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El Group v. Utica Nat'l Ins. Group

El Group v. Utica Nat'l Ins. Group

Appeals Court of Massachusetts

January 6, 2022, Entered

21-P-298

Opinion

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

The plaintiffs in this insurance coverage dispute, EL Group, LLC (EL Group), Joseph P. Lotuff, III, Frederick A. Lotuff, and E. Alden Edmonds, sought a declaratory judgment that the defendant insurance companies, Utica National Insurance Group, Utica Mutual Insurance Company, and Graphic Arts Mutual Insurance Company, had a duty to defend the plaintiffs against claims brought against them by a former business partner. After the parties filed cross motions for summary judgment, a Superior Court judge ruled in favor of the defendants, reasoning that the defendants had no duty to defend the plaintiffs where the underlying counterclaim did not allege a "personal and advertising injury" within the meaning of the insurance policies.3 A judgment entered in favor of the defendants. On appeal, the plaintiffs argue that the defendants had a duty to defend under the policies because the allegations in the underlying counterclaim were "reasonably susceptible of an interpretation that they state or adumbrate a covered claim." For the reasons that follow, we agree with the plaintiffs, vacate the judgment, and remand the case to the Superior [*2]  Court.

Background. We summarize the relevant facts as set forth in the pleadings and the judge's written decision.4 The underlying dispute was between EL Group, a self-described investment company, and Frank Clegg, a designer and manufacturer of custom leather products. The business agreement between them called for Clegg to design and manufacture leather products and for EL Group to market those products online. Clegg terminated the business agreement in 2011, which prompted EL Group to file a multi-count complaint against Clegg and his LLC alleging, among other things, unjust enrichment, conversion, misappropriation of confidential and proprietary information, and defamation. Clegg responded with a detailed, thirteen-count counterclaim, which he later amended,5 alleging that the plaintiffs (1) falsely stated to customers that they had contributed to the design and production of Clegg's products; (2) stole Clegg's designs and manufacturing techniques; (3) charged personal expenses to the business; and (4) infringed on Clegg's trademark.

The plaintiffs sought coverage under insurance policies issued by the defendants for the cost of defending against Clegg's counterclaim. After the defendants [*3]  denied coverage, the plaintiffs brought this action alleging, among other things, that they incurred over $750,000 in attorney's fees and costs in defending against the counterclaim, which the defendants were required to pay under the terms of the policies.6

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2022 Mass. App. Unpub. LEXIS 12 *; 100 Mass. App. Ct. 1119; 2022 WL 53118

EL Group, LLC, & others1 vs. Utica National Insurance Group & others.2

Notice: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4, 881 N.E.2d 792 (2008).

PUBLISHED IN TABLE FORMAT IN THE MASSACHUSETTS APPEALS COURT REPORTS.

CORE TERMS

products, counterclaim, allegations, reasonably susceptible, manufacturer, reputation, advertising injury, duty to defend, coverage, designer, policies, terms of the policy, insurance company, insurance policy, defamation, customers, defending, insured, leather, parties, business agreement, insurance coverage, false statement, no duty, contributed, MEMORANDUM, pleadings, sketches, roughly, slander