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Governo v. Allied World Insurance Co.

United States District Court, D. Massachusetts

August 27, 2019

DAVID M. GOVERNO and GOVERNO LAW FIRM LLC
v.
ALLIED WORLD INSURANCE COMPANY

          MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

          RICHARD G. STEARNS UNITED STATES DISTRICT JUDGE.

         David M. Governo and Governo Law Firm LLC (GLF) brought this lawsuit in Middlesex Superior Court against their insurer, Allied World Insurance Company, alleging that Allied World had failed to provide a defense in an action brought against them in state court. The Complaint sets out two claims: the first for a declaratory judgment that Allied World was obligated to defend them (Count I); the second for breach of the insurance contract (Count II). Allied World timely removed the case to the federal district court on diversity grounds.[1] Plaintiffs now move for partial summary judgment, while Allied World moves for summary judgment. For the reasons to be explained, the parties' motions will be variously allowed in part and denied in part.

         BACKGROUND

         The material facts are as follows. Governo was the founder and managing partner of the Boston law firm GLF. In the summer of 2016, six GLF attorneys attempted to purchase GLF and its assets.[2] After the attempt failed, the dissident attorneys started a competing law firm, CMBG3 Law LLC. On December 27, 2016, GLF brought suit in Suffolk Superior Court against the renegade attorneys and their new law firm for conversion, misappropriation of trade secrets, breach of the duty of loyalty, tortious interference with contractual and advantageous relations, civil conspiracy, and unfair and deceptive trade practices. According to the state court complaint, the departing attorneys unlawfully took from GLF, among other things, certain proprietary databases and client file materials. Dkt # 53-2.

         On February 10, 2017, CMBG3 and the departing attorneys asserted three counterclaims against Governo and GLF. They sought declaratory judgment that they were entitled to the client materials they had taken from GLF, as well as damages for the intentional interference with contractual and/or advantageous business relations, and for a violation of the Employee Retirement Income Security Act of 1974 (ERISA). Dkt # 53-3.

         Governo submitted a notice to Allied World of the counterclaims and requested a defense under an LPL Assure Lawyers Professional Liability Insurance Policy. The Policy, as described in greater detail below, insured Governo and GLF against certain claims made between March 15, 2016 and March 15, 2017. Dkt # 53-5.

         On February 24, 2017, Allied World denied coverage. After Allied World rejected a request for reconsideration, Governo and GLF brought this lawsuit. On September 28, 2018, the court denied a motion by Allied World to dismiss. The sole issue now before the court is whether Allied World breached a duty to defend.

         DISCUSSION

         Summary judgment is appropriate when, based upon the pleadings, affidavits, and depositions, “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). “A fact is material if it has the potential of determining the outcome of the litigation.” Maymí v. P.R. Ports Auth., 515 F.3d 20, 25 (1st Cir. 2008). “An issue is ‘genuine' when a rational factfinder could resolve it [in] either direction.” Boudreau v. Lussier, 901 F.3d 65, 71 (1st Cir. 2018) (citation omitted).

         The court construes the words of an insurance policy “in their usual and ordinary sense, ” Specialty Nat'l Ins. Co. v. OneBeacon Ins. Co., 486 F.3d 727, 732 (1st Cir. 2007), “consider[ing] what an objectively reasonable insured, reading the relevant policy language, would expect to be covered, ” Hazen Paper Co. v. United States Fid. & Guar. Co., 407 Mass. 689, 700 (1990). While “ambiguous words or provisions are to be resolved against the insurer, ” City Fuel Corp. v. Nat'l Fire Ins. Co. of Hartford, 446 Mass. 638, 640 (2006), “provisions [that] are plainly and definitely expressed in appropriate language must be enforced in accordance with [the policy's] terms, ” High Voltage Eng'g Corp. v. Fed. Ins. Co., 981 F.2d 596, 600 (1st Cir. 1992), quoting Stankus v. New York Life Ins. Co., 312 Mass. 366, 369 (1942).

         “An insurer has a duty to defend an insured when the allegations in a complaint are reasonably susceptible of an interpretation that states or roughly sketches a claim covered by the policy terms.” Billings v. Commerce Ins. Co., 458 Mass. 194, 200 (2010). “[T]he obligation of the insurer to defend is based not only on the facts alleged in the complaint but also on the facts that are known or readily knowable by the insurer.” Desrosiers v. Royal Ins. Co. of America, 393 Mass. 37, 40 (1984). “Once the insured makes an initial showing that the overall coverage provisions of the insurance policy apply, the burden ‘shifts to the insurer to demonstrate that some exclusion defeats coverage.'” Clark School for Creative Learning, Inc. v. Philadelphia Indem. Ins. Co., 734 F.3d 51, 55 n.1 (1st Cir. 2013), quoting Vermont Mut. Ins. Co. v. Zamsky, 732 F.3d 37, 41 (1st Cir. 2013).

         Here, the Policy provides, in pertinent part, that

[t]he Insurer will pay on behalf of an Insured . . . all amounts in excess of the Retention shown in the Declarations, that an Insured becomes legally obligated to pay as Damages and Claim Expenses because of a Claim arising out . . . [of a Legal Services Wrongful Act] by an Insured first made during the Policy Period or any Extended Reporting Period[.]

Dkt # 53-5 § I (emphasis omitted). The Insurer is Allied World, while GLF is the Named Insured, and Governo is a covered Insured. Id. §§ III.N., O. A Claim, as relevant here, is “any written notice or demand for monetary relief or Legal Services; [or] . . . any civil proceeding in a court of law . . . made to or against any Insured seeking to hold such Insured responsible for any Wrongful Act.” Id. § III.C. (emphasis omitted). A Wrongful Act includes a Legal Services Wrongful Act, which, in relevant part, refers to “any actual or alleged act, error or omission committed by any Insured, solely in the performance of or failure to perform Legal Services.” Id. §§ III.Q., HH. (emphasis omitted). Legal Services, in turn, is defined as “those services performed on behalf of ...


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