Xu v. Donovan, No. 1584 CV 01625-BLS2, 2017 Mass. Super. LEXIS 66 (Supr. Ct. Mass., Jun. 2, 2017).

A Massachusetts state court awarded summary judgment in favor of a medical center, its captive insurer and the claims administrator who signed a high/low agreement on its behalf, rejecting claims of fraudulent inducement, fraud, unfair/deceptive practices and negligence based upon the alleged misrepresentation of the contents of an excess policy. The case hinged upon the interpretation of complex policy language.

This case arose out of an earlier tort case in which two doctors and a nurse were sued for medical malpractice. The parties in that case agreed, prior to a jury verdict, that the plaintiffs would receive a maximum of US$2.5 million for each defendant found liable, plus a

flat US$300,000 recovery for each defendant found not liable. The jury found two of the individuals liable and awarded US$24.43 million in damages, resulting in the plaintiffs receiving US$5.3 million under the agreement. The plaintiffs then initiated this action, alleging that the agreement was fraudulently induced by misrepresentations that insurance coverage was capped at US$2.5 million per defendant, while in reality, an excess policy provided coverage of up to US$30 million with no individual cap.

The excess policy in question was a "follow form" policy, incorporating by reference various terms and conditions from specified reinsurance contracts. The reinsurance contracts stated that: (a) the reinsurer was only liable in excess of "Underlying Amounts" of US$5 million per medical incident; (b) the contracts covered a maximum of US$30 million of liability in the aggregate for each medical incident; (c) the maximum coverage limit was US$2.5 million per insured individual; and (d) only aggregate losses that exceeded the "applicable underlying amount" of US$5 million would be covered.

The court found that this combination of policy language was "unambiguous" in covering only up to US$2.5 million in liability per individual defendant and refused to allow plaintiffs to challenge this interpretation using witness testimony. Based on this interpretation, the court concluded that there was no fraudulent misrepresentation, as the coverage limited had been accurately conveyed to the plaintiffs (as required by state statute).