Superior Court holds that dispute over coverage for companies related to corporate policyholder does not create conflict between insurer and policyholder

Massachusetts Lawyers Weekly has quoted me in an article about a recent Massachusetts Superior Court case, Crosby Valve, LLC v. OneBeacon America Insurance Co.  The decision is not published on Westlaw, but if you need a copy of it send me an email and I will send it to you.  This case builds on a Massachusetts Appeals Court decision from last year, OneBeacon Ins. Co. v. Celanese Corp., 92 Mass. App. Ct. 382 (2017), which explored when a conflict between an insurer and a policyholder may exist even when the insurer has agreed to defend without a reservation of rights.  The issue matters because if there is a conflict then the policyholder rather than the insurer may control the defense, including selecting its own defense counsel to be paid by the insurer.

In Crosby Valve, the issue was whether a conflict existed when an insurer agreed to defend a policyholder in long-tail asbestos claims without a reservation of rights, but reserved its rights with respect to closely related companies. The policyholder argued that it should be able to control the defense because settlements of individual claims would deplete the coverage limits and would ultimately harm the related companies.

The dispute arose after a series of mergers and acquisitions in which rights under insurance policies were transferred from one corporate entity to another.  The Superior Court held that the dispute over coverage with respect to the related entities did not give rise to a conflict between the insurer and the entity that the insurer had agreed to defend without reserving its rights.