Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Mount Vernon Fire Insurance Co. v. Visionaid, Inc.

United States Court of Appeals, First Circuit

June 9, 2016

VISIONAID, INC. f/k/a H.L. Boulton Co. Inc., Defendant, Appellee.


          Kenneth R. Berman, with whom Heather B. Repicky and Nutter, McClennen & Fish LLP were on brief, for appellant.

          James J. Duane III, with whom Scarlett M. Rajbanshi and Peabody & Arnold LLP were on brief, for appellee.

          Before Thompson, Circuit Judge, Souter, Associate Justice, [*] and Barron, Circuit Judge.

          THOMPSON, Circuit Judge.

         This dispute between an insurance company and its insured has potentially wide-reaching implications for how liability insurers must conduct themselves in the Commonwealth of Massachusetts. The controversy here revolves around whether an insurer may be required to, as part of its defense of a claim against its insured, provide and pay for counsel to prosecute its insured's counterclaim against the claimant.

         In this case, the insured, VisionAid, Inc. ("VisionAid"), is a defendant in a state court suit filed by a former employee, Gary Sullivan, who alleges that his termination was the product of illegal age discrimination. VisionAid's defense includes, among other bases, a claim that it terminated Sullivan not because of his age, but because it discovered that he had misappropriated several hundred thousand dollars of corporate funds. But VisionAid does not want to simply rely on this as a defense. It wants to sue Sullivan for misappropriation in an attempt to recover those funds. Importantly for our purposes, it wants its insurer, Mount Vernon Fire Insurance Company ("Mt. Vernon"), who is covering the defense against the age-discrimination claim, to also cover the prosecution of the misappropriation claim. Whether or not Mt. Vernon has to do this is the crux of this case.

         To resolve this issue, we have to look to Massachusetts law, which governs in this diversity action. When we do that, it becomes clear that the dispositive state law questions here have not been resolved by the Massachusetts Supreme Judicial Court ("SJC"). As a result, we respectfully certify the questions for resolution by the SJC. See Mass. S.J.C. Rule 1:03.[1]


         Although the facts in the underlying dispute are contested, the ones bearing on the issues before us today are not. We'll give a rundown to put the legal issues into perspective.

         VisionAid is a Massachusetts-based company, which manufactures and distributes (among other things) lens cleaning and eye safety products. At the times that matter to us, VisionAid was insured, under an "employment practices" liability policy (the "Policy"), by Mt. Vernon.

         In October 2011, VisionAid fired Sullivan, its then-Vice President of Operations. About a year later, Sullivan brought VisionAid before the Massachusetts Commission Against Discrimination ("MCAD"), alleging that VisionAid's termination of him was based on his age and, therefore, illegal. VisionAid told Mt. Vernon about the MCAD claim, and Mt. Vernon appointed counsel to defend VisionAid in that forum. Counsel sought to defend the claim by arguing that VisionAid fired Sullivan because of legitimate non-discriminatory reasons, namely his sub-par performance and misappropriation of company funds.

         Settlement negotiations proved fruitless. Sullivan, who had started with a demand of $400, 000, repeatedly reduced this number (bottoming out at $5, 000) before he eventually told VisionAid's appointed counsel that he would walk away with no money at all if VisionAid would agree to sign a mutual release. VisionAid was unwilling to do this as it still wanted to go after Sullivan for the allegedly stolen money and, as such, it did not consent to the settlement. Sullivan voluntarily dismissed his MCAD complaint in February 2013.

         A few months later, Sullivan filed an age discrimination complaint (which asserted several additional causes of action) against VisionAid in Massachusetts state court. Mt. Vernon indicated that it would continue to defend VisionAid in the state court action subject to a reservation of rights.[2] The "reservation of rights letter" indicated that counsel appointed in connection with the MCAD proceedings would continue to represent VisionAid in the state court action "unless and until such time that it is determined that there is no coverage under this policy" and that VisionAid had the right to accept or reject this defense.

         VisionAid reacted. It asserted that it did not accept Mt. Vernon's reservation of rights and that it would exercise its right to choose its own attorney. Mt. Vernon responded via letter. It withdrew its reservation of rights and, because of this, indicated that appointed counsel would remain VisionAid's defense counsel. The letter also stated that while Mt. Vernon was aware that VisionAid wished to pursue a counterclaim against Sullivan, Mt. Vernon's position was that the Policy was strictly a defense-liability policy and that it was not required pursuant to the Policy to pay for ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.