Ace American Insurance Company v. Puccio

Filing 26

Judge Indira Talwani: ORDER entered. MEMORANDUM AND ORDER: For the reasons set forth in the attached Memorandumand Order, Ace Americans Petition to Vacate Arbitration Award 5 is DENIED, and Puccios Cross-Motion to Confirm Arbitration Award 15 is ALLOWED.(MacDonald, Gail) (Main Document 26 replaced on 6/4/2015) (MacDonald, Gail).

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
ACE AMERICAN INSURANCE
COMPANY,
Petitioner,
v.
JOHN P. PUCCIO,
Respondent.

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Civil Action No. 15-cv-10262-IT

MEMORANDUM & ORDER
June 4, 2015
TALWANI, D.J.
Ace American Insurance Company (“Ace American”) drafted an insurance agreement
that includes a broad arbitration clause. After a dispute arose over payment of a claim under the
agreement, Respondent John Puccio (“Puccio”) initiated arbitration proceedings. The arbitrator
found in favor of Puccio. Dissatisfied with this result, Ace American now seeks to have this
court vacate or modify the award. Because the arbitrator did not exceed her power in crafting the
award, the court DENIES Ace American’s Petition to Vacate Arbitration Award [#5] and
ALLOWS Puccio’s Cross-Motion to Confirm Arbitration Award [#15].
I.

Facts
In late 2011, Ace American entered into an agreement with Puccio to insure his thirteen-

year-old boat. See Aff. Terence G. Kenneally, Esq. Supp. Pet. Vacate Arbitration Award, Ex. A
at 2 [#3-1] [hereinafter “Insurance Agreement”]. In September 2012, after severe weather in the
area where the boat was docked, the boat sank. See Pet’r’s Mem. Supp. Mot. Vacate Arb.
Award ¶ 10 [#6] [hereinafter “Pet’r’s Mem.”]; Mem. Law Supp. Cross-Mot. Opp’n Pet’r’s Mot.

Vacate Arbitration Award & Confirm Award, 1 [#16] [hereinafter “Resp’t’s Mem.”] (stipulating
to facts as presented in Petitioner’s memorandum). Puccio filed a claim to recover his loss under
the Insurance Agreement. Pet’r’s Mem. ¶¶ 12-13. After sending a marine surveyor to
investigate the cause of the sinking, Ace American denied coverage. Id. ¶¶ 14-15, 22.
In January 2013, Puccio sent Ace American a demand letter pursuant to Mass. Gen. Laws
ch. 93A (“Chapter 93A”), which stated that Ace American’s denial of his insurance claim
violated Mass. Gen. Laws ch. 176D, § 3 (requiring insurers to “effectuate prompt, fair and
equitable settlements of claims in which liability has become reasonably clear”). See Pet’r’s
Mem. ¶ 23. In February 2013, Ace American responded, reiterating its decision not to pay
Puccio’s claim and directing Puccio to arbitration as a “suitable method to resolve this matter.”
Id. ¶ 25.
The Insurance Agreement’s arbitration clause provides that:
Any controversy or claim, whether based in contract, tort, statute or other legal or
equitable theory (including but not limited to any claim of fraud, misrepresentation
or fraudulent inducement, arising out of or related to this policy, the interpretation,
enforcement, or breach thereof, or the handling of any claim involving this policy,
shall be referred to and settled by arbitration.
Insurance Agreement at 22. On May 29, 2013, Puccio initiated arbitration under this clause. See
Aff. Terence G. Kenneally, Esq. Supp. Pet. Vacate Arbitration Award, Ex. F at 1 [#3-6]
[hereinafter “Arbitration Request”]. The dispute submitted to arbitration was “[t]he failure of
business [to] pay on claim [of] loss of pleasure vessel as a result of storm.” Id. at 2. Puccio’s
request for arbitration sought $50,000 under the Insurance Agreement and “[d]ouble or treble
damages and attorney’s fees as provided by Massachusetts law.” Id.
After three days of hearings, the arbitrator issued an award in favor of Puccio for
$48,000. See Pet’r’s Mem. ¶¶ 27, 30; Aff. Paul M. Sushchyk, Esq. Supp. Cross-Mot. Resp’t

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Oppose Pet’r’s Mot. Vacate Arbitration Award & Confirm Final Award Arbitrator, Ex. 6 [#15-6]
[hereinafter “Final Award”]. Pursuant to Chapter 93A, the arbitrator also awarded Puccio
$51,529.02 in attorney’s fees and costs. Final Award at 11.
II.

Discussion
A.

Ace American’s Request to Vacate or Modify the Arbitration Award

Under the Federal Arbitration Act, a court may vacate an arbitration award only in
limited circumstances. As relevant here, the court has authority to vacate an award if “the
arbitrators exceeded their powers” in crafting the award. 9 U.S.C. § 10(a)(4). This exception,
however, is a narrow one: “[o]nly if ‘the arbitrator act[s] outside the scope of his contractually
delegated authority’ . . . may a court overturn his determination.” See Oxford Health Plans LLC
v. Sutter, 133 S. Ct. 2064, 2068 (2013) (second alteration in original) (quoting E. Associated
Coal Corp. v. United Mine Workers of Am., Dist. 17, 531 U.S. 57, 62 (2000)). A court may also
modify or correct an award “where the arbitrators have awarded upon a matter not submitted to
them, unless it is a matter not affecting the merits of the decision upon the matter submitted.”
9 U.S.C. § 11(b). Any award that is not vacated or modified must be confirmed. Id. § 9.
Ace American argues that the arbitrator exceeded her authority by failing to apply “the
clear and unambiguous wear and tear provision” of the insurance agreement. Pet’r’s Mem. at
19.1 According to Ace American, the arbitrator was tasked only with determining whether Ace
American’s reliance on this coverage exclusion was proper. Id. Ace American complains that
the arbitrator did not expressly determine the cause of the boat’s sinking or whether the wear-

The insurance agreement states that coverage for Property Damage is excluded for “any loss or
resulting damage from . . . wear and tear, gradual deterioration, weathering, neglect, lack of
reasonable care or due diligence in the maintenance of the Insured Vessel.” Insurance
Agreement at 15.
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and-tear exclusion applied. Rather, she concluded that even if wear and tear contributed to the
boat’s sinking, Ace American “could not possibly have assumed that a 1998 boat was in new
condition when it insured the [boat] . . . for 2012.” Final Award at 9. Accordingly, she reasoned
that “[i]f the ‘wear and tear’ exclusion were enforceable in this case, [Ace American] could
comfortably insure boats beyond a certain age without an expectation of ever having to pay. Id.
Stating that “this would border on fraud,” she concluded that the wear-and-tear provision could
not exclude coverage of Puccio’s claim. Id. The arbitrator further found that Ace American’s
reliance on the wear-and-tear provision to deny coverage violated Mass. Gen. Laws ch. 176D
and amounted to an unfair and deceptive business practice under Chapter 93A. Id. at 10.
According to Ace American, the arbitrator thus exceed her powers by resolving the parties’
dispute on equitable grounds never submitted to her. Pet’r’s Mem. at 19-20.
Ace American’s argument ignores the language of the arbitration provision in the
insurance agreement, which provides the arbitrator the authority to resolve “[a]ny controversy or
claim . . . based in [any] . . . legal or equitable theory . . . arising out of or related to this policy,
the interpretation, enforcement, or breach thereof, or the handling of any claim involving this
policy.” See Insurance Agreement at 22. This arbitration provision does not limit the
arbitrator’s power to consider equitable grounds in interpreting the contract. Cf. N. New Eng.
Tel. Operations LLC v. Local 2327, Int’l Bhd. of Elec. Workers, AFL-CIO, 735 F.3d 15, 21 (1st
Cir. 2013) (considering an arbitration provision that expressly required the arbitrator not to “‘add
to, subtract from, modify or disregard any of the provisions of this agreement’”).
In addition, the dispute submitted to the arbitrator was not, as Ace American argues,
limited to a question of whether the express language of the wear-and-tear provision excluded
coverage of Puccio’s claim. Rather, the parties submitted the question of whether or not “[t]he

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failure of business [to] pay on claim [of] loss of pleasure vessel as a result of storm” was
warranted. See Arbitration Request at 2. Again, nothing in the arbitration agreement or the
language of the parties’ submission precludes the arbitrator’s consideration of equitable grounds
in resolving this dispute.
Moreover, the arbitrator’s decision not to apply the wear-and-tear exclusion was, at least
arguably, an act of interpreting the contract. See Oxford Health Plans, 133 S. Ct. at 2068. The
arbitrator plausibly could have reached her decision by determining that the wear-and-tear
exclusion could not be read literally, as such a reading would render the contract unenforceable.
See Mass. Gen. Laws ch. 106, § 2-302 (“If the court as a matter of law finds the contract or any
clause of the contract to have been unconscionable at the time it was made[,] the court . . . may
so limit the application of any unconscionable clause as to avoid any unconscionable result.”).
The reasonableness or correctness of the arbitrator’s interpretation is not before the court. It is
enough that arbitrator’s act was even arguably one of interpretation. See Oxford Health Plans,
133 S. Ct. at 2068.2
As to the arbitrator’s award of attorney’s fees pursuant to Chapter 93A, the arbitration
agreement allowed for submission to arbitration of “[a]ny controversy or claim [including one]
based in . . . statute . . . arising out of or related to this policy.” Here, the request for arbitration
raised the issue of “[d]ouble or treble damages and attorney’s fees as provided by Massachusetts
law.” Id. This sufficed to place the demand for attorney’s fees under Chapter 93A before the
arbitrator.

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For the same reason, even presuming that manifest disregard of law remains a valid ground on
which an arbitration agreement governed by the Federal Arbitration Act may be vacated, the
court would not find vacatur appropriate here. See Raymond James Fin. Servs., Inc. v. Fenyk,
780 F.3d 59, 65-68 (1st Cir. 2015).
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Accordingly, the court finds that vacatur or modification of the arbitration award is
unwarranted.
B.

Puccio’s Request to Remand for an Award of Attorney’s Fees

Puccio requests that the court remand this case to the arbitrator with directions to make
an additional award of attorney’s fees. See Resp’t’s Mem. at 22. Puccio identifies no authority
that would give a private arbitrator such jurisdiction following the issuance of a final award. A
private arbitrator does not sit to receive mandates from this court like a trial court might from an
appellate tribunal. Accordingly, Puccio’s request to remand this arbitration is denied.3
III.

Conclusion
For the foregoing reasons, Ace American’s Petition to Vacate Arbitration Award [#5] is

DENIED, and Puccio’s Cross-Motion to Confirm Arbitration Award [#15] is ALLOWED.
IT IS SO ORDERED.
June 4, 2015

/s/ Indira Talwani
United States District Judge

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Although the court has authority to award such fees directly in an appropriate case, see Janney
Montgomery Scott LLC v. Tobin, 571 F.3d 162, 165-66 (1st Cir. 2009) (allowing a district court
to award fees after upholding an arbitration award involving Chapter 93A), Puccio’s request did
not seek such a direct order. If Puccio seeks such an award post-judgment pursuant to Federal
Rule of Civil Procedure 54(d)(2), any motion filed shall be accompanied by a certificate of good
faith consultation pursuant to Local Rule 7.1.
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