US District Court for District of Massachusetts holds that injuries to woman kidnapped, held against her will and sex trafficked come within exclusion for false imprisonment

Lisa Ricchio alleged that she was kidnapped by Clark McLean in 2011, that he held her captive and raped and abused her for several days at the Shangri-La Motel, and that he made clear to her that he intended to force her to work as a prostitute. 

The motel was owned by Bijal, Inc.  Ashvinkumar and Sima Patel worked and lived at the motel at the time.  Ricchio alleged that Bijal and the Patels were aware of McLean's abuse of her and profited from it. She brought a civil lawsuit against them under the federal Victims of Trafficking and Violence Protection Act of 2000 (TVPA) and the Trafficking Victims Protection Reauthorization Act of 2003 ((TVPRA). 

Peerless Indemnity Insurance Company insured Bijal. In Ricchio v. Bijal, Inc., 2019 WL 6253275 (D. Mass.) (unpublished), the United States District Court for the District of Massachusetts considered Peerless's motion for summary judgment in its declaratory judgment action on its duty to defend and indemnify. 

The court first held that Ricchio had standing to oppose Peerless's motion for summary judgment even though she was not an insured, because she had an interest in defining the scope of insurance coverage separate from the interest of the insured. 

The court next addressed whether bodily injury coverage (Coverage A) was excluded by an exclusion for "bodily injury arising out of personal . . . injury."  The policy defined personal injury as including "injury, including consequential 'bodily injury,' arising out of one or more of the following offenses: . . . False arrest, detention or imprisonment." 

Peerless argued that all of Ricchio's claims "arose out of" her "false imprisonment" and therefore came within the exclusion.  Ricchio argued that the source of her personal injury was not her false imprisonment, but rather McLean's act of trafficking her. The court held that her injuries arose of of both the trafficking and the false imprisonment.  The court held that it was irrelevant that the policy contained an asbestos exclusion that excluded injury "arising, in whole or in part, either directly or indirectly out of" asbestos.  If the policy had such broad language in a clause applying to false imprisonment, then the false imprisonment exclusion could be read more narrowly. 

The court then addressed whether there was coverage under Coverage B, Personal Injury Liability.  I will discuss that in my next post.  

US District Court For District of Massachusetts holds that auto exclusion in pedicab's general liability policy excludes injuries caused by car hitting insured's customers in a pedicab

Laura Gentry Reagan and her husband Robert Reagan hired a pedicab that was licensed and registered to Boston Rickshaw and operated by its employee Dennis Suozzi.  During the ride, Suozzi allegedly changed lanes without looking or signaling.  That caused a vehicle to hit the rear of the pedicab, injuring the Reagans.  They sued Suozzi and Boston Rickshaw.

Atain Specialty Insurance provided general liability insurance to Boston Rickshaw.  It denied a duty to defend or indemnify on the basis of an exclusion for bodily injury "arising out of . . . any auto . . . whether or not owned, maintained, used, rented, leased, hired, loaned, borrowed or entrusted to others or provided by another to any insured." 

In Atain Specialty Insurance Co. v. Boston Rickshaw LLC, __ F.3d __, 2019 WL 2766980 (D. Mass.), the United States District Court for the District of Massachusetts first dismissed the argument that the declaratory judgment action was not yet ripe because the underlying lawsuit had not yet resolved, as the declaratory judgment action raised the issue of the duty to defend as well as the duty to indemnify.   

The court then addressed the first part of the auto exclusion, excluding coverage for body injury "arising out of . . . any auto."  It cited the usual definitions for "arising out of," a phrase which "must be read expansively, incorporating a greater range of causation than that encompassed by proximate cause," etc.  It held that the exclusion "therefore, appears to apply to the Reagans' alleged injuries, because the injuries arose directly of the operation of the automobile, and would not have occurred but for the collision."

The Reagans argued that taking the exclusion as a whole, it applies only to autos under the control of the insured, and does not include the auto that struck the pedicab. The court held that such an interpretation was contradicted by the plain meaning of the policy interpreted by the rules of grammar.

Finally, the Reagans argued that a reasonable insured that operates pedicabs would not expect the auto exclusion to apply to autos outside of their control or use, or to autos that strike pedicabs.  The court responded to that argument in part by pointing out that it is commonplace for insureds to have separate automobile and general liability policies.  I find that comment troubling.  After all, insureds who don't own or use automobiles generally don't have automobile policies, but that doesn't mean that their customers or visitors can't get hit by cars in a variety of circumstances under which the insured could be found liable. 

That led me to wonder whether a standard homeowner's policy, which I know excludes coverage generally for motor vehicle accidents, would exclude coverage if an unknown person drove a car through the wall of a house (and then drove away).  The standard ISO homeowner's policy form (a form used by many insurers) does not exclude coverage in those circumstances:

·       The property damage coverage (covering damage to the house itself) excludes coverage to motor vehicles themselves, but does not exclude coverage for damage to the house caused by a motor vehicle. 

·       The liability coverage (covering claims against the homeowner brought by an injured person) excludes "motor vehicle liability," which is defined in the policy as liability arising out the ownership or use of the vehicle by an insured. 

It's worthwhile to note that the exclusion interpreted in the case is also not a standard exclusion (or at least is not in the first general liability ISO form that I grabbed).  I’m not going to speculate about the insurance policy negotiations of a company whose business involves being a part of traffic, or whether that company has an auto policy that is providing coverage. 

First Circuit finds no coverage under personal and advertising injury for manufacturer's use of trademark similar to competitor's trademark

Sterngold Dental manufactures and sells dental products.  Intra-Lock International alleged that it had infringed Intra-Lock's trademark (literally the mark itself) on a product called OSSEAN, by using a nearly identical marks, OSSEO and OSSEOS, for a nearly identical product.  Sterngold's insurer, HDI Global Insurance Company, denied coverage under the personal and advertising coverage of the policy.


In Sterngold Dental, LLC v. HDI Global Ins., __ F.3d __, 2019 WL 2754185 (1st Cir.), a decision full of puns and phrases requiring both a Latin and an English dictionary that could only have been written by Judge Selya, the court agreed with HDI that there was no coverage.

The court first examined the definition of "personal and advertising injury" in the policy.  That definition included the use of "another's advertising idea" or "infringing upon another's copyright, trade dress or slogan in an advertisement."  The policy provided that publication on the internet may constitute an advertisement. 

The meaning of the phrase "advertising idea," the court noted, "is somewhat nebulous."  It includes "if the insured took an idea for soliciting business or an idea about advertising."  But if the underlying complaint merely alleges that the insured "wrongfully took a product and tried to sell that product," that is not a injury stemming from another's advertising idea.

In the claim before the court. Intra-Lock had alleged that Sterngold's use of "confusingly similar marks . . . in internet advertising . . . was likely to cause confusion, mistake, and deceive third parties." 

The court punted on whether the mark was an advertising idea.  It assumed that it was so that it could move on to analysis of an exclusion to the personal and advertising injury coverage.

The exclusion excluded coverage for injury "arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.  Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in an advertisement."

The exclusion had an exception for "infringement, in your advertisement, of copyright, trade dress, or slogan." 

The court examined whether the advertising injury claim arose out of the claimed infringement of Intra-Lock's trademark, which would trigger the exclusion.

The court noted that the phrase "arising out of" indicates a wide range of causation, and means "originating from," "growing out of," "flowing from," "incident to," or "having connection with."  The court held that under that definition the exclusion was triggered because the claim was alleged to have arisen out of infringement of Intra-Lock's trademark.  

Sterngold argued that the exclusion did not apply because it provided that "other such intellectual property rights do not include the use of another's advertising idea in your advertisement."  The court held that, based on the language of the exclusion and common grammatical rules, that phrase applied only to "other intellectual property rights." 

Finally, the court rejected Sterngold's argument that the marks were actually slogans, so that the claim came within the exception to the exclusion.  A "slogan is certainly not by definition a trademark."  

US District Court holds professional liabilty insurer has duty to defend action relating to breakup of law firm

Massachusetts Lawyers Weekly quoted me in an article about a recent U.S. District Court case on coverage under a lawyer's professional liability policy for a claim arising from the breakup of a law firm.  The departing attorneys sued the firm, alleging in part that the firm refused to release client file materials and property to their new firm. 

In Governo v. Allied World Ins. Co., __ F. Supp. 3rd __, 2018 WL 4685566 (D. Mass.), the court held that the firm's professional liability insurance had a duty to defend.  The allegation of refusal to release client material came within coverage for Legal Services Wrongful Acts, which the court held implicates the specialized professional obligations and ethical standards of attorneys. 

More specifically, the policy provided coverage for claims “arising out of” a Legal Services Wrongful Act.  The court noted that  there might not have been coverage if the policy language had provided coverage for claims occurring “by reason of” such an act. And that, ladies and gentlemen, is why insurance coverage law is a specialty in the practice of law. 

US District Court holds that Bill Cosby's homeowner's insurer has a duty to defend him in cases asserting he defamed alleged sexual assault victims by denying the assaults

I've posted here and here about the declaratory judgment action by AIG, Bill Cosby's homeowner's and umbrella insurer, seeking a declaration that it has no duty to defend or indemnify him in three defamation lawsuits against him.  Those lawsuits allege that Cosby lied when he denied the plaintiffs' accusations that he raped them.  They allege defamation rather than assault because the statute of limitations has run on assault claims  The defamation allegations are not barred because the statements were made at a later period in time.  (A criminal trial against Cosby for sexual assault ended in a mistrial as a result of a deadlocked jury.) 

AIG contended that the defamation allegations come within an exclusion in the homeowner's policy  for sexual misconduct excluding "liability . . . for  . . . personal injury arising out of any actual, alleged, or threatened by any person: (a) sexual molestation, misconduct or harassment; . . . or (c) sexual, physical or mental abuse." The umbrella policy has a similar but not identical exclusion.  

AIG had filed a declaratory judgment  action in California with respect to a separate civil lawsuit by a plaintiff making the same allegations against Cosby.  The California court granted Cosby's motion to dismiss.  Applying California law, the California court held that AIG has a duty to defend Cosby because the sexual misconduct exclusions do not unambiguously bar coverage.  It held that under that state's law the phrase "arising out of" can be interpreted broadly or narrowly.  Under a narrow interpretation, the plaintiff's injuries arose out of Cosby's statements, not sexual misconduct.

In a recent decision in the Massachusetts case, AIG Property Casualty Co. v. Green, 217 F.Supp.3d 415 (D. Mass. 2016), the first issue before the United States District Court for the District of Massachusetts was whether AIG was judicially estopped from arguing that Massachusetts law differs from California law in the interpretation of "arising out of."  In California AIG had argued that there was no difference between Massachusetts and California law because both states interpret the phrase broadly.  In Massachusetts it was now arguing that there was a difference and that Massachusetts law should apply.

Let me say that as a litigator the discussion of judicial estoppel made my stomach hurt.  The AIG attorneys in California had to argue that under both California and Massachusetts law the phrase "arising out of" is broadly construed.  The only other alternative would be to concede that in one of the states the phrase is construed narrowly, and the court should apply the law of the state construing it broadly.  Unless it was incontestably true that California construes "arising out of" narrowly, the latter argument would border on malpractice.  When the California court held that "arising out of" should be construed narrowly in the context of the case before it, should AIG no longer be allowed to argue that Massachusetts construes the phrase broadly?  In my view that would simply be unfair. 

The US District Court agreed with me and declined, in its discretion, to apply the doctrine of judicial estoppel.  It held that there was no evidence that AIG was attempting to defraud or mislead either court.  It merely argued in California that coverage was barred under the law of either state.  AIG would gain no unfair advantage by arguing in Massachusetts that the laws of California and Massachusetts conflict. (The court did not say this, but the conflict of law arose, or at least became more obvious, as a result of the California decision.)

That ruling became moot, however, because the court then held that the exclusions did not apply under Massachusetts law either.  The court quoted a number of cases that vaguely define "arising out of" as requiring an intermediate level of causation, between proximate (or direct) cause but more than causation in fact (but for X happening, Y could not have happened).  The court found that the sexual misconduct exclusions are "at least ambiguous."  It held, "while no doubt related to and setting the stage for the defamation claims, the alleged sexual misconduct is multiple steps removed from the defamatory injury-causing statements." 

AIG has appealed the decision.  Stay posted. 

Appeals Court holds pollution exclusion in auto policy of oil delivery service applies to overfilled oil tank

United Energy Oil Company, an oil delivery service, delivered oil from a truck to an oil tank in  a building owned by National Equity Properties.  It overfilled the tank and caused oil to seep into the ground. 


The truck was covered by a business auto insurance policy issued by Hanover Insurance.  Hanover determined that damages over $5000 came within the policy's pollution exclusion. 


A declaratory judgment action over the meaning of the pollution exclusion followed.  It was undisputed in that action that heating oil is a pollutant within the meaning of the pollution exclusion.


The first policy clause at issue in Izdebski v. Hanover Ins. Group, Inc., 86 Mass App. Ct. 1102, 2014 WL 2973681 (unpublished) was one that made the pollution exclusion applicable to property damage arising out of the actual discharge, release, or escape of pollutants:

a.  That are, or that are contained in any property that is:

(1)  Being transported or towed by, handled, or handled for movement into, onto or from, the covered 'auto.'

The Massachusetts Appeals Court held that the clause excluded coverage because the spill happened as the polluting oil was being delivered by the pump from the tank to its intended destination.    The plaintiffs argued that the oil had reached its final destination before it seeped into the ground, or that the oil that seeped into the ground was already in the tank before United began to fill it.  The court held that those interpretations ignored the meaning of "arising out of" in the exclusion. 


The second policy clause at issue was an exception.  The exclusion was for  damage arising out of the actual discharge, release, or escape of pollutants once they have been finally delivered. The exception applied to accidents with respect to pollutants not in a covered auto if

(1)  The pollutants or any property in which the pollutants are contained are upset, overturned or damaged as a result of the maintenance or use of a covered auto; and

(2)  The discharge, dispersal, seepage, migration, release or escape of the pollutants is caused directly by such upset, overturn or damage.

The phrase "upset, overturned or damages" was not defined.  The court held that a fair reading of the exception is that it applies to an accidental oil spill only  if United's truck is upset, overturned or damaged.  That doesn't make a lot of sense to me, as the exception plainly says that it is the pollutants "or any property in which they are contained" that must be upset, overturned, or damaged.  If it was only the covered auto that could be upset, overturned or damaged, the policy would have said so.  On the other hand, it does not seem that an overflow or seepage of oil comes within the definition either. 

First circuit holds that injury from portable fire pit does not arise out of premises; in dicta asserts the issue is interesting

Judge Selya introduced his decision in Vermont Mut. Ins. Co. v. Zamsky, __ F.3d __, 2013 WL 5543915 (1st Cir. 2013) by proclaiming that the decision addresses "what some might regard as an oxymoron: an interesting insurance coverage question." 

Andrew Zamsky was an insured under three homeowners' policies issued to his parents by Vermont Mutual.  Each of the policies covered a separate parcel of residential real estate they owned. 

The policies provided coverage for claims of bodily injury caused by an occurrence.  They also contained a "UL exclusion," which excluded coverage for injuries "arising out of a premises" owned by an insured but not itself an insured location. 

On November 27, 2008, Zamsky, claimant Renata Ivnitskaya, and several friends drove to a house which was owned by Zamsky's parents but which was not an insured location under any of the policies. 

Zamsky retrieved from a shed on the property a portable fire pit he had purchased earlier that year.  The group tried to start a fire in it.  When the wood would not burn readily, one of the group retrieved a container of gasoline from the garage or the shed and poured its contents on the fire.

In the subsequent conflagration three people were burned.  Ivnitskaya suffered especially severe burns.

Ivnitskaya sued Zamsky.  As Judge Selya wrote, she alleged a "golconda" (presumably meaning a source of great wealth, and not a mystical state of enlightenment where a vampire is no longer subject to the beast [thank you, Google]) of negligent acts and omissions.

Vermont Mutual agreed to defend the claim under a reservation of rights, and then filed a declaratory judgment action. 

In rendering its decision the court relied on Massachusetts Appeals Court cases that interpreted the UL exclusion.  One held that a UL exclusion did not exclude coverage for a dogbite case because, while the bite happened at the uninsured premises, the dog was not a condition of the premises. 

In  a second Appeals Court case the claimant was on uninsured premises "in order to minister to  a dying tree" (perhaps so that it would no longer be subject to the beast?).  He fell from a ladder and was injured.  The Appeals Court held the UL exclusion applied because "where . . . a third person is on the property to repair a condition of the property . . . there is a sufficiently close relationship between the injury and the premises" such that the injury should be understood to have arisen out of the premises.

Taken together, the courts change the UL exclusion to claims "arising out of a condition of premises" owned by the insured that are not an insured location.  Judge Selya held that a portable fire pit stored at the premises was not a condition of the premises, so the exclusion did not apply. 

Vermont Mutual tried to change the debate by focusing not on "the premises" but on "arising out of," a phrase that is construed broadly.  Judge Selya held that the "arising out of" language only comes into play if there is some causal link between the covered occurrence and a condition of the premises.  "Here, there is no such linkage." 

Judge Selya also rejected Vermont Mutual's argument that if the group went to the premises with the intention of lighting a fire, the occurrence arose out of the premises.  "The group's reason for going to Falmouth was not material because that purpose was not related to a condition of the premises." 

Judge Selya added that if Vermont Mutual had wanted to exclude from coverage all injuries occurring at an owned location it did not insure, "it would have been child's play to say so."

I think Judge Selya's decision is correct as a matter of a federal court interpreting Massachusetts law.   He properly relied on Massachusetts Appeals Court cases because there are no SJC cases on point.  Although Judge Selya asserted that he was predicting how the SJC would rule, I'm not so sure it would follow the Appeals Court cases.  The exclusion does not exclude injuries "arising out of conditions of premises" that are not insured locations; it excluded injuries "arising out of premises" that are not insured locations.  I don't see a basis for reading "condition of" into the exclusion.

Moreover, it makes sense to me that an insured buying three separate homeowner's policies for three discrete houses would not expect that an injury occurring at another house he owns to be covered by those policies.  (The Zamsky family most likely had coverage from a different carrier for the house where the fire occurred.  My guess is that this is a fight between carriers concerned about which one of them will pay if Ivnitskaya prevails on liability in her underlying action, not a fight about whether an insurer or the Zamsky family will pay.  Not that that should make any difference in the contract interpretation issues, but it gives the fight a different flavor, right?) 

In this I find myself at surprising odds with Barry Zalma, an insurance fraud specialist whose posts tend to be in favor of limited coverage.  But here he claims that "the stupidity [of Vermont Mutual] arguing no coverage even outweighed the stupidity of throwing gasoline on a fire."

U.S. District Court holds that exclusion for loss involving a particular loan excludes coverage for claims that the loan was misappropriated

Marcia and Joseph Valenti donated $500,000 to the Clark School for Creative Learning.  They later sued the school and Jeffrey Clark, the school's director, alleging that the school had not carried through with promises made by Clark in order to induce their gift.  Specifically, they alleged that Clark promised to convey to them as security for the gift a security interest in a parcel of real property on which the school is situated, but that the school never acquired rights to the land; and that the funds would be used to develop a new facility for the school's high school, but that Clark conveyed a large portion of the funds to his mother and sister, purportedly as repayment for loans to the school. 

The school's insurer, Philadelphia Indemnity Insurance Company, denied coverage on the ground that the allegations of the complaint fell within the policy's exclusion for known circumstances revealed in financial statement.  The exclusion excluded claims "arising out of, directly or indirectly resulting from or in consequence of, or in any way involving" any circumstances disclosed in a financial statement that was attached to the policy.  That financial statement stated that the school was the recipient of a major unrestricted gift totaling $500,000.

In Clark School for Creative Learning, Inc. v. Philadelphia Indemnity Ins. Co., 2012 WL 6771835 (D. Mass.),  the United States District Court for the District of Massachusetts held that the claims were excluded.  The court discretely analyzed the phrases "arising out of," "directly or indirectly resulting from or in consequence of," and "in any way involving," and held that under any of the phrases the exclusion applied. 

Judge Fremont-Smith of the Superior Court holds that damages both did and may not have arisen out of use of a vehicle

In Leone v. Schwartz, 2009 WL 3416398, the plaintiff, Leone, was a police officer who responded to an accident in which Schwartz's car had crashed through a fence and some small trees. Leone alleged that as he approached the car on foot, he lost his balance and fell in an area that was covered with debris from the fence, broken tree limbs, and snow and ice.

Leone sued Schwartz's homeowner's insurer, Great Northern, and automobile insurer, Arbella. Judge Fremont-Smith held on summary judgment that there was no coverage under the homeowner's policy because the policy excludes "damages arising out of the . . . use . . . of any motorized land vehicle." He wrote:

The allegations are that Schwartz negligently drove his motor vehicle off a road and into a lawn, causing the plaintiff to investigate the accident scene and suffer a "slip and fall" injury. The only theory on which Schwartz could be held liable, then, is as a result of his allegedly negligent operation of a motor vehicle, for which the policy excludes coverage.

Judge Fremont-Smith then turned to the automobile policy, which provided coverage for "damage to people injured or killed in accidents if you or a household member is legally responsible for the accident." "Accident" is defined in the policy as "an unexpected, unintended event that caused bodily injury or property damages arising out of the ownership, maintenance or use of an auto."

Although two paragraphs earlier Judge Fremont Smith had held that as a matter of law the accident arose out of the use of the car, he now wrote:

The fact that Schwartz's operation of a motor vehicle provides the only possible basis for his liability, so that Great Northern's motion must be allowed, does not necessarily mean that Arbella's motor vehicle policy provides coverage. It is true that, but for Scwartz's vehicle having gone off the road and onto a lawn, Leone would not even have been there. But this does not necessarily mean that Leone's injury arose out of Schwartz's operation of a vehicle. The vehicle was stationary when Leone arrived at the scene, and he has admitted that the yard in which he fell was covered by debris, snow, and ice. Even if the undisputed facts were to indicate that Schwartz was negligent in his operation of his vehicle, it is a disputed question of fact whether Leone's injuries arose out of Schwartz's use of his motor vehicle.

Judge Fremont-Smith concluded that if Leone fell on pieces of broken fence or other debris caused by the accident there would be coverage under the policy, but that if he slipped only on snow and ice or other debris that was not caused by the accident there would be no coverage.

I'm all for splitting hairs in interpreting insurance policies. I make my living doing it. But I do not see how the same opinion can hold as a matter of law that the damages arose out of the use of a vehicle and also hold that whether the injury arose out of the ownership, maintenance or use of the auto is a question of fact. In my opinion the judge can't have it both ways.

SJC rules that drunk driving accident arose out of use of limo earlier in the evening

In Commerce Ins. Co. v. Ultimate Livery Serv., Inc., 452 Mass. 639 (2008), the Supreme Judicial Court of Massachusetts held that an insurer providing commercial automobile coverage to a limousine service must indemnify the limousine service for its negligence in allowing an intoxicated passenger to drive a car after using the insured's services.

As usual, Mike Tracy, of Rudolph Friedmann LLP, sent me the decision on the day it came down in November, 2008.

William Powers and a group of his friends hired the insured, Ultimate Livery Service, to drive them from a sports bar in South Boston to a strip club in Rhode Island and back again. Powers drank heavily throughout the evening. After the van driver left for the night, Powers drove his girlfriend's car and was involved in a collision which seriously injured passengers of another car, killing one of them.

Commerce insured Ultimate Livery under a commercial automobile policy which provided coverage for bodily injury "caused by an accident and resulting from the ownership, maintenance or use of a covered auto."

The court analyzed whether the accident "arose out of" the use of Ultimate Livery's van, stating that there is no meaningful difference between "resulting from" and "arising out of." (The meaning of the term "arising out of" has been frequently litigated, including by me.)

The court found that there was coverage. It noted that the van was used consistently with Ultimate's business objectives. It stated that it was of no consequence that Ultimate Livery did not provide any alcohol because it and its driver knew that Powers was consuming alcohol in the van and getting drunk. The court concluded, "The risk of harm is not too far removed to lack the required nexus under the broad causation standard [under the terms "arose out of" or "resulting from"] that applies. It is a reasonable incident that was contemplated in the first instance when the parties originally entered a contract for transportation service."