American Guarantee & Liability Insurance Company v. Lamond et al

Filing 36

Judge Richard G. Stearns: ORDER entered granting 25 Motion for Partial Summary Judgment. "Plaintiffs motion for partial summary judgment on the scope of coverage of defendant Lamond's professional liability insurance is ALLOWED. The pa rties will submit a joint proposed scheduling order for the disposition of defendants' counterclaims within 30 days of the resolution of the appeal of the state court Hill action. The Clerk will close the case administratively pending the decision of the state appeals court." (RGS, int2)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 13-13168-RGS
AMERICAN GUARANTEE & LIABILITY
INSURANCE COPMANY
v.
JOHN F. LAMOND; SEAN F. MURPHY;
TREMONT REALTY INVESTMENTS, LLC;
SEAMUR ENTERPRISES, LLC; and
COLUCCI, COLUCCI, MARCUS & FLAVIN, P.C.
MEMORANDUM AND ORDER ON
PLAINTIFF’S MOTION FO PARTIAL SUMMARY JUDGMENT
July 29, 2014
STEARNS, D.J.
American

Guarantee

&

Liability

Insurance

Company

issued

defendant John F. Lamond, then a licensed attorney, a professional liability
policy covering the period from May 20, 2007, through May 20, 2008.
During the policy period, Lamond represented defendant Sean F. Murphy
and two defendant companies in which he is the principal – Tremont
Realty Investments, LLC, and Seamur Enterprises, LLC (collectively
Murphy) – in the purchase of several lots of land for development. Prior to
the closing, Lamond learned that the land was the site of an Indian burial
ground and was subject to a preservation restriction.

He nonetheless

certified to Murphy’s mortgagor – Hill Financial Services Company – that
titles to the land were free from any encumbrances. After the purchase, the
truth was discovered, and Murphy was unable build on the land as planned
and defaulted on the mortgage. Hill foreclosed on the lots, but could not
develop or sell them because of the burial ground.
In 2009, Hill brought suit against Murphy and Lamond in the
Norfolk Superior Court.

Murphy, in turn, brought third-party claims

against Lamond for, inter alia, professional negligence and violations of
Mass. Gen. Laws Ch. 93A. In 2013, Murphy’s claims against Lamond were
tried to a jury, which awarded $20,000 to Murphy for Lamond’s
professional negligence, and $397,000 in actual damages for Lamond’s
deceptive acts and practices under Chapter 93A, doubled by the jury to
$794,000 after it found that Lamond had acted willfully. 1 Hill Verdict, Pl.’s
Ex. 1 at AG63-66.

Pursuant to Chapter 93A, the court also awarded

$111,190.62 in attorneys’ fees to Murphy. Hill Docket, Pl.’s Ex. 1 at AG46.
American Guarantee denies that Murphy’s damages against Lamond are

Lamond, represented by an attorney retained by American
Guarantee, is appealing the jury verdict.
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covered by Lamond’s professional liability policy and seeks a declaration of
the same by way of a partial summary judgment motion. 2
DISCUSSION
Summary judgment is warranted “if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56. The parties agree that
Lamond’s professional liability insurance excludes coverage for
4. criminal or civil fines, penalties (statutory or otherwise), fees
or sanctions;
5. punitive, exemplary or multiple damages; . . . [or]
7. legal fees, costs and expenses paid to or incurred or charged
by the Insured, no matter whether claimed as restitution of
specific funds, forfeiture, financial loss, setoff or otherwise,
and injuries that are a consequence of the foregoing.

Lamond has assigned his claim against American Guarantee to
Murphy and Colucci. Defendants, by way of counterclaims, argue that
American Guarantee is estopped from denying coverage to Lamond as a
result of its conduct in defending Lamond in the Hill action. As the court
previously noted, Lamond faces an “insoluble conflict of loyalties [because]
he is contractually bound to assist and cooperate with American Guarantee
on his defense in the underlying state action (the abdication of which would
provide an independent basis for the denial of coverage under his
professional liability policy), and he has similarly promised to assist and
cooperate with Murphy and Colucci (his adversary in the underlying action)
in pursuing his claim against American Guarantee.” Dkt. No. 21. As “the
court does not see a way to fairly proceed on any of Lamond’s
counterclaims in this action while the underlying state action is still
ongoing . . . defendants’ counterclaims [are] stayed until the resolution of
the state court appeal.” Id.
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Policy § VI.E, Pl.’s Ex. 1 at AG08. The policy also excludes
any Claim based upon or arising out of, in whole or part: . . .
any intentional, criminal, fraudulent, malicious or dishonest act
or omission by an Insured; except that this exclusion shall not
apply in the absence of a final adjudication . . . that the act or
omission was intentional, criminal, fraudulent, malicious or
dishonest.
Policy § III.A, Pl.’s Ex. 1 at AG04.
American Liability argues that the Chapter 93A jury award is
excluded under the policy because it stemmed directly from a finding of
willful and knowing conduct, and therefore falls within the definition of
malicious. See Chervin v. Travelers Ins. Co., 448 Mass. 95, 109 (2006)
(“Whatever is done wilfully and purposely, if it be at the same time wrong
and unlawful, and that known to the party, is in legal contemplation
malicious. That which is done contrary to one’s own conviction of duty, or
with a wilful disregard of the rights of others, whether it be to compass
some unlawful end, or some lawful end by unlawful means, or . . . to do a
wrong and unlawful act knowing it to be such, constitutes legal malice.”)
(citation omitted). Further, the doubling of the actual damages is excluded
under the punitive damages exception.
Defendants acquiesce to the exclusion of the doubled damages, but
assert that the actual damages of $397,000 is neither a penalty nor a
punitive award. However, there is no question that the jury found that
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Lamond “knowingly and/or willfully commit[ted] the unfair and deceptive
act or practice.” Verdict Q. 8, Pl.’s Ex. 1 at AG0065. The unmultiplied
actual damages are therefore excluded under Section III.A of the Policy.
With respect to attorneys’ fees, American Guarantee argues that
because the Chapter 93A remedy is contrary to the established American
Rule, under which each party bears the cost of its own legal representation,
they are punitive in intent and should be considered an excluded statutory
penalty under the Policy. Although, as defendants observe, attorneys’ fee
awards under Chapter 93A are treated separately from the recovery of
multiple damages, they are nonetheless, as American Guarantee argues,
punitive in nature. “Statutory authorization to award attorney’s fees to the
prevailing party in certain types of actions primarily serves the interrelated
purposes of encouraging private enforcement of particular laws chosen by
the Legislature, deterring illegal conduct in connection with these laws,
and punishing those who violate these laws.” Lincoln St. Realty Co. v.
Green, 374 Mass. 630, 632 (1978) (emphasis added). Indeed, “[p]rovision
for attorney's fees under [Chapter] 93A reflects ‘the Legislature’s manifest
purpose of deterring misconduct by affording both private and public
plaintiffs who succeed in proving violations of [Chapter] 93A, § 2 (a),
reimbursement for their legal services and costs.’” Drywall Sys., Inc. v. ZVI
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Const. Co., Inc., 435 Mass. 664, 672 (2002) (emphasis added, citation
omitted). Thus, the attorneys’ fees are excluded under § VI.E.5 of the
Policy.
Finally, American Guarantee argues that the $20,000 negligence
award is also excluded under the Policy because the award compensated
Murphy for the fees paid to Lamond for legal services connected to the real
estate transaction. Defendants deny that this was the purpose of the award
and point out that the jury verdict form did not ask for a specific finding as
to the purpose of the award. However, Mr. Colucci, in his closing argument
to the jury, asked the jury to “add [$20,000] to the damages model”
because it was what “Lamond was paid [] for the work that he did.” Hill
Trial Transcript, Pl.’s Ex. 1 at AG0093.

Similarly, in his Motion for

Judgment Notwithstanding the Verdict and for a New Trial, Lamond
characterized the $20,000 as “obviously [] intended to reimburse Murphy
for the legal fees paid to [him].” Pl.’s Ex. 1 at AG107. As these same parties
in the Hill action agreed that the $20,000 award was intended as a
reimbursement for attorneys’ fees, the court deems them estopped from
taking a self-contradictory position in this action. See Patriot Cinemas,
Inc. v. Gen. Cinemas Corp., 834 F.2d 208, 212 (1st Cir. 1987) (“It may be
laid down as a general proposition that, where a party assumes a certain
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position in a legal proceeding, and succeeds in maintaining that position,
he may not thereafter, simply because his interests have changed, assume a
contrary position, especially if it be to the prejudice of the party who has
acquiesced in the position formerly taken by him.”) (citing Davis v.
Wakelee, 156 U.S. 680, 689 (1895)). Therefore, the negligence award is
excluded under § VI.E.7 of the Policy.
ORDER
Plaintiff’s motion for partial summary judgment on the scope of
coverage of defendant Lamond’s professional liability insurance is
ALLOWED. The parties will submit a joint proposed scheduling order for
the disposition of defendants’ counterclaims within 30 days of the
resolution of the appeal of the state court Hill action. The Clerk will close
the case administratively pending the decision of the state appeals court.
SO ORDERED.
/s/ Richard G. Stearns
__________________________
UNITED STATES DISTRICT JUDGE

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