Welch Foods, Inc. v. Liberty Mutual Fire Insurance Company, 19 Mass. L. Rptr. No. 10, 226 (MA 4/6/2005)
| Decision Date | 06 April 2005 |
| Docket Number | No. 001249A.,001249A. |
| Citation | 19 Mass. L. Rptr. No. 10, 226 |
| Parties | Welch Foods, Inc. v. Liberty Mutual Fire Insurance Company |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Insurance — Liability Coverage — Misc. Cases — Coverage of "Malicious Prosecution Claims" Does Not Apply to Allegations that the Insured Threatened Groundless Legal Action as Part of an Illegal Scheme to Gain Competitive Control of the Frozen Grape Juice Market. Allegations that an insured threatened to sue a claimant, asserted in support of claims that the insured party had engaged in unfair competitive practices, do not give rise to an insurer's duty to defend under a policy providing coverage for "malicious prosecution," because a malicious prosecution claim requires proof of a prior judicial determination in the claimant's favor and there could be no such determination in the absence of an actual suit. This opinion holds that an insurer has no duty to defend under the "malicious prosecution" clause of a "Personal and Advertising Injury Liability Endorsement" against a claim for unfair competitive practices based in part on allegations by the third-party claimant that the insured had threatened to sue the claimant and its suppliers in furtherance of an effort to assume control of the frozen grape juice market.
Insurance — Liability Coverage — Misc. Cases — "Wrongful Entry" as Used in a Liability Policy Is Not Limited to Landlord/Tenant Claims But Rather Applies in General to Trespass Claims.
Landlord and Tenant — Wrongful Entry — Misc. Cases — "Wrongful Entry" as Used in a Liability Policy Is Not Limited to Landlord/Tenant Claims But Rather Applies in General to Trespass Claims.
Words and Phrases — Wrongful Entry — Misc. Cases — "Wrongful Entry" as Used in a Liability Policy Is Not Limited to Landlord/Tenant Claims But Rather Applies in General to Trespass Claims. "Wrongful entry" as used in a liability policy is not limited to landlord/tenant claims but rather applies in general to trespass claims. Therefore coverage under a "Personal and Advertising Injury Liability Endorsement" of claims for "wrongful entry into . . . premises that [a claimant] occupies" extends to trespass claims based on allegations that the insured, while on the claimant's premises to conduct an authorized contract compliance audit, entered unauthorized areas to obtain information not relevant to the contract.
Trade Regulation — Unfair Insurance Practices Act — In General — Chapter 93A Does Not Apply to an Unfair Insurance Practice Claim Between a Mass. Insurer and a New York Subsidiary of a Mass. Insured Concerning Coverage of a Claim Involving Events Which Primarily Occurred in New York and Canada. M.G.L.c. 93A does not apply to an unfair insurance practices claim based on a denial of coverage under a business liability policy between a Massachusetts insurer and an upstate New York subsidiary of a Massachusetts insured, involving an underlying claim arising out of a transaction which occurred primarily in upstate New York and Canada.
The plaintiff, Welch Foods Inc. (Welch), brought this action against the defendant insurer Liberty Mutual Insurance Co. (Liberty Mutual), after Liberty Mutual declined to reimburse Welch for Welch's claimed defense costs in its litigation of an underlying action. In Count I, Welch seeks a declaratory judgment that Liberty Mutual had a duty to defend Welch in the underlying action and breached that duty, Count II alleges breach of a duty of good faith and fair dealing under the policy, and Count III alleges violations of G.L.c. 176D and G.L.c. 93A. Presently before this court is Welch's Motion for Partial Summary Judgment on Count I and Liberty Mutual's separate Motion for Summary Judgment on all counts. Welch also moves to strike certain exhibits and statements submitted in support of Liberty Mutual's Motion for Summary Judgment.
The following facts are derived from the summary judgment record. It is necessary to go into some detail regarding the suit that underlies the present insurance coverage question so as to understand how it arose in the context of the underlying suit.
Welch is an agricultural cooperative and food processing corporation organized under the laws of Michigan, comprised of 1,495 growers of Concord and Niagara grapes in the Canadian province of Ontario, and U.S. states of Michigan, New York, Pennsylvania, and Washington. The grape growers and owners are also organized in a separate legal organization, the National Grape Cooperative Association, Inc. (National Co-op), organized in the State of New York, of which Welch is a wholly owned subsidiary.
Welch's principal manufacturing facilities and most of its 1,300 employees are located in Pennsylvania, Michigan, and Washington. Welch's General Office is located in Westfield, New York, where "fewer than 100 employees" are employed. According to Richard Alpert, Associate General Counsel with Welch's Concord, Massachusetts office, Welch has been "headquartered in Massachusetts" since 1983, where 199 employees,
Welch's senior executives, "most of its management functions," as well as its law department are located.
Liberty Mutual is an insurance company incorporated and existing under the laws of Massachusetts, licensed to transact the business of insurance and with its principle place of business in Massachusetts. Liberty International Canada, located in Ontario, Canada (Liberty International) is a "distinct subsidiary" of Liberty Mutual.1 Liberty International has its own computer claims system, which is not shared with claims representatives of Liberty Mutual in the United States, Painter Dep. pp. 21, 25-26.
Liberty Mutual issued to Welch a Commercial General Liability Policy (CGLP), Number TB-681-036801-036 (the policy) with a policy period of September 1, 1996 to September 1, 1997. Most of the contract negotiation, payment of premiums, and procurement activities surrounding the policy occurred in New York. None of these activities took place in Massachusetts. No meetings between Liberty and Welch regarding the policy took place in Massachusetts.
A Personal and Advertising Injury Liability Endorsement (endorsement) modifies Coverage B of Section I, and paragraphs 1 and 13 of Section V, Definitions, of the CGLP. A "NOTICE TO POLICY HOLDERS," summarizing the major changes to the policy, provides in relevant part: "The Insuring Agreement for . . . Coverage B—Personal and Advertising Injury Liability is revised to clarify the intent under the Coverage Form not to defend insureds when no coverage exists under the policy.
The endorsement provides that Liberty The endorsement expresses a limitation for the amounts covered (Section III) and provides:
Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverage A or B or medical expenses under Coverage C.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTAL PAYMENTS — COVERAGES A AND B.
In the endorsement, "Personal injury" is defined as "[i]njury to the feelings or reputation of a natural person other than `bodily injury' or `property damage'" and [i]njury to intangible property sustained by any organization arising out of one or more of the following offenses:
(1) False arrest, detention or imprisonment;
(2) Malicious prosecution;
(3) Wrongful entry into, or eviction of a person from, a room, dwelling or premises that the person occupies;
(4) Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or
(5) Oral or written publication of material that violates a person's rights of privacy.
Coverage applies to personal injury caused by an offense arising out of Welch's business, "excluding advertising, publishing, broadcasting or telecasting done" by or for Welch. Coverage does not apply to personal injury or advertising injury:
The Supplemental Payments Endorsement-Coverages A and B Section provides, inter alia:
We will pay, with respect to any claim we investigate or settle, or any "suit" against an insured we defend:
. . .
4. All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim or "suit" including actual loss of earnings up to $250 a day because of time off from work.
Section IV—COMMERCIAL GENERAL LIABILITY CONDITIONS, subsection 2b, captioned, "Duties In The Event Of Occurrence, Offense, Claim, or Suit," provides: "If a claim is made or `suit' is brought against any insured, [the insured] must immediately record the specifics of the claim or `suit' and the date received [and notify Liberty] as soon as practicable." Subsection 2.c further provides that the "insured must:
(1) Immediately send [Liberty] copies of any demands, notices, summons or legal papers received in connection with...
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