources employees. FFH is the sole stockholder of Financial Resources. Herman is an officer and a director of Financial Resources.
In 2003, Financial Resources hired Caplitz who, among other responsibilities,
In 2002, Financial Resources hired Meiselman as a technical analyst. As an employee of Financial Resources, Meiselman elected to participate in the FRN Plan and executed a tax free rollover of his retirement funds into the FRN Plan amounting to $11,242,853.20. Herman and Caplitz used funds in Meiselman's account to pay for insurance policies on the lives of Meiselman and his wife ("the Meiselman life insurance policies"). Herman signed the two, July 2003 applications along with Meiselman and his wife with the FRN Plan as the designated owner rather than either of the Meiselmans. Caplitz received the aforementioned commission.
As a contracted agent of Indianapolis Life, Caplitz was enrolled in the E & O Policy provided by American Guarantee, a subsidiary of Zurich North, for Indianapolis Life insurance agents from 2001 to July 2004. BBC, a subsidiary of B & B, offered the insurance "through Calsurance, a division of BBC." (Docket Entry # 63, ¶ 6). Calsurance acknowledged and approved applications received from Indianapolis Life agents for the policies provided by American Guarantee. Lancer Claims Services, Inc. ("Lancer"), a division of BBC, provided claims services for the policies.
The E & O policy afforded professional liability coverage for life insurance agents such as Caplitz against "[a]ny `Claim' arising out of a negligent act, error or omission of the `Insured' . . . in rendering or failing to render Professional Services." (Docket Entry # 48, Ex. 2, ¶ I(A)(1)). In greater detail, the relevant language of the E & O policy provides that:
(Docket Entry # 48, Ex. 2, ¶ I(A)(1)) (emphasis added).
The term "Claim" is a defined term in the policy. It "mean[s] a written demand received by the `Insured' seeking monetary damages." (Docket Entry #48, Ex.2)(emphasis added). The E & O Policy defines the term "damages" using similar pecuniary language. The definition states that, "`Damages' shall mean the monetary amounts for which an `Insured' is legally liable, including sums paid as judgments, awards, or settlements . . . ." (Docket Entry #48, Ex. 2) (emphasis added). The definition additionally states that, "`Damages' does not include: . . . 3. the return or withdrawal of fees, commissions, or brokerage charges; 4. Non-pecuniary or injunctive relief; or 5. Judgments or awards from acts deemed uninsurable by law." (Docket Entry #48, Ex. 2, ¶ II(D)) (emphasis added).
The term "Professional Services" is also defined. It means "[t]he sale or servicing of: . . . (c) Employee Benefit Plans . . . including . . . Ordinary Pension or Profit Sharing Plans . . . and (e) `Financial Planning Activities.'" (Docket Entry # 48,
The term "Insured" under the policy is defined to include:
(Docket Entry # 48, Ex 2, ¶ II(F)). Immediately below the words "Named Insured" in item one of the declarations page appears the language, "The Career Agents and Personal Producing Agents of AmerUs Life, Indianapolis Life and Bankers Life of New York." (Docket Entry # 48, Ex 2). As a "contracted agent with Indianapolis Life" (Docket Entry # 63), Caplitz was therefore a named insured within the meaning of the E & O Policy.
As set out in section II(F)(3) of the policy,
As with most insurance policies, the E & O Policy contains a number of exclusions. Exclusions A, E, I, L and T are relevant to the case at bar. They read that:
This Policy does not apply to any "Claim":
(Docket Entry # 48, Ex. 2, ¶ VI).
The 2002 to 2003 "Policy Year E & O Plan Highlights," issued each year to policy holders, expressly states:
(Docket Entry # 63, Ex. 2).
The policy ended on July 1 of each year. The enrollment form for the 2004 to 2005 E & O Policy permitted "[a]gents with [e]xpiring [c]overage" to "[e]nroll within 30 days of [e]xpiration." (Docket Entry # 63). From July 2001 until July 2003, Caplitz was enrolled in the E & O Policy and paid the premium annually by credit card. In 2004, Calsurance "changed its policy" to require "payment by check only." (Docket Entry # 63).
Caplitz attests that on or about July 30, 2004, he "delivered to Calsurance" an enrollment form as well as check number 2018 dated July 29, 2004, in full payment of the premium in order to enroll in the 2004 to 2005 E & O Policy. (Docket Entry # 63, ¶ 9). Caplitz also avers that he "had no knowledge" and no reason to believe that his coverage had not been renewed. He further attests that, "no defendant advised me at the end of the policy year ending July 1, 2004," of a nonrenewal. (Docket Entry # 63, ¶ 12).
By certified letter dated June 30, 2004, Meiselman voiced his objections and those of his wife to Herman, trustee of the FRN Plan, to the purchase of the life insurance policies including the use of funds from the FRN Plan. The letter directed Herman, as trustee, to transfer all his assets in the FRN Plan to a third party account. When Herman purportedly failed to respond, disagreements escalated between Meiselman and Financial Resources, Herman and Caplitz. In what he thought was in accordance with the Awareness Provision, Caplitz orally reported the disagreements to Lancer on or about August 8, 2004.
In response to his telephone call, Caplitz received a letter dated August 19, 2004, from Stephen Casey ("Casey"), Director of Lancer. Casey informed Caplitz that Lancer had been engaged to handle the Meiselman matter on behalf of American Guarantee. Notably, the letter states, "we would like to advise you that your Policy, issued to Amerus by American Guarantee, is effective for the Policy Period of 07/01/2004 to 07/01/2005." (Docket Entry # 63, Ex. C).
On October 29, 2004, however, Caplitz received a letter from Cynthia Renner ("Renner"), "Senior Director-Coverage" for "Lancer Claims Service for American Guarantee," stating that Lancer and American Guarantee "have not been able to confirm your enrollment for the Policy Period July 1, 2004 to July 1, 2005." (Docket Entry #63, Ex. E). The letter requested that Caplitz provide "proof of payment of premium" and confirmation of a completed renewal form. (Docket Entry # 63, Ex. E). Shortly thereafter on November 5, 2004, Caplitz faxed a copy of his enrollment form, dated July 30, 2004, and a copy of the premium check. In the cover sheet, he stated "Please note that the check still has not cleared the account." (Docket Entry # 63, Ex. F).
Calsurance responded to the facsimile on December 2, 2004. The reply facsimile from Stanley R. Rob, Account Executive/Vice President of Calsurance, states, "We have no record of having received either the enrollment form or your check." (Docket Entry # 64, Ex. I). The facsimile concludes with the "regret that we cannot be of service to you." (Docket Entry # 63, Ex. I).
On November 23, 2004, Indianapolis Life filed the complaint in the Indianapolis action against the FRN Plan, Herman, identified as trustee of the FRN Plan, Caplitz and the Meiselmans seeking to rescind the Meiselman life insurance policies and a return of the $650,297.01 commission paid to Caplitz. The five count complaint alleged inter alia intentional and material misrepresentations in the applications for the Meiselman life insurance policies.
On January 26, 2006, the district court in the Indianapolis action (the "Indianapolis court") allowed Indianapolis Life's motion for summary judgment. The motion sought summary judgment on all five counts in the complaint. The decision, rendered without an opinion, thus allowed the rescission of the Meiselman life insurance policies as well as the return of the $650,297.01 commission paid to Caplitz in procuring the policies.
Prior to the decision allowing summary judgment, Meiselman filed a crossclaim against Herman, Caplitz and Financial Resources ("Meiselman crossclaim") on February 9, 2005, on the basis that Herman and Caplitz allegedly used $49,849.69 of Meiselman's retirement funds in the FRN Plan to pay a retainer fee to counsel to defend themselves in Meiselman I. (Docket Entry # 48, Ex. 5). The crossclaim sought a declaratory judgment nullifying the release in Meiselman I (Count I) and further alleged breach of an employment contract (Count II), breach of fiduciary duty (Count III), breach of contract (Count IV) and conversion (Count V). (Docket Entry #48, Ex. 5). Attorney Murphy did not file an answer to the crossclaim thereby
On January 27, 2006, a final judgment issued in favor of Indianapolis Life rescinding the Meiselman life insurance policies. The judgment also awarded Indianapolis Life $650,297.01 against Caplitz reflecting the amount of the commission. The Indianapolis court also awarded Meiselman $938,640.14 on the crossclaim against Herman, Caplitz and Financial Resources.
The First Circuit affirmed the judgment in November 2006. The opinion reflects and establishes that there is "no dispute that Caplitz acted with the intent to deceive Indianapolis Life by submitting an income verification statement for the Meiselmans, which he intentionally misrepresented to have been prepared by a CPA." Indianapolis Life Ins. Co. v. Herman, 204 Fed.Appx. 908, 909 (1st Cir.2006).
American Guarantee and Zurich North move for summary judgment on all counts in the first amended complaint except for Count I. Count I is a breach of contract by estoppel claim against B & B, BBC and Calsurance.
American Guarantee and Zurich North seek summary judgment regarding the absence of the duty to defend and indemnify "plaintiffs" under the E & O Policy against the claims in the complaint and in the Meiselman crossclaim in the Indianapolis action. (Docket Entry # 46). Count II of the first amended complaint, which sets out the breach of the express contractual duty to defend and indemnify, presents the logical starting place to analyze the existence of coverage.
B & B, BBC and Calsurance also move for summary judgment and adopt the arguments made by American Guarantee and Zurich North. (Docket Entry # 54). Plaintiffs bring counts I and VI through IX against B & B, BBC and Calsurance. They reason that if there is no coverage under the E & O Policy for the claims in the complaint and the Meiselman crossclaim in the Indianapolis action, their alleged failure or refusal to enroll Caplitz does not give rise to liability. For purposes of the two summary judgment motions only, defendants assume that the E & O Policy did in fact issue.
Plaintiffs, in turn, seek a partial summary judgment that, "1. The defendants were obligated to provide coverage to the plaintiffs in the Indianapolis action under the policy which they have proffered; [and] 2. The plaintiffs' claims are not time barred." (Docket Entry # 59). The supporting memorandum likewise seeks summary judgment on the basis "that (1) the Zurich Defendants were obligated to provide coverage to the plaintiffs in the Indianapolis action under the Zurich Policy [Doc. # 48-3] and (2) the plaintiffs' claims are not time barred." (Docket Entry #60).
After American Guarantee and Zurich North opposed the motion because of factual issues regarding whether the E & O Policy issued (Docket Entry # 69), however, plaintiffs' sur-reply altered the first request to read "that (1) if it is determined that the Zurich Policy [Doc. # 48-3] issued, the Zurich Defendants were obligated to provide coverage to the plaintiffs
Following the lead of American Guarantee and Zurich North, this court addresses the summary judgment arguments in the context of the separate counts in this action beginning with Count II.
Count II alleges that American Guarantee and Zurich North breached the express contractual duty to defend and indemnify plaintiffs in the E & O Policy. Citing various definitions, language and exclusions in the E & O Policy, American Guarantee and Zurich North argue that the policy did not provide coverage for the claims in the complaint in the Indianapolis action and the claims in the Meiselman crossclaim.
The relevant law is well settled. Examining the duty to defend involves comparing the third party complaint and the policy provisions.
Continental Cas. Co. v. Gilbane Bldg. Co., 391 Mass. 143, 461 N.E.2d 209, 212 (1984); see Vappi & Co., Inc. v. Aetna Cas. & Sur. Co., 348 Mass. 427, 204 N.E.2d 273, 276 (1965); Magoun v. Liberty Mutual Ins. Co., 346 Mass. 677, 195 N.E.2d 514, 517 (1964); Liberty Mutual Ins. Co. v. Metropolitan Life Ins. Co., 260 F.3d 54, 64 (1st Cir.2001) (using similar language); Terrio v. McDonough, 16 Mass.App.Ct. 163, 450 N.E.2d 190, 193 (1983). In addition, "The scope of an insurer's duty to defend is `based not only on the facts alleged in the complaint, but also on the facts that are known or readily knowable by the insurer.'" Timpson v. Transamerica Insurance Co., 41 Mass.App.Ct. 344, 669 N.E.2d 1092, 1095 (1996) (quoting Desrosiers v. Royal Ins. Co. of America, 393 Mass. 37, 468 N.E.2d 625, 627-628 (1984)).
Furthermore, an insurer's duty to defend is not excused though "some, or even many, of the underlying claims may fall outside the duty of coverage." See Simplex Tech. Inc. v. Liberty Mutual Co., 429 Mass. 196, 706 N.E.2d 1135, 1137 (1999). "In Massachusetts, as elsewhere, an insurer must defend the entire lawsuit if it has a duty to defend any of the underlying counts in the complaint." Liberty Mutual Ins. Co. v. Metropolitan Life Ins. Co., 260 F.3d at 63; accord Mt. Airy
Language in an insurance policy is construed "`according to the fair meaning of the language used, as applied to the subject matter.'" Scottsdale Insurance Co. v. Torres, 561 F.3d 74, 77 (1st Cir.2009) (quoting Jacobs v. United States Fidelity & Guaranty Co., 417 Mass. 75, 627 N.E.2d 463, 464 (1994)). Unambiguous words in an insurance contract are "construed in their usual and ordinary sense." (Jacobs v. United States Fidelity & Guaranty Co., 627 N.E.2d at 464); accord Scottsdale Insurance Co. v. Torres, 561 F.3d at 77 (citing Jacobs, 627 N.E.2d at 464, and quoting same language). Language is ambiguous if it "is susceptible to more than one meaning." Scottsdale Insurance Co. v. Torres, 561 F.3d at 77. In the event language is ambiguous, it is construed against the insurance company and in favor of the insured. See Id. ("[a]mbiguous policy terms are construed in favor of the insured"); Massamont Insurance Agency, Inc. v. Utica Mutual Life Insurance Company, 448 F.Supp.2d 329, 331 (D.Mass. 2006); see also Preferred Mutual Ins. Co. v. Gamache, 42 Mass.App.Ct. 194, 675 N.E.2d 438 (1997).
The insured "bears the burden of establishing coverage." Finn v. National Union Fire Insurance Co. of Pittsburgh, Pennsylvania, 452 Mass. 690, 896 N.E.2d 1272, 1275 (2008). The insurer bears the burden of establishing "the applicability of an exclusion." Id. Exclusions are "construed narrowly." Id. at 1277.
The 2004 to 2005 E & O Policy includes a section describing the policy's coverage for defense and settlement. It expressly states:
(Docket Entry # 48, Ex. 2, ¶ I(C)). The fair meaning of this language applied to the subject matter at hand requires a defense for claims to which the insurance applies even if the allegations are groundless. As reasoned by the Massachusetts Supreme Judicial Court, "An insurer's duty to defend is broader than it's duty to indemnify." Doe v. Liberty Mut. Ins. Co., 423 Mass. 366, 667 N.E.2d 1149, 1151 (1996). Consequently, if an insurer has no duty to defend, the insurer has no duty to indemnify. See United Nat'l Ins. Co. v. Parish, 48 Mass.App.Ct. 67, 717 N.E.2d 1016, 1020 (1999).
With these principles in mind, this court turns to the duty to defend in the context of the claims in the complaint in the Indianapolis action and thereafter those in the
The claims alleged in the complaint in the Indianapolis action are: (1) rescission due to misrepresentation (Count I); (2) rescission due to mutual mistake (Count II); (3) breach of contract seeking the return of the commission (Count III); (4) conversion based on Caplitz's retention of the commission (Count IV); and (5) unjust enrichment for retaining the commission (Count V). (Docket Entry # 48, Ex. 4). In essence, Indianapolis Life sought rescission of the Meiselman life insurance policies and the return of the commission earned by Caplitz in connection with those policies. (Docket Entry # 48, Ex. 4).
Addressing counts I and II, they sought rescission of the Meiselman life insurance policies. Count I against Herman, as well as the FRN Plan and the Meiselmans, sought rescission based on misrepresentations and an omission in the applications. The misrepresentations regarding a change in Meiselman's health status and information in an income verification statement. The omission consisted of a failure to disclose an additional life insurance policy. Count II sought rescission based on a mutual mistake between Indianapolis Life and the FRN Plan because the Meiselmans never wanted the life insurance policies. (Docket Entry # 47).
The Meiselman life insurance policies contain an incontestability clause which states:
(Docket Entry # 63, Ex. H). The language of the clause gives Indianapolis Life the ability to void the policies within two years of issuance for any contestable statements made in the applications. In making a necessary finding, the First Circuit decided that Caplitz prepared an income verification statement of the Meiselmans and misrepresented its preparation by a CPA.
Matching the allegations to the policy, counts I and II undeniably sought
With respect to Caplitz, exclusion L acts as a separate basis to reject imposing a duty to defend. Exclusion L of the E & O Policy rejects coverage for claims "arising out of disputes by or between `Insureds' or the insurance company named in Item of the Declarations." (Docket Entry # 48, Ex. 2). The E & O Policy defines named insureds in the declarations page as "The Career Agents and Personal Producing Agents of AmerUs Life, Indianapolis Life and Bankers Life of New York." (Docket Entry # 48, Ex. 2). Indianapolis Life was therefore one of the insurance companies named in the declarations page within the meaning of exclusion L. Agents of the insurance company named in the declarations page who "are party to an agent contract with the insurance company" are insureds under the policy. (Docket Entry # 48, Ex. 2, ¶ II(F)(1)(a)). As a contracted agent with Indianapolis Life, Caplitz is therefore a named insured under the E & O Policy. Exclusion L therefore eliminates any duty to defend Caplitz against the claims by Indianapolis Life as to counts I and II.
Counts III, IV and V in the complaint in the Indianapolis action, brought only against Caplitz, sought the return of the $650,297.01 commission that Caplitz earned in connection with the sale of the life insurance policies. (Docket Entry 48, Ex. 4). Uniformly, these counts asserted that Caplitz received the $650,297.01 commission and either refused to refund it, retained and converted it for his own use or retained it unjustly. All three counts sought damages in the exact amount of the commission.
The definition of damages in the E & O Policy, however, expressly excludes "the return or withdrawal of fees, commissions or brokerage charges." (Docket Entry 48, Ex. 2) (emphasis added). As also stated in the E & O Policy, American Guarantee had a "duty to defend any `Claim' against the `Insured,'" i.e., Caplitz, "seeking damages to which this insurance applies. . . ." (Docket Entry # 48, Ex. 2). "[D]amages to which this insurance applies" does not include damages for the return of a commission. The plain meaning of the policy's definition of damages eviscerates any duty to defend Caplitz against the allegations in counts III, IV and V. Such allegations are not reasonably susceptible of an interpretation that the claims in counts III through V are covered under the E & O Policy.
In short, the return or retention of the commission Caplitz received for procuring the Meiselman life insurance policies is not covered by the E & O Policy. The facts in the Indianapolis action and those known or knowable by American Guarantee are not reasonably susceptible of stating or adumbrating a claim covered by the E & O Policy. Accordingly, Caplitz is not entitled to a defense for counts III, IV and V.
In light of the foregoing, none of the counts in the complaint in the Indianapolis action impose a duty to defend Caplitz or any other plaintiff against any of the claims in the complaint in the Indianapolis action.
Plaintiffs next submit that the E & O Policy required American Guarantee and Zurich North to defend Caplitz against the claims in the Meiselman crossclaim. The introductory paragraph of the crossclaim depicts that, "It is based upon the FRN Plan Trustee's conversion of funds totaling approximately $70,000.00 which should have been rolled over to Meiselman's Individual Retirement Account." (Docket Entry # 48, Ex. 5). As to the Meiselman crossclaim and as noted previously, the Indianapolis court allowed the motion to enter a default judgment and in January 2006 entered the final judgment against Herman, Caplitz and Financial Resources in favor of Meiselman on all counts in the crossclaim.
Count I of the crossclaim sought a declaratory judgment that the release in Meiselman I did not bar the present suit. (Docket Entry # 48, Ex. 5). The duty to defend in the E & O Policy, however, only covered claims "seeking damages to which this insurance applies." (Docket Entry # 48, Ex. 2, ¶ I(C)) (emphasis added). The policy defines the term claim as a demand for "monetary damages." (Docket Entry # 48, Ex. 2, ¶ II(C)). The policy also defines the term damages as meaning "monetary amounts" and as "not includ[ing]" non-pecuniary relief. (Docket Entry # 48, Ex. 2, ¶ II(D)).
A declaratory judgment is not a claim for monetary damages. It is a claim for non-pecuniary relief in the form of a declaration. In essence, a declaratory judgment claim seeks non-pecuniary relief that the policy's definition of damages expressly does not include. See 116 Commonwealth
Accordingly, the facts in the crossclaim and those known or knowable by American Guarantee are not reasonably susceptible of an interpretation that they state or adumbrate Count I as covered by the E & O Policy. Count I of the Meiselman crossclaim therefore does not impose a duty to defend. (Docket Entry # 48, Ex. 2).
Counts II through V of the Meiselman crossclaim allege: (1) breach of Meiselman's employment contract against Financial Resources and Herman (Count II); (2) breach of fiduciary duty against Herman, Financial Resources and Caplitz (Count III); (3) breach of contract against Herman, Financial Resources and Caplitz (Count IV); and (4) conversion against Herman, Financial Resources and Caplitz (Count V). (Docket Entry # 48, Ex. 5).
Turning to Count II, it alleged a breach of Meiselman's employment contract based upon "the failure of Herman and [Financial Resources] to pay over to [Meiselman] certain portions of his salary earned for services provided, namely, $15,000.00 in excess matching [profit sharing plan] contributions and $8,000.00 in salary for 2004." (Docket Entry # 48, Ex. 5, ¶ 26). Count II further alleged that Financial Resources and Herman made excess matching fund contributions of $15,000 of Meiselman's salary into the FRN Plan in "breach of the at-will contract of employment between the parties." (Docket Entry # 48, Ex. 5, ¶ 26). Because the $15,000 amount exceeded the matching contributions, Financial Resources and Herman purportedly should have paid the amount directly to Meiselman as ordinary income. (Docket Entry # 48, Ex. 5, ¶ 16). The count additionally alleged that Financial Resources owed Meiselman $8,000 of his salary which "should have been paid into his pension plan tax free." (Docket Entry # 48, Ex. 5, ¶ 17).
In seeking summary judgment relative to the duty to defend Count II, American Guarantee and Zurich North, as well as B & B, BBC and Calsurance by adopting the former's arguments, raise two arguments. First, they maintain that Meiselman's claim for salary as an employee of Financial Resources "is not a claim for Damages arising out of the rendering or failure to render Professional Services by the insureds as those terms are defined in the Policy." (Docket Entry # 47). They submit that the conduct of not paying Meiselman's salary arises out of the ordinary business operations of Financial Resources. Consequently, the alleged misconduct does not constitute "Professional Services" which, according to defendants, "must involve `the need for specialized learning or training and arise out of those services.' Roe, 412 Mass. at 48, 587 N.E.2d at 217." (Docket Entry # 47).
It is true that a claim under the E & O Policy must involve "rendering or failing to render `Professional Services'. . . ." (Docket Entry # 48, Ex. 2, ¶ I(A)). American Guarantee and Zurich North's reliance on Roe, however, is misplaced. Putting aside the fact that the decision does not contain the precise language quoted, Roe involves the construction of the term "Professional Services" in the context of a dentist's professional liability insurance policy for medical malpractice. "Professional Services" is a defined term in the E & O Policy, which is a professional liability policy for life insurance agents, and it is the language of that policy that controls over the construction of the same term in the somewhat
In addition, Roe focused on the acts or services being "professional" in the sense of "`[s]omething more than an act flowing from mere employment or vocation.'" Roe, 587 N.E.2d at 217 (quoting Nebraska state court decision interpreting "Professional Services" as used in medical malpractice insurance policy). Here, Herman was the plan administrator of the profit sharing plan and the policy defines "Professional Services" as including the servicing of such a plan. (Docket Entry # 48, Ex. 2, ¶ II(J)). Servicing the FRN Plan involved "[s]omething more," Roe, 587 N.E.2d at 217, than merely paying or not paying Meiselman his salary because the acts at issue implicated decisions regarding contribution levels and tax free payments into a profit sharing plan.
Plaintiffs correctly point out that the E & O Policy defines "Professional Services" to include "[t]he sale or servicing of: . . . (c) Employee Benefit Plans, . . ., including. . . Profit Sharing Plans . . . and, (e) `Financial Planning Activities.'"
The precise allegations in the Meiselman crossclaim relative to Count II state that the additional salary of $8,000 "should have been paid into his pension plan account tax free in accordance with the salary deferral agreement on file with the trustee." The allegations also complain about $15,000 in "excess matching contributions" made by Financial Resources that was "contributed to" the "401K pension plan" instead of being paid directly to Meiselman as salary. The Meiselman crossclaim unequivocally denotes the FRN Plan as a "Profit Sharing Plan." (Docket Entry # 48, Ex. 5).
Matching these allegations against the fair meaning of the E & O Policy's definition of "Professional Services" as the "servicing of . . . . Employee Benefit Plans,. . ., including . . . Ordinary Pension or Profit Sharing Plans" (Docket Entry # 48, Ex. 2, ¶ II(J)) and the coverage provided for "[a]ny `Claim' arising out of a negligent act or error" by Caplitz in "rendering or failing to render Professional Services" (Docket Entry # 48, Ex. 2, ¶ 1(A)) (emphasis added) yields a finding that the allegations are reasonably susceptible of stating or adumbrating a covered claim. "Arising out of" professional services means "`having a connection with'" or "`growing out of'" the failure to render professional services in servicing the FRN Plan. See Brazas Sporting Arms, Inc. v. American Empire Surplus Lines Ins. Co., 220 F.3d 1, 7 (1st Cir.2000) (defining "arising out of" as meaning "`growing out of,' . . . or `having connection with'").
In sum, the allegations in Count II for the breach of an employment contract against an employer (Financial Resources) and a plan administrator (Herman) for improperly transferring or not transferring an employee's salary into an ERISA profit sharing plan
Turning to the second argument, American Guarantee and Zurich North, as well as B & B, BBC and Calsurance by adopting this argument, submit there was no duty to defend Count II because Meiselman, as "an employee of the . . . Named Insured's business entity" (Docket Entry # 48, Ex. 2, ¶ II(F)(3)), "would himself have been an insured under the Policy." (Docket Entry # 47). Exclusion L excludes claims "arising out of disputes by or between `Insureds'" (Docket Entry # 48, Ex. 2, ¶ VI(L)) and would therefore operate as a bar to coverage, according to American Guarantee and Zurich North. Section II(F)(3) and exclusion L therefore form the basis of the second argument.
The allegations of the Meiselman crossclaim identify Meiselman as an employee of Financial Resources who elected to participate in the FRN Plan. (Docket Entry # 48, Ex. 5, ¶ 6). Thus, Meiselman was an employee of Financial Resources and in the crossclaim he brought a claim against his employer, Financial Resources, as well as against Herman, the company president, for breach of the employment contract due to unpaid and earned salary.
Section II(F)(3) of the E & O Policy, the section of the policy cited by American Guarantee and Zurich North,
Assuming that Financial Resources or Herman was the named insured under section II(F)(3), the qualifying language places Meiselman outside the realm of section II(F)(3)'s definition of an insured. It is true that the allegations of Count II support a finding that Meiselman was an employee of Financial Resources or Herman thus matching the language in section II(F)(3)'s definition of an insured as "an employee of the Named Insured or Named Insured's business entity." (Docket Entry # 48, Ex. 2, ¶ II(F)(3)). The allegations of Count II, however, do not match the definition
The same finding applies in the event Caplitz is a named insured.
Thus, even assuming Meiselman was "an employee of the Named Insured or Named Insured's business entity" under section II(F)(3), the allegations in Count II of the crossclaim are not reasonably susceptible of an interpretation that Meiselman was acting "on behalf of" Financial Resources or Herman (or Caplitz) within the meaning of section II(F)(3). Hence, he was not an insured under this section of the policy. The exclusion barring claims arising out of disputes by and between insureds (Docket Entry # 48, Ex. 2, ¶ VI(L)) therefore does not apply. Positing no other argument specific to Count II of the Meiselman crossclaim,
The foregoing finding on Count II of the Meiselman crossclaim warrants a denial of summary judgment as to the coverage arguments involving the remaining counts in the Meiselman crossclaim. As previously explained, "an insurer must defend the entire lawsuit if it has a duty to defend any of the underlying counts in the complaint." Liberty Mutual Insurance v. Metropolitan Life Insurance, 260 F.3d at 63. In particular, it is not necessary to address the remaining arguments posed by American Guarantee and Zurich North regarding whether the allegations in counts III and IV are reasonably susceptible of an interpretation
As a final argument relative to summary judgment on Count II of the first amended complaint with respect to the Meiselman crossclaim, American Guarantee and Zurich North point out, correctly, that FFH was not a defendant named in the Meiselman crossclaim or even in the complaint in the Indianapolis action. Because there was no claim lodged against FFH, American Guarantee and Zurich North correctly posit there was no duty to defend or indemnify FFH.
Plaintiffs unsuccessfully attempt to avoid a finding of no duty to defend FFH on the basis of FFH as an insured under section II(F)(3) and the policy's highlights. First, section II(F)(3) applies to "[a]ny person" as opposed to a limited liability company. Second, it is true that Caplitz, as a contracting agent, was a named insured. It is also true that the crossclaim alleges that Caplitz exercised control over all of the operations of Financial Resources. (Docket Entry # 48, Ex. 5, ¶ 4). The crossclaim, however, does not refer or identify FFH. Even assuming that FFH's identify as the sole stockholder of Financial Resources was a fact "`known or readily knowable the insurer,'" Timpson v. Transamerica Insurance Co., 669 N.E.2d at 1095, FFH's role is not identified and the factual allegations do not evidence that its role was readily knowable relative to the misconduct regarding the estimated $70,000 funds set out in the allegations in the Meiselman crossclaim.
In sum, Count II in the first amended complaint alleging that American Guarantee and Zurich North breached the express contractual duty to defend and indemnify Caplitz, Financial Resources and Herman is not subject to summary judgment in favor of American Guarantee and Zurich North. It is, however, subject to summary judgment with respect to FFH.
The foregoing finding does not, however, inevitably lead to an allowance of plaintiffs' summary judgment motion. As explained infra, genuine issues of material facts relative to the issuance of the E & O Policy preclude summary judgment on plaintiff's request regarding the obligation to provide coverage.
American Guarantee and Zurich North move for summary judgment on Count III because, although "possible to have an oral contract for insurance," the factual allegations in the first amended complaint make clear that "the parties never intended an oral contract" of insurance. (Docket Entry # 47). American Guarantee and Zurich North submit that there was either coverage under the express E & O Policy because Caplitz delivered the premium check and enrollment form to Calsurance or there was no insurance because, absent such delivery, "plaintiffs simply are not insureds." (Docket Entry # 47). Plaintiffs assert it is a question of fact for the jury.
American Guarantee and Zurich North correctly concede it is possible to have an oral contract for insurance. See Cunningham v. Connecticut Fire Ins. Co., 200 Mass. 333, 86 N.E. 787, 788 (1909) ("nor can it be argued that there may not be a valid contract of insurance resting only in parol"). Commentators agree. See 3D Steven Plitt, Daniel Maldonado and Joshua Rogers Couch on Insurance
The Cunningham decision, relied upon by American Guarantee and Zurich North to establish the correctness of their position, is distinguishable on its facts. In Cunningham, which did not involve the renewal of an existing policy, "Nothing was said as to the companies by which the policies should be written, as to the amount to be assumed by each company, as to the premium, nor as to the term of the policies." Cunningham v. Connecticut Fire Ins. Co., 86 N.E. at 788. In contrast, the case at bar involves inter alia a prior course of dealing between the parties, an attempt to renew a preexisting policy which presents factual issues for the jury as to its success and the August 19, 2004 letter from Lancer advising Caplitz that "your policy, issued to Amerus by American Guarantee, is effective for the Policy Period of 07/01/2004 to 07/01/2005." (Docket Entry # 63, Ex. C).
Accordingly, the existence of a meeting of the minds on the essential elements of an oral contract for insurance given the record before this court presents an issue of fact for the jury. See generally Salem Laundry Co. v. New England Teamsters and Trucking Industry Pension Fund, 829 F.2d 278, 280 (1st Cir.1987) ("existence of a prior oral contract depended on the intentions of" the parties and "determining that intention involves considering the credibility of witnesses, weighing competing, plausible inferences that can be drawn from events and documents"). Based on the arguments presented, Count III is not subject to summary judgment.
American Guarantee and Zurich North next challenge the implied in fact contract claim in Count IV because "plaintiffs" never "provided any benefit to . . . defendants." (Docket Entry # 47). In addition and similar to their argument on Count III, they maintain that plaintiffs either have a breach of contract claim based upon an express contract or they have no claim.
For similar reasons set out in the preceding section, the latter argument is unavailing. The existence of an agreement renewing the policy may be implied as long as all elements necessary to form a contract are present. See 3D Steven Plitt, Daniel Maldonado and Joshua Rogers Couch on Insurance §§ 29:12 & 29.14 (3d ed. 2005) (to form renewal policy "all elements" necessary to form "contract of insurance. . . must be satisfied" although "missing terms of what purports to be a contract to renew may in some cases be implied"); see, e.g., Campbell v. First American Title Insurance Co., 644 F.Supp.2d 126, 136 (D.Me.2009) (discussing implied in fact contract for title insurance albeit applying Maine law). The presence of the count for breach of an express contract does not foreclose liability for breach of an implied in fact contract which may have more generous terms relative to the delivery of the enrollment form and the premium check. The existence of such an implied in fact contract presents a factual dispute properly addressed
With respect to the former argument, American Guarantee and Zurich North maintain there was no benefit and thus no consideration because they did not cash the premium check. Plaintiffs respond that the returned premium check was the replacement check and not the original check. Caplitz attests that he delivered the check and the enrollment form to Calsurance on or about July 30,2004. The record includes a copy of the enrollment form dated July 30, 2004, as well as a check, not cashed, for the premium dated July 29, 2004. A few weeks later, Caplitz received the August 19, 2004 letter from Casey stating that the policy issued for the July 1, 2004 to July 1, 2005 policy period. Taking into account the entire summary judgment record, such evidence suffices to create a genuine issue of material fact for the jury with respect to whether there was consideration for the implied in fact contract alleged in Count IV.
With respect to Count V, American Guarantee and Zurich North submit that the facts fail to create an estoppel. They reason that if Caplitz's report of the disagreements with Meiselman on August 8, 2004, amounted to a claim, then "nothing Lancer did or failed to do could have affected Caplitz's conduct." (Docket Entry # 47). Alternatively, if the communication was not a claim, then "Caplitz could have obtained other insurance" prior to the October 28, 2004 letter advising him of the inability to confirm his completion of a renewal form. (Docket Entry # 47).
Massachusetts insurance law adheres to "the rule that a liability insurer, `having led the assured to rely exclusively on its protection during the period when he might have protected himself . . . cannot, in fairness, thereafter withdraw that protection.'" Specialty National Ins. Co. v. OneBeacon Ins. Co., 486 F.3d 727, 735 (1st Cir.2007) (quoting Salonen v. Paanenen, 320 Mass. 568, 71 N.E.2d 227, 230 (1947)). Accordingly, to establish such an estoppel "under a liability insurance policy, an insurer must say or do something intended to induce conduct on the part of its insured; the insured must act or refrain from acting in reasonable reliance on the insurer's representation; and the insured must suffer some detriment as a result." Id. (citing Salonen v. Paanenen, 71 N.E.2d at 230).
In the case at bar, Lancer represented in late August 2004 that the policy issued and "is effective" for the 2004 to 2005 policy period (Docket Entry # 63, Ex. C) even after Caplitz advised Lancer about the disagreements with Meiselman. Assuming that the notice was not a claim, as posited by American Guarantee and Zurich North, they note that, "Caplitz could have obtained other insurance." The assumption is not necessarily correct inasmuch as the absence of a "claim" is not dispositive of Caplitz's inability to obtain other insurance which could take place prior to the existence of a claim. See SCA
American Guarantee and Zurich North maintain that Count VI is either duplicative of the "breach of contract claim," presumably Count II, or the claim does not exist.
Massachusetts law implies a covenant of good faith and fair dealing into every contract. See FAMM Steel, Inc. v. Sovereign Bank, 571 F.3d 93, 100 (1st Cir.2009). "`The scope of the covenant is only as broad as the contract that governs the particular relationship.'" FAMM Steel, Inc. v. Sovereign Bank, 571 F.3d at 100; Chokel v. Genzyme Corporation, 449 Mass. 272, 867 N.E.2d 325, 329 (2007). The covenant requires that the parties not "`do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.'" Nile v. Nile, 432 Mass. 390, 734 N.E.2d 1153, 1160 (2000); see Uno Restaurants v. Boston Kenmore Realty, 441 Mass. 376, 805 N.E.2d 957, 964 (2004) (covenant "preserved so long as neither party injures the rights of another to reap the benefits prescribed by the terms of the contract"). American Guarantee therefore had a duty to be honest in its dealings with Caplitz, see Shawmut Bank, N.A. v. Wayman, 34 Mass.App.Ct. 20, 606 N.E.2d 925, 926 (1993) ("duty of good faith would require that the bank be honest in its dealings. . . and that it not purposefully injure [the plaintiff's] right to obtain the benefits of her contract"), and "not to act `to defeat any intended coverage or diminish the protection purchased by the insured.'" Sarnafil, Inc. v. Peerless Insurance Co., 34 Mass.App.Ct. 248, 609 N.E.2d 1234, 1238 (1993).
The record includes copies of the July 2004 premium check and the enrollment form that Caplitz avers he delivered to Calsurance. In August 2004, Lancer acknowledged that the policy was effective. Several months later when the claim became a more likely prospect, Lancer advised Caplitz it could not confirm the enrollment even though Caplitz timely delivered the premium check and the enrollment form.
A reasonable jury could find that Calsurance received the check and the enrollment form, initially issued coverage and then, after the claim materialized to a
American Guarantee and Zurich North next move for summary judgment on the fraud and negligence claims due to the absence of the necessary elements of reasonable reliance and/or damages. They further contend that the three year limitations period applicable to both torts, as well as the four year limitations period applicable to chapter 93A, bar all three counts as untimely. Adopting these arguments, B & B, BBC and Calsurance also seek summary judgment on these counts.
As presented by plaintiffs (Docket Entry # 60, ¶ III(H)) and alleged in the first amended complaint (Docket Entry # 28, ¶¶ 36-37, 74-75, 80 & 84), the fraud, negligent misrepresentation and chapter 93A claims arise out of the false, negligent or deceptive representation that Caplitz had not timely enrolled and, therefore, American Guarantee would not provide coverage under the E & O Policy. The summary judgment record evidences and a jury could find that Caplitz timely delivered the premium check and the enrollment form on or about July 30, 2004. Lancer confirmed the enrollment and the coverage by letter dated August 19, 2004. After the Meiselman claim became evident, however, Lancer's October 29, 2004 letter advised Caplitz incorrectly, negligently or deceptively of an inability to confirm his enrollment. By facsimile dated December 2, 2004, Calsurance likewise informed Caplitz incorrectly, negligently or deceptively that it had no record of receipt of the enrollment form or the check and that it could not backdate coverage to July 2004.
Led to believe they did not have coverage, Caplitz, Herman and Financial Resources retained Attorney Murphy who then filed an answer and a counterclaim in the Indianapolis action on their behalf in March 2005. Hence, they incurred defense costs based upon the negligent, false or deceptive representation that they did not have coverage due to nonreceipt of the enrollment form and the check. Attorney Murphy thereafter allowed a default judgment to enter in January 2006 on the crossclaim by not filing an answer. Notwithstanding these facts, Caplitz avers that, "I did not know until about March or April, 2007, in consultation with [Attorney] Murphy, that I had claims against the defendants because Lancer had told me that there was no coverage because they never received my premium check." (Docket Entry # 63).
B & B, BBC and Calsurance first challenged the timeliness of the fraud, negligent misrepresentation and chapter 93A claims in the August 2006 motion to dismiss the corresponding claims in the original complaint. To support the argument, they filed the answer and counterclaim that Attorney Murphy filed in response to the complaint in the Indianapolis action thus evidencing his representation of these parties as of the March 2005 filing date. In opposing the untimeliness argument then and now, plaintiffs argue that the gist of the action was for breach of contract thereby requiring the application of the six
In addition to this argument, plaintiffs presently argue that the law of the case precludes revisiting the district judge's denial of B & B, BBC and Calsurance's motion to dismiss the claims as untimely as well as this court's denial of the motion to reconsider the denial as to the negligent misrepresentation and chapter 93A claims as untimely.
At the outset, it is worth noting the distinctions between the existing breach of contract claims in counts I and II. The contract claim in Count I against BBC, B & B and Calsurance rests on the breach of their contract to procure "plaintiffs," including Caplitz, an insurance policy whereas the contract claim in Count II against American Guarantee and Zurich North rests on the breach of their duty to defend Caplitz and others under the E & O Policy.
Turning to the law of the case argument, the district judge addressed the negligent misrepresentation,
Taking into account the policies underlying the law of the case doctrine and in light of the preliminary and interlocutory ruling made on the motion to dismiss, the law of the case does not foreclose addressing the timeliness of the claims on summary judgment.
The circumstances are more compelling when faced with an initial denial of a motion to dismiss and a subsequent summary judgment motion. A motion to dismiss addresses the plausibility of the claims in the complaint and assumes facts therein as true whereas a motion for summary judgment addresses whether genuine issues of material fact exist to support the claims. A different factual record and a different standard of review govern summary judgment motions. The facts in the Rule 12(b)(6) record while similar are not identical to those in the summary judgment record. A different legal standard of review also applies when assessing the merits of defendants' summary judgment motions. See McAnaney v. Astoria Financial Corp., 2009 WL 3150430, *7 (E.D.N.Y. Sept. 29, 2009) ("because of the divergent standard of review applicable to motions to dismiss and motions for summary judgment, the law of the case doctrine is inapposite to the Court's analysis of whether, after the close of discovery, genuine issues of fact have been raised which survive summary judgment"). Pretrial rulings are oftentimes designed to be preliminary and, as such, a "[d]enial of a motion to dismiss may be followed by an order granting dismissal, or—in the very nature of the difference between a ruling on the pleadings and an examination of the record—an order granting summary judgment." 18B Charles Alan Wright, Arthur R. Miller and Edward H. Cooper, Federal Practice and Procedure § 4478.1 (2nd ed.). Accordingly, the law of the case doctrine does not bar reconsideration of the timeliness finding made on different legal and factual record. See generally Conley v. U.S., 323 F.3d 7, 13 (1st Cir. 2003) (en banc) (Boudin, C.J.) (law of "case is not a straitjacket but can be avoided—at the direction of the court that made the invoked ruling—on several different bases"). This court therefore turns to the timeliness of the three claims.
As to the negligent misrepresentation and fraud claims against BBC, B & B and Calsurance, an insurance broker's failure to procure coverage may support a breach of contract claim, see Capital Site Management Associates v. Inland Underwriters Ins. Agency, Ltd., 61 Mass.App.Ct. 14, 806 N.E.2d 959, 962 & n. 6 (2004)
The statute of limitations argument challenges the timeliness of the negligent misrepresentation, fraud and chapter 93A claims. These claims arise out of the purportedly false representation that "defendants" would not provide insurance coverage because "plaintiffs" had not timely enrolled. (Docket Entry # 28, ¶ 74; Docket Entry # 60, ¶ III(H)). Plaintiffs submit that Lancer, on behalf of American Guarantee, and Calsurance refused to acknowledge Caplitz's timely enrollment with the delivery of the enrollment form and the premium check in late July 2004. According to plaintiffs, the representations that Caplitz had not timely enrolled were false or negligently made in breach of a duty of care owed to "plaintiffs." (Docket Entry # 28, ¶¶ 74, 75 & 80; Docket Entry # 60, p. 33). Lancer and Calsurance's representations that they had not received the enrollment form and the premium check in a timely manner allegedly induced plaintiffs to believe they lacked defense and indemnity coverage and, in reliance thereon, they refrained from taking action against defendants until filing this action in June 2004. (Docket Entry # 28, ¶¶ 74-77 & 80-81; Docket Entry # 60, pp. 4-6 & 33-34). Plaintiffs maintain that the representations that Caplitz lacked coverage and had not timely enrolled were made in a negligent, fraudulent or deceptive manner thereby leading to the causes of action in counts VII, IX and X with the "gist" being contractual in nature.
Deciding "whether the contract or tort statute of limitations applies is controlled by the essential nature of a party's claim." Oliveira v. Pereira, 414 Mass. 66, 605 N.E.2d 287, 290 (1992); see Desmond v. Moffie, 375 F.2d 742, 743 (1st Cir.1967) ("it is necessary to determine the essential nature of [the] plaintiff's claim" to decide whether tort or contract limitations statute applies) (citing Massachusetts cases); Siebe, Inc. v. Louis M. Gerson Co., Inc., 74 Mass.App.Ct. 544, 908 N.E.2d 819, 830 (2009) (to determine "which statute of limitations to apply to a given claim, we `must look to the "gist of the action"'"); Barber v. Fox, 36 Mass.App.Ct. 525, 632 N.E.2d 1246, 1249 (1994) (although fraud and breach of fiduciary duty claims "sound in tort, the essence of each claim is the complaint that Alden and Esther have failed to do as they promised" and because "`gist of the action' is contractual, the contract period
By statute, a four year limitations period applies to chapter 93A claims. Mass. Gen. L. Ch. 260, § 5A; see Cambridge Plating Co., Inc. v. Napco, Inc., 85 F.3d at 761-762. A four year limitations period therefore applies to the chapter 93A claim in Count IX. See generally Tagliente v. Himmer, 949 F.2d 1, 4 (1st Cir.1991) (statute of limitations legislatively established will not be easily overlooked).
With respect to the fraud and negligent misrepresentation claims against all defendants, Massachusetts case law overwhelmingly construes negligent misrepresentation and fraud claims as subject to the statutory three year limitations period in section 2A of chapter 260. See Salois v. Dime Savings Bank of New York, FSB, 128 F.3d 20, 24 (1st Cir.1997) (summarily noting in case involving misrepresentations about terms of mortgage that claims for inter alia fraud and negligent misrepresentation "are governed by a three-year limitations period"); Cambridge Plating Co., Inc. v. Napco, Inc., 85 F.3d 752, 761-762 (1st Cir.1996) (citing chapter 260, section 2A, for principle that "three-year statute of limitations governs the intentional and negligent misrepresentation claims"); Max-Planck-Gesellschaft Zur Forderung Der Wissenchaften E.V. v. Whitehead Institute for Biomedical Research, 2010 WL 2428690, *2 (D.Mass. June 11, 2010) ("statute of limitations is six years for contract claims, three years for negligent misrepresentation and . . . four years for claims under" chapter 93A); Stolzoff v. Waste Systems International, Inc., 58 Mass.App.Ct. 747, 792 N.E.2d 1031, 1038 (2003) ("common-law torts of fraud and misrepresentation are subject to a three-year statute of limitations"); Beaconsfield Townhouse Condominium Trust v. Zussman, 49 Mass.App.Ct. 757, 733 N.E.2d 141, 145 (2000) ("[m]isrepresentation is subject to a three-year statute of limitations" under chapter 260, section 2A); Humana Foundation, Inc. v. Cantella & Co., Inc., 2000 WL 33774752, *3 (D.Mass. Nov. 17, 2000) ("Massachusetts statute of limitations for a negligent misrepresentation claim is three years," citing chapter 260, section 2A); see also Genereux v. American Beryllia Corp., 577 F.3d 350, 359 (1st Cir.2009) (fraudulent concealment claim subject to section 2A and three year limitations period); Tagliente v. Himmer, 949 F.2d at 4 ("action for fraudulent misrepresentation of material facts in a transaction is an action sounding in tort"); Kent v. Dupree, 13 Mass.App.Ct. 44, 429 N.E.2d 1041, 1043 (1982) ("[f]raudulent misrepresentation, an action sounding in tort, is subject to a three-year statute of limitations"). Moreover, the foregoing cases provide little, if any, analysis regarding the application of section 2A to the negligent misrepresentation and fraud claims. Instead, they often simply
Plaintiffs provide little, if any, reason to depart from this authority. They primarily state that they entered into a contract with American Guarantee and Zurich North whereby these defendants agreed to provide insurance for plaintiffs. (Docket Entry # 60, ¶ III(I)). The argument fails to address why the alleged contract to procure or provide insurance would convert the essence of negligent misrepresentation and fraud claims against the insurance broker for misrepresenting in a false or negligent manner the nonrenewal of the policy into contract claims. Contrary to plaintiffs' position, the existence of a contract, which is assumed for purposes of American Guarantee and Zurich North's summary judgment motion, likewise does not convert the gist of the negligent misrepresentation and fraud claims against these defendants into contract claims. If this were true, almost all breach of insurance contract suits containing negligence, negligent misrepresentation and fraud claims would uniformly apply the six year limitations period applicable to contract claims.
Case law is to the contrary. Breach of contract claims in insurance disputes that also include tort claims do not eviscerate the statutory distinctions drawn by the Massachusetts legislature between tort and contract limitations periods in sections 2A and two of chapter 260. See, e.g., Ferola v. Allstate Life Insurance Co., 2007 WL 2705534, *9 (Mass.Super. Aug. 30, 2007) (noting, in context of beneficiary's claim against financial advisor for representing annuity as appropriate for his father, was subject to three year statute of limitations even though action included separate breach of contract claim). In another case involving alleged misrepresentations by an insurance company about coverage under an annuity policy and an alleged breach of the annuity policy by the failure to provide the coverage under the policy, the First Circuit in Foisy v. Royal Maccabees Life Insurance Co., 356 F.3d 141 (1st Cir.2004), summarily and without discussion applied a six year limitations to the contract claim and a three year limitations period to the negligent misrepresentation claim. Id. at 146-147.
To provide another example, the court in International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 560 N.E.2d at 124, applied different statutory time periods to a negligence claim and a contract claim against an insurance broker who undertook, but failed, to provide excess insurance coverage for a fleet of ice cream vehicles, one of which injured a child resulting in the underlying negligence action. In so doing, the court rejected the argument, also raised here by plaintiffs, that applying different accrual periods for the contract and negligence claims "is out of harmony with the general desirability of having statutes of limitations apply equally, irrespective of the form of the action" and, instead, deferred to the long history of applying different time periods for tort and contract claims. Id. at 127 n. 4.
Finally, the essential nature of the false or negligent representation[s] that "defendants would not provide coverage because [Caplitz] had not timely enrolled for coverage" (Docket Entry # 28, ¶¶ 74 & 80) turn upon the nature and characterization of the conduct rather than the contractual promises that support the breach of contract claims against defendants. In sum, based on the foregoing reasons, a three year limitations period applies to the negligent misrepresentation and fraud claims in counts VI and VII and a four year limitations period applies to the chapter 93A
In seeking to avoid the running of these limitations periods, plaintiffs rely on the discovery rule. Although plaintiffs acknowledge they "incurred attorneys' fees as the result of the defendants' refusal to provide coverage," they submit that factual issues preclude a summary judgment finding that they "knew or should have known prior to" the March or April 2007 discussion with Attorney Murphy "that they had been harmed by the defendants." (Docket Entry # 60, pp. 37-38).
The three year limitations period in section 2A and the four year limitations period in section 5A both commence "after the cause of action accrues." Mass. Gen. Laws ch. 260, §§ 2A & 5A. Ordinarily, a cause of action for personal injury "accrue[s] at the time of injury." Genereux v. American Beryllia Corp., 577 F.3d 350, 359 (1st Cir.2009) (applying Massachusetts law). Similarly, the "accrual of a chapter 93A claim typically occurs at the time injury results from the assertedly unfair or deceptive acts." Cambridge Plating Company, Inc. v. Napco, Inc., 991 F.2d at 25; see Eaton Financial Corporation v. Dunlavey, 1991 WL 241863 at * 6 (Mass.App.Ct. Nov. 7, 1991) (accrual date for chapter 93A claim is analogized according to "general principles which determine the accrual of actions for similar or underlying claims"); International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 560 N.E.2d at 125 ("accrual date for a c. 93A cause of action is determined by the same principles dispositive of the accrual dates of general tort actions").
Under the discovery rule, however, "`a cause of action does not accrue until the plaintiffs know or reasonably should have known that they were injured as a result of the defendant's conduct.'" Genereux v. American Beryllia Corp., 577 F.3d at 359; see also Hanson Housing Authority v. Dryvit System, Inc., 29 Mass.App.Ct. 440, 560 N.E.2d 1290, 1293 (1990) (recognizing that "misrepresentation claims may be subject to the discovery rule"). "`Reasonable notice that a particular product or a particular act of another person may have been a cause of harm to the plaintiff creates a duty of inquiry and starts the running of the statute of limitations.'" Brennan v. Boston Mutual Life Insurance Company, 77 Mass.App.Ct. 1113, 2010 WL 2998669, *3 (Mass.App.Ct. Aug. 3, 2010); see Bowen v. Eli Lilly & Co., 557 N.E.2d at 742. The inquiry is twofold. The "`plaintiff must have (1) knowledge or sufficient notice that she was harmed and (2) knowledge or sufficient notice of what the cause of harm was.'" Genereux v. American Beryllia Corp., 577 F.3d at 360 (quoting Bowen, 557 N.E.2d at 742, with internal brackets omitted).
Although Caplitz attests that he "did not know" until March or April 2007 when he consulted with Attorney Murphy that he "had claims against the defendants" (Docket Entry # 28), the applicable standard is the plaintiff's actual knowledge or "`what a reasonable person in the plaintiff's position would have known or on inquiry would have discovered.'" Genereux v. American Beryllia Corp., 577 F.3d at 359 (internal brackets omitted); see Edwards, Jr. v. John Hancock Mutual Life Insurance Company, 973 F.2d 1027, 1030 (1st Cir. 1992) ("`controlling question is whether a plaintiff's knowledge, actual or attributed, of both harm to him and the likely cause of such harm, was sufficient to stimulate further inquiry'") (emphasis added). Furthermore, the running of the time period is only "delayed while `the facts,' as distinguished from the `legal theory for the cause of action,' remain `inherently unknowable' to the injured party." Catrone v. Thoroughbred Racing Associations of
It is also well established that "`[t]he plaintiff need not know the full extent of the injury before the statute starts to run.'" Massachusetts Eye and Ear Infirmary v. QLT Phototherapeutics, Inc., 412 F.3d 215, 241 (1st Cir.2005) (quoting Bowen v. Eli Lilly & Co., 557 N.E.2d at 741); see Riley v. Presnell, 409 Mass. 239, 565 N.E.2d 780 784 (1991) (victim "need not apprehend the full extent or nature of an injury in order for a cause of action to accrue"). A similar analysis applies with respect to connecting the defendant's conduct to the harm suffered by the plaintiff. Thus, the plaintiff need "not know or have reason to know that the defendant violated a legal duty to the plaintiff, but only that she knew or had reason to know that she had been harmed by the defendant's conduct." Bowen v. Eli Lilly & Co., 557 N.E.2d at 741.
Finally, applying "the discovery rule ordinarily involves questions of fact and therefore in most instances will be decided by the trier of fact." Genereux v. American Beryllia Corp., 577 F.3d at 360. "Determining when a plaintiff had notice of the likely cause of [an] injury is one example of such a [factual] determination." Id.
In the case at bar, Caplitz sent the enrollment form and the check for payment in full of the premium to Lancer on or about July 30, 2004. Lancer confirmed that the renewal policy issued in the August 19, 2004 letter. At this point in time, Caplitz neither knew nor reasonably should have known that he was injured as a result of conduct on the part of American Guarantee, Calsurance or any other defendant. Indeed, all indications pointed to the existence of coverage as confirmed by Lancer on August 19, 2004, even after Caplitz reported the disagreements with Meiselman.
The first inkling of harm occurred in October 2004. Thus, in the October 29, 2004 letter, Caplitz received notice that neither Lancer nor American Guarantee had been able to confirm his enrollment. Caplitz promptly forwarded a copy of the enrollment form dated July 30, 2004, to Lancer with a notation acknowledging that the premium "check still has not cleared the account." (Docket Entry # 63, Ex. F). Meiselman I settled and on November 23, 2004, Indianapolis Life filed the complaint in the Indianapolis action. In light of Lancer's silence after receiving the copy of the enrollment form, Caplitz reasonably assumed he still had coverage and, for summary judgment purposes, lacked reasonable notice of any harm or, more specifically, a lack of coverage due to the asserted non-receipt of the enrollment form and the premium check.
On December 2, 2004, however, Calsurance informed Caplitz that the underwriter could not backdate coverage due to "the pending claim," referring to Meiselman I which, as noted, settled on November 19, 2004. "The failure to obtain insurance obviously will not cause injury in every case." International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 560 N.E.2d at 124 (addressing timeliness of negligence action against insurance broker who undertook but failed to obtain insurance coverage). As explained by the Mobiles court, a negligence claim against an insurance broker for not obtaining adequate coverage does not accrue until a realization of tangible harm such as the insured's payment of legal expenses to defend the underlying action. See Id.
Plaintiffs' attempt to avoid this finding by characterizing the February 24, 2005 letter from Casey as confirming "defendants' recognized obligation to defend" (Docket Entry # 60, p. 6) is disingenuous.
The issue therefore devolves into whether plaintiffs reasonably should have known that defendants may have been the cause of their harm of incurring the defense costs. See Bowen v. Eli Lilly & Co., Inc., 557 N.E.2d at 741 (crucial date for discovery rule is "when a plaintiff discovers, or any earlier date when she should reasonably have discovered, that she has been harmed or may have been harmed by the defendant's conduct"). To state the issue answers the question.
Caplitz knew he sent the enrollment form and the premium check on or about July 30, 2004, to Lancer. He also knew that Lancer initially represented in August 2004 that coverage existed thus indicating receipt. Lancer thereafter advised Caplitz of an inability to confirm his enrollment. Caplitz promptly faxed Lancer the copy of the enrollment form and the copy of the premium check noting that the check had
As events played out, American Guarantee did not defend Caplitz, Herman or Financial Resources against the claims in the Indianapolis action thereby causing them to retain the services of Attorney Murphy. Thus, by March or April 2005, Caplitz, Herman, Financial Resources and FFH reasonably should have known and had all the necessary information to have known that the representation that constitutes the basis for the fraud, negligent misrepresentation and chapter 93A claims, to wit, "that the defendants would not provide coverage because the plaintiffs had not timely enrolled for coverage" (Docket Entry # 28, ¶¶ 36, 37, 74, 80 & 84), may have been false or made in a negligent or deceptive manner. More generally speaking, Caplitz, Herman, Financial Resources and FFH reasonably should have known not only of the injury in the form of incurring defense costs but also "that they were injured as a result of the defendant[s']"
In sum, although application of the discovery rule ordinarily results in questions of fact not suitable for summary judgment, the facts in this case unerringly point to a finding that plaintiffs reasonably should have known that they were injured as a result of defendants' conduct no later than March or April 2005.
In addition to opposing the motion for summary judgment filed by American Guarantee and Zurich North, plaintiffs separately move for summary judgment. They raise two arguments. First, they contend that the fraud, negligent misrepresentation and chapter 93A claims are not time barred.
Second, plaintiffs submit that defendants were obligated to provide coverage in the Indianapolis Action. Viewing the record in defendants' favor, genuine issues of material fact predominate whether the E & O Policy issued for the 2004 to 2005 year. Lynn Kimmel Johnson ("Johnson"), Vice President of BBC, avers that Indianapolis Life "agents seeking to renew coverage under the errors and omissions master policy provided by American Guarantee for the Policy Period of July 1, 2004 to July 1, 2005 were required to send a fully completed enrollment form and premium check to Calsurance by July 30, 2004." (Docket Entry # 69, Ex. 1). The enrollment form requires agents with expiring coverage such as Caplitz to "Enroll within 30 Days of Expiration." (Docket Entry # 63, Ex. A).
Johnson also attests that, "Calsurance has no record of receiving an enrollment form or premium check for [Caplitz] by July 30, 2004." (Docket Entry # 63, Ex. A). Caplitz attests that he delivered the form and the check "[o]n or about July 30, 2004" as opposed to on or before July 30, 2004. In any event, the record contains sufficient evidence to allow a reasonable jury to find that the policy never issued thereby precluding summary judgment in plaintiffs' favor.
In accordance with the foregoing discussion, the motions for summary judgment filed by American Guarantee and Zurich North (Docket Entry # 46) and by BBC, B & B and Calsurance (Docket Entry # 54) are
Indianapolis Life Ins. Co. v. Herman, 204 Fed. Appx. 908, 909 (1st Cir.2006).
Cumis Insurance Society, Inc. v. BJ's Wholesale Club, Inc., 455 Mass. 458, 918 N.E.2d 36, 47-48 (2009); see Nota Construction Corp. v. Keyes Associates, Inc., 45 Mass.App.Ct. 15, 694 N.E.2d 401 (1998) (same).
