Allmerica Financial Corp. v. Certain Underwriters at Lloyd's, London
81 Mass. App. Ct. 674
| Mass. App. Ct. | 2012Background
- Fifteen-year consumer class action against Allmerica for vanishing premium misrepresentations and related issues settlement reached in Bussie v. Allmerica Fin. Corp., with a multilayer adjudicatory review and compensation categories totaling $39.4 million.
- At settlement two liability policies existed: a primary policy for $20 million (self-insured retention $2.5 million) and an excess policy for $10 million; Lloyd’s Underwriters issued a follow-form excess policy.
- Lloyd’s Underwriters rejected Allmerica’s excess claim; all policies are identical for coverage purposes, creating a potential double-trigger risk.
- On remand, the Superior Court granted summary judgment for Lloyd’s on the basis of the policy’s wrongful act requirement, relying on the adjudicatory process outcome showing only 27% meritorious claims.
- Allmerica appealed, arguing the adjudicatory outcomes do not control coverage because the policy covers both alleged and actual wrongful acts, and the 27% figure is irrelevant to coverage.
- The appellate court ultimately vacated the judgment, remanding for further proceedings to determine coverage and allocation between covered and non-covered claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy cover alleged misstatements as wrongful acts? | Allmerica claims alleged misstatements fall within 'wrongful act' coverage even if not proven. | Lloyd’s contends only proven misrepresentations trigger coverage; a meritless claim is not a covered wrongful act. | Yes, alleged misstatements can be wrongful acts under the policy. |
| Is a 'loss' triggered by adjudicatory review and settlements? | Loss exists when Allmerica incurs defense and settlement costs; adjudicated outcomes are not required to establish loss. | Loss requires actual misrepresentation outcomes; adjudicatory results alone determine recovery. | Loss includes settlements and defense costs; adjudicatory outcomes do not alone define loss. |
| Should allocation separate covered from uncovered claims? | Costs should be allocated based on the proportion of covered claims regardless of adjudicated outcomes. | Allocation should be based on the nature of the claims (covered vs. uncovered) and the basis of the adjudication. | Allocation must consider covered and uncovered claims; the record here does not support a precise portion, requiring remand. |
| Does the 'promise of future performance' exclusion apply to class-action claims? | Common class-action allegations do not necessarily prove a centralized promise of future performance. | The class action centered on a centralized scheme, which fits the exclusion. | Exclusion may apply to the extent the claim constitutes a promise of future performance; but analysis must focus on the settled claims rather than outcomes. |
| Is the use of the 27% meritorious claims figure ultimately dispositive? | The percentage should not drive coverage since it reflects adjudicator determinations, not whether a wrongful act occurred. | The 27% figure demonstrates insufficient wrongful acts to trigger excess coverage. | The percentage is not controlling for coverage; remand appropriate to address allocation and scope. |
Key Cases Cited
- Mission Ins. Co. v. United States Fire Ins. Co., 401 Mass. 492 (Mass. 1988) (policies construed as a whole; no undue emphasis on any part)
- Allmerica Fin. Corp. v. Certain Underwriters at Lloyd’s, London, 449 Mass. 621 (Mass. 2007) (follow-form policy; coverage determination depends on contract language and scope)