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HDH Corp. v. Atlantic Charter Ins. Co.

Supreme Judicial Court of Massachusetts

March 5, 1997, Argued ; July 14, 1997, Decided

SJC-07314

Opinion

 [*434]   [**848]  ABRAMS, J. The primary question [***2]  presented is whether a workers' compensation insurer has a duty to defend an insured employer in a civil action brought by an employee who has not preserved her right of action at common law. See G. L. c. 152, § 24. 1 A former employee of the plaintiff, HDH Corporation (HDH), brought an action against HDH in the Superior Court, seeking damages for emotional distress, lost wages, and lost benefits caused by gender discrimination and wrongful termination.  [**849]  The employee's husband claimed loss of consortium and loss of support in the same action.

 [***3]  HDH notified its workers' compensation and employers' liability insurer, the defendant, Atlantic Charter Insurance Company (Atlantic), and requested that Atlantic defend the civil action. Atlantic refused to defend and denied coverage. 2 HDH assumed the defense of the action and eventually agreed to submit to binding arbitration. The arbitrator found that the former employee was wrongfully terminated and awarded $ 120,000 to her and $ 25,000 to her husband. HDH paid the award and brought this action against Atlantic, seeking to recover the amounts paid on the award, its legal fees, and G. L. c. 93A damages.

Atlantic moved for summary judgment, claiming that there was no coverage for liability arising from the employee's civil action under either Part One, the workers' compensation portion of the insurance policy, or Part Two, the employers' liability portion. Atlantic argued that Part One only [***4]  covered claims for benefits payable under the Workers' Compensation Act, G. L. c. 152, and not civil actions for common law damages. Atlantic further claimed that, because the employee had not given statutory notice  [*435]  of her intent to claim her right of action at common law, HDH had acted at its own peril by choosing to defend the civil suit on its merits rather than asserting the absolute defense of exclusivity of the workers' compensation statute. See note 1, supra. Atlantic argued that, by failing to assert the exclusivity defense and to file a notice of claim for workers' compensation benefits with the Department of Industrial Accidents (department), see G. L. c. 152, § 6, HDH had waived any right to coverage under Part One of the insurance policy. Regarding Part Two, the employers' liability portion, the insurance policy expressly excluded coverage of "damages arising out of the discharge of, coercion of, or discrimination against any employee in violation of law." A Superior Court judge allowed Atlantic's motion for summary judgment. The judge ruled that HDH was not entitled to recover from Atlantic because HDH should have invoked the absolute defense of exclusivity to bar [***5]  the former employee's civil action. 3 HDH appealed to the Appeals Court, which correctly concluded that there was no coverage under Part Two, the employers' liability portion, because of the policy's express exclusion of damages arising out of the discharge or discrimination of an employee. HDH Corp. v. Atlantic Charter Ins. Co., 41 Mass. App. Ct. 131, 668 N.E.2d 872 (1996). See, e.g., Lusalon, Inc. v. Hartford Accident & Indem. Co., 400 Mass. 767, 773, 511 N.E.2d 595 (1987) (no duty to defend where coverage precluded by specific policy exclusion).

However, the Appeals Court determined that the insurer may have had a duty to defend HDH in the civil action because the allegations [***6]  of the employee's complaint, reasonably read, stated a claim covered under the terms of Part One, the workers' compensation portion of the policy. 4 [***7]  The court rejected Atlantic's  [*436]  argument that Part One  [**850]  of the policy provided a duty to defend only against claims for benefits brought before the department. The court reasoned that, because G. L. c. 152, § 25, in certain circumstances, requires workers' compensation insurers to reimburse employers for damages awarded to employees "by a judgment of a court," Atlantic's duty to defend under Part One of the policy was not limited to claims for workers' compensation benefits. 5 Accordingly, the Appeals Court reversed and remanded for further proceedings against Atlantic. We granted Atlantic's application for further appellate review. We affirm the granting of summary judgment in favor of Atlantic. 6

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425 Mass. 433 *; 681 N.E.2d 847 **; 1997 Mass. LEXIS 170 ***

HDH CORPORATION vs. ATLANTIC CHARTER INSURANCE COMPANY.

Prior History:  [***1]  Suffolk. Civil action commenced in the Superior Court Department on April 6, 1994. The case was heard by Margaret R. Hinkle, J., on a motion for summary judgment. After review by the Appeals Court, the Supreme Judicial Court granted leave to obtain appellate review.

Disposition: Judgment of the Superior Court affirmed.

CORE TERMS

coverage

Workers' Compensation & SSDI, Claims, Statute of Limitations, General Overview, Insurance Law, Business Insurance, Commercial General Liability Insurance, Duty to Defend, Administrative Proceedings, Obligations of Parties, Settlements, Liability & Performance Standards, Good Faith & Fair Dealing, Civil Procedure, Remedies, Damages, Monetary Damages, Exclusivity, Exceptions, Benefit Determinations, Coverage, Employment Status, Governmental Employees, Defenses, Exclusivity Provisions, Compensability, Injuries, Filing Requirements, Actions Against Employers, Intentional Misconduct, Jurisdiction, Jurisdictional Sources, Statutory Sources, Judicial Review, Standards of Review, Labor & Employment Law, Employer Liability, Third Party Insurers