Manganella v. EVANSTON INSURANCE COMPANY
746 F. Supp. 2d 338
D. Mass.2010Background
- Manganella founded Jasmine-Sola, later Jasmine, served as president and shareholder; sold to Lerner in 2005 with a three-year post-sale presidency.
- Jasmine purchased EPLI coverage from Evanston after a 1998 sexual harassment suit by Sonia Bawa, with Burgess as Jasmine's HR manager signing the application and Burgess later sworn affidavit denying harassment.
- Jasmine renewal EPLI policies ran 1999–2006 with a retroactive date of April 28, 1999, and required that wrongful conduct occur within the policy period to trigger coverage.
- In 2006 Burgess claimed harassment by Manganella; Lerner terminated him for cause; arbitration awarded escrow, interest, and $2M in fees; the arbitration panel found willful harassment in violation of Jasmine's policies.
- MCAD later charged Manganella with discrimination; Evanston denied defense and coverage, citing the period and the Intentional Acts Exclusion.
- Manganella filed suit seeking a defense and coverage; the court must decide whether the alleged misconduct occurred within the insured period and whether exclusions apply.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alleged wrongful conduct occurred wholly within the policy period | Manganella argues disputes facts; conduct may be after retroactive date; extrinsic Burgess evidence supports coverage. | Evanston contends the misconduct began before the retroactive date, outside coverage. | There is a material dispute of fact; not precluded from defense. |
| Whether Evanston's duty to defend was triggered by MCAD/Arbitration findings | Allegations could be construed to fall within coverage when read favorably to insured. | Exclusion and timing foreclose defense; prior adjudications establish intentional conduct. | Disputed facts preclude summary judgment on duty to defend. |
| Whether the Intentional Acts Exclusion bars coverage | Arbitration did not decide whether harassment violated law; willfulness alone is insufficient for exclusion. | Arbitration found willful harassment; conduct violated policy, triggering exclusion. | Arbitration finding of willfulness supports exclusion; no defense or coverage owed. |
| Whether issue preclusion applies to bind this action | Arbitration findings may not be identical to current issues; not binding on all elements. | Arbitration decision is binding on essential conduct issues and precludes relitigation. | Arbitration decision essential to outcome; precludes re-litigation of those issues. |
Key Cases Cited
- Great Am. Ins. Co. v. Riso, Inc., 479 F.3d 158 (1st Cir. 2007) (insurer must consider allegations and known facts to determine defense duty)
- Sterilite Corp. v. Cont'l Cas. Co., 17 Mass.App.Ct. 316 (Mass. App. Ct. 1983) (scope of defense based on policy terms and known facts)
- Cont'l Cas. Co. v. Gilbane Bldg. Co., 391 Mass. 143 (Mass. 1984) (duty to defend depends on underlying allegations and policy purpose)
- Desrosiers v. Royal Ins. Co. of Am., 393 Mass. 37 (Mass. 1984) (insurer's duty reflects facts known or readily knowable by insurer)
- Green v. Brookline, 53 Mass.App.Ct. 120 (Mass. App. Ct. 2001) (issue estoppel and preclusion principles for prior adjudications)
- Monarch Life Ins. Co. v. Ropes & Gray, 65 F.3d 973 (1st Cir. 1995) (preclusion when issue had fair opportunity to be litigated)
- United States v. Pomponio, 429 U.S. 10 (1976) (willfulness requires knowledge of acts, not necessarily legal violation)