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American Guarantee & Liability Ins. Co. v. Lamond

United States District Court, D. Massachusetts

April 4, 2016

AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY
v.
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 FOR SUMMARY JUDGMENT ON DEFENDANTS’ COUNTERCLAIMS

Richard G. Stearns UNITED STATES DISTRICT JUDGE

The remaining dispute in this litigation is whether plaintiff American Guarantee & Liability Insurance Company (AGLI) is estopped from denying professional liability insurance coverage to defendant John F. Lamond because it did not issue to Lamond a second reservation of rights letter in the underlying state court litigation. The facts of this case, taken in part from the court’s earlier memorandum and order on AGLI’s partial summary judgment motion for a declaration of the policy scope, are not disputed by the parties.

[AGLI] issued [] 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.

Dkt. # 36 at 1-2.

In May of 2009, after Hill initiated the state court lawsuit, AGLI sent Lamond a letter informing him that while it had arranged for attorney Joseph Berman of the law firm of Looney & Grossman to defend him, it was “reserv[ing] all rights and defenses available under the Policy and at law to deny coverage on any of the [] bases” identified in the letter.[1] AGLI Ex. I at SJ37 - 38. Specifically, the reservation letter quoted that Lamond’s policy

does not apply . . . “[t]o 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 or admission by an Insured that the act or omission was intentional, criminal, fraudulent, malicious or dishonest[.]”

Id. at SJ36.

[T]he [Hill] Complaint alleges the Insured’s failure to advise of the Indian issue was deceitful and claims the Insured’s failure to advise Hill Financial of the Indian issue was done so fraudulently so that Hill Financial would loan money. . . . To the extent that this exclusion applies, American Guarantee may be able to deny coverage and reserves the right to do so.

Id. The reservation letter also noted that the definition of covered damages under the policy excluded

4. criminal or civil fines, penalties (statutory or otherwise), fees or sanctions;
5. punitive, exemplary or multiple damages; . . .
7. legal fees, costs and expenses paid to or incurred or charged by the Insured . . .
To the extent that Claimant may seek relief that is not included in the definition of “Damages, ” American Guarantee may be able to deny ...

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