SDV Insights

Massachusetts High Court: Attorney's Fee Award Under Consumer Protection Act Not Covered by General Liability Insurance Policy


In the case of Vermont Mutual Insurance Co. v. Poirier, 189 N.E.3d 306 (Mass. 2022), Massachusetts’ Supreme Judicial Court concluded that an award of attorney's fees pursuant to Chapter 93A (Massachusetts’ Consumer Protection Act) is not covered under an insured’s general liability insurance policy. Applying Massachusetts law, the Court found that a statutory award of attorney’s fees stemming from a bodily injury claim is not reasonably considered “damages because of bodily injury” or “costs taxed against the insured” so as to trigger general liability coverage.

Facts of the Case

A Servpro company (owned by Mr. and Mrs. Poirier) was hired to clean up a basement after a sewage spill. The owners of the home were injured by fumes from chemicals used in the cleanup and accordingly brought suit against the Poiriers and their Servpro business. In the lawsuit, the homeowners alleged negligence, breach of contract, and also a Chapter 93A claim, asserting breach of warranty of merchantability and warranty of fitness for a particular purpose. Prior to trial, the plaintiffs waived the negligence and breach of contract claims and sought a bench trial on the Chapter 93A claims alone.

After a bench trial, the judge found for the homeowners and determined that a violation of Chapter 93A occurred. The judge thus awarded damages as well as attorney's fees and costs as allowed under Chapter 93A. The Poirier’s business insurer, Vermont Mutual, paid approximately $700,000 of compensatory damages to the plaintiffs, but did not pay the attorney's fees and interest thereon that totaled approximately $250,000. Vermont Mutual then filed a declaratory judgment action, seeking a determination that its general liability policy did not cover attorney's fees awarded under Chapter 93A.

Damages “Because of” Bodily Injury

The case revolves around the issue of whether an attorney's fee award under Massachusetts’ consumer protection law is covered as damages or costs under a commercial general liability policy. Vermont Mutual’s general liability policy provided that it would pay “damages because of bodily injury” and further indicated that it would pay “[a]ll costs taxed against the insured in the ‘suit.’” The Poiriers argued that these two provisions in the policy compelled Vermont Mutual to pay the total attorney's fee award and costs that were “taxed” against the insureds.

The trial court found for the Poriers and Servpro, but the Supreme Judicial Court reversed. In its ruling, the Court construed the term “damages because of bodily injury” to mean money damages that compensate someone for the physical injuries they suffer and held that an award of attorney's fees is not designed to compensate someone for physical injuries, but instead “to deter misconduct and recognize the public benefit of bringing the misconduct to light.” Justice Kafker reasoned that, “damages and attorney's fees are conceptually different, and are so recognized under that chapter. The insurance contract here only provides for the recovery of ‘damages.’ Therefore, attorney's fees awarded pursuant to G. L. c. 93A are not recoverable as damages under the insurance contract.”

Attorney’s Fees Are Not Costs

The Court also rejected the Poiriers’ argument that an award of attorney’s fees would be covered under the section of the policy that required Vermont Mutual to pay “[a]ll costs taxed against the insured in the suit.” It reasoned that, in the legal industry, the term “costs” has a distinct meaning, i.e., the costs associated with the filing of suit, such as filing fees and the nominal costs associated with the filing of documents at a courthouse. The Court thus found that these expenses are usually distinct, and treated separately from, attorney’s fees.

Takeaways

Policyholders should be cognizant of the fact that in some jurisdictions, including Massachusetts (under the current state of the law), a standard general liability policy may not cover an award of attorney’s fees as damages “because of” bodily or property damage or as taxable costs. There are other jurisdictions, however, that reach the opposite conclusion and hold that an award of attorney’s fees is covered under a general liability policy’s “damages because of bodily injury” language. Therefore, this issue further illustrates the importance of choice of law when it comes to coverage issues.

Carefully reviewing policy language and applying the appropriate choice of law in consultation with coverage counsel will help policyholders successfully navigate the maze these case decisions can create.   

For more information, contact Jeffrey J. Vita at JVita@sdvlaw.com or David G. Jordan at DJordan@sdvlaw.com.






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