United States District Court, D. Massachusetts
MEMORANDUM OF DECISION
ZOBEL SENIOR UNITED STATES DISTRICT JUDGE.
2011, the Securities and Exchange Commission
(“SEC”) issued a formal order directing an
investigation of plaintiffs BioChemics, Inc.
(“BioChemics”), and its founder John Masiz.
BioChemics made a claim under its directors and officers
(“D&O”) liability insurance policy for
defense costs arising out of the SEC investigation and
resulting enforcement action. After their D&O carrier,
AXIS Reinsurance Company (“AXIS”), denied that
claim, plaintiffs brought this suit.
allowed AXIS's motion for summary judgment, see
Docket # 88, at 5-6. Plaintiffs seek damages, fees, and costs
from the remaining defendants, BioChemics's insurance
broker Brown & Brown of New York, Inc. (“Brown
& Brown”), and insurance producer John P. Raucci.
Claiming that defendants' handling of their account
resulted in the denial of D&O coverage for the SEC
action, plaintiffs allege negligence, breach of fiduciary
duty, and violations of Massachusetts General Laws chapter
93A. Defendants move for summary judgment on Counts II
through VII. Docket # 108.
summarize the relevant facts in the light most favorable to
plaintiffs, the non-moving parties. See Planadeball v.
Wyndham Vacation Resorts, Inc., 793 F.3d 169, 172 (1st
is a specialty pharmaceutical company focused on transdermal
drug delivery products. Masiz was the president and chief
executive officer of BioChemics at all times relevant to this
action. BioChemics purchased its first D&O coverage in
2005 from Brown & Brown's corporate predecessor
through a consultant named Greg Kroning. After Kroning's
2009 departure from what was by then Brown & Brown,
Raucci was designated the producer on the BioChemics account.
Despite this designation, the parties agree that Raucci has
had no personal involvement in the account.
The D&O Policies
& Brown obtained for plaintiffs from XL Insurance a
D&O policy providing coverage from November 13, 2010, to
November 13, 2011 (“the XL policy”). The XL
policy was written on a claims made basis, meaning it only
covered claims made against BioChemics during the policy
period. As the expiration date of the XL policy approached,
Brown & Brown informed plaintiffs that because XL would
be restricting D&O coverage and increasing premiums in
the coming year, it recommended renewing with a different
carrier. As part of the renewal process, Brown & Brown
consulted a wholesale broker, who asked XL for a report of
any claims BioChemics had made during the policy period. XL
responded that, as of September 13, 2011, it had not received
notice of any claims from BioChemics.
November 9, 2011, Brown & Brown sent BioChemics a
proposal for D&O coverage with a different carrier, AXIS.
Page 4 of the proposal states under the heading
REQUIREMENTS PRIOR TO BINDING
The following items must be received and accepted by the
underwriter(s) prior to binding. Underwriters reserve the
right to amend/rescind terms until such time the required
documents have been received, reviewed, and deemed
satisfactory and acceptable.
AXIS NEW BUSINESS APPLICATION
CONFIRMATION THAT ALL KNOWN CLAIMS HAVE BEEN ...