Attorney, The attorney represented the Appellant in this insurance coverage case, which settled with Liberty Mutual, the primary insurer following mediation, and then went forward with claims against the insurance agent, AIS Affinity Insurance (“AON”), who had procured policies of insurance for a Boston attorney. AON did not participate in the mediation.
The attorney had allegedly missed the statute of limitations in a claim brought by a surviving husband against tobacco companies, after his wife, a cigarette smoker since the age of thirteen (13), died of lung cancer. The husband sued the attorney, and ultimately settled with him, but only after the insurer maintained that he had no insurance for the claims under any of three (3) different potential policies of insurance, which named him as an insured.
The settlement included assignment of the attorney’s claims against his insurer and broker, based on the denial of coverage. The case against AON came on for summary judgment before a judge of the Suffolk Superior Court. After hearing, the judge granted summary judgment to the insurance agency. The husband appealed from the summary judgment against him.
In August, 2018, the appeals court affirmed in Perreault v. AIS Affinity Ins. Agency of New England, Inc., No. 17-P-1139 (Mass. App. Ct. Aug. 2, 2018). The Appeals Court considered the obligations of a broker with respect to a professional negligence policy.
Although the thrust of the decision focused on the issue of whether the broker had a “special relationship” with the attorney, ruling in the negative in this case, the Plaintiff/Appellant made two other arguments, which were seemingly overlooked by the Appeals Court.
First, the husband argued that the broker, by its representative, had made a binding promise that Liberty, through AON, would provide prior acts coverage under the attorney’s new policy if he made an installment payment on his existing policy, which he had communicated to the broker that he intended to cancel in less than two (2) weeks, upon his departure from his prior firm.
The broker advised the defendant to make the AGM policy payment in December 2009, “so that [it] does not cancel so we can offer you prior acts.” The defendant made the payment, and as planned, instructed the broker to cancel the AGM policy effective December 31, 2009. The attorney had the option of buying extended reporting coverage, but did not, thinking he would have prior acts coverage under the new policy. He did not.
The attorney made the payment, but did not get the promised prior acts coverage under the new policy. The husband argued that this was a breach of contract, or at a minimum, warranted application of promissory estoppel, meaning that the attorney, even in the absence of a binding contract, had relied to his detriment on the promise of the broker. The Superior Court judge, and the appeals court, never really reached the estoppel issue.
Second, the husband claimed that his demand letter to the attorney fell within a sixty (60) day “automatic extended reporting period” provided in each of the Liberty policies, which went into effect after a policy had cancelled. The husband argued that the policy, which was supposed to cancel on December 31, 2009, did not in fact cancel on that date, but on January 19, 2010. This meant that the cancelling policy was in force on January 4, 2010, when the new policy issued, and therefore there was no gap in coverage, which was one of the grounds for Liberty not to provide prior acts on the new policy.
Furthermore, using the January 19, 2010 cancellation date, and applying the sixty (60) day automatic extended reporting period, the claim would have been timely. The Appeals Court, however, retroactively applied the December 31, 2009 cancellation date, relying on language in the policy rather than the facts as occurred.
Because the broker’s representative with whom the attorney had always worked was out for vacation, he was moved to another AON broker, when he called to inquire about the status of his new policy. On January 4, 2010, that broker completed another application over the telephone, checking a box indicating that it was a policy with a January 4, 2010 prior acts date. The attorney admitted that he never reviewed the new policy and believed on January 4, 2010 and thereafter that he had been given prior acts as promised.
When the husband sent a demand letter to the attorney in March, 2010, Liberty took the position that there was no coverage under the new policy due to the January 4, 2010 prior acts date, and under the expiring policy because the claim was outside of the sixty (60) day automatic extended reporting period and denied the claim. Liberty did, however, agree to provide a defense under the AG policy with a full reservation of rights.
The entry of judgment was a disappointment for the husband, but likely the result of a lower court judge, and an appeals court, which was not pleased with the underlying conduct of the attorney, and his cavalier approach to his insurance coverage issues. Given the prior settlement with Liberty, the husband elected not to seek further appellate review from the Supreme Judicial Court.