Superior Court holds that binder trumps subsequent amendments to insurance policy

In Kopin Corp. v. One Beacon Am. Ins. Co., 2009 WL 2449880 (Mass. Super.), the Massachusetts Superior Court held that an insurance company was bound by the terms of a binder, despite its subsequent efforts to change the policy.

Kopin had an ocean marine open cargo insurance policy. As the court explained, an open marine cargo policy insures goods in transport from point of origin to final destination.

In March, 2005, Kopin contacted its insurance agent, GHM, to request to amend the policy to cover used merchandise it would export. GHM eventually issued a quote for coverage from IMU that included a used machinery clause.

Kopin requested that GHM provide the quoted coverage. GHM responded with an email stating, "You are bound."

In May, 2005, IMU informed GHM that it was moving its "new and renewal business" to a different division of its parent company. It offered a renewal quote "effective 4/20/05" for Kopin's policy. The quoted policy included endorsements that limited coverage.

In June, 2005, Kopin learned that two pieces of equipment it had shipped to Hong Kong had suffered rust and corrosion damage. The insurer, IMU, denied coverage on the grounds that the endorsements included in the May, 2005 quote excluded coverage.

The Superior Court held that the original quote trumped the subsequent endorsements and the renewal quote. The court stated:

One reason the Court so concludes is that the Quote, once accepted by Kopin and acknowledged by [the insurer], constituted a temporary, binding contract, known in the industry as a "binder." . . . As is the case here, a "binder contract, a commercial document, is to be read in accordance with its terms and not in accordance with the unexpressed terms which a party later wishes had been written into it."