Massachusetts’ highest courtroom dominated earlier this month that lawyer’s charges awarded beneath the Commonwealth’s shopper safety statute should not lined damages beneath a normal legal responsibility insurance coverage coverage. Consequently, the determination in Vermont Mutual Insurance coverage Co. v. Poirier, Slip Op. SJC-13209 (July 6, 2022), implies that corporations sued for allegedly unfair or misleading practices could also be left to fund awards of attorneys’ charges beneath Chapter 93A, even the place different elements of their legal responsibility could also be lined by insurance coverage.
The Supreme Judicial Courtroom’s determination stems from a case introduced beneath Massachusetts Normal Legislation, Chapter 93A, which permits customers to sue for unfair or misleading practices. Profitable petitioners beneath Chapter 93A could recuperate, amongst different cures, their very own attorneys’ charges. In Poirier, Douglas and Phyllis Maston sued the house owners of a Massachusetts-based restoration enterprise after hiring the restoration firm to wash a sewage spill within the Maston’s basement. Because of the lack of correct warning, Phyllis Maston allegedly was uncovered excessively to the disinfectant and subsequently developed ongoing respiratory issues. Along with alleging that the restoration firm did not warn of the risks posed by the disinfectants used within the basement, the Mastons alleged that the corporate engaged in unfair or misleading commerce practices beneath Chapter 93A. Following a bench trial, the courtroom discovered that the Poiriers violated Chapter 93A and awarded over $215,000 in attorneys’ charges.
The Poirers’ industrial legal responsibility insurer, Vermont Mutual, paid the Mastons almost $700,000 in legal responsibility within the underlying motion, but it surely didn’t pay the attorneys’ price award and, as an alternative, sought a declaratory judgment that these quantities weren’t lined beneath the coverage. The trial courtroom discovered that the award of lawyer’s charges got here inside the coverage’s protection grant for “sums that the insured turns into legally obligated to pay as damages due to ‘bodily damage.’” After taking the case up sua sponte, the Supreme Judicial Courtroom reversed, discovering that lawyer’s charges beneath Chapter 93A are distinct from an award of damages. Whereas “damages are to compensate for the damage,” the Courtroom reasoned, “lawyer’s charges are to discourage misconduct and acknowledge the general public advantage of bringing the misconduct to mild.” The Courtroom concluded, due to this fact, that the award of attorneys’ charges are “decoupled and handled in another way” from damages which are awarded “due to bodily damage.” Thus, as a result of the final legal responsibility insurance coverage coverage supplied protection just for compensatory damages which are awarded due to the sustained bodily damage, and never as a consequence of a statute or contract, the award of attorneys’ charges weren’t recoverable.
The Supreme Judicial Courtroom additionally rejected the argument that lawyer’s charges are encompassed by the coverage provision extending protection to “[a]ll prices taxed in opposition to the insured within the ‘swimsuit.’” There, the Courtroom reasoned that beneath Massachusetts regulation, the time period “prices” should be learn in context with its surrounding phrases, together with the time period “taxed,” which carries a specific which means within the context of authorized proceedings. Because the Courtroom defined, the time period “prices,” as utilized in authorized proceedings, ordinarily means authorized or taxable prices, not attorneys’ charges.
The Courtroom’s determination ought to mood policyholder expectations of protection for attorneys’ charges awarded beneath a Chapter 93A declare, no less than with respect to normal legal responsibility insurance policies requiring damages “due to” bodily damage. Protection could also be out there beneath different legal responsibility insurance policies, nonetheless, particularly for protection of fits alleging violations that by no means lead to an opposed judgment.
The holding in Poirier can also not foreclose protection for shopper safety violations beneath different states’ legal guidelines. The truth is, deciphering an insurance coverage coverage just like the one at problem in Poirier, the Ohio Supreme Courtroom reached the alternative conclusion of the Supreme Judicial Courtroom, holding that lawyer’s charges are damages due to bodily damage. See Neal-Pettit v. Lahman, 928 N.E.2nd 421, 424 (Ohio 2010). Companies, even these in Massachusetts, can also escape an analogous destiny if the coverage at problem just isn’t ruled by Massachusetts regulation, underscoring the significance of choice-of-law, discussion board choice, or related provisions in insurance policies which will steer insurance coverage claims into states with much less favorable precedent on key protection points.
After all, outcomes will activate the particular coverage language and details of a specific declare, and whether or not Massachusetts or one other state’s legal guidelines will profit the policyholder or insurer is often problem particular. However policyholders ought to fastidiously overview coverage provisions probably impacting the regulation governing insurance coverage claims, as it could have a major impression on protection.
