## Facts

- Gerardo Salvati died in 2010 when brickwork fell from a Boston building and caused him to fall from a ladder during maintenance work.
- Lucia Salvati sued the decedent’s supervisor and related property-ownership entities (the insureds) for wrongful death and loss of consortium in Massachusetts state court.
- The insureds had a $1 million primary liability policy with Western World Insurance Company and a $9 million excess liability policy with American Insurance Company (AIC).
- Western World defended the tort action; AIC repeatedly refused to provide excess coverage.
- Before trial, the parties settled for $6 million: Western World paid its $1 million limit; Salvati released Western World and the insureds from further liability; and the insureds assigned their rights against AIC to Salvati.
- The settlement was not accompanied by a court judgment against the insureds.

## Issues

1. Whether the settlement, without a court judgment and coupled with a release of the insureds, plausibly triggered AIC’s duty to indemnify under the excess policy.
2. Whether an assignee of the insureds may maintain statutory claims for unfair insurance settlement practices under Mass. Gen. Laws ch. 176D and related claims under ch. 93A.

## Decision

- The First Circuit affirmed dismissal under Rule 12(b)(6).
- The court rejected a categorical reading that the excess policy required a formal judgment to trigger indemnity.
- Nonetheless, the complaint did not plausibly allege that the settlement created a covered, enforceable legal obligation of the insureds reaching the excess layer, so the breach-of-contract and declaratory-judgment claims failed.
- The court held Salvati could not bring a direct claim under Mass. Gen. Laws ch. 176D, and her statutory causes of action did not survive.

## Legal Principles

- Excess coverage for “sums the insured is legally obligated to pay” may, in principle, be implicated by liability resolved through settlement, not only by judgment, depending on policy language and governing law.
- A settlement that releases the insureds from further liability, and that is not binding on a nonparticipating excess insurer denying coverage, may fail to establish the insureds’ continuing “legal obligation to pay” required to trigger excess indemnity.
- Under Massachusetts law, there is no independent private right of action directly under Mass. Gen. Laws ch. 176D; statutory recovery must proceed, if at all, through ch. 93A within recognized standing limits.

## Conclusion

The First Circuit held that, even though an excess policy’s “judgment” wording should not be read to categorically bar settlement-based liability, the pleaded settlement terms here eliminated any plausible allegation that the insureds remained legally obligated to pay amounts implicating excess coverage, and the plaintiff also lacked a viable statutory cause of action under Massachusetts unfair-settlement-practice law.


Salvati v. Am. Ins. Co., 855 F.3d 40 (1st Cir. 2017)