The Saint Consulting Group, Inc. v. Eastern Insurance Group, LLC

• Decision Date: 10 February 2015
• Docket Number: MICV2012-02218-H
• Parties: The Saint Consulting Group, Inc. v. Eastern Insurance Group, LLC et al No. 130070
• Court: Massachusetts Superior Court

The Saint Consulting Group, Inc. v. Eastern Insurance Group, LLC et al

No. 130070

No. MICV2012-02218-H

Superior Court of Massachusetts, Middlesex

February 10, 2015

Filed February 25, 2015

MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS EASTERN AND DANAHY'S MOTION FOR SUMMARY JUDGMENT

Rosalind H. Miller, Justice of the Superior Court.

This dispute between plaintiff, Saint Consulting Group, Inc. (" Saint") and its liability insurers, Twin City Fire Insurance Company d/b/a The Hartford (" Hartford") and Eastern Insurance Group, LLC (" Eastern") and its agent Robert Danahy (" Danahy"), stems from the insurer's refusal to defend Saint in a lawsuit (" the Rubloff action") filed in Illinois.

In its complaint, Saint brought claims for breach of written contract against Eastern and Hartford (Count I), breach of oral contract against Eastern and Danahy (Count II), breach of implied-in-fact contract against Eastern and Danahy (Count III), breach of contract by estoppel against Eastern and Danahy (Count IV), breach of the covenant of good faith and fair dealing against Eastern, Danahy and Hartford (Count V) negligence against Eastern and Danahy (Count VI), negligence against Hartford (Count VII), negligent misrepresentation against Eastern and Danahy (Count VIII), negligent misrepresentation against Hartford (Count IX), breach of fiduciary duty against Eastern and Danahy (Count X) violation of Chapter 93A against Eastern, Danahy and Hartford (Count XI), and unjust enrichment against Eastern, Danahy and Hartford (Count XII).^[1] This matter is now before the court on the Defendants' Eastern and Danahy's Motion for Summary Judgment under Mass.R.Civ.P. 56(c).

For the following reasons, the Defendants' Eastern and Danahy's Motion is ALLOWED in part and DENIED in part.

BACKGROUND

The following facts are taken from the joint appendix and the statement of undisputed facts filed jointly by the parties under Superior Court Rule 9A(b)(5) or, if disputed in accordance with that rule, reflect the facts in the light most favorable to Saint.

Saint is a land-use consulting firm specializing in land-use politics and advocating for its clients in zoning and land-use disputes. In the 1990s, Saint began conducting " turf defense" for its clients. Big box store clients hired Saint to protect their " business interests from unwanted competition." (CSMF ¶ 3-4.)

Prior to 2008, Saint's insurance broker was USI. USI brokered an errors and omissions policy (" E& O") for Saint with the Chubb Group of Insurance Companies (" Chubb E& O") which was due to expire on November 1 2008.^[2] The Chubb E& O policy contained " Exclusion (A)(13), " applicable to antitrust claims.

Saint also had a directors and officers (" D& O") policy issued by Twin City Fire Insurance Co. d/b/a The Hartford (" Hartford D& O"). That policy was in effect from June 30, 2008 to April 24, 2009. The policy provided not only liability coverage, but also defense costs associated with covered claims. However, that coverage was subject to an exclusion for alleged violations of the antitrust laws. The policy provided Employment Practices Liability Coverage (" EPLI"), but also had a FLSA (Fair Labor Standards Act) exclusion. On July 10, 2008, USI sent Saint the Hartford D& O policy, with a cover letter advising Saint to read the policy carefully and inform USI if any changes or corrections were necessary. (CSMF Ex. J.)

Jeffrey Gould, Saint's general counsel since 2005, received a B.A. from Holy Cross College, cum laude , in 1977 and a J.D. from Suffolk University Law School, cum laude in 1989. (CSMF Ex. F.) Gould practiced law from 1992 to 1996 and tried numerous cases involving complex business disputes. During that time, Gould had the occasion to evaluate insurance policies to determine whether those policies provided coverage for the people that he was suing and to make arguments to insurers regarding coverage. (CSMF Ex. G, p.166.) In 1996, Gould formed his own law firm and tried state and federal court cases involving contract disputes. (CSMF Ex. F.)

Gould claims to have " significant experience as an attorney dealing with contractual matters, " negotiating and drafting contracts, leading the defense and prosecution of lawsuits, and reviewing compliance with all federal and state corporate related laws. (CSMF Ex. G, p.81; Ex. F.) At Saint, Gould reviewed all contracts to which Saint was a party, including its insurance policies. (CSMF Ex. H, p.16.)

Paul Salvucci (" Salvucci"), Saint's CFO since 2008, earned his MBA from Babson College in 1981 and is a CPA. (CSMF ¶ 9.) After college, Salvucci worked as a senior financial analyst, but in the 1980s became a corporate controller with duties including the evaluation of his employer's corporate insurance proposals, presentations and bids. (CSMF ¶ 10.) In 2002, Salvucci became CFO at Wilmark Group, where he managed all of the accounting, tax, audit, banking, IT, business insurance as well as employee insurances and benefits. At Wilmark Salvucci was involved with professional liability insurance, workers' compensation insurance, property insurance and general liability insurance. (CSMF Ex. E, p. 24-25.) Salvucci and his partner acted as risk managers at Wilmark. (CSMF Ex. E., p. 26.)

Eastern Insurance is one of the largest insurance brokers in Massachusetts. Robert Danahy, a licensed Insurance Producer and a licensed Insurance Advisor, who is an agent for Eastern, knew Salvucci, Saint's CFO, through prior employment. (CSMF Ex. HH, pp. 64-67.)

In 2008, Danahy contacted Salvucci and proposed that they meet to discuss Saint's insurance needs. Salvucci responded to Danahy and noted that Saint had " no appetite" to switch agents to Eastern from USI, absent a clear reason to do so, but invited Danahy to " review our Professional Liability policy and make your recommendations on how this can be improved upon." (CSMF Ex. K.)

In September 2008, Danahy met with Salvucci and Gould. During this meeting, Danahy and Gould discussed the business and professional services Saint provides to its clients. Gould explained the constitutional underpinnings of Saint's efforts to protect its clients " market share" from " unwanted competition." Gould claims that Danahy asked if Saint's professional services were illegal or violated anti-trust laws. (CSMF Ex. H, p. 29.) Gould assured Danahy that Saint was not breaking the anti-trust laws due to the constitutional legal doctrine known as " Noerr-Pennington." Id. at p. 29. Gould told Danahy that Saint had never been involved in, nor accused of being involved in, antitrust activities. However, Gould claims that he expressed concern to Danahy about frivolous antitrust litigation. Id. at pp. 31-34.

Danahy told Salvucci and Gould that he had been in the insurance business since the 1970s and had a great deal of experience. Danahy tried to convince Saint that he and Eastern had the background and experience to give them advice about insurance. Danahy told them that he and Eastern wanted to handle all of Saint's insurance needs, and that he wanted to do an " outstanding job on the D& O, Employment Practice Liability and Fiduciary coverages."

Danahy advised Saint that he and Eastern would review Saint's existing E& O and D& O policies. Danahy pointed out a number of deficiencies in Saint's existing E& O policy. On October 27, 2008, Danahy sent Salvucci a copy of a " Policy Comparison Chart" (the " Chart") which had been prepared by S.H. Smith, a specialty lines wholesale broker that Eastern was using to obtain a professional liability policy for Saint. The Chart compared and contrasted, among other things, the exclusions in Saint's existing Chubb E& O policy through USI, with those in the Endurance E& O policy which Eastern was marketing to Saint. The Chart stated that there was no coverage for anti-trust claims under either policy. (CSMF Ex. H, p. 46.) Danahy's accompanying cover letter to Salvucci suggested that he obtain Gould's input since much of the Chart involved " legal" issues. (CSMF Ex. EE at 37.) Salvucci collaborated with Gould throughout the process of purchasing Saint's E& O insurance policy through Eastern. Gould noted that the Chart was so understandable that " a layperson could follow along."

On October 29, 2008, Danahy met with Gould and Salvucci to review the Chart. Salvucci later testified that he and Gould asked Danahy questions in order to understand the differences between the two policies and that Danahy provided a " very good analysis" of the two policies. Gould later testified that, upon reading the Chart, he understood that it stated: (a) both E& O policies included antitrust exclusions; (b) there was no antitrust coverage in the Endurance E& O policy; and (c) nothing in the Chart suggested the Endurance E& O policy included coverage for defense costs for the excluded antitrust claims. Despite that, Gould " assumed" that the Endurance E& O policy provided a defense for alleged antitrust violations. (CSMF Ex. H, pp. 38-39.) Gould also " believed" that Danahy said that in the event Saint was sued for allegations of antitrust violations Saint would have coverage. (CSMF Ex. HH, p. 37). Gould believed that Danahy agreed, either explicitly or implicitly, that he was going to select insurance that covered defense costs in the event of litigation. (CSMF Ex. HH, p. 37.)

On October 31, 2008, Salvucci signed Endurance's E& O Application. (CSMF Ex. M.) On February 10, 2009, Danahy mailed a copy of the Endurance E& O policy to Salvucci. The front page of the Endurance E& O policy states " This is a Claims Made and Reported Policy . Please Read It Carefully ." (CSMF Ex. O.) (Emphasis in original.) Section III, Exclusion (N) of the policy provides that the policy shall not apply to " any...