[Copyrighted Material Omitted]
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS. Hon. Indira Talwani, U.S. District Judge.
Higgins, with whom Russell F. Conn, Katherine A. Kelter, and
Conn. Kavanaugh Rosenthal Peisch & Ford LLP were on brief,
A.K. Grunert, with whom Goganian & Associates, P.C. was on
brief, for appellee.
Howard, Chief Judge, Lynch and Lipez, Circuit Judges.
HOWARD, Chief Judge.
Mutual Insurance Company (" Utica" ) appeals from a
summary judgment order requiring it to defend its insured
Herbert H. Landy Insurance Agency (" Landy" ) in a
California state court lawsuit. Agreeing with the district
court that Utica is obligated to defend Landy under its
professional liability insurance policy, we affirm.
and Utica each are insurance companies. Landy provides
insurance to real estate professionals, and Utica insured
Landy under a professional liability insurance policy. This
policy, which the parties agree is governed by Massachusetts
law, contains a " duty to defend" obligation that
required Utica to defend Landy in certain lawsuits arising
from errors and omissions in Landy's provision of
professional services as an insurance broker and agent.
alleges that Utica's duty to defend was triggered when
Landy was sued by CRES Insurance Services, LLC ("
CRES" ). CRES is a competitor of Landy in the California
real estate professional liability insurance market. CRES
sued Landy in California state court, alleging that Landy had
engaged in unfair business practices in violation of
California state law.
CRES alleged that California law divides the relevant
insurance market between " admitted" and "
surplus" insurers. See generally Cal. Ins. Code §
1763; Cal. Code Regs. tit. 10, § § 2131-2140; 39
Cal.Jur. 3d Insurance Companies § 227. According to
CRES's complaint, admitted insurers generally charge
higher premiums than surplus insurers. Nevertheless,
California law favors the admitted insurers. See Cal. Code
Regs. tit. 10, § 2132(a). California permits an
insurance broker to offer a surplus insurer's policy only
in limited circumstances when the admitted pool is deemed
inadequate. See Cal. Ins. Code § 1763(a); Cal. Code
Regs. tit. 10, § 2132(b). CRES alleged that Landy
improperly offered surplus insurers' policies despite the
adequacy of the admitted market.
on these facts, CRES asserted two causes of action.
CRES's first claim was a statutory claim alleging that
Landy's violation of the state insurance code constituted
unfair business practices. See Cal. Bus. & Prof. Code §
17200, et seq.
second claim was for negligence, alleging that Landy's
conduct negligently interfered with CRES's prospective
economic advantage. Specifically, CRES asserted that Landy
" failed to act with reasonable care," including
" in the solicitation and placement of [insurance
policies]." It further alleged that Landy " failed
to conduct a diligent search of the admitted market, filed
falsified documentation relating to the search, and evaded
scrutiny . . . by failing to file required statements."
demanded that Utica defend it in the CRES lawsuit under the
policy. In response, Utica filed this action in Massachusetts
federal district court, seeking a declaration that CRES's
negligence claim did not trigger its duty to
parties dispute the meaning of two policy provisions. First,
the policy covers only suits arising from Landy's errors
or omissions in " rendering or failing to render
professional services" as an insurance broker or
insurance agent. It does not provide comprehensive
liability insurance. Utica argues that CRES's negligence
claim did not arise from alleged errors in Landy's
professional insurance services, but rather from Landy's
allegedly unfair business practices. Landy's position is
that the two are not mutually exclusive: Landy's
allegedly unfair business practices were committed in the
course of providing allegedly negligent professional
the policy expressly excludes coverage for " unfair
competition of any type." The policy also contains an
exclusion for intentional misconduct. Utica argues
that, in order to give independent meaning to both the unfair
competition and intentional misconduct exclusions, the unfair
competition provision excludes not only intentional unfair
competition, but also negligent unfair competition. Utica
characterizes CRES's negligence claim as just such a
claim of negligent unfair competition.
disagrees for two reasons. It says that under Massachusetts
law, " unfair competition" encompasses only conduct
that misleads consumers, and the CRES complaint includes no
allegations of consumer confusion. Alternatively, Landy
argues that the exclusion does not apply to negligent
performance of ...