Opinion
20-P-1171
07-01-2021
THE FESSENDEN SCHOOL v. HUB INTERNATIONAL LIMITED & another.[1]
Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass.App.Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass.App.Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass.App.Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
This is a suit for professional negligence and breach of fiduciary duty against an insurance broker. The plaintiff, The Fessenden School, alleges that sometime "[i]n the 1960s or 1970s" the defendants' predecessor, Brewer & Lord, advised Fessenden that Fessenden need not retain its insurance policies for more than seven years. In 1995, and again in 2011-2012, Fessenden received claims from various of its former students, which alleged that the students had been abused at Fessenden at some point between the years 1963 and 1980. Fessenden was unable to locate or to identify applicable insurance policies for many of those years, allegedly due to the faulty advice from Brewer & Lord.
The defendants, HUB International Limited and HUB International New England, LLC (which merged with Brewer & Lord in 2007), both deny being legal successors to Brewer & Lord and contest Brewer & Lord's liability in this matter. Deciding the case as we do, we need not resolve either issue.
A Superior Court judge dismissed Fessenden's complaint on statute of limitations grounds. The judge reasoned that Fessenden was on notice of Brewer and Lord's breaches of duty in 1995, and no later than 2012, after receiving the former students' complaints and learning of Brewer & Lord's advice. Moreover, Fessenden had suffered "appreciable harm," because it had incurred significant costs when it hired outside consultants to investigate the status of its insurance coverage both in 1995 and again in 2011-2012. Since suit was not brought until 2016, the applicable three year statute of limitations had expired.
A predecessor to this action was filed in Federal court in November of 2016. The parties subsequently entered into a pair of agreements to toll the statute of limitations until January of 2019. The complaint underlying the present appeal was filed in October of 2019.
The plaintiff appeals, and we affirm.
Discussion.
"We review the allowance of a motion to dismiss de novo, accepting the allegations in the complaint as true and drawing all reasonable inferences in the [nonmovant's] favor." Harrington v. Costello, 467 Mass. 720, 724 (2014). The facts discussed infra are taken from the well pleaded allegations of the complaint, supplemented as appropriate by certain facts that were briefed at the motion to dismiss stage and that are not disputed on appeal.
The basic law with respect to statutes of limitation for claims of professional negligence and breach of fiduciary duty is well established. The limitations period is that applicable generally to tort claims -- three years from the date the cause of action accrued. G. L. c. 260, § 4. The cause of action generally accrues on the date that the plaintiff was injured, but where either the breach of duty or the plaintiff's injury was "inherently unknowable," the cause of action does not accrue until the plaintiff knew, or reasonably should have known, the facts that give rise to both a breach of duty and resulting harm. Massachusetts Elec. Co. v. Fletcher, Tilton & Whipple, P.C., 394 Mass. 265, 267-268 (1985). The plaintiff need not know the legal theory on which he or she might sue, as long as the plaintiff has notice of the operative facts. Gore v. Daniel O'Connell's Sons, Inc., 17 Mass.App.Ct. 645, 647 (1984). Furthermore, and importantly for present purposes, the plaintiff need not know the full extent of his or her harm for the cause of action to accrue. Cantu v. St. Paul Cos., 401 Mass. 53, 56 (1987), citing Olsen v. Bell Tel. Labs., Inc., 388 Mass. 171, 175 (1983). See Gore, supra at 649 ("[T]he statute of limitations does not stay in suspense until the full extent, gravity, or permanence of that same injury ... is known"). All that is required is notice that the plaintiff has suffered "appreciable harm" as a result of the defendant's negligence or breach of duty. Cantu, 401 Mass. at 56.
Here, there were two events that provided Fessenden with notice of the defendants' alleged breach of duty. The first occurred in 1995, when Fessenden received a claim from a former student, which alleged that the student had been abused at the school in 1974. At that time, Fessenden retained a lawyer who, among other things, investigated the status of Fessenden's insurance coverage for the student's claim. The lawyer could not locate Fessenden's insurance policies from the 1974 time period. In the process the lawyer contacted Brewer & Lord, and learned of Brewer & Lord's advice that had been given many years earlier ("[i]n the 1970s and prior to the mid 1980s"); that alleged advice forms the basis of Fessenden's claims here. At the time (1995), the lawyer prepared a draft affidavit for a former Brewer & Lord employee in an attempt to document Brewer & Lord's prior advice, but the draft affidavit reflecting that advice was not signed.
While the 1995 student claim was apparently resolved short of litigation, the issue of Fessenden's insurance coverage arose again in 2011-2012, when Fessenden received a series of additional abuse claims, spanning the years 1963-1973, and 1979-1980. Fessenden again retained an outside consultant, this time hiring Marsh & McLennan (an insurance firm, hereinafter Marsh) "to reconstruct the school's insurance program over the 1963 to 1977 time period." Fessenden states that Marsh was retained to aid Fessenden in its "negotiations with the insurance companies" regarding coverage for the new student claims.
The record does not reveal the basis for the new student claims, or why they might be deemed timely when made.
In light of the above facts, the conclusion that the statute of limitations had run in this case follows from settled law. Suit was brought in 2016, so the question is whether Fessenden was on inquiry notice of its claim against Brewer & Lord prior to 2013. Here it clearly was.
To begin, Fessenden does not contest that it had actual knowledge of Brewer & Lord's allegedly faulty advice by 1995, and that it contended again with the consequences of that advice in 2011-2012. Since Fessenden had knowledge of the breach of duty, the only remaining question is whether it had suffered "appreciable harm" from the alleged breach prior to 2013.
The professional fees Fessenden incurred in hiring Marsh satisfy the "appreciable harm" test. In Cantu, 401 Mass. at 57, the Supreme Judicial Court confronted a similar question, regarding when a cause of action had accrued for legal malpractice. The defendant law firm had defended the plaintiff, a doctor, in the trial of a medical malpractice case, and allegedly had failed to notify the doctor's excess insurer, thereby exposing the doctor to unnecessary personal liability as a result of an adverse trial judgment. Id. at 55. After the jury returned a verdict adverse to the doctor he became aware of trial counsel's failure, and he retained separate counsel to advise him regarding his insurance issues. Id.
The doctor did not sue his medical malpractice lawyers, however, until his appeal was unsuccessful. Cantu, 401 Mass. at 57-58. The court held that the doctor's legal malpractice claim accrued when he retained and incurred the costs of separate counsel, even though he did not then know the full extent of his harm:
"Here, [plaintiff] knew that the defendants failed to give timely notice to [the excess insurance carrier]. He knew that the jury verdict exceeded his primary coverage. As a result, [plaintiff] retained [separate counsel] and incurred legal fees. At that point, the necessary coalescence of discovery and appreciable harm occurred. It is of no import whether [plaintiff] won on appeal; he had been harmed by having to pay legal fees to [separate counsel]."Id. at 57. See Frankston v. Denniston, 74 Mass.App.Ct. 366, 375 (2009) (cause of action accrued when plaintiff incurred "additional attorneys' fees and expenses required to ameliorate the harm caused by [the attorney's] alleged error"), quoting Pelletier v. Chouinard, 27 Mass.App.Ct. 92, 95 (1989).
Cantu and its progeny are controlling with respect to Fessenden's claims here. The gist of Fessenden's argument is that it did not know that it had been harmed by Brewer & Lord's faulty advice until Fessenden learned, in 2016, that its purported insurers were denying coverage for some of the 1963-1973 claims. However, Fessenden suffered sufficient and "appreciable harm" back in 2011-2012, when it incurred the costs of Marsh's investigation. The Marsh investigation resulted from Brewer & Lord's alleged negligence -- that is, Marsh was retained because the insurer's policies could not be located at Fessenden, and further investigation was required. Fessenden argues that Marsh's work was "related to [Fessenden's] negotiations with the insurance companies" -- rather than to the claims of Fessenden's former students -- but that argument is unavailing. The point is that Fessenden incurred appreciable costs in 2011-2012 as a result of Brewer & Lord's faulty advice; it does not matter how Fessenden characterizes the purpose of the work that Marsh performed.'
At oral argument, Fessenden contended that there was an insufficient record to determine that the costs incurred for Marsh's investigation were actually "appreciable." This argument was not made in the Superior Court, and in any event, given Fessenden's statement that it "does not dispute its incurrence of professional expenses for . . . Marsh and McLennan," as well as Fessenden's statements regarding the nature of Marsh's work, it is evident that the costs incurred for Marsh were material, and not de minimis.
The motion judge was of the view that Fessenden suffered sufficient appreciable harm back in 1995, when it first hired counsel to investigate. Fessenden counters that those 1995 legal costs only had to do with coverage for a single year, 1974, and for a student claim no longer at issue. In our view Fessenden has the better of this argument; a claim filed by Fessenden in 1995 could not have sought the relief sought in this lawsuit, which involves other polices and other student claims. The claim at issue accordingly did not accrue in 1995 but instead by no later than 2011 or 2012, still more than three years before Fessenden filed suit.
Fessenden's reliance on International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 29 Mass.App.Ct. 215 (1990), is also misplaced. International Mobiles merely stands for the proposition that a cause of action for professional negligence has not accrued where the plaintiff has not yet suffered any harm. The court expressly distinguished cases, such as this one, where professional costs had previously been incurred. The court stated:
"In the instant case, although [plaintiff] had reason to think that [defendant] had bungled when [the excess coverage insurer] responded in 1981 that its policy did not cover vehicles in Rhode Island, [plaintiff] incurred no expense nor, on this record, suffered any discernible detriment as a result of [defendant's] negligence. The expense of [plaintiff's] defense, as we have noted, was borne entirely by [the primary liability insurer] and that relatively peculiar circumstance bears decisively on the outcome of the case. This is not a case where some damage had been sustained, as by the payment of legal fees, but its extent was unknown. . . . Whether there is any harm at all is a question distinct from whether the magnitude of the harm is ascertainable, albeit definite" (emphasis added).Id. at 219-220.
In short, here the record showed that Fessenden's claims for negligence and breach of fiduciary duty had accrued by 2012, more than three years prior to suit, due to "[t]he necessary coalescence of discovery and appreciable harm." Cantu, 401 Mass. at 58.
Judgment affirmed.
The panelists are listed in order of seniority.