United States District Court, D. Massachusetts
AND ORDER ON PLAINTIFF'S MOTION TO DISMISS (DOCKET NO.
78) DEFENDANT'S MOTION TO STRIKE (DOCKET NO. 87)
PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (DOCKET NO. 88)
DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT (DOCKET NO.
91) DEFENDANT'S MOTION TO VACATE (DOCKET NO. 93)
PLAINTIFF'S MOTION TO STRIKE (DOCKET NO. 109)
TIMOTHY S. HILLMAN DISTRICT JUDGE
Specialty Insurance Corporation (Capitol) moves to dismiss
nine counterclaims brought by Kailee Higgins on behalf of
herself and PJD Entertainment of Worcester, Inc., d/b/a
Centerfolds II (PJD) in this protracted insurance coverage
dispute. The counterclaims relate to Capitol's handling
of Higgins's tort claims against PJD, which she brought
in an effort to recoup damages for serious injuries that she
suffered in a motor vehicle accident after leaving PJD's
establishment. Although Capitol ultimately paid Higgins the
remaining limits under PJD's liquor liability insurance
policy, Higgins alleges that Capitol engaged in unfair
settlement practices while handling her claim, and that she
incurred damages as a result.
parties filed a slew of motions relating to Higgins's
counterclaims, which are the only claims that remain in this
suit. Higgins also seeks to vacate my order on a previous
summary judgment decision, which I issued in September of
2015. For the reasons set forth below, Capitol's motion
to dismiss (Docket No. 78) and Higgins's motion to strike
(Docket No. 87) are denied as moot. Capitol's
motion for summary judgment (Docket No. 88) is
denied as to counts III, IV, and V, and
granted as to counts I, II, VI, VII, VIII, and IX.
Higgins's cross-motion for summary judgment (Docket No.
91) and Capitol's motion to strike (Docket No. 109) are
denied. Higgins's motion to vacate (Docket No.
93) is denied.
the early morning hours of November 28, 2010, Higgins was
severely injured in a car accident. The accident occurred
after she left her shift as a dancer at Centerfolds II, an
adult club owned and operated by PJD. She alleges that she
was served and permitted to consume alcohol during her shift
and that she was intoxicated at the time of the accident. She
was twenty years old at the time.
insured under a liability policy issued by Capitol, which
included two different coverage forms: a Commercial General
Liability Coverage Form (CGL Form) with a limit of $1, 000,
000; and a Liquor Liability Coverage Form (LL Form) with a
limit of $300, 000. The CGL Form was subject to a liquor
liability exclusion, which eliminated coverage for:
"Bodily injury'' or "property damage"
for which any insured may be held liable by reason of:
(1) Causing or contributing to the Intoxication of any
(2) The furnishing of alcoholic beverages to a person under
the legal drinking age or under the influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the
sale, gift, distribution or use of alcoholic beverages.
(Docket No. 90-10 at 50.)
promptly notified Capitol of Higgins's accident, and
Capitol retained Norfield Associate, Inc. (Norfield) to
conduct a limited investigation of the potential claim.
PJD's insurance policy was an “eroding
limits” policy, meaning that Capitol bore the costs of
claims investigations that occurred before a suit was filed
against the insured, whereas the costs of investigation and
defense incurred after the filing of a lawsuit would be
deducted from the limits of the policy. As part of its
limited investigation, Norfield sought information from the
Worcester Police Department and the Licensing Commission.
Norfield also interviewed Richard McCabe, who was a manager
at Centerfolds and a part-owner of PJD.
December 28, 2010, Norfield provided Capitol with a written
summary of its investigation, including the following
information provided by McCabe:
The insured [McCabe] notes that following the incident all
workers were interviewed by both the insured and the
Worcester Police Department and they universally asserted
that Ms. Higgins had not consumed any alcoholic beverages
during the evening in question. More specifically, the
insured noted that they have the same detail officer,
“Dave, ” working every Saturday evening and he
did not recollect seeing Ms. Higgins consume any alcoholic
beverages on the evening in question.
(Docket No. 90-4 at 3.) Under a section of the report titled
“remarks, ” Norfield listed future investigatory
actions that it would take, including interviewing McCabe and
the bartender on duty, developing a list of potential
witnesses, mapping out potential routes taken by Higgins, and
continuing contact with the Worcester Police Department.
However, upon receipt of Norfield's report, Capitol's
Senior Claims Specialist, Michael Wedwick, determined that
the information obtained to date was sufficient. Norfield
issued a final report dated January 25, 2011, confirming a
telephone call with Wedwick on January 11, 2011, during which
Wedwick had instructed Norfield to close its investigatory
one year later, on February 3, 2012, Higgins's
then-counsel sent a letter of representation to PJD, stating
that Higgins would seek damages as a result of the accident.
Higgins's counsel described PJD's purported liability
While at Centerfolds, Ms. Higgins was served and permitted to
consume alcohol to the point where she became intoxicated.
During the early morning hours of November 28, 2010, Ms.
Higgins was assisted to her vehicle by the agents, servants,
or employees of Centerfolds after which she drove off. The
alcohol served to Ms. Higgins at Centerfolds caused her to be
impaired, and this impairment caused her to be involved in a
serious motor vehicle accident shortly after leaving the
parking lot of Centerfolds.
(Docket No. 90-6 at 1.) Higgins's counsel further alleged
that PJD was aware that Higgins was underage. PJD forwarded
this letter to Capitol. Wedwick construed the letter as
presenting a liquor liability claim premised on the service
of alcohol by PJD. He responded to Higgins's counsel by
letter on February 13, 2012, denying PJD's liability:
We respectfully deny any and all liability on the part of our
insured for your client's injuries. Our insured denies
that they served alcohol to your under aged client and they
are not responsible for the injuries sustained by your client
when she was involved in a motor vehicle accident.
(Docket No. 90-7 at 1.)
weeks after PJD received Higgins's letter of
representation, PJD also advised Capitol of an affidavit of
Christine Zbikowski, who was employed by PJD as an
entertainer. Zbikowski stated that she had been contacted by
Higgins's attorney, and that both Higgins and her
attorney had told her that she would be given $10, 000 if she
signed an affidavit stating that the staff at Centerfolds had
served Higgins alcohol while knowing that she was underage
and intoxicated. Zbikowski informed Higgins's counsel
that she had not seen Higgins drinking or being served
alcohol. Zbikowski then completed an affidavit for PJD.
February 22, 2013, Higgins filed suit against PJD in
Worcester Superior Court, seeking damages relating to her
injuries from the accident. Higgins alleged in her complaint
that the staff at PJD had served her to the point of
intoxication; that she was obviously intoxicated; that an
employee escorted her to her vehicle; and that she drove away
and was involved in an accident as a result of her
intoxication. Her complaint included two causes of action:
negligence and gross negligence. The complaint was
accompanied by an affidavit, in which she stated that she was
intoxicated when she got into her car on the night of the
interpreted the allegations in Higgins's complaint as
asserting a liquor liability claim triggering coverage under
the LL Form. On May 28, 2013, Capitol advised PJD that it had
retained counsel to defend it “in the liquor liability
claim” filed by Higgins. (Docket No. 90-12 at 1.) This
letter further advised PJD that the applicable policy
included $300, 000 in liquor liability coverage. On May 24,
2013, Capitol retained attorney Jeffrey Stern to defend PJD.
In the email assigning the defense of PJD to Stern, Wedwick
wrote: “Please accept this assignment to defend our
insured, only, in the liquor liability suit filed against
them in the Worcester Superior court.” (Docket No.
90-11 at 1.)
conducted an investigation and provided multiple reports to
Capitol in 2013. During his investigation, he obtained a copy
of the District Attorney's report, which indicated that
Higgins had used cocaine and marijuana within twenty-four
hours of the accident. The District Attorney's report
also included witness statements from PJD's employees,
each of whom had said that they had not witnessed Higgins
drinking alcohol on the night of the accident. In Stern's
final report to Capitol, he predicted that PJD's
liability “could be as high as $2-3, 000, 000, ”
and that the likely verdict range based on the information
gathered to date was at least $500, 000-$1, 000, 000. (Docket
No. 91-26 at 3.) He noted that “[t]here clearly would
be some element of comparative fault here, ” based on
the facts that Higgins was intoxicated; that her blood had
tested positive for marijuana; and that, according to
Zbikowski, Higgins and her attorney had offered to bribe a
witness. (Docket No. 91-26 at 3.) Stern recommended waiting
until after Higgins's deposition to offer her a
was deposed on December 9, 2013. Immediately after the
deposition, Stern advised Capitol to tender the policy limit
available under the LL Form because, in his opinion, it was
more likely than not that a jury would believe Higgins's
testimony that she had been drinking at Centerfolds before
the accident. Although Stern advised Capitol that Higgins
appeared credible in her deposition, he later testified that
he did not consider PJD's liability to be
“reasonably clear” as that term is defined in
Mass. Gen. Laws ch. 176D, § 3(9). He explained during
The evidence of a bribe, if believed, and I would see no
reason to think that this witness made that up, is the sort
of evidence that could absolutely be so toxic as to
completely undercut a plaintiff's case. . . . [T]he
nature of the comparative negligence is not of the
momentary-lapse-of-judgment variety but of a protracted
series of misjudgments. . . . And, [ ] still a lot of factual
disputes, some of which we never, you know, which we never
got to evaluate, never talked about, a bunch of witnesses; if
the case had gone forward, there would have been, you know,
interviews of other waitresses and so forth.
(Docket No. 90-13 at 126.)
receiving Stern's recommendation, Wedwick shared the
information with his supervisor, who authorized Stern to
tender the remaining limits available under the LL Form after
deducting the costs of any unbilled expenses. On December 10,
2013, Stern had a phone conversation with Higgins's
counsel, in which he stated that Capitol was offering the
remaining limits of the LL Form-approximately $285, 000-in
exchange for a release of all claims against PJD.
December 27, 2013, Higgins's counsel wrote to Wedwick and
demanded payment of $1, 300, 000-the combined total of the
CGL Form and the LL Form. Higgins's counsel acknowledged
that Stern “ha[d] communicated to our office that the
limit of the Liquor Liability coverage ($300, 000) would be
offered by [Capitol], but the General Liability coverage ($1,
000, 000) was being disputed.” (Docket No. 90-19 at 4.)
By letter dated February 10, 2014, Capitol responded to
Higgins's demand by ...