Session Watch May 2007 page 2

Summarizing opinions from October 1, 2006 through
December 31, 2006

Court reaffirms breadth of insurer’s duty to defend

O T H E R D E C I S I O N S :

Mass. Bay Ins. Co. v. Boston Beer Co., Docket No. 05-4634-BLS, 21 Mass. L. Rep. 633
(December 8, 2006) (van Gestel, J.).

This case demonstrates the breadth of an insurer’s duty to defend, particularly relative to an insurer’s duty to indemnify. Several class action lawsuits had been commenced against Boston Beer in multiple jurisdictions, alleging that Boston Beer and other beer manufacturers (collectively, “Boston Beer”) had illegally targeted underage drinkers in their marketing campaigns. Boston Beer sued its insurers to force them to defend it in these lawsuits.

The complaints against Boston Beer, Judge van Gestel noted, were “massive, multifarious, internally inconsistent and flagrant abuses of the mandate for notice pleading.” Moreover, in several similar lawsuits Boston Beer had succeeded in

getting the cases dismissed. Nonetheless, the Court held that the insurers had an obligation to defend Boston Beer. Relying on Simplex Technologies, Inc. v. Liberty Mutual Ins. Co., 429 Mass. 196 (1999), the Court noted that “Massachusetts courts impose a duty to defend when a third party’s complaint makes general allegations that might possibly support recovery of a loss that is covered under the policy.” The Court held that it was not permitted to consider at the duty to defend stage the fact that similar claims against the insured had failed. Thus, even if on their face the claims alleged against the insured appear frivolous, if there is even a possibility that the alleged loss comes within the terms of the policy, the insurer will be obligated to defend.

Refresher course in Massachusetts choice of law

Bank of America, N.A. v. Deloitte & Touche, LLP, 21 Mass. L. Rep. 677, 2006
Mass. Super. LEXIS 565 (December 1, 2006) (van Gestel, J.).

This is a relatively straightforward case in which Bank of America alleged that Deloitte and Touche aided and abetted the borrower’s fraud by certifying financial statements supplied by the borrow (now in bankruptcy) to the bank in connection with a credit facility. Although the opinion is relatively short, it is clear that this case is part of a larger battle being waged in at least one other jurisdiction. The Court declined to address whether certain arguments were barred by prior rulings in a related case. Instead, the Court took a very simple approach. It held as a threshold matter that even though Bank of America was in Boston (its interest was as successor to Fleet), all of the alleged fraudulent conduct took place in Pennsylvania and to a lesser extent in New Jersey. The Court, therefore, held that Pennsylvania law was controlling. Applying Pennsylvania law, the Court dismissed two of the three counts of the complaint.

This case is useful as a primer of Massachusetts choice of law principles. Otherwise this opinion is unremarkable for the Massachusetts practitioner. getting the cases dismissed. Nonetheless, the Court held that the insurers had an obligation to defend Boston Beer. Relying on Simplex Technologies, Inc. v. Liberty Mutual Ins. Co., 429 Mass. 196 (1999), the Court noted that “Massachusetts courts impose a duty to defend when a third party’s complaint makes general allegations that might possibly support recovery of a loss that is covered under the policy.” The Court held that it was not permitted to consider at the duty to defend stage the fact that similar claims against the insured had failed. Thus, even if on their face the claims alleged against the insured appear frivolous, if there is even a possibility that the alleged loss comes within the terms of the policy, the insurer will be obligated to defend.

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