In the case of Vermont Mutual Insurance Co. v Poirier (Massachusetts Supreme Judicial Court no. SJC-13209, July 6, 2022) Paul Poirier and Jane Poirier operated a disaster restoration business. The business was insured under a general commercial liability insurance policy. The policy covered “sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’,” a standard liability insurance policy provision.
Phyllis Maston sued the Poiriers, contending that the Poiriers' business activities caused her injury. The court described the relevant facts as follows:
[D]uring the term of the policy, Douglas and Phyllis Maston hired the Poiriers' company . . . to clean up a sewage spill in their basement . . . [W]orkers removed contaminated material, cleaned the basement, and applied disinfectants. Although they warned Phyllis to stay out of the basement while they applied the products, they did not warn her that being in the basement could be dangerous until the disinfectants dried. Phyllis continued cleaning the basement in the days following the application of the disinfectants. Shortly after, she developed ongoing respiratory problems, which her doctors determined was caused by exposure to chemicals that were used in [the] cleaning products.
Ms. Maston's lawsuit alleged breach of contract, negligence, and violation of G. L. c. 93A * based on breach of the implied warranty of merchantability and breach of the implied warranty of fitness for a particular purpose. Shortly before trial Ms. Maston waived her contract and negligence claims and proceeded to a [judge] trial on the c. 93A claim alone.
* G. L. c. 93A prohibits “unfair or deceptive acts or practices in the conduct of any trade or commerce.” The statute additionally provides that a prevailing party shall “be awarded reasonable attorney’s fees and costs . . .”
As relates to Ms. Maston's c. 93A claim, Massachusetts law provides that those engaged in business imply that the goods they offer are "fit," that is, will perform as intended (this is referred to as the implied warranty of merchantability). If the goods are promoted as capable of accomplishing a particular task(s) or outcome(s), the goods must actually be so capable (this is referred to as the implied warranty of fitness for a particular purpose). * A breach of warranty is also a violation of G.L. c. 93A.
* For instance, a wet-dry vacuum must be capable of collecting water. If the vacuum is advertised as capable of collecting a particular volume of water over a specific time, it must be so capable.
The trial judge found that Poiriers committed a breach of the implied warranty of merchantability (subjecting them to liability under G.L. c. 93A), though did so unknowingly and unintentionally. The judge determined that Ms. Maston suffered diminished earning capacity, medical expenses, and pain and suffering in an amount totaling $267,248.
Because Poiriers were responsible under G. L. c. 93A, the judge additionally assessed attorney’s fees in the amount of $215,328 and costs of litigation in the amount of $15,447. Poiriers appealed to the Massachusetts Appeals Court. The Appeals Court affirmed the trial court outcome and imposed further (appellate) attorney’s fees of $21,600 and (appellate) costs of $1,970, for a total $236,928 in fees and $17,417 in costs.
The insurer paid Ms. Maston $696,669, which represented her damages and the costs assessed (and legal interest on both), but did not include attorney’s fees (or legal interest on the attorney’s fees). The insurer then sued Poiriers, seeking a determination that the policy did not include coverage for attorney’s fees (that is, that the policy required the Poiriers to satisfy from their own wealth any award of attorney’s fees (here $236,928 plus legal interest)). The trial court concluded that the policy included coverage for attorney’s fees assessed against an insured (that is, Poiriers prevailed in the trial court). The insurer appealed.
The issue on appeal was whether the attorney’s fee award amounted to “damages because of bodily injury,” the Poiriers contending that the bodily injury was the cause of the attorney’s fee award: without the bodily injury no attorney’s fees would be awarded.. The Massachusetts Supreme Judicial Court concluded differently, reasoning damages because of bodily injury are compensation for physical or emotional--but not economic--harm.
In the final analysis, the Poiriers were found to have acted innocently, that is, they did not knowingly or intentionally cause harm. Persons obtaining insurance for their innocent wrongs expect that that insurance will cover the resulting harm--but these expectations can be mistaken. In this instance the Poiriers will be responsible to Ms. Maston in an amount likely in excess of $600,000 (and will have additionally incurred their own attorney’s fees is seeking to establish insurance coverage).
The moral of the story: Even innocent wrongs by a business with liability coverage can result in significant, uninsured losses. Businesses might inquire of their insurance agent if additional coverage is available to cover these business liabilities.