United States District Court, D. Massachusetts
July 29, 2014
AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY
JOHN F. LAMOND; SEAN F. MURPHY; TREMONT REALTY INVESTMENTS, LLC; SEAMUR ENTERPRISES, LLC; and COLUCCI, COLUCCI, MARCUS & FLAVIN, P.C.
MEMORANDUM AND ORDER ON PLAINTIFF'S MOTION OF PARTIAL SUMMARY JUDGMENT
RICHARD G. STEARNS, District Judge.
American Guarantee & Liability Insurance Company issued defendant John F. Lamond, then a licensed attorney, a professional liability policy covering the period from May 20, 2007, through May 20, 2008. During the policy period, Lamond represented defendant Sean F. Murphy and two defendant companies in which he is the principal - Tremont Realty Investments, LLC, and Seamur Enterprises, LLC (collectively Murphy) - in the purchase of several lots of land for development. Prior to the closing, Lamond learned that the land was the site of an Indian burial ground and was subject to a preservation restriction. He nonetheless certified to Murphy's mortgagor - Hill Financial Services Company - that titles to the land were free from any encumbrances. After the purchase, the truth was discovered, and Murphy was unable build on the land as planned and defaulted on the mortgage. Hill foreclosed on the lots, but could not develop or sell them because of the burial ground.
In 2009, Hill brought suit against Murphy and Lamond in the Norfolk Superior Court. Murphy, in turn, brought third-party claims against Lamond for, inter alia, professional negligence and violations of Mass. Gen. Laws Ch. 93A. In 2013, Murphy's claims against Lamond were tried to a jury, which awarded $20, 000 to Murphy for Lamond's professional negligence, and $397, 000 in actual damages for Lamond's deceptive acts and practices under Chapter 93A, doubled by the jury to $794, 000 after it found that Lamond had acted willfully. Hill Verdict, Pl.'s Ex. 1 at AG63-66. Pursuant to Chapter 93A, the court also awarded $111, 190.62 in attorneys' fees to Murphy. Hill Docket, Pl.'s Ex. 1 at AG46. American Guarantee denies that Murphy's damages against Lamond are covered by Lamond's professional liability policy and seeks a declaration of the same by way of a partial summary judgment motion.
Summary judgment is warranted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. The parties agree that Lamond's professional liability insurance excludes coverage for
4. criminal or civil fines, penalties (statutory or otherwise), fees or sanctions;
5. punitive, exemplary or multiple damages;... [or]
7. legal fees, costs and expenses paid to or incurred or charged by the Insured, no matter whether claimed as restitution of specific funds, forfeiture, financial loss, setoff or otherwise, and injuries that are a consequence of the foregoing.
Policy § VI.E, Pl.'s Ex. 1 at AG08. The policy also excludes
any Claim based upon or arising out of, in whole or part:... any intentional, criminal, fraudulent, malicious or dishonest act or omission by an Insured; except that this exclusion shall not apply in the absence of a final adjudication... that the act or omission was intentional, criminal, fraudulent, malicious or dishonest.
Policy § III.A, Pl.'s Ex. 1 at AG04.
American Liability argues that the Chapter 93A jury award is excluded under the policy because it stemmed directly from a finding of willful and knowing conduct, and therefore falls within the definition of malicious. See Chervin v. Travelers Ins. Co., 448 Mass. 95, 109 (2006) ("Whatever is done wilfully and purposely, if it be at the same time wrong and unlawful, and that known to the party, is in legal contemplation malicious. That which is done contrary to one's own conviction of duty, or with a wilful disregard of the rights of others, whether it be to compass some unlawful end, or some lawful end by unlawful means, or... to do a wrong and unlawful act knowing it to be such, constitutes legal malice.") (citation omitted). Further, the doubling of the actual damages is excluded under the punitive damages exception.
Defendants acquiesce to the exclusion of the doubled damages, but assert that the actual damages of $397, 000 is neither a penalty nor a punitive award. However, there is no question that the jury found that Lamond "knowingly and/or willfully commit[ted] the unfair and deceptive act or practice." Verdict Q. 8, Pl.'s Ex. 1 at AG0065. The unmultiplied actual damages are therefore excluded under Section III.A of the Policy.
With respect to attorneys' fees, American Guarantee argues that because the Chapter 93A remedy is contrary to the established American Rule, under which each party bears the cost of its own legal representation, they are punitive in intent and should be considered an excluded statutory penalty under the Policy. Although, as defendants observe, attorneys' fee awards under Chapter 93A are treated separately from the recovery of multiple damages, they are nonetheless, as American Guarantee argues, punitive in nature. "Statutory authorization to award attorney's fees to the prevailing party in certain types of actions primarily serves the interrelated purposes of encouraging private enforcement of particular laws chosen by the Legislature, deterring illegal conduct in connection with these laws, and punishing those who violate these laws. " Lincoln St. Realty Co. v. Green, 374 Mass. 630, 632 (1978) (emphasis added). Indeed, "[p]rovision for attorney's fees under [Chapter] 93A reflects the Legislature's manifest purpose of deterring misconduct by affording both private and public plaintiffs who succeed in proving violations of [Chapter] 93A, § 2 ( a ), reimbursement for their legal services and costs.'" Drywall Sys., Inc. v. ZVI Const. Co., Inc., 435 Mass. 664, 672 (2002) (emphasis added, citation omitted). Thus, the attorneys' fees are excluded under § VI.E.5 of the Policy.
Finally, American Guarantee argues that the $20, 000 negligence award is also excluded under the Policy because the award compensated Murphy for the fees paid to Lamond for legal services connected to the real estate transaction. Defendants deny that this was the purpose of the award and point out that the jury verdict form did not ask for a specific finding as to the purpose of the award. However, Mr. Colucci, in his closing argument to the jury, asked the jury to "add [$20, 000] to the damages model" because it was what "Lamond was paid  for the work that he did." Hill Trial Transcript, Pl.'s Ex. 1 at AG0093. Similarly, in his Motion for Judgment Notwithstanding the Verdict and for a New Trial, Lamond characterized the $20, 000 as "obviously  intended to reimburse Murphy for the legal fees paid to [him]." Pl.'s Ex. 1 at AG107. As these same parties in the Hill action agreed that the $20, 000 award was intended as a reimbursement for attorneys' fees, the court deems them estopped from taking a self-contradictory position in this action. See Patriot Cinemas, Inc. v. Gen. Cinemas Corp., 834 F.2d 208, 212 (1st Cir. 1987) ("It may be laid down as a general proposition that, where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.") ( citing Davis v. Wakelee, 156 U.S. 680, 689 (1895)). Therefore, the negligence award is excluded under § VI.E.7 of the Policy.
Plaintiff's motion for partial summary judgment on the scope of coverage of defendant Lamond's professional liability insurance is ALLOWED. The parties will submit a joint proposed scheduling order for the disposition of defendants' counterclaims within 30 days of the resolution of the appeal of the state court Hill action. The Clerk will close the case administratively pending the decision of the state appeals court.