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Mass. SJC Ruling – Chapter c.93A Attorney Fee Award
Legal Update: Massachusetts Supreme Judicial Court Holds That Chapter c.93A Attorney Fee Award Does Not Qualify as Covered “Damages Because of Bodily Injury” Under Liability Policy.
Massachusetts – In its July 6, 2022 decision in Vermont Mutual Insurance Company v. Poirier, 490 Mass. 161, the Massachusetts Supreme Judicial Court unanimously relieves insurer of obligation to afford coverage for an award of attorney’s fees to a prevailing plaintiff in a c. 93A lawsuit under liability policy’s “damages because of bodily injury” and/or “costs taxed against the insured” provisions.
The applicable insuring agreement in Vermont Mutual’s “Businessowners Liability Coverage Form” afforded coverage for “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury,’ ‘property damage,’ ‘personal injury,’ or ‘advertising injury’ to which this insurance applies.” The Policy’s Supplementary Payments provision affords specified coverage for “certain expenses related to the claim or suit covered by the policy” including “costs taxed against the insured in the ‘suit.’”
After paying the prevailing plaintiffs $696,669.48 for an award of damages sustained as a result of Servpro’s alleged failure to provide adequate warnings about the harmful effects of disinfectants used to remedy a basement sewage spill, Vermont Mutual filed a declaratory judgment action to resolve a dispute over its asserted obligation to afford coverage for attorneys’ fees awarded to the plaintiffs on their G.L.. c.93A §9(4) implied breach of warranty claims.
Grounding its analysis in the “plain language of the insurance contract and the common understanding of damages and attorney’s fees,” the SJC reversed the trial court’s entry of summary judgment in favor of the insured defendants and concluded that Vermont Mutual’s Policy did not afford coverage for the c.93A attorney’s fees award for two reasons:
First, the SJC acknowledged that the attorney’s fees award represented “sums that the [Poiriers became] legally obligated to pay” under the Policy’s insuring agreement but concluded that they do not qualify as covered “damages because of ‘bodily injury’.” In support of this conclusion, the SJC pointed to the fact that damages and attorney’s fees are awarded separately: “Courts may thus award both damages and attorney’s fees, but that does not mean they award attorney’s fees as damages.” The Court also addressed the differing purposes served by these forms of relief under G.L. c. 93A: damages “compensate for the injury, and awards of attorney’s fees are to deter misconduct and recognize the public benefit of bringing the misconduct to light.”
Second, the SJC rejected the insured’s argument in the alternative that “even if the award of attorney’s fees is not covered by the general insuring clause, they qualify as covered ‘costs taxed against the insured in the ‘suit’” under the Policy’s Supplementary Payments provision. Sustaining this aspect of the trial court’s ruling, the SJC held that the reference to “costs” in the Policy’s Supplementary Payments provision does not encompass a statutory attorney’s fee award because this term is ordinarily limited to legal and taxable costs. Lending further support to this conclusion, the SJC also noted that G. L. c. 93A distinguishes between awards of costs and attorney’s fees.
Lastly, the SJC declined to afford any significance to ISO’s subsequent issuance of an amended Supplemental Payments provision that expressly states that costs “do not include attorneys’ fees or attorneys’ expenses taxed against the insured.” Referring to its recent holding in Verveine Corp. v. Strathmore Ins. Co., 489 Mass. 534, 545-547 (2022), the SJC reiterated that the “’[A]bsence of an express exclusion does not operate to create coverage,’ even if other policies contain an express exclusion.”