I was pleased to read this article in Massachusetts Lawyers Weekly, as well as the recent Supreme Judicial Court decision it references. For several years, I have been arguing that in insurance coverage disputes involving sophisticated insureds, Massachusetts courts are moving away from their historic reliance on pro-insured maxims in deciding coverage disputes in favor of a more traditional contract law approach to deciding such disputes. For many lawyers who, like me, have been practicing insurance law in Massachusetts for decades, our experience for many years was that Massachusetts courts considering disputes between insureds and their insurers would frequently fall back on what I call “tie goes to the runner” maxims, such as the rule that ambiguous policy language must be interpreted in favor of the insured, to find in favor of insureds in such disputes. Over the past handful of years, though, it has been clear to me that state appellate decisions were cutting against that approach, in favor of rubrics that favored identifying and then enforcing the apparent contractual intent of the parties, at least when the insured was a sophisticated entity. Unfortunately over the years, there has not been an appellate decision that could serve as a ready and easy touchstone for making that argument, but that now seems to have changed.
As Massachusetts Lawyers Weekly points out in the article, with affirmation from a number of prominent coverage lawyers, a recent state supreme court decision decided a complex coverage action by determining and then enforcing the contracting intent of all the parties – both the insured and the insurer – to decide the scope of coverage, rather than invoking other maxims or rules to reach its decision. The Court declined to find coverage for a risk not addressed in the policy language itself, stating that “[g]iven the express allocation of risk and the sophisticated parties that contracted to allocate this risk, we decline to imply a common-law duty to fill in the gap in coverage.” The Court held that the parties – both the insured and the insurer – were sophisticated entities who negotiated the extent of the risk transfer between them and that there was no basis for the Court to make a reallocation of their decision by reading benefits into the policy that the parties did not expressly include within it. One leading coverage lawyer called the decision “a refreshing recognition of the sanctity of contract.”
To me, the decision is another marker on the journey of Massachusetts insurance coverage law from a regime in which extracontractual rules of policy interpretation (which inevitably favor insureds) control the outcome of disputes to one more in line with traditional rules of contractual interpretation, in which the guiding principle is to try to identify as precisely as possible what the contracting parties actually intended to accomplish by their written agreement.