83 F. Supp. 3d 405
D. Mass.2015Background
- BioChemics, Inc. and its CEO John Masiz were the subject of an SEC Formal Order investigation that began May 5, 2011, leading to subpoenas in May and Sept. 2011 and later subpoenas and an enforcement action in 2012.
- BioChemics had a claims-made D&O policy with Greenwich covering 2011 until it expired in November 2011; plaintiffs obtained an AXIS claims-made policy effective Nov. 13, 2011–Nov. 13, 2012.
- The AXIS policy defines a single “Claim” to include regulatory proceedings or investigative orders and treats all claims arising from the same or interrelated wrongful acts as one Claim, deemed "first made" on the earliest relevant date.
- SEC investigative subpoenas in 2011 and 2012 were issued under the same Formal Order and matter number; plaintiffs notified AXIS of the 2012 subpoenas but AXIS denied coverage, contending the Claim was first made in May 2011 before AXIS’s policy period.
- The December 2012 enforcement complaint alleged misconduct spanning 2009–mid‑2012, with some alleged wrongful acts predating May 2011 and some occurring after; AXIS maintained the entire investigation/enforcement action was one Claim first made in May 2011.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether subpoenas and enforcement action constitute one "Claim" under the policy | The 2012 subpoenas and subsequent enforcement action are distinct claims triggering AXIS coverage | All subpoenas and the enforcement action are part of a single SEC Investigation and thus one Claim | Court: All subpoenas and enforcement action are one Claim under the policy |
| Whether that Claim was "first made" during AXIS policy period (triggering coverage) | The Claim was first made when 2012 subpoenas were served, after AXIS policy effective date, so AXIS owes defense | The Claim was first made when SEC issued the Formal Order/subpoenas in May 2011, before AXIS policy, so no coverage | Court: Claim was first made May 2011 (pre-AXIS), so AXIS owes no coverage |
| Interpretation of claims-made policy language | Plaintiffs urge coverage for claims made during AXIS policy period | AXIS relies on clear policy language treating interrelated actions as one Claim and using earliest date for "first made" | Court: Policy language unambiguous; earliest triggering event controls |
| Entitlement to duty to defend / summary judgment relief | Plaintiffs seek partial summary judgment that AXIS must defend | AXIS seeks summary judgment that it has no duty to defend as claim predated policy | Court: Grants AXIS summary judgment; denies plaintiffs' motion as moot |
Key Cases Cited
- Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399 (1st Cir.) (policy interpretation is a question of law; insurer entitled to summary judgment where underlying allegations lie outside coverage)
- Fin. Res. Network, Inc. v. Brown & Brown, Inc., 867 F.Supp.2d 153 (D. Mass.) (contrasting claims-made and occurrence policies)
- New England Environmental Technologies v. American Safety Risk Retention Group, Inc., 738 F.Supp.2d 249 (D. Mass.) (explaining claims-made coverage timing and scope)