United States District Court, D. Massachusetts
NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH, PA
TOWN OF NORWOOD ET AL.
MEMORANDUM AND ORDER ON CROSS MOTIONS FOR SUMMARY
RICHARD G. STEARNS JUDGE
a dispute over an insurance company's duty to defend its
insured in a lawsuit alleging, inter alia,
retaliation by the insured against a third party for the
exercise of First Amendment rights. Plaintiff National Union
Fire Insurance Company of Pittsburgh, PA, denied having a
duty to defend, but agreed to provide a defense for the Town
of Norwood and affiliated defendants (collectively
“Norwood”) in a lawsuit brought by Boston
Executive Helicopters, LLC (BEH), under a reservation of
rights. This court eventually dismissed all but one of
BEH's claims - that Norwood allegedly retaliated against
BEH in violation of 42 U.S.C. § 1983. See Boston
Exec. Helicopters v. Maguire, 196 F.Supp.3d 134 (D.
action, National Union seeks a declaration pursuant to 28
U.S.C. § 2201 that under the policy it owes no duty to
defend or indemnify Norwood against the retaliation claim.
Norwood filed a cross-motion for summary judgment.
See Fed. R. Civ. P. 56. A hearing on the motions was
held on July 6, 2017.
held a commercial permit (the Part 135 Permit) to operate a
helicopter flight service at the Norwood Airport since 2010.
BEH Am. Compl. ¶ 49. Conflicts that culminated in the
underlying lawsuit between Norwood and BEH began in 2011 when
BEH attempted to expand its business by applying for a permit
to become a fixed base operator (FBO). Id.
¶¶ 2, 55. The NAC required an FBO applicant to make
a substantial capital investment at the Airport as a ticket
of admission. To satisfy that requirement, BEH leased a 30,
000 square foot plot on which it built a new hangar and fuel
farm facility. Id. ¶ 53-59. Disputes arose when
the NAC refused to provide BEH with necessary ramp space,
which BEH perceived as favoring the Airport's sole
existing FBO, FlightLevel Norwood, LLC. Id. ¶
64. BEH served public records requests on Norwood regarding
the decision to deny it the ramp space and subsequently
petitioned for a court order to compel Norwood to comply with
the requests. Id. ¶ 70-71. On June 5, 2014, BEH
filed a formal complaint with the Federal Aviation
Administration (FAA). Id. ¶ 75.
11, 2014, the NAC voted to table discussion of BEH's FBO
permit application. Id. ¶ 222. On October 26,
2015, BEH filed a twelve-count complaint against Norwood,
alleging that the NAC had colluded with FlightLevel to stifle
competition at the Airport. The original complaint has since
been whittled down to one surviving claim - an allegation
that Norwood unlawfully retaliated against BEH in violation
of the First Amendment.
analyzing the First Amendment claim in Boston Executive
Helicopters, this court held that BEH's allegations
that: (1) the NAC had tabled consideration of BEH's
application for an FBO permit in response to its filing a
complaint with the FAA; (2) the NAC had refused to issue the
FBO permit, in part, because BEH publicly litigated the
dispute in the press; and (3) the NAC had denied hearings on
BEH's FBO permit application in retaliation for BEH
filing a public records dispute, when considered
collectively, made out a plausible claim of First Amendment
retaliation. 196 F.Supp.3d at 144-145.
relevant times, Norwood held two identical Aviation
Commercial General Liability (CGL) Policies with National
Union. Under the CGL Policies, National Union undertook the
defense against BEH's claims under a reservation of
rights. National Union now seeks a declaration from the court
that under the CGL Policies it owes no duty to defend Norwood
against the remaining retaliation claim. The sole issue is
whether the surviving claim falls within the scope of the CGL
Policies require National Union to defend and indemnify
Norwood for damages incurred arising from any
“suit” resulting from “personal and
advertising injury, ” subject to various exclusions.
The operative exclusion for present purposes is the exclusion
from coverage of “knowing” violations on the part
of the insured, including “‘[p]ersonal and
advertising injury' caused by or at the direction of the
insured with the knowledge that the act would violate the
rights of another and would inflict ‘personal and
advertising injury.'” Dkt #1-2 at 7.
judgment is appropriate when, based upon the pleadings, the
discovery and disclosure materials on file, and any
affidavits, “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(a), (c).
“A genuine issue is one that could be resolved in favor
of either party, and a material fact is one that has the
potential of affecting the outcome of the case.”
Calero-Cerezo v. U.S. Dep't of Justice, 355 F.3d
6, 19 (1st Cir. 2004). “[W]ith cross-motions for
summary judgment, we ‘must view each motion,
separately, ' in the light most favorable to the
non-moving party, and draw all reasonable inferences in that
party's favor.” OneBeacon Am. Ins. Co. v.
Commercial Union Assur. Co. of Canada, 684 F.3d 237, 241
(1st Cir. 2012) (quoting Estate of Hevia v. Portrio
Corp., 602 F.3d 34, 40 (1st Cir. 2010)).
law, which controls in this case, provides that if the
allegations in the third-party complaint against the insured
are “‘reasonably susceptible' of an
interpretation that they state or adumbrate a claim covered
by the policy terms, the insurer must undertake the
defense.” Utica Mut. Ins. Co. v. Herbert H. Landy
Ins. Agency, Inc., 820 F.3d 36, 41 (1st Cir. 2016)
(quoting Metro. Prop. & Cas. Ins. Co. v.
Morrison, 460 Mass. 352, 357 (2011)). “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.
There is no requirement that the facts alleged in the
complaint specifically and unequivocally make out a claim
within the coverage.” Sterilite Corp. v.
Continental Cas. Co., 18 Mass.App.Ct. 316, 319 (1983).
Moreover, where an insurer is obligated to defend the insured
on one of the counts alleged against it, the common law
“in for one, in for all” doctrine requires the
insurer to mount a defense on all counts, including those
that are not covered. Mount Vernon Fire Ins. Co. v.
Visionaid, Inc., 477 Mass. 343, 347-348 (2017). By
contrast, where the allegations in the underlying complaint
“lie expressly outside the policy coverage and its
purpose, the insurer is relieved of the duty” to
defend. Terrio v. McDonough, 16 Mass.App.Ct. 163,
168 (1983); see also Metro. Prop. & Cas. Ins. Co. v.
Fitchburg Mut. Ins. Co., 58 Mass.App.Ct. 818, 820
apparent tension between these two bedrock propositions of
insurance law raises the question of whether the general duty
to defend under the “in for one, in for all”
doctrine requires an insurer to continue the defense at the
point the only remaining claim against the insured falls
within an exclusion from the policy. The answer is found in
the venerable Sterilite decision: “When, as in
the present case, the allegations of the third-party
complaint find apparent lodgment in the effective coverage of
the policy, the insurer is obligated to defend. But it can,
by certain steps, get clear of the duty from and after the
time when it demonstrates with conclusive effect on the third
party that as matter of fact - as distinguished from the
appearances of the complaint and policy - the third party
cannot establish a claim within the insurance.”
Sterilite Corp., 17 Mass.App.Ct. at 323. In other
words, under Sterilite, the insurer is permitted to
withdraw the defense when only “counts falling directly
within the policy exclusions remain.” Conway
Chevrolet-Buick, Inc. v. Travelers Indem. Co., 136 F.3d
210, 214 (1st Cir. 1998). National Union argues that the CGL
Policies' exclusion for knowing violations extinguishes
any conceivable remaining coverage.
there is one more bedrock proposition at play. Policy
“[exclusions] are strictly construed against the
insurer.” Camp Dresser & McKee, Inc. v. Home
Ins. Co., 30 Mass.App.Ct. 318, 323-324 (1991). Norwood
argues that for the knowing violations exclusion to apply, it
must have not only intended the retaliatory acts, but also to
have intended any resulting harm. Norwood is correct that
Massachusetts courts have interpreted the policy exclusion
for knowing violations as applying to the intentional and
knowing infliction of injury, and not to injury resulting
from reckless or negligent behavior. Norfolk & Dedham
Mut. Fire Ins. Co. v. Cleary Consultants, Inc.81 Mass.App.Ct. 40, 41 (2011). For example, in
Norfolk, the underlying claim of sexual harassment
remained outside the scope of the exclusion because the
defendant's offensive conduct “f[e]ll well within
the range of reckless misconduct.” Id. at 53.
Norwood asserts that whether it intended to injure BEH is
still in dispute in the underlying ...