76 N.E.3d 204
Mass.2017Background
- VisionAid purchased employment-practices liability insurance from Mount Vernon covering wrongful-termination claims during the policy period.
- Policy provided Mount Vernon the “right and duty to defend any Claim” and to pay 100% of "Defense Costs" for covered Claims; "Claim" was defined as any proceeding initiated against the insured.
- An employee, Gary Sullivan, sued for age discrimination; VisionAid alleged misappropriation of funds and wanted to assert a counterclaim for theft.
- Mount Vernon-appointed panel counsel defended VisionAid but did not prosecute the affirmative counterclaim for misappropriation.
- Mount Vernon sought a declaratory judgment that its duty to defend did not require prosecuting the insured’s counterclaim; the District Court ruled for Mount Vernon and the First Circuit certified three questions of Massachusetts law.
- The Massachusetts Supreme Judicial Court held the insurer’s duty to defend (and to pay defense costs) does not require prosecuting affirmative counterclaims on the insured’s behalf; it declined to reach the certified third question about conflicts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a contractual duty to “defend any Claim” requires insurer to prosecute insured’s affirmative counterclaim | VisionAid: “defend any Claim” includes all acts a reasonable defense attorney would take, including prosecuting compulsory or intertwined counterclaims | Mount Vernon: “defend” means oppose claims brought against the insured; it does not include prosecuting affirmative claims | Held: No — duty to defend does not require prosecuting affirmative counterclaims |
| Whether the “in for one, in for all” rule compels prosecution of counterclaims | VisionAid: the rule expands insurer duties in a proceeding and should include prosecuting intertwined compulsory counterclaims | Mount Vernon: the rule only expands defense of claims against the insured, not affirmative prosecution | Held: “In for one, in for all” does not obligate insurer to bring affirmative counterclaims |
| Whether duty to pay “Defense Costs” requires funding prosecution of counterclaims | VisionAid: defense costs should cover reasonable measures to reduce liability, including prosecuting counterclaims | Mount Vernon: policy definition ties defense costs to defending Claims the insurer defends (coextensive with duty to defend) | Held: No — duty to pay defense costs is coextensive with duty to defend and does not require funding prosecution of counterclaims |
| Whether insurer’s refusal to prosecute counterclaim can create a conflict requiring independent counsel (certified question 3) | VisionAid: refusal creates conflict of interest entitling insured to independent counsel | Mount Vernon: no conflict where insurer’s obligations do not include prosecuting counterclaims | Held: Not reached (court resolved Questions 1–2 against VisionAid) |
Key Cases Cited
- Boston Gas Co. v. Century Indem. Co., 454 Mass. 337 (clarifies plain-language approach to policy interpretation)
- Golchin v. Liberty Mut. Ins. Co., 466 Mass. 156 (policy interpretation according to objective insured expectations)
- GMAC Mtge., LLC v. First Am. Title Ins. Co., 464 Mass. 733 (explains Massachusetts “in for one, in for all” rule)
- Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747 (breach of duty to defend requires insurer to pay defense costs)
- Rubenstein v. Royal Ins. Co. of Am., 429 Mass. 355 (duty to defend and duty to pay defense costs are coextensive)
- McKennon v. Nashville Banner Pub. Co., 513 U.S. 352 (principle that subsequent legitimate reasons can limit recovery; cited for remedial effect of counterclaims)