Manganella v. Evanston Insurance Company
700 F.3d 585
1st Cir.2012Background
- Manganella, former Jasmine president, sought defense/indemnity from Evanston for Burgess's MCAD harassment claims.
- Jasmine purchased Evanston Employment Practices Liability Insurance; policy covers wrongful employment practices within period/extended reporting date.
- A Disregard Exclusion bars claims based on willful/disregard of law by the insured.
- Arbitration between Lerner New York, Inc. and Manganella (2007) awarded escrowed funds to Manganella due to notice/remedy issues, and was confirmed in court.
- Burgess filed MCAD charge March 19, 2007; Evanston denied coverage in 2009, citing timing and the Disregard Exclusion; district court granted partial summary judgment for Evanston.
- Court affirmed district court’s ruling that issue preclusion bars relitigation of whether conduct fell within the Disregard Exclusion under the arbitration judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether issue preclusion bars relitigation of the Disregard Exclusion issue. | Manganella argues issues not identical or necessary to arbitration. | Evanston argues arbitration resolved the required issue and is binding. | Yes; issue preclusion applies. |
| Whether the arbitrators effectively decided the same issue as Burgess's MCAD claim. | Arbitrators did not decide state-law disregard specific to Burgess. | Arbitrators' findings on harassment show disregard to state law. | Yes; materially identical issues were decided. |
| Whether the arbitration decision was necessary to the judgment. | Arbitrators could have decided differently without affecting outcome. | Findings on harassment were necessary to determine notice/remedy issue. | Yes; the harassment findings were necessary. |
| Whether the Disregard Exclusion bars coverage for Burgess’s MCAD claims. | Disregard Exclusion does not apply to Burgess claims proven after retroactive date. | Arbitration established willful disregard triggering exclusion. | Yes; exclusion applies. |
| Whether the district court erred by failing to investigate Burgess's MCAD charge before denial. | Investigation was required prior to denial to assess potential coverage. | Investigation error did not affect outcome given exclusion. | No; preclusion forecloses claims. |
Key Cases Cited
- Rodríguez-García v. Miranda-Marín, 610 F.3d 756 (1st Cir. 2010) (defines collateral estoppel and its scope in the First Circuit)
- Allen v. McCurry, 449 U.S. 90 (1980) (issues of law and fact preclusion)
- FleetBoston Fin. Corp. v. Alt, 638 F.3d 70 (1st Cir. 2011) (final arbitral awards receive preclusionary effect)
- Wolf v. Gruntal & Co., 45 F.3d 524 (1st Cir. 1995) (preclusion and arbitral award treatment)
- Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) (preclusion in civil actions; deterrence and efficiency)