Financial Resources Network, Inc. et al v. Brown & Brown, Inc. et al

Filing 132

Magistrate Judge Marianne B. Bowler: ORDER entered. MEMORANDUM AND ORDER. In accordance with the foregoing discussion, the motion for summary judgment filed by defendants (Docket Entry 119 ) is ALLOWED except for Count V with respect to the 2004-20 05 policy period and for Count VI. Plaintiffs motion for partial summary judgment (Docket Entry 115 ) under Rules 56(a) and Rule 56(g) is DENIED. The parties shall appear for a status conference on April 2, 2013, at 2:30 p.m. to set a trial date.(Garvin, Brendan)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
FINANCIAL RESOURCES NETWORK, INC.,
FINANCIAL FAMILY HOLDINGS LLC,
ROSALIND HERMAN and GREGG D. CAPLITZ,
Plaintiffs,
v.

CIVIL ACTION NO.
09-11315-MBB

BROWN & BROWN, INC., BROWN & BROWN OF
CALIFORNIA, INC., AMERICAN GUARANTEE
AND LIABILITY INSURANCE COMPANY, ZURICH
NORTH AMERICA COMPANY AND CALSURANCE,
Defendants.
MEMORANDUM AND ORDER RE:
DEFENDANTS’ SECOND RENEWED MOTION FOR SUMMARY
JUDGMENT (DOCKET ENTRY # 119);1 PLAINTIFFS’
MOTION FOR PARTIAL SUMMARY JUDGMENT
(DOCKET ENTRY # 115)
March 14, 2013
BOWLER, U.S.M.J.
Pending before this court is a third summary judgment motion
filed by defendants American Guarantee and Liability Insurance
Company (“American Guarantee”), Zurich North America Company
(“Zurich”), Brown & Brown, Inc. (“B&B”), Brown & Brown of
California, Inc. (“BBC”) and Calsurance (collectively
“defendants”).

(Docket Entry # 119).

They seek summary judgment

on counts I, III, IV, V and VI in the first amended complaint.
Plaintiffs Financial Resources Network, Inc. (“Financial

1

The caption of the motion is a misnomer.
third summary judgment motion.

The motion is a

Resources”), Rosalind Herman (“Herman”) and Gregg D. Caplitz
(“Caplitz”) (collectively “plaintiffs”)2 seek partial summary
judgment to establish certain facts under Rule 56(g), Fed. R.
Civ. P. (“Rule 56”), and liability under Rule 56(a) in their
favor.

After conducting a hearing in October 2012, this court

took the motions (Docket Entry ## 115 & 119) under advisement.
PROCEDURAL BACKGROUND
Summary judgment opinions in November 2010 and March 2012
(Docket Entry ## 72 & 107) outline the procedural history in
depth.

Briefly stated, this litigation concerns Life Insurance

Agents Errors & Omissions Liability Policies for the July 1, 2003
to July 1, 2004 policy year (“2003-2004 E&O Policy”) and for the
the July 1, 2004 to July 1, 2005 policy year (“2004-2005 E&O
Policy”).

Caplitz, an agent of Indianapolis Life Company

(“Indianapolis Life”), was enrolled in the 2003-2004 E&O Policy
provided by American Guarantee, a wholly owned subsidiary of
Zurich, for Indianapolis Life insurance agents from 2001 to July
2004.3

As a contracted agent with Indianapolis Life, he was a

“Named Insured” under the 2003-2004 E&O Policy.

(Docket Entry #

72, p. 26).

2

Financial Family Holdings LLC (“FFH”) is also a plaintiff. It
is the sole stockholder of Financial Resources. Herman is an
officer and director of Financial Resources.
3

Defendants’ LR. 56.1 statement admits that Caplitz enrolled in
the 2003-2004 policy for purposes of their summary judgment
motion.
2

In 2002, Financial Resources hired Rudy K. Meiselman, M.D.
(“Meiselman”) as a technical analyst.

As an employee of

Financial Resources, Meiselman elected to participate in the
Financial Resources Network Plan and Trust (“the FRN Plan”) and
executed a tax free rollover of his retirement funds into the FRN
Plan.

Herman and Caplitz used funds in Meiselman’s account to

pay for insurance policies on the lives of Meiselman and his wife
(“the Meiselman life insurance policies”).

The two, July 2003

applications identified the FRN Plan as the designated owner.
Caplitz received a $650,297.01 commission.
On October 28, 2004, Meiselman filed a lawsuit against the
FRN Plan, Herman, as trustee of the FRN Plan, and Caplitz
(“Meiselman I”) when Herman allegedly failed to respond to
Meiselman’s request to transfer his funds in the FRN Plan into a
third party account.

On November 19, 2004, Caplitz executed a

release and settlement agreement agreeing to transfer the funds
to the third party account.
The claims subject to this insurance coverage dispute under
which American Guarantee and Zurich had an alleged duty to defend
and indemnify emanate from a complaint in a November 2004 civil
action (“the Indianapolis action”) filed in this district by
Indianapolis Life against Herman, identified as trustee of the
FRN Plan; Caplitz; Meiselman and his wife, Hope E. Meiselman,
(“the Meiselmans”); and the FRN Plan.

3

On January 26, 2006, the

district court allowed Indianapolis’ summary judgment motion on
all five counts in the complaint (“the Indianapolis complaint”).
The district court ruled that Indianapolis Life had properly
rescinded the Meiselman policies.4

See Indianapolis Life Ins.

Co. v. Herman, 2006 WL 3233837, *1 (1st Cir. Nov. 9, 2006).
The alleged duty to defend and indemnify also involves a
February 2005 crossclaim Meiselman filed against Herman, Caplitz
and Financial Resources (“Meiselman crossclaim”) in the
Indianapolis action.

The crossclaim sought a declaratory

judgment nullifying the release in Meiselman I (Count I) and
alleged breach of an employment contract (Count II), breach of
fiduciary duty (Count III), breach of contract (Count IV) and
conversion (Count V).

In August 2005, the district court allowed

Meiselman’s motion for a default judgment.
On January 27, 2006, the district court in the Indianapolis
action entered a final judgment in favor of Indianapolis Life.
The final judgment ordered inter alia the rescission of the
Meiselman life insurance policies and a return of the $650,297.01
commission previously paid to Caplitz.

The Indianapolis court

also awarded Meiselman $938,640.14 on the crossclaim.5

4

Prior thereto, Indianapolis Life rescinded or canceled the
policies.
5

The First Circuit affirmed the judgment in November 2006.
Indianapolis Life Ins. Co. v. Herman, 2006 WL 3233837, *1 (1st
Cir. Nov. 9, 2006).
4

Count I of the first amended complaint in this action sets
out claims against B&B, BBC and Calsurance for breach of a
contract by estoppel.

Counts II through V consist of claims

against Zurich and American Guarantee for breach of contract.
Respectively, they allege breach of the express E&O Policy to
defend and indemnify (Count II), breach of an oral contract
(Count III), breach of an implied in fact contract (Count IV) and
breach of a contract by estoppel (Count V).

Count VI is brought

against all defendants for breach of the implied covenant of good
faith and fair dealing.

Counts VII, VIII and IX constitute

claims against all defendants for fraud, negligent
misrepresentation and violation of Massachusetts General Laws
chapter 93A (“chapter 93A”).
The November 2010 decision allowed defendants’ summary
judgment motions on counts VII, VIII and IX as untimely under
applicable statutes of limitations.
50 & 55-72).

(Docket Entry # 72, pp. 49-

With respect to Count II, summary judgment issued

in defendants’ favor only with respect to the breach of the duty
to defend and indemnify the counts in the complaint in the
Indianapolis action under the express 2003-2004 and 2004-2005 E&O
Policies (“the E&O Policies”).

Count II remained as to the

Meiselman crossclaim except with respect to FFH.

(Docket Entry #

72).
The March 2012 decision allowed defendants’ summary judgment

5

motion (Docket Entry # 85) on the remaining portion of Count II,
i.e., the breach of the duty to defend and indemnify the
Meiselman crossclaim in violation of the express E&O Policies.
The opinion also issued rulings on a motion to strike various
paragraphs of affidavits by Caplitz (Docket Entry # 95) and
Herman (Docket Entry # 96).
In June 2012, this court allowed a motion to reconsider
(Docket Entry # 111) but only in light of plaintiffs’ limited
opposition.

In pertinent part, the Order reads:

In light of plaintiffs’ failure to oppose reconsideration if
afforded an opportunity to file their own summary judgment
motion, this court will allow defendants an opportunity to
file a summary judgment motion on the remaining causes of
action. Plaintiffs may also file a summary judgment motion
on the remaining causes of action . . . . the motion for
reconsideration (Docket Entry # 111) is ALLOWED only to the
extent that defendants and plaintiffs may each file one
summary judgment motion subject to the above parameters.
(Docket Entry # 114, pp. 5 & 6).

The Order did not eviscerate or

eliminate the effect of the prior summary judgment opinions as
setting out the law of this case.

See generally Iacobucci v.

Boulter, 193 F.3d 14, 19 (1st Cir. 1999) (noting that “trial
court ordinarily is the best expositor of its own orders” and
deferring to district judge’s interpretation of her own order).
For example, this court has not considered the portions of
Caplitz’s affidavit (Docket Entry # 95) and Herman’s affidavit
(Docket Entry # 96) that plaintiffs continue to cite and that
this court struck from the prior summary judgment record.

6

Plaintiffs offer no basis to alter or reconsider that ruling.
At this point, the following claims remain:

(1) breach of

contract by estoppel against B&B, BBC and Calsurance to provide
plaintiffs insurance (Count I); (2) breach of an oral contract
for insurance against Zurich and American Guarantee (Count III);
(3) breach of an implied in fact contract for insurance against
Zurich and American Guarantee (Count IV); (4) breach of contract
by estoppel against Zurich and American Guarantee (Count V); and
(5) breach of the implied covenant of good faith and fair dealing
against defendants (Count VI).

Defendants presently seek summary

judgment on these remaining counts.

(Docket Entry # 119).

In addition to a number of factual findings under Rule
56(g), plaintiffs seek partial summary judgment under Rule 56(a)
insofar as:
1. B&B, BBC and CalSurance are liable for breach of oral
contract and breach of implied-in-fact contract to provide
insurance.
2. B&B, BBC and CalSurance are liable for breach of
contract by estoppel to provide insurance.
3. Zurich and American Guarantee are liable for breach of
oral contract and breach of implied-in-fact contract to
defend and indemnify.
4. Zurich and American Guarantee are liable for breach of
contract by estoppel to defend and indemnify.
5. All defendants are liable for breach of the implied
covenant of good faith and fair dealings.
(Docket Entry # 115).

Item numbers two through five involve

counts I, III, IV, V and VI.
The first request, however, attempts to resurrect claims
dismissed from the original complaint by the district judge on
7

October 21, 2009.

Count I in the original complaint alleged that

B&B, BBC and Calsurance breached an oral contract to provide a
insurance policy “for E&O Coverage effective July 1, 2004 to July
1, 2005.”

(Docket Entry # 1-2, ¶¶ 50-54).

Count II alleged that

B&B, BBC and Calsurance breached an implied in fact contract with
plaintiffs to provide them “a policy of insurance for E&O
Coverage effective July 1, 2004 to July 1, 2005.”
# 1-2, ¶¶ 55-59).

(Docket Entry

In the context of B&B, BBC and Calsurance’s

argument to dismiss these counts due to the absence of an actual
contract to procure an insurance policy, the district judge
allowed the Rule 12(b)(6) dismissal on counts I and II.

(Docket

Entry ## 8, 9 & 24).

The first amended complaint does not

include these claims.

In fact, plaintiffs acknowledge the

dismissal of these claims by the district judge but raise them
“to preserve their right to appeal” in light of subsequent
rulings.

(Docket Entry # 116).

They submit the ruling “was in

error and should be revisited.”

(Docket Entry # 116).

Properly construed, this portion of plaintiffs’ partial
“summary judgment” motion is a motion to reconsider the district
judge’s decision and is subject to a different and more exacting
standard of review.

See generally Villanueva v. U.S., 662 F.3d

124, 128 (1st Cir. 2011).

As an interlocutory decision, the

decision by the district judge remains subject to
reconsideration.

See Harlow v. Children’s Hospital, 432 F.3d 50,

8

55 (1st Cir. 2005) (“[i]nterlocutory orders . . . remain open to
trial court reconsideration”).

“The orderly functioning of the

judicial process” nevertheless dictates “that judges of
coordinate jurisdiction honor one another’s orders and revisit
them only in special circumstances.”
F.3d 636, 646-648

Id.

Ellis v. United States, 313

Reconsideration remains appropriate

“where the movant shows a manifest error of law or newly
discovered evidence, or where the district court has
misunderstood a party or made an error of apprehension.”
Villanueva v. U.S., 662 F.3d at 128.
Plaintiff fails to make a proper showing.

Almost three

years after the district judge’s ruling, plaintiffs do not
provide newly discovered facts previously unavailable that would
establish an oral or an implied in fact contract to procure an
insurance policy.

The Plan Highlights for the 2003-2004 E&O

Policy existed prior to the ruling.

This court previously struck

the conversation referenced by Herman from her affidavit and
plaintiffs do not provide a basis to alter that ruling.

Lacking

any justifiable basis to reconsider the ruling, reconsideration
is denied.
STANDARD OF REVIEW
Summary judgment is designed “‘to pierce the boilerplate of
the pleadings and assay the parties’ proof in order to determine
whether trial is actually required.’”

9

Davila v. Corporacion De

Puerto Rico Para La Difusion Publica, 498 F.3d 9, 12 (1st Cir.
2007).

It is appropriate when the summary judgment record shows

“there is no genuine issue of material fact, and the moving party
is entitled to judgment as a matter of law.”
Civ. P.

Rule 56(c), Fed. R.

“‘A dispute is genuine if the evidence about the fact is

such that a reasonable jury could resolve the point in the favor
of the non-moving party.’”

American Steel Erectors, Inc. v.

Local Union No. 7, Int’l Ass’n of Bridge, Structural, Ornamental
& Reinforcing Iron Workers, 536 F.3d 68, 75 (1st Cir. 2008).

“A

fact is material if it carries with it the potential to affect
the outcome of the suit under the applicable law.”
are viewed in favor of the non-moving party.

Id.

Facts

See Noonan v.

Staples, Inc., 556 F.3d 20, 23 (1st Cir. 2009).
Cross motions for summary judgment are viewed separately
under the summary judgment standard of review.

See OneBeacon

America Insurance Co. v. Commercial Union Assurance Co. of
Canada, 684 F.3d 237, 241 (1st Cir. 2012).

Each motion is

examined “in the light most favorable to the non-moving party”
with reasonable inferences drawn in favor of the non-moving
party.

Id.
FACTUAL BACKGROUND6

6

In accordance with a Procedural Order and defendants’ response
to the Order, the factual background includes facts in the
summary judgment record applicable to both motions. The
discussion sections, one for each motion, resolve disputed facts
in favor of the non-moving party.
10

From at least 1998 through 2006, Caplitz was a contracted
agent of Indianapolis Life.

Indianapolis Life offered its

contracted agents who sold insurance policies an errors and
omissions liability insurance program.

As a contracted agent and

having been continuously enrolled in the E&O Policies since
January 1, 2002, Caplitz enrolled in the 2003-2004 E&O Policy.
Since 2003, Caplitz was an employee of Financial Resources.7
(Docket Entry # 124, ¶¶ 1-3 & 5).
Zurich provided the errors and omissions coverage and
American Guarantee, Zurich’s wholly owned subsidiary, issued the
policies for Indianapolis Life agents.
(Docket Entry # 125, ¶ 2).

(Docket Entry # 124, ¶ 3)

“B&B acted as an insurance

intermediary through its subsidiary, BBC.”
¶ 2).

BBC, in turn, “offered the insurance through Calsurance, a

division of BBC.”

(Docket Entry # 125, ¶ 2).

as a broker for American Guarantee.8
23).

(Docket Entry # 125,

Calsurance served

(Docket Entry # 121-2, p.

Calsurance distributed information materials, including

enrollment forms and plan highlights, to agents identified by
Indianapolis Life, the sponsoring company, as contracted agents
with Indianapolis Life.

Contracted agents with expiring coverage

7

For purposes of plaintiffs’ partial summary judgment motion,
Caplitz did not start working as an employee of Financial
Resources until 2004.
8
Plaintiffs submit that “Calsurance acted as an agent and
broker for Zurich and American Guarantee.” (Docket Entry # 116,
pp. 13-14). Calsurance’s status is a disputed material fact.
11

such as Caplitz would then complete an enrollment form and send
the form with a premium check to Calsurance within 30 days of the
expiration.9

Calsurance would receive the enrollment form along

with a premium and, “if everything was in order on the enrollment
form and the premium” received, the contracted agent would be a
Named Insured under the policy.

The policy itself was a master

policy issued by American Guarantee.

Lancer Claims Services,

Inc. (“Lancer”), a division of BBC, provided claims services for
the annual policies.

Lancer did not make coverage decisions.

(Docket Entry # 125, ¶¶ 1-2) (Docket Entry # 121-2, pp. 21, 23,
25-28 & 102-103) (Docket Entry # 124, ¶ 7).
Except with respect to the policy period, the relevant and
material express terms of the 2003-2004 E&O Policy mirror those
of the 2004-2005 E&O Policy.

(Docket Entry ## 121-4 & 121-5).

Each policy afforded professional liability coverage for life
insurance agents such as Caplitz against “[a]ny ‘Claim’ arising
out of a negligent act, error or omission of the ‘Insured’ . . .
in rendering or failing to render ‘Professional Services.’”
(Docket Entry ## 121-4 & 121-5, ¶¶ I(A)(1)).

Specifically, the

E&O Policies provide that:
The Company shall pay on behalf of the “Insured” all sums
9

The 2004-2005 Enrollment Form states, “Enrollment forms with
checks, please mail to: Calsurance . . ..” (Docket Entry # 9712). The form set a different time period for “Newly Contracted
Agents” of Indianapolis Life. These individuals had to “Enroll
within 45 Days of Contract date.” (Docket Entry # 97-12).
12

which the “Insured” shall become legally obligated to pay as
“Damages” as a result of:
1. Any “Claim” arising out of a negligent act, error or
omission of the “Insured”, or any person for whose acts the
“Insured” is legally liable, in rendering or failing to
render “Professional Services” for others in the conduct of
the “Insured’s” profession as a licensed Life, Accident and
Health Insurance Agent, Broker, General Agent or Manager,
Notary Public or Registered Representative, while there is
in effect a contract between Named Insured and the insurance
company named in Item 1 of the Declarations.
(Docket Entry ## 121-4 & 121-5, ¶¶ I(A)(1)).
The term “Claim” is defined in each policy.

It “mean[s] a

written demand received by the ‘Insured’ seeking monetary
damages, including service of suit or the institution of
arbitration proceedings against the ‘Insured’.”
121-4 & 121-5, ¶¶ II(C)).

(Docket Entry ##

The term “Damages” in each policy

meant “monetary amounts for which an ‘Insured’ is legally liable,
including sums paid as judgments, awards, or settlements.”
(Docket Entry ## 121-4 & 121-5, ¶¶ II(D)).

The definition did

not include “the return or withdrawal of fees, commissions, or
brokerage charges” and it did not include “[n]on-pecuniary or
injunctive relief.”10

(Docket Entry ## 121-4 & 121-5, ¶¶ II(D)).

The E&O Policies define the term “Insured” to include
contracted life insurance agents such as Caplitz.

The relevant

and identical language in each policy states that:
10

Based on this language as well as other policy language, the
November 2010 decision allowed summary judgment on Count II
relative to the duty to defend and indemnify the counts in the
Indianapolis complaint. (Docket Entry # 72, pp. 22-28).
13

“Insured” shall mean:
1. The Named Insured set forth in Item 1 of the
Declarations, including:
a. All Agents or General Agents of the insurance
company named in Item 1 of the Declarations provided
they are party to an agent contract with the insurance
company named in Item 1 of the Declarations . . ..
2. Any corporation, partnership or other business entity
which engages in “Professional Services” and which is either
owned or controlled by the Named Insured and then only with
respect to those operations of the business entity related
to the “Professional Services” provided by the Named
Insured.
3. Any person acting on behalf of the Named Insured who was
or is a partner, officer, director, stockholder or an
employee of the Named Insured or Named Insured’s business
entity . . . and then only with respect to “Professional
Services” provided by the Named Insured.
(Docket Entry ## 121-4 & 121-5, ¶¶ II(F)).

The policies define

“Professional Services” to include “[t]he sale or servicing of .
. . Life Insurance” and “‘Financial Planning Activities.’”
(Docket Entry ## 121-4 & 121-5, ¶¶ II(J)).
The Plan Highlights for the 2003-2004 E&O Policy (“2003-2004
Plan Highlights”) and the 2004-2005 E&O Policy (“2004-2005 Plan
Highlights”) truncate this definition of “Insured” which, viewed
in isolation, gives a broader definition to paragraphs two and
three under the heading “Additional Insured.”

More specifically,

the highlights define “Additional Insured” as the “Insured
Agent’s Business Entity.”

The terms “Officers,” “Directors” and

other positions or categories appear immediately under the

14

language “Insured Agent’s Business Entity.”11
97, Ex. D & QQ).

(Docket Entry #

Although Caplitz was an employee of Financial

Resources, Herman deferred to his expertise in the area of
insurance.

(Docket Entry # 125, ¶ 15) (Docket Entry # 96, ¶ 4).

Herman authorized Financial Resources to pay insurance premiums.
As to the Meiselman life insurance policies, Caplitz prepared
projections which Meiselman reviewed.

Herman, as trustee of the

FRN Plan, wanted Meiselman’s input but it was Herman who made the
decision to purchase the policies.

(Docket Entry # 125, ¶ 15)

(Docket Entry # 96, ¶¶ 4-7).
As with previous policies, the 2003-2004 E&O policy year
ended on July 1, 2004.

(Docket Entry # 124, ¶ 4).

In prior

years, Caplitz paid the annual premium by credit card.

In 2004,

Calsurance changed its policy and required payment by check.

As

previously indicated, in order to effectively enroll, an agent
such as Caplitz had to submit an enrollment form and pay the

11

The March 2012 decision determined that neither Herman nor
Financial Resources was an “Insured” under the express E&O
Policies. (Docket Entry # 107, pp. 48-52). Plaintiffs presently
argue that Herman and Financial Resources each fall within the
definition of “Additional Insured” in the 2003-2004 and the 20042005 Plan Highlights and are therefore covered under the oral and
the implied in fact contracts as well as the “contract by
estoppel.” Also relying on a conversation between Herman and
James Madsen (“Madsen”), plaintiffs submit that “Insured Agent’s
Business Entity” includes the business at which Caplitz, the
“Named Insured,” performed the professional services, i.e.,
Financial Resources, as well as the “Officers” and “Directors” of
the company, i.e., Herman. (Docket Entry # 116, pp. 11-12)
(Docket Entry # 123).
15

premium within 30 days of July 1, 2004.
6).

(Docket Entry # 124, ¶

“Calsurance delivered an enrollment form to all agents with

expiring coverage, including Caplitz, so that the agents, if they
chose to do so, could renew their errors and omissions coverage
with American Guarantee for the 2004-2005 policy year.”
Entry # 124, ¶ 7).

(Docket

The 2004-2005 Enrollment Form allowed “Agents

with Expiring Coverage” to “Enroll within 30 days of Expiration.”
(Docket Entry # 97-12).
On or about July 30, 2004, Caplitz completed and delivered a
2004-2005 Enrollment Form to Calsurance as well as a check dated
July 29, 2004, in full payment of the premium in order to enroll
in the 2004-2005 E&O Policy during the 30 day period.

(Docket

Entry # 125, ¶ 5) (Docket Entry # 95, ¶ 9) (Docket Entry # 97,
Ex. L).

Herman signed the premium check.

The printed address on

the check is for a bank account under the name of Financial
Designing Consultants Inc. as opposed to Financial Resources.
(Docket Entry # 97-12).
On a routine basis, Calsurance “sent out notices of
cancellation when a premium [was] not paid, but Caplitz never
received one.”

(Docket Entry # 125, ¶ 7).

Caplitz avers he had

no knowledge that his coverage had not been renewed.
Entry # 125, ¶ 8) (Docket Entry # 95, ¶ 12).

(Docket

He further attests

that, “no defendant advised me at the end of the policy year
ending July 1, 2004,” of a nonrenewal.

16

(Docket Entry # 125, ¶ 8)

(Docket Entry # 95, ¶ 12).

Calsurance does not have a record of

receiving the July 29, 2004 Enrollment Form or the July 30, 2004
premium check.

(Docket Entry # 121-3).

Escalating disagreements between Caplitz, Herman and
Financial Resources on the one hand and Meiselman on the other
hand led Caplitz to orally report the disagreements to Lancer by
telephone on or about August 8, 2004.12
16) (Docket Entry # 95, ¶ 14).

(Docket Entry # 125, ¶

Caplitz and Meiselman, a longtime

client, had disagreed regularly in the past about a number of
subjects including investment strategies.
16) (Docket Entry # 95, ¶ 14).

(Docket Entry # 125, ¶

In this instance, Meiselman

objected to the purchase of the Meiselman life insurance
policies.

Although Meiselman originally supported the purchasing

decision, he subsequently decided he no longer wanted the
policies.

Seeking to cancel the policies after their issuance,

Meiselman registered a complaint with the Massachusetts Office of
Consumer Affairs and Business Regulation – Division of Insurance.
(Docket Entry # 125, ¶¶ 16 & 17).
Lancer’s internal progress notes initially reveal a notation
designating Caplitz as “Currently Enrolled” for the 2004-2005 E&O
Policy as well as the existence of a “potential claim.”13
12

Lancer’s internal progress notes with the applicable claim
number reflect a reporting date of August 12, 2004. (Docket
Entry # 98, Ex. LL). The difference in the date is not material.
13
See footnote 17 and related text outlining the automatic
Extended Reporting Provision and the Awareness Provision.
17

(Docket Entry # 125, ¶ 23) (Docket Entry # 98-11).

“Currently

Enrolled” “should mean” that “the adjuster has attained
information from Calsurance that the agent [Caplitz] is currently
a participant in an[] in force policy.”
26) (Docket Entry # 98-19, p. 153).

(Docket Entry # 125, ¶

The same page of Lancer’s

internal progress states, “Coverage Questions relating to date:
‘None’” as well as, “This is a potential claim for professional
services against a properly enrolled agent, which was made and
reported within the policy period,” to wit, July 1, 2004 to July
1, 2005.

(Docket Entry # 98-11).

On another page, the internal

progress notes show “REVISED COVERAGE” reflecting Caplitz as not
currently enrolled because the insured “failed to renew in time
for the 7/1/04 to 7/1/05 policy year.”

(Docket Entry # 98-11).

On August 19, 2004, Stephen Casey (“Casey”), Director of
Lancer, sent a letter to Caplitz.

Consistent with the initial,

foregoing internal notations, the letter advised Caplitz that the
E&O Policy “issued to Amerus14 by American Guarantee” was
“effective for the Policy Period of 07/01/2004 to 07/01/2005.”
(Docket Entry # 125, ¶ 20) (Docket Entry # 97, Ex. N).

The

letter states the following with respect to coverage:
this claim is subject to all other applicable terms and
conditions of the policy. A complete coverage evaluation
will be completed on this matter within the next 30 days.
If there are any coverage issues that need to be addressed,
14

AmerUs purchased Indianapolis Life.
24).
18

(Docket Entry # 121-2, p.

you will receive notice of those issues under separate
cover. In the meantime, American Guarantee considers all
rights mutually reserved.
(Docket Entry # 97, Ex. N).

Caplitz did not receive notice of

coverage issues during the next 30 days.

In addition, after

reporting the Meiselman disagreement, Caplitz did not receive
advice from any defendant requiring him to provide written
notice.

(Docket Entry # 95, ¶ 26, 1st sentence).

Like its predecessors, the 2004-2005 E&O Policy was a claims
made and reported policy.15

The 2003-2004 E&O Policy and the

2004-2005 E&O Policy contain the following unambiguous language
establishing each as a claims made and reported policy:
This Policy applies to negligent acts, errors or omissions
provided further that:
1. The “Claim” is first made against the “Insured” during
the “Policy Period” and is reported to the Company in
writing during the “Policy Period”, or the Extended
Reporting Period (if applicable), in accordance with VII.
CONDITIONS A.
(Docket Entry # 121-5, ¶ ID(1)) (Docket Entry # 121-4, ¶ ID(1))
(emphasis added).

The 2003-2004 and the 2004-2005 Plan

Highlights likewise reflect the coverage as “Claims Made and
Reported Acts, errors or omissions.”
(Docket Entry # 98-16).

(Docket Entry # 97-4)

The referenced conditions A contains the

two types of notice requirements commonly found in a claims made
15

The March 2012 decision provides an extended discussion of the
nature of a claims made and reported errors and omissions
insurance policy which need not be repeated. (Docket Entry #
107, pp. 44-48).
19

and reported policy.16

Conditions A states:

As a condition precedent to the right of insurance coverage
afforded herein, the “Insured” . . . which seeks coverage
shall: (a) As soon as practicable, but not more than (60)
days after the termination of coverage, give to the Company
written notice of any “Claim” made against the “Insured” . .
. during the “Policy Period” . . ..
(Docket Entry # 121-5, ¶ VIIA(1)) (Docket Entry # 121-4, ¶
VIIA(1)) (emphasis added).

Again, the 2003-2004 and the 2004-

2005 Plan Highlights substantially repeat this policy language.
In answer to the question, “How do I report a Claim,” the
highlights state, “1.

As soon as practicable, give to the

Insurance Company written notice.

2.

Immediately forward every

demand, notice summons or other process received to” Lancer.
(Docket Entry # 97-4) (Docket Entry # 98-16).
Lancer’s internal progress notes reflect a potential claim
reported under the automatic Extended Reporting Provision.

The

automatic Extended Reporting Provision in both policies provides
that:
In the event insurance under this Policy is terminated, the
“Insured” shall have a period of sixty (60) days after the
date of termination to report to the Company any “Claim”
which (1) is first made during said sixty (60) day period,
and (2) arises out of a negligent act, error or omission
which occurred before the date of termination . . ..
(Docket Entry # 121-4, ¶ IV(A)) (Docket Entry # 121-5, ¶

16

The March 2012 decision explains the two kinds of notice
requirements in greater detail. (Docket Entry # 107, p. 46).
20

IV(A)).17

The 2003-2004 Plan Highlights and the 2004-2005 Plan

Highlights do not contain this 60 day automatic Extended
Reporting Provision.
Both the 2003-2004 and the 2004-2005 E&O Policies contain
the following Awareness Provision:
If, during the “Policy Period,” the Company shall be given
written notice of any negligent act, error or omission which
could reasonably be expected to give rise to a “Claim”
against an “Insured” under this Policy . . . then any
“Claim” which subsequently arises out of such negligent act,
error or omission shall be considered to be a “Claim” made
during the “Policy Period” in which the written notice was
received.
(Docket Entry # 121-4, ¶ V) (Docket Entry # 121-5, ¶ V).

The

term “Policy Period” is defined as “the period from the effective
date of this Policy to the expiration date or earlier termination
date, if any, of this Policy.”

(Docket Entry # 121-4, ¶ II(I))

(Docket Entry # 121-5, ¶ II(I)).
The 2003-2004 and the 2004-2005 Plan Highlights reiterate
the substance of the Awareness Provision, stating:
For your protection, the policy also includes an “Awareness
Provision.” This allows you to provide written notice of
circumstances that could reasonably be expected to give rise
17

The March 2012 decision rejected plaintiffs’ argument of
coverage for Caplitz under the 2003-2004 E&O Policy. As to
Caplitz, there was no “Claim” within the meaning of the policy
reported and first made during the 60 day automatic Extended
Reporting Provision or any notice of a potential claim made
during the policy period (July 1, 2003 to July 1, 2004) in
compliance with the Awareness Provision. (Docket Entry # 107,
pp. 54-58). The decision also held that Herman and Financial
Resources were not “Insureds” within the meaning of the express
E&O Policies.
21

to a claim. Then if a claim subsequently arises out of the
described circumstances, it will be considered to be a claim
during the Policy Period in which the written notice was
received.
(Docket Entry # 97-4) (Docket Entry # 98-16) (emphasis added).
The 2003-2004 and the 2004-2005 Plan Highlights define the
“Policy Period” respectively as July 1, 2003 to July 1, 2004, and
July 1, 2004 to July 1, 2005.
Entry # 98-16).

(Docket Entry # 97-4) (Docket

The Awareness Provision in the 2003-2004 and the

2004-2005 Plan Highlights therefore provides coverage for the
policy period in which the written notice is received.

Here,

Caplitz did not give any written or oral notice to Lancer or
Calsurance during the July 1, 2003 to July 1, 2004 policy period
set out in the 2003-2004 Plan Highlights.
On September 28, 2004, Casey spoke by telephone to Caplitz.
Caplitz informed Casey that the Meiselman matter would likely be
settled and that he had forwarded a check and application for the
2004-2005 E&O Policy.

(Docket Entry # 125, ¶ 11).

On the same

day, Casey wrote a note for the Lancer claim file indicating that
he forwarded a copy of the enrollment application and the
check.18

The note includes “AmerUs” on a separate line.

(Docket

Entry # 98-19, pp. 162-163) (Docket Entry # 98-22, pp. 74-75)

18

The above finding is disputed and therefore made only when
viewing the record in plaintiffs’ favor for purposes of resolving
defendants’ summary judgment motion. For purposes of resolving
plaintiffs’ partial summary judgment motion and thus viewing the
record in defendants’ favor, a different finding results.
22

(Docket Entry # 97-15).
On October 28, 2004, Meiselman filed the Meiselman I lawsuit
against Financial Resources, the FRN Plan, Herman, as trustee of
the FRN Plan, and Caplitz.

(Docket Entry # 125, ¶ 28).

By

letter dated October 29, 2004, however, Cynthia Renner
(“Renner”), Senior Director of Coverage for Lancer and on behalf
of American Guarantee, informed Caplitz that Lancer and American
Guarantee “have not been able to confirm your enrollment for the
Policy period July 1, 2004 to July 1, 2005.”

(Docket Entry #

125, ¶ 29) (Docket Entry # 124, ¶ 12) (Docket Entry # 97-18).
The letter invited Caplitz to provide proof of payment and a
completed renewal form.

Shortly thereafter, on November 5, 2004,

Caplitz faxed a copy of the aforementioned Enrollment Form dated
July 30, 2004, and a copy of the July 29, 2004 premium check
noting that the check had not cleared the account.

(Docket Entry

# 125, ¶ 33).
On November 19, 2004, Meiselman I was settled by execution
of a release and a settlement agreement.

On November 18 or 19,

2004, Caplitz spoke to Stanley Robb (“Robb”) of Calsurance to
inform him of the settlement and that he had sent his Enrollment
Form and premium check.

(Docket Entry # 124, ¶ 13).

Caplitz

attests that he forwarded the settlement agreement to Lancer

23

around that same time.19

(Docket Entry # 95, ¶ 33).

According

to Lynn Johnson (“Johnson”), however, Lancer did not receive the
release and the settlement agreement until October 10, 2005.
(Docket Entry # 125, ¶ 36) (Docket Entry # 121-1, p. 188).
From August 8 to November 23, 2004, Caplitz believed he was
insured and covered under the 2004-2005 E&O Policy.
Entry # 124, ¶ 14) (Docket Entry # 95, ¶ 49).

(Docket

On November 23,

2004, Indianapolis Life filed the complaint in the Indianapolis
action against the FRN Plan, Herman, identified as trustee of the
FRN Plan, Caplitz and the Meiselmans seeking a return of the
$650,297.01 commission paid to Caplitz.20

(Docket Entry # 125, ¶

40, 1st and 2nd sentences).
By email dated November 29, 2004, Jeanette Younger
(“Younger”), a Calsurance employee who processed coverage
confirmations and assisted in drafting enrollment forms,21 sent
Caplitz an enrollment form for retroactive coverage for the 20042005 E&O Policy year with an effective date of August 1, 2004,
19

This fact is disputed. There is, however, no dispute that
Caplitz did not send the Meiselman crossclaim filed in February
2005 to Lancer. Rather, Lancer first received notice of that
claim on August 31, 2004, in an email from Meiselman’s attorney.
20

As previously noted, Indianapolis Life had rescinded the
policies. The November 2010 decision allowed summary judgment in
favor of American Guarantee and Zurich on Count II to the extent
that the counts in the Indianapolis complaint did not impose a
duty to defend and indemnify Caplitz or any other plaintiff.
(Docket Entry # 72, pp. 22-28).
21
Younger did not interpret policies and was not responsible for
coverage issues. (Docket Entry # 121-3).
24

along with an attached letter for his signature.
124, ¶ 15) (Docket Entry # 97-12).

(Docket Entry #

In order to enroll,

Calsurance required Caplitz to sign the letter acknowledging that
he was not currently enrolled in the 2004-2005 E&O Policy, he had
a “potential gap in coverage” and he would have “no prior acts
coverage.”

(Docket Entry # 97-12).

In December of the previous

year, Calsurance allowed Caplitz to backdate coverage to July 1,
2003, for the 2003-2004 E&O Policy simply by signing a letter
that he had no knowledge of a claim or potential claim.

The

December 2003 letter did not include an acknowledgment of a
“potential gap in coverage.”

(Docket Entry # 97-9).

Calsurance

similarly allowed Caplitz to effectuate a late enrollment and
backdate coverage for the 2002-2003 E&O Policy as long as he
signed a warranty letter.

(Docket Entry # 97-2).

Caplitz

refused to sign the letter attached to the November 2004 email.
(Docket Entry # 121-1, p. 182) (Docket Entry # 95, ¶ 39).
On November 30, 2004, Caplitz spoke by telephone with
Younger as well as John Jasinki (“Jasinki”) of Calsurance.
(Docket Entry # 124, ¶¶ 15-16).

Jasinki and Caplitz discussed

Caplitz’s ability to renew coverage for the 2004-2005 policy year
and whether there would be a gap in coverage.

After the

conversation, Caplitz wrote a letter to Jasinki reiterating
Caplitz’s intent not to create a gap in coverage.
# 124, ¶ 16) (Docket Entry # 121-13).

25

(Docket Entry

Meanwhile, a series of internal emails between Robb,
Younger, Jasinki, Anne Baker (“Baker”) of Calsurance22 and Harris
Tsangaris (“Tsangaris”) of Zurich took place during this time
period.

Baker initially emailed Robb on December 1, 2004, about

the potential for a problem with Caplitz’s attempt to backdate
coverage to July 1, 2004.

She noted that Robb previously allowed

Caplitz to backdate coverage for both the 2002-2003 E&O Policy
and the 2003-2004 E&O Policy notwithstanding late renewals.
also noted that, “[N]ow he has a claim.”
12).

She

(Docket Entry # 121-

In a reply email, Robb did not favor backdating coverage.

The following day, Tsangaris weighed in that he was not willing
to backdate coverage if Caplitz had a potential claim.

Tsangaris

noted that Zurich typically requires an agent to sign a warranty
statement.

If the agent states he has knowledge of a claim,

Zurich will not provide the coverage, according to Tsangaris.

In

reply, Robb requested clarification and, if he understood the
matter correctly, proposed “email[ing] the warranty statement to
[Caplitz] and tell[ing] him that this needs to be completed and
signed and faxed back to us.”
warranty statement.23

Robb did not send Caplitz a

(Docket Entry # 97-22) (Docket Entry #

22

Baker was a Calsursance senior account administrator working
under Robb. (Docket Entry # 121-8, pp. 34-35).
23
Plaintiffs take issue with the more onerous requirement in the
letter attached to the November 29, 2004 email that Caplitz
acknowledge a “potential gap in coverage” as opposed to the less
onerous acknowledgment in years past of the absence of knowledge
of a claim or a potential claim.
26

121-12) (Docket Entry # 125, ¶¶ 44-46 & 48) (Docket Entry # 9819, pp. 195-196).
On December 2, 2004, Robb telephoned Caplitz.

Robb informed

him that the only way Zurich would backdate coverage was if
Caplitz had no claims.
against him.24

Caplitz responded that he had no claims

(Docket Entry # 124, ¶ 18).

On December 2 and/or 3, 2004, Robb faxed Caplitz a letter
explaining Zurich’s inability to backdate coverage.

In pertinent

part, the letter reads:
We have gone to the Zurich underwriter to see if we could
back date your coverage to July 1, 2004 so that there would
be no interruption in coverage. The underwriter has stated
that he cannot backdate coverage at this time because of the
pending claim.
We did have to disclose to the underwriter that you enrolled
late in the 7-1-2002 policy year. That year you enrolled in
February, 2003, and we backdated coverage to 7-1-2002. You
again late enrolled for the 7-1-2003 policy enrolling in
January, 2004. You stated to me yesterday and also sent a
fax to us representing that you sent us the enrollment form
and check in July, 2004 for the July 1, 2004 policy year
renewal. We have no record of having received either the
enrollment form or your check.
You also stated to me yesterday that you had no claim. I
checked with Lancer Claim[s] Service and you did report a
claim to them on August 10, 2004. It is Lancer Claim Number
24

As determined in the November 2010 decision, exclusion L in
the 2004-2005 E&O Policy bars coverage for Caplitz for the claims
in the Indianapolis complaint. (Docket Entry # 72, pp. 25-26).
Citing this exclusion for commissions and a portion of Robb’s
deposition, plaintiffs now reason that the claim for the return
of the commission in the Indianapolis complaint “is excepted from
coverage.” Hence, there were no covered claims against Caplitz
on December 2, 2004, when he made the foregoing representation to
Robb. (Docket Entry # 124, ¶ 18, p. 8).
27

61380. It is because of this claim that the Zurich
underwriter has declined to backdate your coverage.
(Docket Entry # 124, ¶ 19) (Docket Entry # 121-14) (Docket Entry
# 97, Ex. X) (Docket Entry # 125, ¶ 48, referencing Ex. X).
In another letter to Caplitz dated December 3, 2004, Younger
repeated the inability to renew coverage for the July 1, 2004 to
July 1, 2005 policy period.

(Docket Entry # 125, ¶ 51) (Docket

Entry # 97-25) (Docket Entry # 98-19, pp. 201-202).
notes the lack of coverage as of July 1, 2004.
97-25).

The letter

(Docket Entry #

Johnson of BBC testified that the termination would

trigger the automatic extended reporting period of the 2003-2004
E&O Policy subject to the terms and conditions of that policy.
(Docket Entry # 125, ¶ 51) (Docket Entry # 98-19, pp. 201-202).
Caplitz attests that no one advised him that “my claim was
covered under the automatic extended reporting period.”
Entry # 95, ¶ 40).

(Docket

On December 6, 2004, Caplitz was served with

a summons and the complaint in the Indianapolis action.

(Docket

Entry # 124, ¶ 18, p. 8) (Docket Entry # 98-24) (Docket Entry #
95, ¶ 38).
Caplitz attests that he immediately tried to obtain
replacement coverage but was not successful.
¶ 45).

(Docket Entry # 95,

On December 9, 2004, he telephoned Robb and repeated his

position that he does not have a claim against him.25

25

See the previous footnote.
28

(Docket

Entry # 97-26) (Docket Entry # 121-8, p. 87).
On February 9, 2005, Meiselman filed the Meiselman
crossclaim against Herman, Caplitz and Financial Resources.
Caplitz did not report the claim to Lancer or Calsurance.
(Docket Entry # 125, ¶¶ 54-55) (Docket Entry # 95, ¶ 47) (Docket
Entry # 98-1).

On February 21, 2005, Lancer closed its file.26

(Docket Entry # 125, ¶ 57, citing Docket Entry # 98-19, p. 217).
Caplitz, Herman and Financial Resources retained the services of
Attorney Wayne Murphy (“Attorney Murphy”) to represent them.
(Docket Entry # 125, ¶ 59).

Attorney Murphy did not file an

answer to the crossclaim thereby resulting in the default
judgment.

Indianapolis Life Ins. Co. v. Herman, 204 Fed.Appx.

908, 909 (1st Cir. 2006); (Docket Entry # 125, ¶ 60, citing
Indianapolis Life Ins. Co. v. Herman, 204 Fed.Appx. at 909).
On January 27, 2006, the final judgment issued in favor of
Indianapolis Life.

The judgment awarded Indianapolis Life

26

Caplitz attests that he did not report the Meiselman
crossclaim because defendants “informed him unequivocally that he
was not covered.” (Docket Entry # 125, ¶ 55) (Docket Entry # 95,
¶ 47). The summary judgment record includes certain portions of
Caplitz’s affidavit that were not stricken, including paragraph
48. (Docket Entry # 121-10). Paragraph 48 refers to a February
24, 2005 letter from Casey to Caplitz (Docket Entry # 98, Ex. EE)
as does a page of Johnson’s deposition cited by plaintiffs
(Docket Entry # 98-19, p. 217) (Docket Entry # 125, ¶ 57) and a
paragraph in plaintiffs’ LR. 56.1 statement (Docket Entry # 125,
¶ 57, citing Ex. FF). The letter asks Caplitz to immediately
contact Lancer if he receives any communication about the claim
or if suit is filed against him. (Docket Entry # 98, Ex. EE).
29

$650,297.01 against Caplitz reflecting the amount of the
commission.
98, Ex. KK).
2006.

(Docket Entry # 60, citing Ex. KK) (Docket Entry #
The First Circuit affirmed the judgment in November

Indianapolis Life Ins. Co. v. Herman, 204 Fed.Appx. 908

(1st Cir. 2006).
Caplitz avers that, as a consequence of the judgment, he has
not been able to work as an insurance agent.

The inability to

work has caused him “a substantial loss of commission income.”
(Docket Entry # 95, ¶ 84) (Docket Entry # 121-10, ¶ 84).

Herman

attests to experiencing losses resulting from defendants’ failure
to properly procure insurance including attorneys’ fees of
approximately $900,000.

(Docket Entry # 118).

In a state court

action Herman brought against Attorney Murphy, the court denied
the bulk of these fees.
I.

(Docket Entry # 87, Ex. CC).

DEFENDANTS’ SUMMARY JUDGMENT MOTION
Defendants move for summary judgment on the remaining counts

against them in the first amended complaint.
119).

(Docket Entry #

In general, they submit there is no evidence of an oral or

an implied in fact contract nor a contract by estoppel that would
provide coverage that differs from the terms of the 2003-2004 E&O
Policy and the 2004-2005 E&O Policy.
A.

(Docket Entry # 120).

Counts III and IV
Counts III and IV respectively assert that American

Guarantee and Zurich breached an oral and an implied in fact

30

insurance contract.

Each count alleges a breach of the oral or

the implied in fact contract “by failing to defend and indemnify
them against Meiselman’s claims, among other things.”

(Docket

Entry # 28, ¶¶ 60 & 64).
With respect to Count III, defendants initially argue there
was no meeting of the minds on all of the essential elements of
an oral contract for insurance irrespective of whether the
contract was for the 2004-2005 E&O Policy or for a completely
different policy.

(Docket Entry # 120, § I(A)).

In addition,

they argue there was no breach of any such contract.

(Docket

Entry # 120, § I(B)).
As to Count IV, defendants submit there are no Massachusetts
cases involving an implied in fact contract for insurance.
Alternatively, they argue that plaintiffs fail to establish the
existence of an implied in fact contract.

Further, if a contract

did exist through a course of dealing and the 2004-2005 Plan
Highlights, it would not provide coverage because the highlights
expressly incorporate the terms and conditions of the express
2004-2005 E&O Policy.

Finally, plaintiffs failed to confer any

benefit on American Guarantee or Zurich and Herman’s conversation
with Madsen of Indianapolis Life does not bind American Guarantee
and Zurich, according to defendants.27

27

(Docket Entry ## 120 &

Outside the insurance context, an implied in fact contract
arises where the plaintiff confers measurable benefits upon
another party, the defendant accepts the services with the
31

126).
Before addressing the arguments, it is worth noting that
plaintiffs rely on similar if not identical evidence, including
the 2003-2004 and the 2005-2005 Plan Highlights and the
enrollment forms, to create the oral and the implied in fact
contracts and to set out their terms.28

Massachusetts cases

repeatedly refer to insurance contracts outside the context of an
express contract as oral as opposed to implied in fact contracts.
More importantly, so called “oral” insurance contracts still use
documentary evidence to establish their creation and their terms.
See Cunningham v. Connecticut Fire Ins. Co., 86 N.E. 787, 788
(Mass. 1909) (action on “parol” contracts of insurance which,
although court found they were never made, court considered facts
including the conduct that defendant’s agent was to write the
policies and plaintiff was to receive them);29 Baldwin v.
expectation of compensating the plaintiff and the plaintiff
demonstrates that he provided the services with the reasonable
expectation of receiving compensation. General Electric Company
v. Lyon, 894 F.Supp. 544, 554 (D.Mass. 1995); Bolen v. Paragon
Plastics, Inc., 747 F.Supp. 103, 106-107 (D.Mass. 1990); see
generally LiDonni, Inc. v. Hart, 246 N.E.2d 446, 449 (Mass. 1969)
(“In the absence of an express agreement, a contract implied in
fact may be found to exist from the conduct and relations of the
parties”); Restatement (Second) of Contracts § 4, comments a & b
(1981) (distinguishing express and implied contracts from quasicontracts, also denominated contracts implied in law).
28
For example, plaintiffs argue that they “had an oral agreement
and implied-in-fact agreement that they were enrolled because the
Enrollment Form and Plan Highlights say so . . ..” (Docket Entry
# 116).
29
Delivery of a policy is not ordinarily required unless, as
indicated by the facts in Cunningham, the contract sets out a
delivery requirement. See Gargano v. Liberty International
32

Connecticut Mutual Life Insurance Co., 65 N.E. 837, 838 (Mass.
1903) (action to recover on “oral” life insurance contract which,
although never formed because of agent’s lack of authority, was
based on signing an application and an oral conversation); London
Clothes v. Maryland Casualty Co., 63 N.E.2d 577, 578-580 (Mass.
1945) (action on “oral” contract of insurance or oral agreement
to renew policy based on conversations and conduct of charging
full premium and paying commission was sufficient to create
agreement to issue new policy in a form similar to previous
policy); see also Sanford v. Orient Insurance Co., 54 N.E. 883,
884 (Mass. 1899) (claim of “oral” agreement to make insurance
policy based on same terms as prior written policy).

Similarly,

as explained by one commentator, the essential terms of an oral
contract for insurance may be implied if not expressly stated
based upon the parties’ “prior dealings and contracts between the
parties” or industry custom and practice.

1 Jeffrey Thomas and

Francis Mootz, III, New Appleman on Insurance Law § 3:02 (2009).
Thus, in determining the existence of an oral contract, this
court does not limit itself to conversations but rather considers
all of the relevant, non-verbal evidence.

The creation and the

terms of an oral contract therefore include all of the evidence

Underwriters, Inc., 575
(“‘neither delivery nor
essential to the making
contract expressly sets

F.Supp.2d 300, 306 (D.Mass. 2008)
actual possession by the insured is
of an insurance contract unless the
out a requirement of delivery’”).
33

considered to create and to enforce any implied in fact insurance
contract.
It is well settled that Massachusetts courts recognize oral
contracts for insurance.

See Cunningham v. Connecticut Fire Ins.

Co., 86 N.E. at 788 (“nor can it be argued that there may not be
a valid contract of insurance resting only in parol”).

The oral

contract may take the form of a contract to renew an existing
policy or a contract for a new or a renewed policy with different
terms.

See 3D Steven Plitt, Daniel Maldonado and Joshua Rogers,

Couch on Insurance § 29:24 (3d ed. 2005) (“right to make a
renewal by oral agreement exists” and it is “permissible for an
oral agreement for renewal” to contain new terms); 1 Jeffrey
Thomas and Francis Mootz, III, New Appleman on Insurance Law §
3:02 (2009) (“[o]ral contracts of insurance are enforceable . . .
‘[e]ven “permanent” contracts of insurance can be oral’”); see,
e.g., London Clothes v. Maryland Casualty Co., 63 N.E.2d 577
(Mass. 1945) (addressing whether parties entered into oral
contract to renew original theft policy or a revised oral policy
that added requirement of watchman at insured property).
In order to form an oral contract for insurance, there must
be a meeting of the minds between the parties on the essential
elements of the contract.

See Cunningham v. Connecticut Fire

Ins. Co., 86 N.E. at 788-790 (rejecting formation of oral
insurance contract because facts did not sufficiently show

34

“meeting of minds” as to all “essential elements”); London
Clothes v. Maryland Casualty Co., 63 N.E.2d at 580 (“oral
contract of insurance which contains all the essential elements
of the transaction is valid”); 1 Jeffrey Thomas and Francis
Mootz, III, New Appleman on Insurance Law § 3:07 (2009)
(“[r]enewal contracts have the same requirements of mutual
assent, offer and acceptance and new consideration as other
contracts”).

The parties likewise agree there must be a meeting

of the minds on the essential elements of an oral contract.
(Docket Entry # 123, p. 2) (Docket Entry # 120, p. 6).

These

essential elements include the identity of the insuring company,
“the time the policies should run,” the amount of the insurance
assumed and the amount of the premium.
Fire Ins. Co., 86 N.E. at 788.

Cunningham v. Connecticut

Like an express insurance

contract, an oral insurance contract “must specify the subject
matter to be insured, the scope of the risk to be insured, the
duration of the risk, the amount of indemnity and the amount of
the premium.”

1 Jeffrey Thomas and Francis Mootz, III, New

Appleman on Insurance Law § 3:02 (2009).
The parties’ prior course of dealing, enrollment forms and
prior express policies uniformly establish that the policies ran
for a period of one year beginning on July 1 and ending on July 1
of the following year.

Plaintiffs primarily, albeit not

exclusively, focus on the 2004-2005 policy period.

35

It is also

undisputed that Caplitz was enrolled in the 2003-2004 E&O Policy.
Accordingly, this court initially turns to the formation, if any,
of an oral or an implied in fact contract for the 2004-2005
policy period and, if made, whether it was breached.
With American Guarantee and Zurich having pointed to the
absence of evidence to form an oral or an implied contract, it is
incumbent upon plaintiffs, as the summary judgment targets with
the underlying burden of proof, to show facts sufficient to
create a trialworthy dispute.

Kenney v. Floyd, 700 F.3d 604, 608

(1st Cir. 2012) (“‘summary judgment target’” who “‘bears the
ultimate burden of proof . . . cannot rely on an absence of
competent evidence, but must affirmatively point to specific
facts that demonstrate the existence of an authentic dispute’”).
Plaintiffs rely and point to the 2004-2005 Plan Highlights and
the 2004-2005 Enrollment Form as the basis for the formation of
the oral and the implied contracts and their terms.
Plaintiffs also identify Caplitz’s “conversations with the
defendants’ representatives” as containing the essential terms of
the oral or the implied agreement.
(Docket Entry # 124, ¶¶ 11-17).

(Docket Entry # 123, pp. 1-2)

The referenced paragraphs set

out the following, aforementioned conversations and documents:
(1) the September 28, 2004 conversation Caplitz had with Casey
advising him that he had forwarded the check and the application
to enroll in the 2004-2005 E&O Policy (Docket Entry # 124, ¶ 11);

36

(2) Casey’s internal notes the same day evidencing that he
forwarded the check and the application thereby evidencing
receipt (Docket Entry # 124, ¶ 12);30 (3) the November 5, 2004
facsimile by Caplitz of copies of the July 29, 2004 check and the
July 30, 2004 Enrollment Form to Renner of Lancer (Docket Entry #
124, ¶ 15) (Docket Entry # 125, ¶ 33) (Docket Entry # 97-16); (4)
the November 18 or 19, 2004 conversation Caplitz had with Robb of
Calsurance advising him that he had sent in the check and the
2004-2005 Enrollment Form and that Meiselman I had settled
(Docket Entry # 124, ¶ 13); (5) the November 30, 2004
conversations Caplitz had with Younger of Lancer and thereafter
Jasinki of Calsurance with Jasinki discussing the ability to
renew coverage for the 2004-2005 policy period and the
possibility of a gap in coverage (Docket Entry # 124, ¶ 16); (6)
the November 30, 2004 letter from Caplitz to Jasinki wherein
Caplitz denies any intent on his part to create a gap in coverage
(Docket Entry # 124, ¶ 16) (Docket Entry # 121-13); and (7) the
December 2, 2004 conversation Caplitz had with Robb of Calsurance
reiterating his timely sending of the check and the enrollment
form, the absence of any claim against him and the settlement of
Meiselman I (Docket Entry # 124, ¶ 17) (Docket Entry # 121-1, pp.
182-185) (Docket Entry # 121-8, p. 36).31
30

All of these

See footnote 18 and related text.
In addition to the above evidence and the terms of the
enrollment form, Caplitz attests to sending the check and the
31

37

conversations pertain to the enrollment dispute and the
formation, if any, of a contract and the breach thereof.

They do

not, for example, address the reporting or notice requirement of
the alleged claims made and reported oral or implied insurance
contracts.
Turning to formation of an oral contract, plaintiffs rely on
the 2004-2005 Plan Highlights as containing the subject matter of
the risk, the amount of insurance, the duration of the insurance
and the identity of the parties.

(Docket Entry # 123, p. 3).

plaintiffs point out, the 2004-2005 Plan Highlights contain:

As
(1)

the subject matter of the risk, to wit, “Claims Made and Reported
Acts, errors or omissions arising out of the rendering of or
failure to render Professional Services”; (2) the amount of the
insurance, to wit, a policy aggregate of $100,000,000 with three
choices of an annual aggregate and per claim limit with
designated deductibles;32 (3) the duration of the insurance, to
wit, the “Policy Period” of “July 1, 2004 to July 1, 2005”; and
(4) the identity of the parties, to wit, American Guarantee33 on
the one hand and the “Named Insured,” defined as agents of AmerUs

2004-2005 Enrollment Form on or about July 30, 2004. (Docket
Entry # 95, ¶ 9).
32
The 2004-2005 Enrollment Form provides a space to check the
option chosen. Here, Caplitz checked the highest limit of
$3,250,000 per claim and annual aggregate. (Docket Entry # 9712).
33
The 2004-2005 Plan Highlights identify “American Guarantee and
Liability Insurance Company[,] A Zurich North American Company”
as the insurance provider. (Docket Entry # 98-16).
38

Life, and the “Additional Insured,” defined as “Insured Agent’s
Business Entity[,]” “Officers” and “Partners.”34

As to the

premium, the 2004-2005 Plan Highlights sets out a premium table.
The 2004-2005 Enrollment Form contains a box to set out the
amount of the premium from the table.

Here, Caplitz stated

$2,916, an amount that corresponds to the coverage option he
chose.

(Docket Entry # 97-12).

The terms of the enrollment form

require “Agents with Expiring Coverage,” such as Capltiz, to
“Enroll within 30 days of Expiration” of the prior policy and to
mail the “Enrollment forms with check” to Calsurance.

(Docket

Entry # 97-12).
Excluding the Madsen conversation, the foregoing
conversations, documents and Caplitz’s affidavit provide
sufficient evidence for a jury to find that Caplitz sent in the
signed 2004-2005 Enrollment Form and the check for the $2,916
premium in a timely manner on or before July 30, 2004.
34

The

Plaintiffs argue that Herman and Financial Resources are each
an “Additional Insured” based on the language in the 2004-2005
Plan Highlights (Docket Entry # 98-16) and a conversation Herman
had with Madsen of Indianapolis Life that she and Financial
Resources were covered because of the statements in the Plan
Highlights (Docket Entry # 96, ¶ 2). See fn. 11. The latter
basis is not part of the summary judgment record because this
court struck the affidavit statement (Docket Entry # 96, ¶ 2)
(Docket Entry # 107, pp. 27-28) and plaintiffs fail to provide
any justification for reconsideration. Nonetheless, this court
will accept for purposes of the two pending summary judgment
motions that, as urged by plaintiffs, Herman and Financial
Resources are “Additional Insured[s].” Accepting this fact does
not alter, effect or change the denial of defendants’ summary
judgment motion on Count V as to the 2004-2005 policy period and
on Count VI.
39

record also provides adequate support for a jury to find that
Calsurance and/or American Guarantee received the check and the
enrollment.

Again, viewing the record in plaintiffs’ favor, it

is a genuine issue of material fact as to whether the parties
agreed upon all of the essential terms of the oral or the implied
contract of insurance for the 2004-2005 policy period based on
the 2004-2005 Plan Highlights, the 2004-2005 Enrollment Form and
the foregoing conversations, documents and affidavit.35

Caplitz

is a “Named Insured” as an agent of Indianapolis Life.

(Docket

Entry # 72, p. 26).

Summary judgment in favor of American

Guarantee and Zurich on the basis of the absence of an oral or an
implied in fact contract is not warranted.
American Guarantee and Zurich next submit that the statute
of frauds, Massachusetts General Laws chapter 259, section one,
bars enforcement of the oral insurance contract.
120, § I(C)).

(Docket Entry #

“When a party seeks to enforce an alleged oral

35

The finding is not based on Lancer’s uncommunicated, internal
progress notes. See Louis Stoico, Inc. v. Colonial Development
Corporation, 343 N.E.2d 872, 875 (Mass. 1976) (“circumstances
surrounding the making of an agreement must be examined to
determine the objective intent of the parties”); Brewster
Wallcovering Company v. Blue Mountain Wallcoverings, Inc., 864
N.E.2d 518, 532 n.35 (Mass.App.Ct. 2007) (binding contract arises
when “the parties manifested the intent, viewed objectively, to
be bound at the time of contract formation, notwithstanding
either party’s subjective intent”); see also T.F. v. B.L., 813
N.E.2d 1244, 1249 (Mass. 2004); Donoghue v. IBC USA
(Publications), Inc., 70 F.3d 206, 212 (1st Cir. 1995); In re
Newport Plaza, Associates, L.P., 985 F.2d 640, 646 (1st Cir.
1993) (contracts depend upon “objective indicia of consent, not
on a party’s subjective expectations”).
40

contract that is within the statute of frauds, he must not only
prove the existence of the oral contract itself but he must go
one step further and prove a memorandum in writing containing the
terms of that same oral contract in so far as he seeks to enforce
them.”

Fichera v. City of Lawrence, 44 N.E.2d 779, 780 (Mass.

1942) (citation to statute of frauds omitted).

In order to

satisfy the statute, the written memorandum must “correctly
state[] the oral undertaking of the party sought to be charged.”
Epdee Corp. v. Richmond, 75 N.E.2d 238, 239 (Mass. 1947); see
Harrington v. Fall River Housing Authority, 538 N.E.2d 24, 29
(Mass.App.Ct. 1989) (memorandum “must contain all the provisions
of the oral contract with which the plaintiff is seeking to
charge the defendant”); see also Simon v. Simon, 625 N.E.2d 564,
567 (Mass.App.Ct. 1994) (writing must set out the essential
provisions of the oral agreement).
memorandum must therefore:

Ordinarily, the written

“(1) reasonably identify the subject

matter of the contract, (2) indicate that a contract with respect
to this subject matter has been made between the parties, (3)
state with reasonable certainty the essential terms of the
unperformed promises in the contract, and (4) be signed by or on
behalf of the party to be charged.”

Trenwick America Reinsurance

Corp. v. IRC, Inc., 764 F.Supp.2d 274, 298-299 (D.Mass. 2011)
(citing Massachusetts cases).

Finally, “under Massachusetts law,

multiple documents pertinent to a transaction may be read

41

together in determining whether the statute of frauds has been
satisfied.”

Blackstone Realty LLC v. F.D.I.C., 244 F.3d 193, 198

n.4 (1st Cir. 2001); see In re Rolfe, 710 F.2d 1, 3 (1st Cir.
1983) (“written memorandum ‘may consist of several writings’ as
long as they ‘clearly indicate that they relate to the same
transaction’”).
Here, plaintiffs identify the 2004-2005 Plan Highlights, the
2004-2005 Enrollment Form and the August 19, 2004 letter signed
by Casey “on behalf of American Guarantee” (Docket Entry # 97-14)
to satisfy the statute.

Assuming for purposes of argument that

the oral liability insurance contract falls within the reach of
the statute of frauds, the foregoing documents provide the
necessary writings to satisfy the statute of frauds.
Turning to the terms of the oral or the implied in fact
contract and any breach, American Guarantee and Zurich submit
that such terms are no different than the terms of the express
2004-2005 E&O Policy.

Because this court found there was no

coverage under the 2004-2005 E&O Policy, American Guarantee and
Zurich argue there should be no coverage under the oral or the
implied in fact contract for insurance.

Briefly stated, the

March 2012 decision found that Caplitz did not comply with the
conditions precedent to coverage requiring the “Insured” to
provide “written notice of any ‘Claim’ made . . . during the

42

‘Policy Period’” and requiring the “Insured,” Caplitz,36 to
“Immediately forward . . . every ‘Claim’, notice, summons or
other process” received by the Insured to Lancer.

(Docket Entry

# 121-5, ¶ VII(A)) (Docket Entry # 107, pp. 58-66).

The March

2012 decision also found that the Awareness Provision
unambiguously applied to reporting a potential claim as opposed
to an actual claim.

(Docket Entry # 107, pp. 55 & 59-62).

With respect to the terms of the oral and the implied
contract, plaintiffs rely on the 2004-2005 Plan Highlights.

They

submit that the terms of the 2004-2005 oral contract allowed
Caplitz to orally report “the claim.”
III(D)).

(Docket Entry # 116, ¶

In particular, they argue that, “Caplitz properly

reported plaintiffs’ claim as required by the plain language of
the Plan Highlights and that claim was received and accepted by
Calsurance even though the claim was reported orally.”
Entry # 116, p. 14).

(Docket

According to plaintiffs, Lancer accepted

the oral report of the claim and no one advised Caplitz of a
requirement to send a written notice.

They also note that

Lancer’s internal progress notes state, at least initially, that
“this is a potential claim . . . made and reported within the
policy period.”

(Docket Entry # 98-11, p. 00290).

36

American

Assuming arguendo, as previously noted, that Herman and
Financial Resources qualify as “Additional Insured[s],” there is
no evidence that they provided oral or written notice to Lancer
of the Meiselman crossclaim.
43

Guarantee and Zurich thereafter breached the oral and the implied
insurance contracts by refusing coverage and failing to defend
and identify plaintiffs, according to plaintiffs.
In addition to properly reporting “the claim,” plaintiffs
submit they properly reported a potential claim “under the
‘awareness provision’ of the Plan Highlights.”
116, p. 5).

(Docket Entry #

Here too, however, plaintiffs rely on the 2004-2005

Plan Highlights for coverage during that policy period.
Plaintiffs’ reliance on the 2004-2005 Plan Highlights as a
basis to properly report the Meiselman crossclaim by orally
reporting the disagreements in early August 2004 is misguided.
In no uncertain terms, the 2004-2005 Plan Highlights state that:
This document is a summary of the coverage provided. All
statements contained herein are subject to all of the terms,
Conditions and Exclusions of the actual policy. Call (800)
745-7189 to receive a copy of the policy.
(Docket Entry # 98-16).

For reasons explained in the March 2012

decision, Caplitz did not provide proper notice during the July
1, 2004 to July 1, 2005 policy period and he did not immediately
forward the February 2005 Meiselman crossclaim to Lancer.
(Docket Entry # 107, 44-48 & 58-66).

Furthermore, reporting a

potential claim under the Awareness Provision in early August
2004 does not satisfy the 2004-2005 E&O Policy’s notice
provisions to report a claim in the designated manner.
Entry # 107, 44-48 & 58-66).

(Docket

Because Caplitz did not comply with

the reporting and notice provisions, the express 2004-2005 E&O
44

Policy did not afford him coverage.
58-66).

(Docket Entry # 107, 44-48 &

Because the reporting and notice provisions apply to

“Additional Insured[s],” neither Herman nor Financial Resources
are covered under the 2004-2005 E&O Policy even if, for purposes
of argument, they qualify as “Additional Insured[s].”

The

incorporation of the terms of the 2004-2005 E&O Policy into the
2004-2005 Plan Highlights therefore eviscerates plaintiffs’
breach of contract argument both with respect to the oral
contract and the implied in fact contract.

See generally Mt.

Airy Insurance. Co. v. Greenbaum, 127 F.3d 15, 19 (1st Cir. 1997)
(there is “no duty to defend a claim that is specifically
excluded from coverage”) (applying Massachusetts law).
Even without the incorporation language, the 2004-2005 Plan
Highlights do not afford coverage under the oral or the implied
in fact contract.

The 2004-2005 Plan Highlights, like the 2003-

2004 Plan Highlights, state that:
a Claim is “reported” by giving written notice of it to
Lancer Claims Services. A Claim must be “made and reported”
during the policy period. The policy requires that written
notice of claims be provided as soon as practicable during
the Policy Period . . ..
How do I report a Claim?
The agent has the following duties in the event of a claim
or suit:
1. As soon as practicable, give to the Insurance Company
written notice.
2. Immediately forward every demand, notice, summons or
other process to [Lancer].
45

(Docket Entry # 98-16).37

This language sets out the substance

of the two condition precedents that formed the basis to deny
coverage under the express 2004-2005 E&O Policy in the March 2012
decision.

For reasons stated therein, Caplitz did not comply

with these requirements and, accordingly, there is no duty to
defend or indemnify.
Turning to the existence of an oral or an implied in fact
contract for the 2003-2004 policy period, plaintiffs contend that
the 60 day automatic Extended Reporting Provision provides
coverage.38
41).

(Docket Entry # 116, p. 7) (Docket Entry # 125, ¶

The March 2012 decision rejected this argument with respect

to the express 2003-2004 E&O Policy.
54-58).

(Docket Entry # 107, pp.

Here too, the same reasons apply.

The Awareness

Provision of the 2003-2004 Plan Highlights affords coverage for
37

The language does not disclose the 60 day automatic Extended
Reporting Provision. There is, however, no coverage for the
2004-2005 policy period under this provision based on the August
31, 2005 email from Meiselman’s counsel. (Docket Entry # 107,
pp. 60-62). Plaintiffs do not identify any other communication
during the July 1 to August 31, 2005, 60 day period.
38
The argument reads as follows:
The defendants were, in any event, well aware that, even if
Caplitz was not enrolled in the 2004-05 policy, he was
nevertheless covered under the Automatic Extended Reporting
Period for the prior year policy which allowed him to report
claims within 60 days of the termination of the prior year’s
policy for claims made during the prior year policy period.
Meiselman’s claim arose out of the purchase of insurance
during that policy period. SOF, par. 41.
(Docket Entry # 116, p. 7).
46

“the Policy Period in which the written notice” of the potential
claim “was received.”

(Docket Entry # 97-4) (emphasis added).

Caplitz did not report or notify Lancer of the Meiselman matter
until August 8, 2004.

Because the notice “was received” in the

2004-2005 policy period, any coverage is supplied by the July 1,
2004 to July 1, 2005 oral or implied in fact contract.
Even irrespective of the Awareness Provision, the 60 day
automatic Extended Reporting Provision in the 2003-2004 E&O
Policy does not afford coverage.

By its term, it applies to any

Claim that “(1) is first made during said sixty (60) day period,
and (2) arises out of a negligent act, error or omission which
occurred before the date of termination.”
¶ IV(A)).

(Docket Entry # 121-4,

Plaintiff’s argument that “Meiselman’s claim arose out

of the purchase” of the Meiselman life insurance policies does
not satisfy the first requirement.

The Meiselman claim was

“first made” at the time of the February 2005 Meiselman
crossclaim.
Plaintiffs further note that, “No one advised Caplitz that
his claim was covered under the Automatic Extended Reporting
Period and nothing in the Plan Highlights provided to Caplitz
disclosed the existence of this extended reporting period.”
(Docket Entry # 116, p. 7).

Because the claim was not

encompassed under this reporting provision, the argument does not
provide a basis for relief.

In light of the lack of defense and

47

indemnity coverage under the terms of the oral or the implied in
fact contracts, it is not necessary to address American Guarantee
and Zurich’s argument that they are not bound by the actions of
Calsurance as to Count IV.
B.

(Docket Entry # 126, § III(B)).

Count VI
Count VI sets out the breach of the covenant of good faith

and fair dealing claim against defendants.

In seeking summary

judgment, defendants first submit that if no insurance is in
effect, there is no contract to which the implied covenant can
attach.
“‘In order to establish a breach of the covenant of good
faith and fair dealing, a plaintiff must prove that there existed
an enforceable contract between the two parties.’”

Blake v.

Professional Coin Grading Service, 2012 WL 4903334, *16 (D.Mass.
Oct. 16, 2012) (quoting Boyle v. Douglas Dynamics, LLC, 292
F.Supp.2d 198, 209–10 (D.Mass. 2003)).

A “failure to demonstrate

the existence of an enforceable contract” is “fatal” to a
plaintiff’s “contention that [the defendant] violated that
contract’s implied covenant of good faith and fair dealing.”
O’Connor v. Merrimack Mutual Fire Insurance Co., 897 N.E.2d 593,
600 (Mass.App.Ct. 2008).

As previously explained, however,

sufficient evidence exists that the parties agreed upon the
essential terms of an oral contract thereby giving rise to an
oral contract for insurance based on the 2004-2005 Plan

48

Highlights, the 2004-2005 Enrollment Form and the previously
identified conversations, documents and Caplitz’s affidavit.
Viewing the record in plaintiffs’ favor, there is also sufficient
evidence that Caplitz timely enrolled in the policy and that
Calsurance received the enrollment form and the check.
Defendants first argument therefore does not provide a basis for
summary judgment as to the 2004-2005 policy period.39
Next, defendants contend that if the E&O Polices were in
effect, there is no breach of the covenant because, as determined
by this court, there was no breach of the duty to defend and
indemnify in the 2003-2004 E&O Policy and in the 2004-2005 E&O
Policy.

As a result, purportedly “there can be no breach of the

covenant of good faith and fair dealing based on the Defendants’
refusal to defend and indemnify the Plaintiffs.”

(Docket Entry #

120, § IV) (citing Chokel v. Genzyme Corp., 867 N.E.2d 325, 329331 (Mass. 2007)).

In other words, because they acted in a

manner authorized by the E&O Policies, defendants submit they did
not breach the covenant.

(Docket Entry # 126, § III(D)).

Plaintiffs, in turn, argue that defendants breached the covenant
because their agent, Calsurance, received the check and the 20042005 Enrollment Form and initially issued coverage in accordance
with the oral or the implied in fact insurance contract but, when
39

Defendants do not present a separate argument specific to the
2003-2004 policy period during which Caplitz was enrolled in the
express 2003-2004 E&O Policy.
49

the claim materialized to a greater degree, disavowed such
coverage in late October 2004.40

It is therefore the performance

of the enrollment provisions and the representation of coverage,
if any, that provide the basis for the covenant and its breach.
(Docket Entry # 116, § III(F)) (Docket Entry # 123, § III(E)).
Massachusetts law implies a covenant of good faith and fair
dealing into every contract.

See FAMM Steel, Inc. v. Sovereign

Bank, 571 F.3d 93, 100 (1st Cir. 2009).

“The purpose of the

covenant ‘is to guarantee that the parties remain faithful to the
intended and agreed expectations’ of the contract.”
Studeny, 879 N.E.2d 676, 680 (Mass. 2008).

Liss v.

In essence, the

covenant requires that the parties not “‘do anything which will
have the effect of destroying or injuring the right of the other
party to receive the fruits of the contract.’”

Nile v. Nile, 734

N.E.2d 1153, 1160 (Mass. 2000); see Liss v. Studeny, 879 N.E.2d
at 680 (covenant ensures “that ‘neither party shall do anything
that will have the effect of destroying or injuring the right of
the other party to receive the fruits of the contract’”); Uno
Restaurants v. Boston Kenmore Realty, 805 N.E.2d 957, 964 (Mass.
2004) (covenant “preserved so long as neither party injures the
rights of another to reap the benefits prescribed by the terms of
the contract”).

“It is implicit in [the foregoing] definition,

40

The argument parallels this court’s reasoning for denying
American Guarantee and Zurich’s first summary judgment motion.
(Docket Entry # 72, pp. 48-49).
50

and made explicit [under First Circuit] precedent, that the
prohibition contained in the covenant applies only to conduct
during performance of the contract, not to conduct occurring
prior to the contract’s existence . . ..”

AccuSoft Corp. v.

Palo, 237 F.3d 31, 45 (1st Cir. 2001).
“Equally clear from this definition is that the requirement
of good-faith performance ultimately is circumscribed by the
obligations-the contractual ‘fruits’-actually contained in the
agreement.”

Id.; see Liss v. Studeny, 879 N.E.2d at 680 (“‘scope

of the covenant is only as broad as the contract that governs the
particular relationship’”).

Consequently, “[t]he covenant does

not supply terms that the parties were free to negotiate, but did
not” and it does not “‘create rights and duties not otherwise
provided’ for in the contract.”

Chokel v. Genzyme Corp., 867

N.E.2d at 329 (citation omitted).

A successful claim for breach

of the covenant does not, however, require a separate breach of
the express terms of the contract or the agreement.

See, e.g.,

Larson v. Larson, 636 N.E.2d 1365 (Mass.App.Ct. 1994).
The facts viewed in plaintiffs’ favor establish that Caplitz
completed the 2004-2005 Enrollment Form (Docket Entry # 97-12)
and mailed the form and the premium check to Calsurance within
the requisite 30 days in accordance with the instructions in the
form.

In early August 2004, Caplitz orally reported the

Meiselman dispute.

Lancer initially represented that the policy

51

“is effective” but it remained subject to the terms of the
policy.

(Docket Entry # 97-14).

The August 19, 2004 letter also

explained that a “complete coverage evaluation will be completed”
in the next 30 days and, if there are any coverage issues,
Caplitz “will receive notice of those issues.”

(Docket Entry #

97-14).

Caplitz did not receive any such notice during the next

30 days.

When the Meiselman disagreements or claim materialized

to a greater degree, American Guarantee and Zurich disavowed the
policy and Calsurance’s receipt of the enrollment form and check.
Thus, their performance of initially honoring and thereafter
dishonoring Caplitz’s timely enrollment provides sufficient
evidence of a breach of the covenant as circumscribed by the
enrollment obligations.

Those obligations required the

Indianapolis contracted agent to complete the enrollment form and
send the check to Calsurance.

Then, if everything was in order,

the contracted agent would be a Named Insured under the policy.
It is the performance of the enrollment provisions that provide
the scope of the covenant.
Defendants however argue that they acted in conformity with
the terms of the policy when they refused to defend and indemnify
plaintiffs.

Even assuming that their adherence to the terms of

the Awareness Provision and the automatic Extended Reporting
Provision in denying coverage does not violate the covenant,
their conduct relative to their performance of the enrollment

52

provisions of the oral insurance contract may nonetheless violate
the covenant.

Defendants brevis assertion in a footnote that if

plaintiffs could prove a breach of the duty to defend and
indemnify then the breach of the covenant of good faith adds
nothing fails because of the absence of any legal authority, see
LR. 7.1(b)(1), and the absence of the initial premise, to wit,
breach of the duty to defend and indemnify.
Thus, given the arguments presented,41 they do not provide a
sufficient basis to allow summary judgment on Count VI.
C.

Counts I and V
In seeking summary judgment, defendants apply the same

arguments to each of the two estoppel counts with respect to the
2004-2005 policy period.

Count I presents an estoppel claim

against B&B, BBC and Calsurance for failure to procure or provide
a policy of insurance.

Plaintiffs purportedly relied on the

promise to procure insurance by refraining from purchasing
coverage through another carrier.

(Docket Entry # 28, ¶¶ 50-53)

(Docket Entry # 116, § III(C)) (Docket Entry # 123, § III(D)).
Count V is an estoppel claim against American Guarantee and
Zurich based on their failure to defend and indemnify plaintiffs
notwithstanding their alleged representations of coverage.

In

reliance on those coverage representations, plaintiffs did not
41

Defendants do not expressly refer to the absence of “damages”
caused by the covenant’s breach or otherwise raise such an
argument.
53

seek coverage elsewhere.

(Docket Entry # 28, ¶¶ 66-69) (Docket

Entry # 116, § III(E)) (Docket Entry # 123, § III(D)).
Massachusetts insurance law adheres to “the rule that a
liability insurer,” such as American Guarantee and Zurich,
“‘having led the assured to rely exclusively on its protection
during the period when he might have protected himself . . .
cannot, in fairness, thereafter withdraw that protection.’”
Specialty National Ins. Co. v. OneBeacon Ins. Co., 486 F.3d 727,
735 (1st Cir. 2007) (quoting Salonen v. Paanenen, 71 N.E.2d 227,
230 (Mass. 1947)).

To establish such an estoppel “under a

liability insurance policy, an insurer must say or do something
intended to induce conduct on the part of its insured; the
insured must act or refrain from acting in reasonable reliance on
the insurer’s representation; and the insured must suffer some
detriment as a result.”

Id. (citing Salonen v. Paanenen, 71

N.E.2d at 230); Safety Insurance Co. v. Day, 836 N.E.2d 339, 346
(Mass.App.Ct. 2005) (setting out same elements).
reliance is a required element.

Detrimental

Specialty National Insurance Co.

v. OneBeacon Insurance Co., 486 F.3d at 737; see also Rotundi v.
Arbella Mutual Insurance Co., 763 N.E.2d 563, 564 (Mass.App.Ct.
2002).

Moreover, as noted in the context of the “special

circumstances” in Jet Line, when an insurance company makes a
representation that “misleads an insured reasonably to believe
that there is coverage” for a type of loss, “the insured may

54

satisfy its burden of proof of detrimental reliance (that is,
that the insurer’s conduct caused a loss to the insured) simply
by demonstrating that the loss occurred.”

Jet Line Services,

Inc. v. American Employers Insurance Co., 537 N.E.2d 107, 113
(Mass. 1989).

The insurance company then has the burden of

“showing that, if the insured had not had the coverage as
represented by the insurer, the insured would have sustained the
same loss in any event.”

Id.

For purposes of their summary judgment motion, defendants
assume that, “Plaintiffs reasonably relied on the Defendants’
representation that the 2004-2005 [E&O] Policy was in effect and
that, as a result, the Plaintiffs refrained from buying other
insurance.”

(Docket Entry # 120, § III).

They then point out,

correctly, that plaintiffs have no defense and indemnity coverage
under the express 2004-2005 E&O Policy as determined in the
November 2010 and the March 2012 decisions.

Thus, even if

successful in establishing that defendants are estopped to deny
the policy’s timely renewal, plaintiffs are not entitled to any
relief, according to defendants.

(Docket Entry # 120, § III)

(Docket Entry # 126, § III(C)).

Defendants also emphasize that

plaintiffs did not comply with the terms of the express 2004-2005
E&O Policy.

(Docket Entry # 120, § III).

Without more, defendants’ argument that the express policy
does not provide coverage precludes the estoppel claim in Count V

55

does not warrant summary judgment.

As explained by the court in

Jet Line, “Although the [general liability insurance] policy did
not provide coverage for the damage to the Air Force tank caused
by the Newington explosion, the jury [was] warranted in finding
that [the insurance company] was estopped to deny coverage for
that damage.”

Jet Line Services, Inc. v. American Employers

Insurance Co., 537 N.E.2d at 112.
Defendants’ argument also misperceives the relevant inquiry
and the nature of the estoppel claim that plaintiffs present in
Count V.

After Caplitz’s notice in early August 2004, plaintiffs

assert they “were led to believe they had coverage” and their
“reliance created a detriment in the form of an inability to
obtain replacement coverage after the August notice from
Caplitz.”42

(Docket Entry # 116, § III(E)).

A reasonable fact

finder could find that Lancer did not simply make a
representation that the policy was in effect in the August 19,
2004 letter.

(Docket Entry # 97-13) (“we would like to advise

you that your Policy . . . is effective”).

In addition to noting

that the Meiselman matter or “claim is subject to all other
applicable terms and conditions,” the letter states that, “A
complete coverage evaluation will be completed on this matter

42

Plaintiffs also base the claim on representations in the
2004-2005 Plan Highlights that Herman and Financial Resources
were covered as Additional Insureds. (Docket Entry # 116, §
III(E)).
56

within the next 30 days.

If there are any coverage issues that

need to be addressed, you will receive notice of those issues
under separate cover.”

(Docket Entry # 97-13).

Consequently, a

reasonable fact finder could find that Lancer made a
representation about coverage for the Meiselman matter absent
notice of a coverage issue in the next 30 days.

Caplitz did not

receive a coverage determination in the next 30 days.

See id. at

112 (evidence “that insurance companies usually disclaim coverage
within sixty days of notice of a claim” gave support to estoppel
claim).
Viewing the record in plaintiffs’ favor, plaintiffs
demonstrated that the loss took place inasmuch as they incurred
the liability to Meiselman.

On summary judgment, it is incumbent

upon defendants and, in particular, American Guarantee and Zurich
as to Count V, to provide a sufficient showing that plaintiffs
would have sustained the same (or greater) loss if they had known
that Caplitz did not have the coverage as represented.
at 113.

See id.

Defendants fail to provide the requisite showing with

respect to the 2004-2005 policy period.

Defendants additionally

argue that, “‘[A]n action based on reliance is equivalent to a
contract action, and the party bringing such an action must prove
all the necessary elements of a contract other than
consideration.’”

(Docket Entry # 120, § III) (quoting Rhode

Island Hospital Trust National Bank v. Varadian, 647 N.E.2d 1174,

57

1179 (Mass. 1995)).

In Varadian, “the necessary elements of a

contract” consisted of the offer and acceptance.

Rhode Island

Hospital Trust National Bank v. Varadian, 647 N.E.2d at 1179.
Assuming for purposes of argument that Varadian applies in the
context of a liability insurance dispute, a fact finder could
conclude that all of the elements of an oral contract of
insurance exist.

As previously explained, there is sufficient

evidence to establish all of the essential elements of an oral
insurance contract, including offer and acceptance.

Defendants’

argument based on Varadian therefore does not provide a basis to
enter summary judgment on Count V.
Raising a similar premise and citing Massachusetts Municipal
Wholesale Electric Co. v. Town of Danvers, 577 N.E.2d 283, 288
(Mass. 1991), defendants assert that proving all of the elements
of a contract entails and requires plaintiffs to prove compliance
with conditions precedent.

(Docket Entry # 120, § III).

First,

although Massachusetts Municipal sets out the well established
principle that if a condition precedent “is not fulfilled, the
contract, or the obligations attached to the condition, may not
be enforced,” the case is a breach of contract case that does not
involve an estoppel claim.

Massachusetts Municipal Wholesale

Electric Co. v. Town of Danvers, 577 N.E.2d at 288 (breach of
electric power sales agreements).

Second, as explained therein,

“A condition precedent defines an event which must occur before a

58

contract becomes effective or before an obligation to perform
arises under the contract.”

Id.

Here, sufficient evidence

exists of an oral insurance contract.

The circumstances do not

involve events that must occur before the oral insurance contract
becomes effective.

As such, plaintiffs’ compliance with the

conditions precedent at issue in this case (such as reporting) is
not a necessary element to form the oral insurance contract.
Third, defendants do not identify the conditions precedent
plaintiffs must fulfill to succeed on the estoppel claim.
Defendants single sentence argument based on the Massachusetts
Municipal decision does not provide a basis to enter summary
judgment on either estoppel claim.

In sum, based on the

arguments defendants present,43 they are not entitled to summary
judgment on the estoppel claim in Count V as to the 2004-2005
policy period.
Turning to the 2003-2004 policy period, defendants address
the estoppel claim, if any, out of an abundance of caution.

In

addition to presenting the same arguments, they add an agency
argument.

In particular, they submit that the representatives of

the insured lack the authority to bind them.

(Docket Entry #

120, § III, n.4) (citing Providence Washington Indemnity Co. v.
Varella, 112 F.Supp. 732, 733-734 (D.Mass. 1953)).
43

They also

Defendants do not make an insurable loss or an agency
argument with respect to the estoppel claim in Count V based on
the 2004-2005 policy period.
59

assume that the claim, if any, is premised on the 2003-2004 E&O
Policy’s automatic Extended Reporting Provision.

The August 2004

notice by Caplitz to Lancer falls within the 60 day time frame of
the 2003-2004 E&O Policy’s automatic Extended Reporting
Provision.

Although the 2003-2004 Plan Highlights and the 2003-

2004 Enrollment Form do not refer to this 60 day automatic
Extended Reporting Provision, plaintiffs do not identify any
other representation that supports an estoppel claim in Count V
for the 2003-2004 policy period.

See generally Kenney v. Floyd,

700 F.3d at 608 (“‘summary judgment target’” with underlying
burden of proof “‘must affirmatively point to specific facts that
demonstrate the existence of an authentic dispute’”).
Even if the oral or the implied in fact insurance contracts
do not include this provision, it remains incumbent upon
plaintiffs to provide facts sufficient to withstand summary
judgment that Lancer, or whoever else made the representation
supporting the estoppel in Count V, had the authority to make a
representation that would alter the terms of the oral or the
implied insurance contract and bind American Guarantee and
Zurich.

See Smith Beverages, Inc. v. Metropolitan Casualty

Insurance Co., 149 N.E.2d 146, 148 (Mass. 1958) (allowing
directed verdict inasmuch as “the plaintiff made no affirmative
preliminary showing that McDonald had the authority from the
defendant” and there was also “no showing of the scope of

60

Meehan’s authority”); Belbas v. New York Life Insurance Co., 15
N.E.2d 806, 808 (Mass. 1938); see also Providence Washington
Indemnity Co. v. Varella, 112 F.Supp. at 733-734.

In response to

defendants’ agency argument, plaintiffs fail to provide such
facts thus requiring summary judgment on the estoppel claim in
Count V based on the 2003-2004 policy period.
With respect to Count I, defendants argue that, “Plaintiffs’
alleged reliance on B&B to procure coverage under the 2004-2005
[E&O] Policy and refrain from purchasing other insurance during
that time does not expand the scope of coverage available to the
Plaintiffs under the policy.”

(Docket Entry # 126, § III(C)).

Defendants submit that the terms of the 2004-2005 E&O Policy did
not provide defense and indemnity coverage.

Consequently, an

estoppel based on plaintiffs’ reliance on Calsurance to procure
the 2004-2005 E&O Policy does not expand or alter the lack of
coverage available under the 2004-2005 E&O Policy.

Therefore,

even if plaintiffs established that B&B, BBC and/or Calsurance
are estopped to deny the renewal of the 2004-2005 E&O Policy,
they would not be entitled to any relief.

In other words,

defendants maintain there was no detriment as a consequence of
the failure to procure the policy.

(Docket Entry # 126, §

III(C)) (Docket Entry # 120, § III).
Plaintiffs point out that the 2004-2005 Plan Highlights and
the 2004-2005 Enrollment Form as opposed to the express 2004-2005

61

E&O Policy constitute the basis for the “contract by estoppel.”
(Docket Entry # 123, § III(D)).

As previously explained, the

highlights and the enrollment form do not provide defense and
indemnity coverage.

Thus, the terms of these contracts, like the

terms of the express 2004-2005 E&O Policy, do not entitle
plaintiffs to relief.

The absence of any detriment as a

consequence of the failure of B&B, BBC or Calsurance to procure
such “coverage” thus remains a viable argument.
As previously noted, detrimental reliance is required to
succeed on an estoppel claim.

Lumbermens Mutual Casualty Co. v.

Office Unlimited, 645 N.E.2d 1165, 1169 (Mass. 1995); Specialty
National Insurance Co. v. OneBeacon Insurance Co., 486 F.3d at
737.

To succeed on an estoppel claim, “it must be shown that one

has been induced by the conduct of another to do something
different from what otherwise would have been done and that harm
has resulted.”

Lumbermens Mutual Casualty Co. v. Office

Unlimited, 645 N.E.2d at 1169; see Rotundi v. Arbella Mutual
Insurance Co., 763 N.E.2d at 564 (estoppel requires showing
“‘that one has been induced by the conduct of another to do
something different from what otherwise would have been done and
which has resulted to his harm’”) (quoting Royal-Globe Insurance
Co. v. Craven, 585 N.E.2d 315, 319 (Mass. 1992)).

Plaintiffs

bear the underlying burden of showing their detrimental reliance.
See Specialty National Insurance Co. v. OneBeacon Insurance Co.,

62

486 F.3d at 737.

The burden shifting framework in Jet Line does

not apply to the estoppel claim in Count I because it is based on
a failure to procure the insurance policy covering Caplitz,
Herman and Financial Resources as opposed to a misrepresentation
of coverage for the Meiselman matter.

See Dahlstedt v. State

Farm Insurance Co., 1998 WL 324197, *5 (Mass.Super. June 8, 1998)
(rejecting burden shifting under Jet Line in context of estoppel
claim in part because insurer’s delay in denying coverage was not
“a misrepresentation that requires the burden of proof of loss to
shift to the insurer”).
Here, plaintiffs assert that they refrained from purchasing
other insurance coverage covering Herman and Financial Resources
as well as Caplitz as a result of a representation made by
Calsurance (or B&B or BBC) to procure insurance.
116, § III(C)) (Docket Entry # 28, ¶ 51).

(Docket Entry #

The evidence in the

record to support the assertion consists of Caplitz’s averment
that he tried without success “through his broker” to “obtain
replacement coverage” after the December 2, 2004 fax from Robb.
(Docket Entry # 125, ¶ 53) (Docket Entry # 95, ¶ 45).

The

broker, now deceased, “took a telephone application” for “an E&O
policy” with AIG.

AIG denied Caplitz “E&O coverage” because of

the claim history as to the Meiselman claim.
125, ¶ 53) (Docket Entry # 87, pp. 54-57).

(Docket Entry #

There is no evidence

about the terms of the AIG policy and whether the errors and

63

omissions coverage would have included defense and indemnity for
the Meiselman crossclaim.

In other words, there is no showing

that the AIG replacement policy (or another unidentified errors
and omissions policy Caplitz refrained from purchasing in
reliance on the representation to procure insurance) was better
than the oral insurance contract or the express 2004-2005 E&O
Policy Calsurance (or B&B or BBC) failed to obtain.

Herman’s

averment that she did not purchase additional or other insurance
“[i]n reliance on the language in the Plan Highlights” (Docket
Entry # 125, ¶ 14) (Docket Entry # 96, ¶ 3) does not provide
detrimental reliance because there is no indication that the
additional insurance would have provided more favorable coverage
for the Meiselman matter.

See generally Specialty National

Insurance Co. v. OneBeacon Insurance Co., 486 F.3d at 735-736;44
44

As explained in Speciality:
[T]here is no evidence that McMillan did, or refrained from
doing, anything in response to Specialty’s actions, either
before or after it hired him an attorney. Nor is there any
evidence that whatever McMillan did, or failed to do, worked
to his detriment. OneBeacon suggests that McMillan could
have retained his own counsel had he known that Specialty
would disclaim coverage, but there is nothing to suggest
that, had he done so, the claim would have been resolved
more favorably to him . . ..
[OneBeacon also] postulates that it might have hired counsel
for McMillan to seek a declaratory judgment that he was not
liable to the Rhodeses, or even to intervene in their
lawsuit, rather than waiting to get brought in on a
third-party complaint. But OneBeacon does not explain how
these tactics would have improved McMillan’s settlement
position, and the point is far from obvious. Speculation as
64

Transamerica Insurance Group v. Turner Construction Co., 601
N.E.2d 473, 477 (Mass.App.Ct. 1992) (“action based on estoppel .
. . presupposes a change of position by the plaintiff to that
plaintiff’s detriment”).
Simply stated, plaintiffs do not provide sufficient facts of
the harm they experienced as a consequence of relying on the
representation to procure insurance.

Accordingly, the estoppel

claim in Count I against B&B, BBC and Calsurance based upon
plaintiffs’ alleged reliance on the representation to procure or
provide insurance does not withstand summary judgment.
II.

PLAINTIFFS’ PARTIAL SUMMARY JUDGMENT MOTION
Plaintiffs seek partial summary judgment on liability for

counts I, III, IV, V and VI.

They also seek to establish certain

facts under Rule 56(g).
As to counts III and IV and viewing the facts in plaintiffs’
favor, they are not entitled to summary judgment on the oral and
the implied in fact contract claims against American Guarantee
and Zurich because of plaintiffs’ failure to establish as a
matter of law that these contracts provide defense and indemnity
coverage for the Meiselman crossclaim.

Genuine issues of

material fact also preclude a finding that Caplitz sent the

to the insured’s detrimental reliance cannot sustain an
estoppel claim.
Id.
65

enrollment form and the premium check to Calsurance in a timely
manner as required in the 2004-2005 Enrollment Form.

Summary

judgment on Count I in plaintiffs’ favor is inappropriate because
of plaintiffs’ failure to provide sufficient facts to establish
detrimental reliance as a matter of law.

Plaintiffs also fail to

establish as a matter of law that B&B, BBC or Calsurance made a
contract to procure an insurance policy with plaintiffs.
Genuine issues of material fact also prevent summary
judgment on Count VI.

At a minimum, plaintiffs fail to establish

that defendants breached the covenant as a matter of law.

They

also fail to establish as a matter of law that Caplitz sent the
enrollment form and the premium check to Calsurance in a timely
manner.
Genuine issues of material fact likewise preclude summary
judgment on Count V.

Plaintiffs fail to establish as a matter of

law that Lancer or anyone else made a promise or representation
of coverage for the Meiselman matter or claim.
Finally, plaintiffs seek to establish certain facts under
Rule 56(g).

Under Rule 56(g), if a court does not grant all of

the relief requested in a summary judgment motion, “the court can
determine if there are material facts which are genuinely not in
dispute, and establish those facts as undisputed for trial.”
Pariseau v. Captain John Boats, 2011 WL 1560975, *2 (D.Mass.
April 25, 2011).

All of the proposed facts plaintiffs seek to

66

establish are genuinely disputed.

In addition, facts assumed by

defendants for purposes of their summary judgment motion are not
appropriate facts to deem established under Rule 56(g).

See

Advisory Committee Notes, 2010 Amendment, Rule 56(g), Fed. R.
Civ. P.; Triple H Debris Removal, Inc. v. Companion Property and
Casualty Insurance Co., 647 F.3d 780, 785-786 (8th Cir. 2011).
CONCLUSION
In accordance with the foregoing discussion, the motion for
summary judgment filed by defendants (Docket Entry # 119) is
ALLOWED except for Count V with respect to the 2004-2005 policy
period and for Count VI.

Plaintiff’s motion for partial summary

judgment (Docket Entry # 115) under Rules 56(a) and Rule 56(g) is
DENIED.

The parties shall appear for a status conference on

April 2, 2013, at 2:30 p.m. to set a trial date.
/s/ Marianne B. Bowler
MARIANNE B. BOWLER
United States Magistrate Judge

67