Massachusetts Supreme Judicial Court Holds a Duty to Defend Does Not Extend to Affirmative Counterclaims

The Massachusetts Supreme Judicial Court has ruled that under a policy with a duty to defend, “the insurer’s duty to defend does not require it to prosecute affirmative counterclaims on behalf of its insured.”  The Court, its Mount Vernon Fire Ins. Co. v. VisionAid, Inc. decision with a 5-2 vote, further held the same outcome results when a policy contains a duty to pay defense costs.  In limiting an insurer’s obligation to “any proceeding initiated against” the policyholder, the opinion relies on the “clear and unambiguous” language of the policy and the “usual and accepted meaning” of the word “defend.”  The majority disagreed with VisionAid and the dissenting opinion that looked to allow for defense coverage for “sufficiently intertwined” counterclaims, saying “not only is this proposition found nowhere in the language of the contract, [but also] it would result in extensive preliminary litigation to determine what claims are sufficiently intertwined ….”