On July 6, 2022, the Massachusetts Supreme Judicial Court published an opinion in Vermont Mutual Insurance Company v. Poirier in which it held that attorney’s fees awarded under G. L. c. 93A were not “damages because of bodily injury,” and accordingly were not covered under an insured’s commercial liability policy.
The Plaintiffs in the underlying G. L. c. 93A case giving rise to this declaratory judgment action, the Maston family, hired Servpro of Fitchburg-Leominster (“Servpro”) to clean a sewage spill in their basement. Servpro was insured under a commercial liability policy issued by Vermont Mutual. The policy covered “sums that the insured becomes legally obligated to pay as damages because of bodily injury.”
As part of the cleaning process, Servpro applied disinfectant chemicals in the basement of the Mastons’ home. Servpro warned the Mastons to stay out of the basement while it applied the disinfectant, but allegedly did not warn them that the disinfectant posed a danger to individuals who entered the basement. Phyllis Maston continued cleaning the basement in the following days and developed respiratory problems, which her physician determined were caused by exposure to the disinfectant.
The Mastons sued Servpro for breach of contract, negligence, and violations of c. 93A based on breaches of the warranty of merchantability and the warranty of fitness for a particular purpose. After the Mastons waived their claims for breach of contract and negligence, the trial court found that ServPro violated c. 93A by committing a breach of the warranty of merchantability and imposed liability for costs and attorney’s fees. The trial court awarded Phyllis Maston $267,248.67 for her medical expenses, diminished earning capacity, and pain and suffering, and awarded Douglas Maston $5,000 for his loss of consortium. The trial judge also awarded the Mastons $15,447.61 in costs and $215,328 in attorney’s fees. The Appeals Court affirmed both the substantive findings and the award of attorney’s fees and costs, and further imposed appellate costs of $1,970.32 and appellate attorney’s fees of $21,600.
Vermont Mutual paid the judgment in the underlying action, except for the award for attorney’s fees and interest thereon, arguing that the attorney’s fees were not covered under the policy. Vermont Mutual then instituted a declaratory judgment action requesting that the court declare that the policy did not provide coverage for the attorney’s fee award. The parties filed cross motions for summary judgment. The court denied Vermont Mutual’s motion and granted the cross motion, holding that the award of attorney’s fees fell under the policy’s coverage for sums that the insured becomes legally obligated to pay as “damages because of bodily injury.”
The policy that Servpro purchased included a “Businessowners Liability Coverage Form,” which provided that Vermont Mutual would “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury,’ ‘property damage,’ ‘personal injury’ or ‘advertising injury’ to which this insurance applies.” (Emphasis supplied). The policy further states that “no other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Coverage Extension — Supplementary Payments.” The Supplementary Payments clause provided that “in addition to the Limit of Insurance we will pay, with respect to any claim we investigate or settle, or any ‘suit’ against an insured we defend . . . all costs taxed against the insured in the ‘suit.’”
Since the parties agreed that attorney’s fees themselves were not a ‘bodily injury,’ the Supreme Judicial Court considered whether attorney’s fees awarded under c. 93A constituted “damages because of” bodily injury that Vermont Mutual would be obligated to pay.
In analyzing whether the attorney’s fees awarded to the Mastons were covered under the Vermont Mutual policy, the SJC began by reviewing both statutory and judicial precedent distinguishing damages from attorney’s fees. The Court recognized that damages caused by bodily injury refers to physical injuries and the money damages required to compensate them. In contrast, attorney’s fees reflect the cost of bringing and maintaining a lawsuit.
The Court observed that G. L. c. 93A itself differentiates between damages and attorney’s fees. The statute provides for recovery “in the amount of actual damages or twenty-five dollars, whichever is greater.” This amount of actual damages may be doubled or trebled for willful violations. However, the statute separately provides for the recovery of attorney’s fees “in addition to other relief” and “irrespective of the amount in controversy.” Accordingly, under c. 93A, damages and attorney’s fees are conceptually different and “serve two different purposes.” Damages are awarded to compensate for the injury, while attorney’s fees are awarded to deter misconduct and promote the public benefit of bringing misconduct to light.
With these differences in mind, the Court held that the Vermont Mutual policy provision covering damages caused by bodily injury did not cover an award of attorney’s fees under G. L. c. 93A because attorney’s fees are a separate form of relief distinct from damages.
Servpro’s owners and the Mastons also argued that the attorney’s fees were covered under the Policy’s “Coverage Extension — Supplementary Payments” provision, which includes coverage for “[a]ll costs taxed against the insured in the ‘suit.'” The SJC rejected this argument and held that attorney’s fees are not covered under this provision of the Vermont Mutual policy. The Court explained that the term “costs” ordinarily means only legal or taxable costs, not attorney’s fees.
Going forward, in the absence of other provisions providing coverage for attorney’s fees, insurance policies that employ the same or similar language as the Vermont Mutual policy at issue will be construed as not covering attorney’s fees awarded under G. L. c. 93A unless the attorney’s fees were incurred in the limited scenario the Court noted in which the purported c. 93A violation, in essence, forces the claimant to incur legal fees and expenses that are not simply those fees incurred in vindicating that person’s rights under the statute. If you have questions about how the ruling in this case may affect your coverage, please contact Barton Gilman LLP.
 The Court did recognize an exception to its holding whereby attorney’s fees can be awarded as damages when a c. 93A violation forces someone to incur legal fees and expenses that are not simply those incurred in vindicating that person’s rights under the statute, such as where a party is forced to incur expenses as the result of the other party’s initiation of litigation which itself is a violation of c. 93A. See Tech Plus v. Ansel, 59 Mass. App. Ct. 12, 21 (2003).