Superior Court of Massachusetts, Suffolk, Business Litigation Session
MEMORANDUM OF DECISION AND ORDER ON CROSS MOTIONS FOR
Mitchell H. Kaplan, Justice.
Philadelphia Indemnity Insurance Company (PIIC) and defendant
National Union Fire Insurance Company (National Union) each
issued insurance policies to North Suffolk Mental Health
Associated, Inc. (North Suffolk). PIIC issued a Commercial
General Liability (CGL) policy; and National Union issued a
Workers' Compensation and General Liability (Workers'
Comp.) policy. In a case filed in the Middlesex Superior
Court in 2011, captioned Estate of Stephanie Moulton v.
Nicholas Puopola et al. (the Underlying Action), the
plaintiff estate brought suit against eighteen directors of
North Suffolk (the Director Defendants) asserting claims
arising out of the work-related death of Ms. Moulton, a North
Suffolk employee. The Director Defendants tendered the claim
to both PIIC and National Union. PIIC defended the claim
(under a reservation of right) and National Union declined
coverage. The Director Defendants' motion to dismiss the
Underlying Action was eventually allowed, after appeal to the
Supreme Judicial Court (SJC). See Estate of Moulton v.
Puopolo, 467 Mass. 478, 5 N.E.3d 908 (2014) (
Moulton ). In this action, PIIC has filed suit
against National Union asserting claims for declaratory
judgment and equitable subordination and seeking to recover
the cost of its successful defense of the Underlying Action.
The case is now before the court on the parties' cross
motions for summary judgment. For the reasons that follow,
National Union's motion is ALLOWED, and PIIC's motion
following additional facts are undisputed.
Moulton was an employee of North Suffolk, a charitable
corporation that provides mental health and rehabilitation
services. She was assaulted and killed by a patient while
performing her job. As explained in Moulton, her
estate (the Estate) filed the Underlying Action against the
directors of North Suffolk and others. It alleged claims for
willful, wanton, reckless, malicious and grossly negligent
conduct and, also, as to the Director Defendants, breach of
fiduciary duty. The complaint alleged that the Director
Defendants " effectuated" policies and failed to
" effectuate" other policies that caused Ms.
Moulton's death. Id. at 480. They " moved
to dismiss the complaint chiefly on the grounds that, with
respect to the wrongful death action, they are immune from
suit, as Ms. Moulton's employer, under the exclusive
remedy provision, G.L.c. 152, § 24 of the Workers'
Compensation Act (act), and, with respect to the breach of
fiduciary duty claim, they owed Moulton no such duty."
Id. The Superior Court denied the motion to dismiss;
the director defendants sought interlocutory review under the
doctrine of present execution; and the case was transferred
to the SJC.
relevant to this case, the SJC found that: " The
complaint, fairly read, alleges that the Director Defendants,
acting qua directors rather than in any other capacity, set
and enforced misguided and wrongful corporate policies that
resulted in Moulton's death while in the course of her
employment. There is no allegation that the directors
undertook any action without a formal board meeting or vote,
. . . to the extent that the complaint alleges that
Moulton's death arose from the adoption of or failure to
adopt corporate policies, it alleges conduct by the
charitable corporation that could have been occasioned only
by the vote of its directors acting collectively as a
board." Id. at 488-89. It then held that,
" we conclude that the director defendants were
Moulton's employer for purposes of the exclusivity
provision of the act. As Moulton's employer, the director
defendants are therefore immune from suit for workplace
injuries due to actions taken by the board."
Id. at 490-91.
Workers' Comp. Policy
National Union Workers' Comp. policy was in effect when
the Moulton claim was asserted. It is a standard form of
Workers' Comp. policy issued in Massachusetts. It has two
coverage parts. Part One provides for payment of any benefits
" required of you by the workers' compensation
law"; and that National Union has " the right and
duty to defend at our expense any claim, proceeding or suit
against you for benefits payable by this insurance . . . We
have no duty to defend a claim, proceeding or suit that is
not covered by this insurance."
Two provides Employers' Liability Insurance. As explained
by the SJC in HDH Corporation v. Atlantic Charter Ins.
Co., 425 Mass. 433, 681 N.E.2d 847 (1997) ( Atlantic
Charter ), the seminal decision addressing the coverage
provided under a workers' compensation policy, discussed
at greater length infra : " Part Two, the
employers' liability portion of the insurance policy, is
intended to provide coverage in the rare circumstance in
which an employee who has affirmatively opted out [of the
workers' compensation benefits system at the time of
hire] brings a tort action for personal injuries."
Id. at 439 n.11.
declarations page of the Workers' Comp. policy identifies
North Suffolk as the named insured. There are no policy
provisions or endorsements that broaden the definition of
named insured to include directors, officers, or employees.
first argues that since, in Moulton, the SJC held
that " the director defendants were Moulton's
employer for purposes of the exclusivity provision of the
act, " they might also be insureds under the
Workers' Comp. policy, even though the policy terms do
not extend coverage to them; or, at least, there is a "
possibility" that they would be held to be insureds in a
declaratory judgment action addressing coverage issues under
the Workers' Comp. policy. PIIC next argues that there
then also exists a " possibility" that the claims
asserted by the Estate in the Underlying Action were covered
under either Part One or Part Two of the Workers' Comp.
policy coverage provisions. PIIC then goes on to cite
Billings v. Commerce Ins. Co., 458 Mass. 194,
200-01, 936 N.E.2d 408 (2010), for the long established
principle that: " In order for the duty of defense to
arise, the underlying complaint need only show through
general allegations, a possibility that the
liability claim falls within the insurance coverage."
(Emphasis supplied.) According to PIIC, given this
possibility of coverage, National Union had a duty
to defend the Director Defendants in the Underlying Action.
court finds it doubtful that the SJC's holding that,
under the " so-called exclusivity provision of the act,
" the directors of a corporation cannot be sued for work
place injuries in the Superior Court, when they were alleged
to have done nothing more than vote on corporate policies,
could be interpreted to mean that the directors were
additional insureds under a workers' compensation policy.
However, the court declines to address that argument. This is
because the SJC's decision in Atlantic Charter
clearly establishes that National Union's Workers'
Comp. policy did not provide coverage for the claims asserted
by the Estate in the Underlying Action.
Asserted under Part One of the ...