On July 6, 2022, the Supreme Judicial Court of Massachusetts determined that an award for attorney’s fees under the Massachusetts consumer protection statute, M.G.L. c. 93A (“Chapter 93A” or “the statute”), was not covered under a business owners liability policy because attorney’s fees awarded under the statute do not constitute damages “because of” bodily injury. The Court further rejected the insured’s argument that attorney’s fees awarded under Chapter 93A were payable under the subject policy’s Supplementary Payments provision, which provided coverage for “costs taxed against the insured”. 

In Vermont Mutual Insurance Co. v. Poirier et al., Slip Op. No. SJC-13209 (Mass. July 6, 2022), Vermont Mutual issued a business owners policy to Paul and Jane Poirier in effect from December 1998 to December 2001 for the operation of their cleaning business (“Servpro”). The policy stated in relevant part that Vermont Mutual will “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury.’” The policy’s Supplementary Payments provision also provided that “[i]n addition to the Limit of Insurance we will pay, with respect to any claim we investigate or settle, or any ‘suit’ against an insured we defend,” certain expenses related to the claim or suit covered by the policy. The policy set forth certain expenses covered under this provision including, “[a]ll costs taxed against the insured in the ‘suit.’”

In June 1999, the underlying claimants hired Servpro to clean out a sewage spill in their basement. One of the claimants later suffered from respiratory issues which she alleged were linked to exposure of chemicals used by Servpro during the cleanup. A lawsuit was brought against Servpro, and Servpro was found liable under Chapter 93A for breach of the implied warranty of merchantability. The trial court in the underlying litigation found damages for diminished earning capacity, medical expenses, pain and suffering, and loss of consortium. It also awarded attorney’s fees against Servpro pursuant to the attorney’s fee provisions under Chapter 93A. 

Vermont Mutual paid all of Servpro’s liability but refused to pay any attorney’s fees. It then subsequently filed a declaratory judgment action seeking a declaration that the attorney’s fee award was not payable under its policy since Chapter 93A treats damages and attorney fee awards as separate remedies and that the Vermont Mutual policy only insured damages “because of” bodily injury. The lower court found that the Chapter 93A award for attorney’s fees fell within the scope of the policy’s coverage for “sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’” and rejected the alternative argument that the policy’s Supplemental Payments provision authorized payment for attorney’s fees. Vermont Mutual appealed that the attorney’s fee award was payable under its policy and the Supreme Judicial Court transferred the case sua sponte.

Chapter 93A creates a private cause of action for any person injured by any unfair methods of competition or deceptive acts or practices during the course of trade or commerce. Chapter 93A, § 9 (3) addresses what a claimant can recover under the statute:

“[R]ecovery shall be in the amount of actual damages or twenty-five dollars, whichever is greater; or up to three but not less than two times such amount if the court finds that the use or employment of the act or practice was a willful or knowing violation of said [§ 2] or that the refusal to grant relief upon demand was made in bad faith with knowledge or reason to know that the act or practice complained of violated said [§ 2].

Chapter 93A, § 9 (4) further provides that once a violation is established under the statute, a claimant may “in addition to other relief provided for by this section and irrespective of the amount in controversy, be awarded reasonable attorney’s fees and costs incurred in connection with said action.”

In reversing the lower court’s decision, the Court examined the common meanings associated with “damages” and “attorney’s fees.” Relying on prior case law citing to Black’s Law Dictionary and Webster’s Third New International Dictionary, the Court found that “…damages caused by bodily injury refer to the physical injuries and the money damages required to compensate them.” Attorney’s fees, however, are different from damages because “they reflect the cost of bringing suit” and that “traditionally parties are responsible to pay their own attorney’s fees.”

The Court acknowledged that statutes like Chapter 93A contain fee-shifting provisions in which a court may award both damages and attorney’s fees against the person or entity responsible for the injury. The Court further noted that the language in Chapter 93A itself distinguishes between recovery of actual damages and awards for attorney’s fees, noting that the statute states that: “[R]ecovery shall be in the amount of actual damages or twenty-five dollars, whichever is greater….”, and “[I]n addition to other relief,” attorney’s fees may be awarded “irrespective of the amount in controversy.” Focusing on Chapter 93A’s own distinction between recovery of actual damages and awards for attorney’s fees, the Court concluded that the statute treats these types of recoveries separately. It also noted that damages and attorney’s fees serve two different purposes, one being to compensate for the injury and the other being to deter misconduct and the public benefit of bringing the misconduct to light. In so finding, the Court determined that attorney’s fees awarded under Chapter 93A are not insured damages under the Vermont Mutual policy since they were not awarded “because of” bodily injury under the statute.

The Court also held that attorney’s fees were not payable under the policy’s Supplemental Payments provision, which authorizes payments for costs “taxed” against the insured. The Court determined that this language conveyed a “narrower, technical meaning of court-related or nominal costs recoverable as a matter of course to prevailing parties” and that prior case law already established that such costs do not include attorney’s fees.