FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
MASSACHUSETTS [Hon. F. Dennis Saylor, IV, U.S. District
J. Rogoski, with whom Edward C. Carleton and Skarzynski Black
LLC were on brief, for appellant.
Miranda S. Jones, with whom O'Reilly, Grosso, Gross &
Jones, P.C. was on brief, for appellee.
Lynch, Stahl, and Barron, Circuit Judges.
2014, the appellees in this case brought suit against
Wellesley Advisory Reality Fund I, LLC ("WARF").
Acting in their capacity as representatives of the Board of
Trustees for the Plumbers and Pipefitters Local 51 Pension
and Annuity Funds (the "Funds"), Appellees alleged
that WARF had mismanaged and squandered money that the Funds
had invested in that entity. Following entry of default
judgment against WARF in that case, WARF assigned the Funds
its rights in WARF's insurance policy with Appellant
Scottsdale Insurance Company ("Scottsdale"), which
had declined to defend WARF on the basis of several
exceptions within the policy.
brought an action against Appellees seeking a declaration
that it did not owe WARF a duty to defend or indemnify under
the policy and so owed the Funds nothing, and the Funds
counterclaimed. On cross-motions for summary judgment, the
United States District Court for the District of
Massachusetts ruled that the exclusions in Scottsdale's
policies did not relieve the insurer of its duty to defend
WARF in the prior action. In a subsequent order, the district
court awarded the Funds $3 million, the full limits of the
insurance policy, plus post-judgment interest.
appeals, arguing both that it did not breach its duty to
defend under the policy under Massachusetts law and that,
even if it did, damages should be limited to the costs of the
defense. After careful consideration, we affirm.
dispute in this appeal stems from a "Business and
Management Indemnity Policy" (the "Policy")
issued by Scottsdale to WARF, a real estate investment
vehicle developed by Wellesley Advisors. The Policy
covered the period from November 15, 2013, to December 15,
2014,  and carries a coverage limit of $3
million. The Policy contains the following coverage clauses:
1. The Insurer shall pay the Loss of the Management Insureds
for which the Management Insureds are not indemnified by the
[Company and] which the Management Insureds have become
legally obligated to pay by reason of a Claim first made
against the Management Insureds during the Policy Period . .
. and reported to the Insurer . . . for any Wrongful Act
taking place prior to the end of the Policy Period.
2. The Insurer shall pay the Loss of the Company for which
the Company has indemnified the Management Insureds and which
the Management Insureds have become legally obligated to pay
by reason of a Claim first [made against] the Management
Insureds during the Policy Period . . . and reported to the
Insurer . . . for any Wrongful Act taking place prior to the
end of the Policy Period.
3. The Insurer shall pay the Loss of the Company which the
Company becomes legally obligated to pay by reason of a
[Claim first] made against the Company during the Policy
Period . . . and reported to the Insurer . . . for any
Wrongful Act taking place prior to the end of the Policy
relevant here, the Policy defines "Claim" as
"a civil proceeding against any Insured seeking monetary
damages or non-monetary or injunctive relief . . . ."
"Loss" is defined as "damages, judgments,
settlements, pre-judgment or post-judgment interest awarded
by a court, and Costs, Charges, and Expenses incurred
by" the entities covered under the Policy.
"Wrongful Act" is defined as "any actual or
alleged error, omission, misleading statement, misstatement,
neglect, breach of duty or act allegedly committed or
attempted by" the insured entities.
Policy contains a number of exclusions, three of which are
claimed to be relevant to the present appeal. First, the
Policy includes a "Professional Services Exclusion"
Insurer is not liable for Loss . . . on account of any
Claim alleging, based upon, arising out of, attributable
to, directly or indirectly resulting from, in consequence of,
or in any way involving the rendering or failure to render
Professional Services. . . .
Solely for purposes of this exclusion, Professional Services
means services as a real estate broker or agent, multiple
listing agent, real estate appraiser, title agent, title
abstractor or searcher, escrow agent, real estate developer,
real estate consultant, property manager, real estate
inspector, or construction manager. Such services shall
include, without limitation, the purchase, sale, rental,
leasing or valuation of real property; the arrangement of
financing on real property; or any advice proffered by an
Insured in connection with any of the foregoing.
the Policy provides an "ERISA Exclusion" which
states that Scottsdale
shall not be liable for Loss . . . on account of any Claim .
. . for any actual or alleged violation of the
responsibilities, obligations or duties imposed by [the]
Employee Retirement Income Security Act of 1974, as amended
["ERISA"], or any rules or regulations promulgated
thereunder, or similar ...