No Coverage for Actual Damages Under 39A

In a recent case in federal court in Boston, Judge Stearns ruled that compensatory damages awarded under the Massachusetts consumer protection statute, G.L. c. 93A (“Chapter 93A”), against an attorney were excluded under the malpractice policy of insurance because they  stemmed from knowing and willful conduct.

In American Guarantee & Liability Insurance Co. v. Lamond, Civ. No 13-cv-13168 (USDC Mass. July 29, 2014), a jury awarded damages against the attorney, Lamond, for professional negligence and (as an advisory verdict) for his deceptive acts and practices under Chapter 93A.  The attorney, representing a purchaser of land, had certified the property was free of encumbrances while knowing that it was the site of an Indian burial ground and subject to preservation restrictions.  When the purchaser was unable to build on the land, the purchaser defaulted on his mortgage.  The mortgagor foreclosed and filed suit against the purchaser and the lawyer.  The purchaser/client in turn sued the lawyer for negligence and violation of Chapter 93A.

The jury found against the lawyer and awarded $20,000 in damages for negligence, and $397,000 in “actual” damages under Chapter 93A which the Court adopted and doubled as per the statute and to which the Court added $111,190.62 in attorneys’ fees.

The insurer argued on summary judgment that the 93A damages were excluded under the policy because liability on the Chapter 93A was premised on the attorney’s intentional conduct.  The attorney conceded that the doubled damages were excluded but argued that the single damages were covered because they were neither a penalty nor a punitive award but rather represented “actual damages.”  The Court disagreed, holding that, because the 93A award was based on a finding of knowing or willful conduct, they were excluded under the policy provision that excluded coverage for any claim “based on or arising out of, in whole or part: . . . any intentional, criminal, fraudulent, malicious or dishonest act or omission . . . .”  The Court also confirmed that the award of attorneys’ fees under Chapter 93A was “punitive” in nature and excluded under another provision of the policy.

This case is a good reminder that claims against attorneys under 93A are not covered by insurance – and highlights that even compensatory damages suffered by the client are not covered when there is an intentional conduct exclusion in the policy.