NOTICE: All slip opinions and orders are subject to formal
revision and are superseded by the advance sheets and bound
volumes of the Official Reports. If you find a typographical
error or other formal error, please notify the Reporter of
Decisions, Supreme Judicial Court, John Adams Courthouse, 1
Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-
1030; SJCReporter@sjc.state.ma.us

15-P-401                                             Appeals Court

  WINBROOK COMMUNICATION SERVICES, INC., & others1    vs.     UNITED
               STATES LIABILITY INSURANCE COMPANY.


                             No. 15-P-401.

           Suffolk.       March 8, 2016. - June 14, 2016.

            Present:    Hanlon, Sullivan, & Massing, JJ.


Practice, Civil, Default, Summary judgment. Insurance,
     Coverage, Insurer's obligation to defend, Construction of
     policy. Contract, Insurance, Performance and breach.
     Damages, Negligent misrepresentation.


     Civil action commenced in the Superior Court Department on
December 20, 2011.

     The case was heard by Geraldine S. Hines, J., on a motion
for summary judgment, and a motion for reconsideration and a
second motion for summary judgment were heard by Bonnie H.
MacLeod, J.


    Eric F. Eisenberg for the plaintiffs.
    John B. DiSciullo for the defendant.


    SULLIVAN, J.      In this insurance coverage dispute we

consider whether the factual record on cross motions for summary

    1
       360 Public Relations LLC; Andrew Wolfendon; Daystar
Computer Services, Inc.; Michelle Winder; Opera House Digital;
and Sheila Beninati, doing business as Sheila Beninati Design.
                                                                   2


judgment is adequate to permit either party to establish

entitlement to judgment as matter of law.    Plaintiff Winbrook

Communication Services, Inc. (Winbrook2), appeals from a summary

judgment declaring that the defendant, United States Liability

Insurance Company (USLIC), had no obligation under a directors

and officers liability policy to pay a judgment obtained by

Winbrook against USLIC's insureds, DeSales Group, LLC (DSG), and

William York (collectively, DSG).   We conclude that it was error

to grant USLIC's motion for summary judgment because there

remain genuine issues of material fact as to the applicability

of the policy's personal profit exclusion.   More precisely,

there is a genuine dispute of material fact whether DSG received

any profit, benefit, remuneration, or advantage to which DSG was

not legally entitled.   Accordingly, we vacate and remand for

further proceedings.

     Background.   The procedural history of the litigation is

both material and undisputed.   Winbrook filed suit against DSG

and York on August 24, 2010, alleging that York had made a

series of negligent misrepresentations concerning DSG the

entity's financial condition that induced Winbrook to continue

to work on the development of a children's storybook series and




     2
       Unless otherwise noted, "Winbrook" refers, collectively,
to all plaintiffs.
                                                                     3


associated promotional items.    The series never went to market

and Winbrook sued, seeking compensation for work performed.

     DSG gave notice to USLIC of Winbrook's claims in advance of

suit.    USLIC replied that the policy would not cover the claims.

After suit was filed, Winbrook notified USLIC of the suit and of

a pending motion for entry of default.    DSG reportedly told

USLIC that it did not intend to defend.    USLIC again denied

coverage, citing two reasons:    (1) the claims were for the

failure to pay contractual debts, and such claims did not allege

a "Wrongful Act" as required for coverage under the insuring

agreements,3 and (2) the claims were excluded by exclusion C, the

so-called "personal profit exclusion."4    USLIC declined to defend

under a reservation of rights, and did not seek declaratory

relief while the underlying liability action was pending.      DSG

defaulted.    After a hearing, a judge of the Superior Court

(first judge) adopted proposed findings outlining the claimed

     3
       The policy defines "Wrongful Act" to include claims of
misrepresentation: "'Wrongful Act' means any actual or alleged
act, error, omission, misstatement, misleading statement,
neglect or breach of duties."
     4
         Exclusion C states, in pertinent part:

     "[USLIC] shall not be liable to make payment for Loss in
     connection with any Claim made against any Insured arising
     out of, directly or indirectly resulting from or in
     consequence of, or in any way involving: . . .

     "C. any of the Insureds gaining in fact any profit,
     benefit, remuneration or advantage to which such Insured
     was not legally entitled."
                                                                   4


misrepresentations, and Winbrook's calculation of losses.    The

judge then entered a default judgment in favor of Winbrook in

the amount of $597,633.25 plus interest.5

     With judgment in hand, Winbrook brought this action against

USLIC in December of 2011, seeking a declaratory judgment that

USLIC is obligated to pay the judgment obtained by Winbrook

against DSG, damages for breach of contract as a third-party

beneficiary of the insurance contract, and damages for unjust

enrichment and for violation of G. L. c. 93A.   Winbrook moved

for summary judgment, and also moved for a protective order to

bar discovery by USLIC.   A different Superior Court judge

(second judge) concluded that the existence of a claim for

misrepresentation was conclusively established in the previous

action, and that the claim fell within the coverage provisions

of the policy.   She granted the motion for a protective order,

reasoning that the sole purpose of USLIC's discovery requests

was to "marshal additional evidence in support of its position

that the insureds are properly liable under a theory of breach

of contract, not negligent misrepresentation," and that because

that claim was barred by the default, discovery was not

warranted.   Finally, she determined that there was a genuine


     5
       Execution issued in the amount of $667,022.09. The
judgement was later reduced upon motion of Winbrook to reflect a
set-off for monies paid by third parties before the
misrepresentations were made.
                                                                    5


dispute of material fact as to the applicability of exclusion C,

and denied summary judgment.6

     The summary judgment order was silent as to discovery

regarding exclusion C, and neither party sought discovery

regarding exclusion C.7   Rather, Winbrook filed a request for

reconsideration of the summary judgment as to the applicability

of exclusion C, and USLIC filed a cross motion for summary

judgment.   Winbrook provided additional affidavits in support of

the motion for reconsideration, and supplied the record

supporting the default judgment.   In opposing Winbrook's motion

to reconsider and in supporting its own cross motion for summary

judgment, USLIC relied exclusively on materials submitted by

Winbrook.

     On the basis of the record as supplemented, a third judge

of the Superior Court ruled that coverage was barred by

     6
       USLIC had filed an affidavit in opposition to Winbrook's
motion for summary judgment stating, "The record is not
developed as to whether [USLIC's] insured reaped wrongful gains
as a result of conduct that would be insurable under the
Policy." See Mass.R.Civ.P. 56(f), 365 Mass. 824 (1974).
     7
       Under Massachusetts law, an insurer is allowed to contest
indemnity even if it has breached its duty to defend, so long as
its coverage defense is compatible with the facts to which the
insurer is bound. See Metropolitan Prop. & Cas. Ins. Co. v.
Morrison, 460 Mass. 352, 360-361 (2011) (insurer bound "as to
all matters therein decided which are material to recovery by
the insured"). Here, Winbrook's losses were established by the
default judgment, but DSG's gains were not at issue in that
proceeding. In other words, DSG's gains were not material to
the judgment, and DSG's gains therefore were not conclusively
established by the default judgment. See ibid.
                                                                      6


exclusion C because the insureds had reaped a gain "in fact,"

that is, an advantage or an opportunity to profit.     The third

judge concluded that the insured had secured an advantage or

opportunity, to wit, an extension of credit from Winbrook by

persuading Winbrook to work without payment.    As a result, the

judge ordered the entry of summary judgment in favor of USLIC.

    Discussion.    The standard of review of a grant of summary

judgment is whether, viewing the evidence in the light most

favorable to the nonmoving party, there are no genuine issues of

material fact and the moving party is entitled to a judgment as

a matter of law.     Commissioners of the Bristol County Mosquito

Control Dist. v. State Reclamation & Mosquito Control Bd., 466

Mass. 523, 528 (2013).    See Mass.R.Civ.P. 56(c), as amended, 436

Mass. 1404 (2002).    Where, as here, both parties have moved for

summary judgment, "the evidence is viewed in the light most

favorable to the party against whom judgment is to enter."

Albahari v. Zoning Bd. of Appeals of Brewster, 76 Mass. App. Ct.

245, 248 n.4 (2010).    See DiLiddo v. Oxford St. Realty, Inc.,

450 Mass. 66, 70 (2007).     "We review a decision to grant summary

judgment de novo."     Boazova v. Safety Ins. Co., 462 Mass. 346,

350 (2012).

    1.   Wrongful act.     USLIC urges us to affirm the summary

judgment on the basis that the claims asserted against DSG did

not fall within the insuring agreements of the policy, a claim
                                                                   7


that the second judge rejected.   See Aetna Cas. & Sur. Co. v.

Continental Cas. Co., 413 Mass. 730, 734-735 (1992) (prevailing

party may argue that judge was "right for the wrong reason").

USLIC contends that the second judge erred in concluding that

the claim fell within the definition of a "Wrongful Act" because

the damages sought arose out of a breach of contract and the

policy does not insure trade debt.

    "Where, as here, the plaintiff in the underlying action

brings a negligence claim and the factual allegations in the

complaint are sufficient to support such a claim, the default

judgment conclusively establishes negligence as to the defendant

insured and, if the insurer has committed a breach of its duty

to defend, as to the insurer."    Metropolitan Prop. & Cas. Ins.

Co. v. Morrison, 460 Mass. 352, 360 (2011), citing MacBey v.

Hartford Acc. & Indem. Co., 292 Mass. 105, 106 (1935).    See,

e.g., Miller v. United States Fid. & Guar. Co., 291 Mass 445,

448 (1935) ("Where an action against the insured is ostensibly

within the terms of the policy, the insurer, whether it assumes

the defense or refuses to assume it, is bound by the result of

that action as to all matters therein decided which are material

to recovery").

    Here, a default judgment entered against the insured on a

claim of negligent misrepresentation.   USLIC, which was on

notice of the action by Winbrook but disclaimed coverage and
                                                                    8


declined to defend without first obtaining a judicial

declaration, was bound by the default judgment.   See Blais v.

Quincy Mut. Fire Ins. Co., 361 Mass. 68, 70-71 (1972) ("[A]n

indemnitor, after notice and an opportunity to defend, is bound

by material facts established in an action against the

indemnitee. . . .    In the absence of fraud or collusion the

insurer would be bound by a judgment entered by default").

       On appeal USLIC contends that the second judge applied the

doctrine of res judicata in error.    This argument misapprehends

the basis of the judges' rulings.8   "[USLIC] may be bound . . .

if it committed a breach of its duty to defend, because 'an

insurer who has wrongfully refused to defend its insured cannot

relitigate coverage issues.'"    Metropolitan Prop. & Cas. Ins.

Co., supra at 361 n.10, quoting from Maimaron v. Commonwealth,

449 Mass. 167, 175 (2007).    A breach of the duty to defend

"trigger[s] a duty to indemnify" because the insurer is bound by

the result in the underlying action "as to all matters therein

decided which are material to recovery by the insured."    Id. at

360.

       8
       Although the second judge did not expressly address the
duty to defend, we understand her ruling to have encompassed an
implicit determination of the duty to defend, which was
essential to her conclusion that USLIC was bound by the default
judgment. On appeal, USLIC urges us to decide the question of
coverage as a matter of law based on the definition of "Wrongful
Acts." USLIC does not argue that it was relieved of the duty to
defend because of any exclusion. Contrast Metropolitan Prop. &
Cas. Ins. Co., supra at 361-362.
                                                                     9


     USLIC responds that the lack of coverage is so evident on

the face of the Winbrook complaint against DSG that it had no

duty either to defend or to indemnify.    See generally United

Natl. Ins. Co. v. Parish, 48 Mass. App. Ct. 67, 70-73 (1999).

"[The] duty to defend is independent from, and broader than,

[the insurer's] duty to indemnify."    Metropolitan Prop. & Cas.

Ins. Co., supra at 357 (citation omitted).    "In order for the

duty of defense to arise, the underlying complaint need only

show, through general allegations, a possibility that the

liability claim falls within the insurance coverage."    Preferred

Mut. Ins. Co. v. Vermont Mut. Ins. Co., 87 Mass. App. Ct. 510,

513 (2015) (citation omitted).

     The wrongful act provision of the policy here expressly

covered claims of negligent misrepresentation.    See note 3,

supra.    The complaint against DSG alleged negligent

misrepresentation by DSG.    The complaint contained no allegation

that a contract existed, or that DSG had breached a contract.9

Rather, the complaint alleged that Winbrook was duped into

continuing to develop a product on the basis of promises of

future payment at a time when the promises were negligently

made.    The operative source of the injury alleged was the

misrepresentation, not a contract or other preexisting

     9
       The policy excluded claims arising out of a breach of
contract as to DSG, the entity, but not as to York as an
individual.
                                                                     10


obligation.10   The fact that the damages sought for the covered

negligence claim -- the cost of the goods and services produced

-- were based on invoices did not place the allegations of the

complaint wholly outside of the coverage provisions of the

policy.   See ibid.    The policy contained no general exclusion

for damages for a wrongful act -- such as misrepresentation --

simply because those damages also might be similar or equivalent

to contract damages.

     "We do not disagree that the underlying factual allegations

of a complaint are a better gauge for assessing potential

coverage than conclusory theoretical labels squarely at odds

with those facts. . . .     Here, however, the labels are not at

odds with [the] factual allegations."    Norfolk & Dedham Mut. Fire

Ins. Co. v. Cleary Consultants, Inc., 81 Mass. App. Ct. 40, 50

(2011).   Because USLIC owed its insureds a duty to defend under

the policy, and breached that duty, it was bound by the default

judgment.

     2.   Exclusion C.    The third judge granted summary judgment

on the duty to indemnify on the basis that there were no

material facts in dispute as to Winbrook's gains, and that

     10
       For this reason USLIC's reliance on Pacific Ins. Co. v.
Eaton Vance Mgmt., 369 F.3d 584 (1st Cir. 2004), is also
misplaced. In Pacific Ins. Co., supra at 591, it was conceded
that the insured had a preexisting and ongoing obligation to
make the pension payments at issue. Here there is no allegation
evident from the face of the complaint that DSG had an ongoing
obligation to provide goods or services.
                                                                    11


exclusion C barred coverage.    Winbrook submits that DSG did not

in fact gain any profit, benefit, remuneration, or advantage

because (1) DSG never received any of the goods Winbrook

produced, and (2) the plain meaning of the phrase "in fact" does

not encompass the mere opportunity to gain a profit, benefit,

remuneration, or advantage.    In addition, to the extent an

opportunity can be considered a benefit or an advantage in fact,

Winbrook argues that the opportunity must be "objectively real"

and not merely possible.

       "The proper interpretation of an insurance policy is a

matter of law to be decided by a court."    Boazova, 462 Mass. at

350.    Terms of an insurance policy must be interpreted in

accordance with the "fair meaning of the language used, as

applied to the subject matter."    Davis v. Allstate Ins. Co., 434

Mass. 174, 179 (2001) (citation omitted).    "Doubts created by

any ambiguous words or provisions are to be resolved against the

insurer."    City Fuel Corp. v. National Fire Ins. Co. of

Hartford, 446 Mass. 638, 640 (2006).    A term or policy provision

is ambiguous "only if it is susceptible of more than one meaning

and reasonably intelligent persons would differ as to which

meaning is the proper one."    Barnstable v. American Financial

Corp., 51 Mass. App. Ct. 213, 215 (2001).    However, an

exclusionary clause "may be ambiguous . . . when read in the

context of the entire policy or as applied to the subject
                                                                      12


matter."    Ibid.   "Exclusionary clauses must be strictly

construed against the insurer so as not to defeat any intended

coverage or diminish the protection purchased by the insured."

City Fuel Corp., supra.

    There is no Massachusetts case law construing exclusion C,

nor the phrase "in fact" as it appears within exclusion C.

Winbrook principally relies on and distinguishes two Federal

cases that have interpreted the meaning of the language in

similar or identical personal profit exclusions to mean

potential, not just actual, business opportunities.     See TIG

Specialty Ins. Co. v. PinkMonkey.com Inc., 375 F.3d 365, 370-371

(5th Cir. 2004); Jarvis Christian College v. National Union Fire

Ins. Co. of Pittsburgh, Penn., 197 F.3d 742, 747-749 (5th Cir.

1999).

    In Jarvis Christian College, the insured wrongfully induced

the transfer of $2 million to a company in which he owned a

forty-nine percent interest, without disclosing that interest.

197 F.3d at 744-745.    The court concluded that this transfer

constituted an "advantage in fact" sufficient to trigger an

identical exclusion because an advantage "encompasses any gain

or benefit, such as an opportunity to make a profit."        Id. at

748, 749.   The court reasoned that the cash infusion created an

opportunity for the business to "grow and prosper, and also to

gain credibility with other companies," and that the insured
                                                                     13


"would become the owner of a successful business," thus creating

a "personal advantage."   Id. at 747.   Even though the insured's

company operated at a net loss, the $2 million "created a viable

opportunity for his business, and therefore himself as well, to

make a profit."   Id. at 748.

     Similarly, in TIG Specialty Ins. Co., supra at 369, the

insured had been convicted of stock fraud.     The conviction meant

that the jury found that the insured "benefitted from the false

representation or promise."     Id. at 370.   Citing Jarvis

Christian College, the court concluded that, as a result of the

stock fraud, the insured "gained a personal advantage from the

opportunity to own and participate in a successful business."

Ibid.

     We agree with the United States Court of Appeals for the

Fifth Circuit and conclude that an opportunity may constitute an

advantage in fact sufficient to trigger exclusion C.     Exclusion

C specifically references "profit, benefit, remuneration or

advantage" (emphasis supplied).    As the court reasoned in Jarvis

Christian College, certain actions, such as the direct infusion

of capital or, as here, the extension of trade credit and

production of goods, may create an advantage in the form of

opportunity for a business to attract capital or customers.

     Our analysis does not end there, however.     The case was

heard on cross motions for summary judgment, but the record does
                                                                   14


not indicate whether DSG enjoyed such an advantage.    This vacuum

was created by Winbrook's successful motion for a protective

order, an order that was predicated on the fact that discovery,

at that time, was directed to fleshing out the existence of a

contract between DSG and Winbrook.   No discovery has been

conducted on what advantage DSG or York obtained.     The record

consists only of a DSG principal's affidavit stating that it did

not receive the goods and did not turn a profit, and Winbrook's

invoices.

    On summary judgment, the burden is on USLIC to demonstrate

that no genuine dispute of fact exists with respect to the

exclusion.   See Boazova, 462 Mass. at 351 (even at trial "[a]n

insured bears the initial burden of proving that the claimed

loss falls within the coverage of the insurance policy. . . .

Once the insured does this, the burden then shifts to the

insurer to show that a separate exclusion to coverage is

applicable to the particular circumstances of the case").     This

means that USLIC was required to show not only that the

exclusion applied as a matter of law, but that the facts

demonstrated that DSG received a gain that fell within the

exclusion.   See Wintermute v. Kansas Bankers Sur. Co., 630 F.3d

1063, 1072 (8th Cir. 2011) ("Whether an insured in fact gained a

personal profit is a fact issue that must be decided by a trier

of fact if the relevant evidence is disputed").
                                                                   15


     USLIC failed to satisfy that burden where it produced no

evidence of what advantage Winbrook's advances of services

created.   In this respect, this case is distinguishable from

Jarvis Christian College, 197 F.3d at 744, where the undisputed

fact was that $2 million was transferred to the corporate

principal's business, creating a business opportunity.11      Unlike

the stock fraud in TIG Specialty Ins. Co., there is no showing

here of actual personal gain.   There is no showing of undisputed

fact that money, goods, or services actually were delivered to

which DSG was not legally entitled after the misrepresentations

took place.12   The actual or anticipated delivery of those

services may have produced investment, advantage, or

opportunity, but it was for USLIC to produce some evidence of

that advantage or opportunity if it sought summary judgment.

USLIC points to the affidavits of Winbrook's principals, and the

principals of the other plaintiff companies as to services


     11
        In Jarvis Christian College, the opportunity was created
when the funds were transferred. The insured was operating at a
net loss prior to the transfer. 197 F.3d at 744. The company
continued to operate at a loss, but the cash infusion created a
renewed opportunity to operate. Ibid. In this appeal, the
parties do not contend that USLIC was required to show an actual
profit.
     12
       Winbrook submitted the affidavit of DSG's principal, who
stated that the goods were warehoused and that DSG had no right
or physical access to the product. Sales in the amount of
$27,000 were made to third parties, but these sales were made
before the misrepresentations, i.e., the wrongful acts, took
place.
                                                                    16


rendered without compensation, but Winbrook's losses are not

necessarily dispositive of DSG's gain or advantage.    See note 7,

supra.13

       "Of course, [USLIC's] failure to show that it was entitled

to summary judgment does not mean that the plaintiffs were

entitled to the allowance of their cross motion for summary

judgment.    See, e.g., Curly Customs, Inc. v. Bank of Boston,

N.A., 49 Mass. App. Ct. 197, 199 (2000)."    Khalsa v. Sovereign

Bank, N.A., 88 Mass. App. Ct. 824, 829 (2016).    With respect to

its motion for summary judgment, Winbrook had the burden of

demonstrating the absence of a genuine dispute whether DSG had

not received a gain or advantage.    Winbrook produced some

evidence in support of its motion for summary judgment showing

that no advantage accrued to DSG, and that exclusion C was

inapplicable as a matter of law, based on the affidavit from

DSG's principal that stated no product was ever delivered to

DSG.    However, a review of the documents substantiating

Winbrook's claims for damages includes bills for services

rendered, e.g., several months of employment as "VP of Product

Development."    There are also bills for goods produced for trade


       13
       Winbrook also argues that, even if an opportunity can be
considered a gain in fact so as to trigger exclusion C, the
opportunity must be viable and not merely speculative. We do
not address this argument because of the absence of a factual
record as to what opportunities DSG had and what goods or
services it did or did not supply.
                                                                  17


shows on DSG's behalf.   Other bills include copies of artist's

drawings of prototype characters, illustrations, and sample

pages of written materials, such as a child's newspaper.     These

invoices raise a question of material fact whether DSG received

goods or services that created an opportunity for gain or

advantage.   The Superior Court Rule 9A statement of disputed and

undisputed material facts is utterly devoid of a statement

whether DSG used the actual or anticipated receipt of products

or services to obtain credit, investors, or customers.

    Conclusion.    Summary judgment is not appropriate at this

juncture, as genuine issues of material fact remain regarding

the applicability of exclusion C, and neither party is entitled

to judgment as matter of law.   The judgment is vacated and the

matter is remanded to the Superior Court for further

proceedings.

                                    So ordered.
