Biochemics, Inc. v. Axis Reinsurance Company

United States Court of Appeals
For the First Circuit

No. 17-2059

BIOCHEMICS, INC.; JOHN MASIZ,

Plaintiffs, Appellants,

v.

AXIS REINSURANCE COMPANY,

Defendant, Appellee.

JOHN P. RAUCCI; BROWN & BROWN OF NEW YORK, INC.,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Rya W. Zobel, U.S. District Judge]

Before

Thompson, Kayatta, and Barron,
Circuit Judges.

Steven L. Schreckinger, with whom Anderson & Kreiger LLP were
on brief, for appellants.
Melinda B. Margolies, with whom Kaufman Borgeest & Ryan LLP,
William A. Schneider, and Morrison Mahoney LLP were on brief, for
appellee.

May 23, 2019
 BARRON, Circuit Judge. This appeal concerns a 2013 suit

that BioChemics, Inc. ("BioChemics"), a pharmaceutical company

based in Massachusetts, and John Masiz ("Masiz"), its president

and chief executive officer, brought in the District of

Massachusetts to enforce a directors and officers ("D&O")

insurance policy (the "Policy") with AXIS Reinsurance Company

("AXIS"). BioChemics and Masiz seek damages for what they contend

is AXIS's breach, under the Policy, of its "duty to defend" them

in connection with a Securities and Exchange Commission ("SEC")

investigation against the company and its officers.

BioChemics and Masiz moved for partial summary judgment

in 2013, and the District Court denied the motion. BioChemics,

Inc. v. Axis Reinsurance Co., 963 F. Supp. 2d 64, 70-71 (D. Mass.

2013). They filed a renewed motion for partial summary judgment

in 2015, and AXIS cross-moved for summary judgment. AXIS contended

in that motion that it did not breach its duty to defend under the

Policy because, among other things, BioChemics and Masiz were

seeking to enforce that duty in relation to a "Claim" that -- given

when the SEC investigation commenced -- was "first made" before

the Policy took effect and thus was not "covered" by the Policy.

The District Court granted AXIS's motion. BioChemics and Masiz

now appeal from the grant of summary judgment to AXIS. We affirm.

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 I.

The undisputed facts are the following. On May 5, 2011,

the SEC began a "Non-Public Formal Investigation" by issuing a

Formal Order captioned "In the Matter of BioChemics, Inc., B-02641"

(the "2011 Order"). The 2011 Order mentioned Masiz by name,

described him as the sole officer of the company, and identified

several "possible" securities violations. These "possible"

violations included instances of fraud and misrepresentation,

beginning as early as 2009, that were aimed at distorting the value

of BioChemics securities. The 2011 Order also noted that Masiz

had been sanctioned for securities violations in the past and that,

due to those sanctions, he had been barred from serving as an

officer or director of any publicly traded company until 2009.

On May 9, 2011, and then again on September 12, 2011,

the SEC served subpoenas on BioChemics. The 2011 subpoenas

requested documents pertaining to, among other things, the

company's finances, operations, drugs under development,

interactions with pharmaceutical companies, and payments to Masiz.

These subpoenas bore the same caption as the 2011 Order and

expressly referenced the 2011 Order as authorizing their issuance.

In a cover letter that accompanied the September 2011 subpoena,

the SEC stated that the "investigation . . . should not be

construed as an indication by the [SEC] that any violation of law

has occurred."

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 After receiving the May 2011 subpoena, BioChemics

retained legal counsel and a consulting firm to assist with its

response. At that time, BioChemics had a D&O insurance policy

with Greenwich Insurance Company. BioChemics did not, at any

point, notify that insurer about the ongoing SEC investigation.

In October of 2011, BioChemics and Masiz, in his

individual capacity, applied to have AXIS take over as the D&O

insurer for the policy period that ran from November 2011 to

November 2012. In that application, BioChemics and Masiz

represented that there were no legal claims pending against them.

AXIS agreed to provide the D&O insurance for the requested policy

period.

In January of 2012, the SEC served deposition subpoenas

on Masiz and other individuals. In March of that same year, the

SEC followed up by serving documents subpoenas on BioChemics and

Masiz. Each of these 2012 subpoenas -- eight in total -- bore the

same caption as the 2011 Order and the 2011 subpoenas. One of

these subpoenas was served on Masiz in his individual capacity for

deposition testimony and one was served on him in his individual

capacity for document production.

Finally, in December of 2012, the SEC commenced an

Enforcement Action ("2012 Action") against BioChemics, Masiz, and

two other individuals. The 2012 Action "allege[d]" that, beginning

as early as 2009, Biochemics and Masiz had "engaged in a fraudulent

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scheme" to mislead investors about the company's value. At least

one of the "allege[d]" misrepresentations, concerning a topical

ibuprofen product, took place after the 2011 Order and the 2011

subpoenas were issued.

After receiving the March 2012 documents subpoenas,

BioChemics and Masiz notified AXIS of them, as well as of the

subpoenas that the SEC had issued in January of 2012. AXIS

"agree[d] that the SEC Investigation . . . constitute[d] a D&O

Claim" under the Policy. AXIS asserted, however, that BioChemics

and Masiz were necessarily seeking -- given the terms of the

Policy -- "coverage" for a single "Claim" that encompassed the SEC

investigation as a whole and that this "Claim" was "first made" in

May of 2011 when the SEC issued the documents subpoena to

BioChemics and thus that this "Claim" was "first made" "prior to

the inception of the Policy Period."1 On the basis of that

assertion, AXIS stated that "because the Claim was not made during

the Policy Period, coverage is not available for the SEC

Investigation."

AXIS later took the same position with respect to the

2012 Action. It concluded that the 2012 Action was also part of

the same single "Claim" that was "first made" when the SEC issued

1BioChemics and Masiz had not informed the insurer about the
2011 Order at the time that AXIS denied coverage.

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the May 2011 documents subpoena, which was prior to the start of

the policy period.

In response, on February 27, 2013, BioChemics and Masiz

sued AXIS in Massachusetts Superior Court. BioChemics and Masiz

alleged breach of contract and breach of fiduciary duty, under

Massachusetts law, based on the contention that AXIS had breached

its duty to defend under the Policy. The case was subsequently

removed to the United States District Court for the District of

Massachusetts based on diversity jurisdiction. 28 U.S.C. § 1332.

BioChemics and Masiz filed a Motion for Partial Summary Judgment

in the District Court on June 5, 2013. They argued that each of

what they contended were the "Claim[s]" that triggered AXIS's duty

to defend under the Policy -- respectively, each of the 2012

subpoenas and the 2012 Action -- had been brought by the SEC after

the policy period began to run and thus was "first made" within

the policy period.

The District Court denied that motion in August of 2013.

BioChemics, Inc. v. Axis Reinsurance Co., 963 F. Supp. 2d 64 (D.

Mass. 2013). In reaching this decision, the District Court did

not address the relevance of the 2011 Order, as BioChemics and

Masiz had not yet disclosed the 2011 Order to AXIS or the District

Court.

On February 14, 2014, BioChemics and Masiz filed a

renewed Motion for Partial Summary Judgment. They again argued

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that, under the Policy, AXIS had a duty to defend that was

triggered by "Claim[s]" -- each of the 2012 subpoenas and the 2012

Action -- that had been "first made" during the policy period.

AXIS cross-filed a Motion for Summary Judgment. AXIS argued that

it had no such duty because, among other things, the SEC filings

were properly treated as a single "Claim" that had been "first

made" when the SEC issued the May 2011 documents subpoena and thus

that was "first made" prior to the policy period.

On January 6, 2015, the District Court entered an order

granting AXIS's Motion for Summary Judgment and denying BioChemics

and Masiz's Motion for Partial Summary Judgment. BioChemics, Inc.

v. Axis Reinsurance Co., 83 F. Supp. 3d 405 (D. Mass. 2015)

[hereinafter BioChemics II]. By that time, the District Court had

been made aware of the 2011 Order. Equipped with that knowledge,

the District Court held that the 2012 Action, and the multiple

2012 subpoenas, were all part of a "Claim" that had been "first

made" when the 2011 Order issued (May 5, 2011). Id. at 408.

BioChemics and Masiz then appealed the District Court's order.2

2 The Policy sets forth AXIS's "duty to defend" and its duty
to cover "defense costs" under separate provisions. BioChemics
and Masiz's complaint requested the recovery only of "damages
caused by [AXIS's] breach of . . . its duty to defend." We proceed
on the understanding that the parties, in referring to "coverage"
under the Policy, are referring to AXIS's duty to defend.

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 II.

The Policy incorporates four separate Insuring

Agreements: the D&O Corporate Liability Agreement, the Employment

Practices Liability Agreement, the Fiduciary Liability Agreement,

and the Outside Executive Liability Agreement. The only agreement

that is at issue in this appeal is the D&O Corporate Liability

Agreement.

That agreement obligates AXIS to cover "all Loss on

behalf of any Insured arising from any D&O Claim for a Wrongful

Act . . . first made against such Insured . . . during the Policy

Period ."3 The Policy defines "Loss" as "the amount(s) which the

Insureds become legally obligated to pay on account of a Claim,

including damages, judgments, any award of pre-judgment and post-

judgment interest, settlement amounts, costs and fees awarded

pursuant to judgments, and Defense Costs." (Emphasis added). The

Policy separately provides that AXIS has "both the right and duty

to defend and appoint counsel with respect to any Claim made

against the Insureds alleging a Wrongful Act, even if such a Claim

is groundless, false or fraudulent."

The Policy defines a "D&O Claim" as:

a. a written demand against an Insured for
monetary or nonmonetary relief;

3 The policy period ran from November 13, 2011 to November
13, 2013.

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 b. a civil, arbitration, administrative or
regulatory proceeding against any Insured
commenced by:
(i) the service of a complaint or similar
pleading;
(ii) the filing of a notice of charge,
investigative order or like document; or
(iii) written notice or subpoena from an
authority identifying such Insured as an
entity or person against whom a formal
proceeding may be commenced; or
c. a criminal investigation or proceeding
against any Insured Individual commenced by:
(i) the return of an indictment, information,
or similar pleading; or
(ii) written notice or subpoena from an
authority identifying such Insured Individual
as an individual against whom a formal
proceeding may be commenced.

A "Wrongful Act," in turn, is defined as "any actual or

alleged error, misstatement, misleading statement, act, omission,

neglect, or breach of duty."

There is one more provision that is important for present

purposes. Under the Policy's "Limits of Liability" heading, there

is a provision [hereinafter "Interrelated Wrongful Acts

Provision"] that states:

All Claims, including all D&O Claims . . .
arising from the same Wrongful Act, Wrongful
Third Party Act, and all Interrelated Wrongful
Acts shall be deemed one Claim and such Claim
shall be deemed to be first made on the earlier
date that: (1) any of the Claims is first made
against an Insured under this Policy or any
prior policy, or (2) valid notice was given by
the Insureds under this Policy or any prior
policy of any Wrongful Act, Wrongful Third
Party Act, or any fact, circumstance,
situation, transaction or cause which
underlies such Claim. Coverage under this

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 Policy shall apply only with respect to Claims
deemed to have been first made during the
Policy Period and reported in writing to the
Insurer in accordance with the terms herein.

The Policy earlier separately defines "Interrelated Wrongful Acts"

as "any and all Wrongful Acts that have as a common nexus any fact,

circumstance, situation, event, transaction, cause or series of

causally or logically connected facts, circumstances, situations,

events, transactions or causes."4

With that background in place, we now turn to the merits

of the parties' contentions. Because we are reviewing a grant of

summary judgment to AXIS, we must affirm the order below if there

is no genuine issue of material fact and AXIS is entitled to

judgment as a matter of law. See Utica Mut. Ins. Co. v. Herbert

H. Landy Ins. Agency, Inc., 820 F.3d 36, 41 (1st Cir. 2016). Our

review is de novo. See id. Moreover, in this case, only "the

interpretation and application of the [insurance] policy language"

are in dispute. Massamont Ins. Agency, Inc. v. Utica Mut. Ins.

Co., 489 F.3d 71, 72 (1st Cir. 2007) (citation omitted). We review

those issues of interpretation and application de novo as well.

Id.

4
The Policy also includes a section on "Exclusions" outlining
several circumstances under which AXIS will not bear liability for
"Claims" against the insured parties. However, it appears that
neither party argues that any of these "Exclusions" apply to the
instant matter.

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 III.

BioChemics and Masiz, the appellants, begin by

contending that the District Court erred in ruling that the "Claim"

that triggered AXIS's duty to defend had been "first made" when

the SEC issued the 2011 Order in May of that year -- and thus prior

to the start of the policy period, which began in November of 2011.

The appellants contend that the District Court based that ruling

solely on a construction of the definition of "D&O Claim" in the

Policy and thus without reference to the Interrelated Wrongful

Acts Provision. The appellants then go on to contend that this

construction of the definition of "D&O Claim" was mistaken.

To make that case, the appellants assert that the Policy

defines a "D&O Claim" in a way that makes the 2011 Order, each of

the various subpoenas issued in its wake, and the 2012 Action a

"Claim" in its own right, rather than merely components of a

"Claim" that encompasses the SEC investigation as a whole. Thus,

the appellants contend, the District Court's sole reason for

treating the 2012 subpoenas and the 2012 Action as part of a

"Claim" that was "first made" when the SEC issued the 2011 Order

and thus before the policy period began rests on a mistaken

construction of the Policy's definition of a "D&O Claim."

The appellants appear to rely for their argument about

the nature of the District Court's reasoning on the following

portions of the District Court's ruling:

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 The policy here defines a "Claim" broadly to
include, inter alia, any "civil, arbitration,
administrative or regulatory proceeding
against any Insured commenced by . . . the
filing of a notice of charge, investigative
order, or like document." The triggering
events are all part of a single SEC
Investigation under the Formal Order. Each
subpoena was issued under, and referred to,
the original Formal Order, and investigated
the same officers and company for the same
pattern of security violations through public
material misstatements. Under the clear
language of the Policy, and on the record
before the [C]ourt, the subpoenas all
constituted a single "Claim" under the policy.

The only remaining question is whether the
Claim at issue is covered under the AXIS
policy. A Claim is only covered under the
policy if "deemed to have been first made
during the Policy Period." A claim "shall be
deemed to be first made on the earlier date
that: (1) any of the Claims is first made
against an Insured under this Policy or any
prior policy . . . ." Docket # 30, Ex. A
(Policy) § V.A. The Formal Order issued on
May 5, 2011. The policy went into effect on
November 13, 2011. The investigation and
enforcement action, the Claim at issue, was
thus "first made" before the policy period and
is, therefore, not covered under the policy.

BioChemics II, 83 F. Supp. 3d at 407-08 (internal citations

omitted) (alterations in original).

The problem with the appellants' argument is that the

District Court does not purport in these passages to rely solely

on the Policy's definition of a "D&O Claim" to reach the conclusion

that the 2011 Order, the subpoenas, and the 2012 Action are part

and parcel of one "Claim." Rather, the District Court explains in

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this passage that the 2012 Action may be deemed to be part of one

"Claim" that was "first made" prior to the start of the policy

period by citing to the portion of the Interrelated Wrongful Acts

Provision that states that "[a] Claim 'shall be deemed to be first

made on the earlier date that: (1) any of the Claims is first made

against an Insured under this Policy or any prior policy.'" Id.

at 408 (citing "§ V.A" of the Policy -- the Interrelated Wrongful

Acts Provision) (alteration in original).

In other words, the District Court appears to have

concluded that, pursuant to the Policy's definition of a "D&O

Claim," the 2012 Action constitutes a "Claim" that was distinct

from the "Claim" of which the 2011 Order was a part. But, the

District Court then went on to conclude, those two otherwise

distinct "Claim[s]" must be deemed to be "one Claim" pursuant to

the Interrelated Wrongful Acts Provision.

Thus, the appellants' contention that the District Court

erred in treating the 2012 Action as part of a "Claim" that was

"first made" before the start of the policy period because the

District Court relied on a mistaken construction of the Policy's

definition of a "D&O Claim" fails for a simple reason. The

District Court did not base its conclusion as to the 2012 Action

on that allegedly erroneous ground.

We still must address, though, the appellants'

contention that the District Court erred by construing the Policy's

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definition of a "D&O Claim" to make each of the 2012 subpoenas

merely a component of a "Claim" that "commenced" with the issuance

of the 2011 Order and not a "Claim" in its own right. Here, too,

we reject the argument.

The Policy's definition of a "D&O Claim" is set forth in

Section III.B.2 of the Policy. As we have noted above, that

provision defines a "D&O Claim," as relevant here, to include

either "a written demand . . . for . . . non-monetary relief" or

"a civil . . . administrative or regulatory proceeding against any

Insured commenced by":

(i) the service of a complaint or similar
pleading;
(ii) the filing of a notice of charge,
investigative order or like document; or
(iii) written notice or subpoena from an
authority identifying such Insured as an
entity or person against whom a formal
proceeding may be commenced.

The appellants contend that the first component of this

two-part definition of a "D&O Claim" -- the "written

demand . . . for . . . non-monetary relief" -- encompasses each of

the 2012 subpoenas. The appellants thus contend that this

component of the definition renders each subpoena a "Claim" in its

own right.

Black's Law Dictionary, however, defines "relief" as

"[t]he redress or benefit, esp. equitable in nature (such as an

injunction or specific performance) that a party asks of a court."

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Relief, Black's Law Dictionary (10th ed. 2009) (emphasis added);

see Metro. Prop. & Cas. Ins. Co. v. Morrison, 951 N.E.2d 662, 671

(Mass. 2011) (instructing courts to construe clear policy language

according to its "usual and ordinary sense"). The 2012 subpoenas

were requests made of a party for information. They were not

requests made of a court for equitable redress or benefit, such as

specific performance. See Diamond Glass Cos., Inc. v. Twin City

Fire Ins. Co, No. 06-CV-13105, 2008 WL 4613170, at *4 (S.D.N.Y.

Aug. 18, 2008) (noting that, based on the "plain meaning of

relief," a subpoena would not constitute a "demand[ ] for

non-monetary relief" (internal quotation marks omitted)). Thus,

the text of the component of the definition on which the appellants

rely would appear to refute their position that the definition of

a "D&O Claim" treats each subpoena as a "Claim" in its own right.

The rest of the definition reinforces that conclusion.

See Starr v. Fordham, 648 N.E.2d 1261, 1269 (Mass. 1995) (noting

that contract language must be interpreted in the context of the

entire document). The second component of the definition concerns

"a civil . . . administrative or regulatory proceeding." That

component of the definition expressly refers to "subpoena[s],"

while the component of the definition on which the appellants rely

does not. The second component of the definition thus makes clear

that "subpoenas" are components of the "Claim" that "a civil

proceeding" against an insured constitutes.

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 For this reason, the appellants' preferred construction

of the definition necessarily has the following odd consequence.

It requires us to construe a portion of that definition that does

not mention subpoenas at all as if it makes them "Claim[s]" in

their own right, even though the portion of the definition that

expressly mentions subpoenas treats them as if they are merely

components of a "Claim." Cf. J.A. Sullivan Corp. v. Commonwealth,

494 N.E.2d 374, 378 (Mass. 1986) (noting that every phrase in a

contract must be given meaning that, when interpreted relative to

other provisions in the document, gives the contract "workable and

harmonious" effect (quoting Charles I. Hosmer, Inc. v.

Commonwealth, 19 N.E.2d 800, 804 (Mass. 1939))).5

The appellants do point to out-of-jurisdiction cases

that have held that a subpoena, like those at issue here, is itself

a "Claim" under other D&O insurance policies. See Polychron v.

Crum & Forster Ins. Co., 916 F.2d 461, 463 (8th Cir. 1990);

Minuteman Int'l, Inc. v. Great Am. Ins. Co., No. 03 C 6067, 2004

WL 603482, at *5 (N.D. Ill. Mar. 22, 2004). But, neither of these

precedents is controlling, as neither was decided by a

Massachusetts court applying Massachusetts law. Nor does either

5 The appellants' preferred construction presents an
additional complication. Even if we assumed that subpoenas are
"Claims" in their own right, that conclusion does not, on its own,
imbue them with "actual or alleged" "errors" such that they state
"Wrongful Acts" and trigger the duty to defend under the Policy.

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case, by terms, purport to be interpreting a policy that

denominates subpoenas to be components of "Claims" as expressly as

the Policy does here, let alone explain how such a policy could be

construed to permit a subpoena such as those at issue here to be

deemed a "Claim" in its own right. In fact, multiple other courts

have reached the opposite conclusion. See Trice v. Emp'rs

Reinsurance Corp., 124 F.3d 205 (Table), 1997 WL 449736, *3 (7th

Cir. 1997); National Fire Ins. v. Bartolazo, 27 F.3d 518, 519 (11th

Cir. 1994); Diamond Glass Cos., 2008 WL 4613170, at *4.

Thus, while we are mindful that we must construe

ambiguous policy language to favor coverage, see Metro. Prop. &

Cas. Ins. Co., 951 N.E.2d at 671 (setting forth the interpretive

principle -- known as contra proferentem -- that ambiguous contract

language should be interpreted in favor of coverage against the

drafter), we conclude that the Policy here is simply too clear in

the relevant respect to permit us to do so. See id. (instructing

courts to construe clear policy language according to its "usual

and ordinary sense" (internal quotation marks omitted)).

Accordingly, we reject this aspect of the appellants' challenge to

the District Court's summary judgment ruling.

IV.

The appellants next contend that, insofar as the

District Court did rely on the Interrelated Wrongful Acts Provision

to conclude that they were bringing a "Claim" that was "first made"

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when the SEC issued the 2011 Order, the District Court erred in

doing so. The appellants offer a variety of reasons for reaching

that conclusion. But, we do not find any of them to be persuasive.

A.

The appellants' first argument is premised on the fact

that the Interrelated Wrongful Acts Provision appears only within

the section of the Policy entitled "Limits of Liability." The

appellants contend that, because Massachusetts law requires that

ambiguities be construed in favor of coverage, see id., the

provision's placement requires that we construe it to address only

the "amount of coverage available" and not the availability of

"coverage." For that reason, the appellants contend, the

Interrelated Wrongful Acts Provision cannot serve as the basis for

a conclusion that the "Claim" at issue was "first made" when the

SEC issued the 2011 Order such that AXIS did not breach its duty

to defend.

The text of the Interrelated Wrongful Acts Provision,

however, is at odds with the appellants' restricted construction

of its import. The text of the provision states that "[c]overage

under this Policy shall apply only with respect to Claims deemed

to have been first made during the Policy Period." It is unclear

what purpose this sentence would serve if the appellants' proposed

construction were correct. Section VIII.L of the Policy, moreover,

expressly states that "[t]he descriptions in the headings and

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subheadings of this Policy are solely for convenience, and form no

part of the terms and conditions of coverage." Thus, we read the

provision to mean just what it says. It addresses "coverage under

this Policy" rather than merely the limits of liability. See id.6

B.

The appellants also contend that the terms of the

Interrelated Wrongful Acts Provision simply do not permit the

distinct "Claim[s]" that the appellants contend triggered AXIS's

duty to defend under the Policy -- namely, each of the 2012

subpoenas and the Action -- to be "deemed" to be part and parcel

of "one Claim" that was "first made" before the start of the policy

period. But, we do not find the various arguments that the

appellants make in support of this aspect of their challenge to

the grant of summary judgment to AXIS to be persuasive either.

1.

The appellants first argue that, even if the 2011 Order

may be understood to refer to an "error, misstatement, misleading

statement, act, omission, neglect, or breach of duty," it does not

6 Our Court's holding construing Puerto Rico law in Lind-
Hernández v. Hospital Episcopal San Lucas Guayama, 898 F.3d 99
(1st Cir. 2018), is not to the contrary. The Limits of Liability
provision at issue there contained different language, and, in any
event, Lind-Hernández held only that the placement of the
"Interrelated Wrongful Acts" provision in the Policy's "Limits of
Liability" section did not indicate that the insurer could use the
provision to aggregate "Claims" that were levied against different
insured parties who fell under different insuring agreements. Id.
at 108. No such issue is presented here.

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"allege[]" one, as the Policy's definition of a "Wrongful Act"

requires. If that is so, the appellants then contend, the 2011

Order contains no "Wrongful Acts," which means, in turn, that there

is no basis for concluding that either the 2012 Action or any of

the 2012 subpoenas contains "Wrongful Acts" that "share[] a common

nexus" with any "Wrongful Acts" set forth in the 2011 Order.

Accordingly, the appellants contend, the Interrelated Wrongful

Acts Provision supplies no basis for treating any of the discrete

2012 SEC filings -- whether the 2012 Action or any of the 2012

subpoenas -- as if it constitutes one unified "Claim" with the

2011 Order, such that the resulting unified "Claim" was "first

made" prior to the start of the policy period.

The 2011 Order quite clearly refers to various actions

that, if they occurred, would constitute violations of the federal

securities laws and thus constitute an "error, misstatement,

misleading statement, act, omission, neglect, or breach of duty"

within the meaning of the Policy's definition of "Wrongful Acts."

For example, the 2011 Order clearly stated that the SEC was

investigating possible violations of Sections 5(a), 5(c), and

17(a) of the Securities Act and Rule 10b-5, as well as Section

15(a) of the Exchange Act. These possible violations included

"making false statements of material fact or failing to disclose

material facts concerning . . . BioChemics' business prospects

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(including products under development and agreements that the

company has entered into)."

But, there remains the question of whether the 2011 Order

in referring to such misconduct "allege[s]" it, as it must in order

to contain a "Wrongful Act," given that the Policy defines a

"Wrongful Act" as "any actual or alleged error, misstatement,

misleading statement, act, omission, neglect, or breach of duty."

(Emphasis added).7

With respect to their contention that the 2011 Order

contains no such allegations, the appellants point out that the

2011 Order simply noted that the SEC "ha[d] information that

tend[ed] to show" that violations had occurred. The appellants

note, too, that the 2011 Order goes on to list what it describes

as merely "possible" violations where certain persons "may have

been" engaging in actions that ran afoul of various securities

laws. Moreover, in the letter accompanying the September 2011

7
A "Wrongful Act" is defined with reference to whether there
is "any . . . alleged error, misstatement, misleading statement,
act, omission, neglect, or breach of duty," even though the duty
to defend provision refers to "any Claim made against the Insureds
alleging a Wrongful Act." (Emphases added). The parties in the
course of their briefs frequently refer to whether the 2011 Order
and the subpoenas "allege[]" any "Wrongful Acts." Considered in
context, we understand those references to be intended to address
whether those documents contain "any . . . alleged error,
misstatement, misleading statement, act, omission, neglect, or
breach of duty" and not the more metaphysical question of whether
those documents "allege[]" "an alleged error, misstatement,
misleading statement, act, omission, neglect, or breach of duty."

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subpoena, the appellants emphasize, the SEC pointedly noted that

the "investigation . . . should not be construed as an indication

by the [SEC] that any violation of law has occurred."

To show that these qualified references to misconduct in

the 2011 Order do not "allege[]" that misconduct, the appellants

cite to cases that conclude that similar investigative filings did

not "allege" the misconduct referenced in them. See Emp'rs' Fire

Ins. Co. v. ProMedica Health Sys., Inc., 524 F. App'x. 241, 247

(6th Cir. 2013); MusclePharm Corp. v. Liberty Ins. Underwriters,

Inc., 712 F. App'x. 745, 756 (10th Cir. 2017). But other courts

have held just the opposite. See Patriarch Partners, LLC v. AXIS

Ins. Co., 16-CV-2277 (VEC), 2017 WL 4233078, at *6 (S.D.N.Y. Sept.

22, 2017); Weaver v. Axis Surplus Ins. Co., No. 13-CV-7374 (SJF),

2014 WL 5500667, at *12 (E.D.N.Y. Oct. 30, 2014), aff'd, 639 F.

App'x. 764 (2d Cir. 2016); Nat'l Stock Exch. v. Fed. Ins. Co., No.

06 C 1603, 2007 WL 1030293, at *5 (N.D. Ill. Mar. 30, 2007); Morden

v. XL Specialty Ins., 177 F. Supp. 3d 1320, 1330 (D. Utah 2016).

Moreover, none of these precedents are from Massachusetts courts

construing Massachusetts law. Nor is the word "allege[]" in and

of itself so clearly restrictive that -- simply by virtue of that

word -- the Policy must be construed to ensure that it does not

provide coverage for any loss arising from, or trigger the duty to

defend against, an SEC Order of the sort that is at issue here.

And the appellants develop no argument to the contrary. Thus, it

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is certainly not clear that the 2011 Order fails to "allege[]" any

"Wrongful Acts."

The appellants may mean to argue that the term "alleged"

in the Policy's definition of "Wrongful Acts" is at least ambiguous

as to whether it encompasses the qualified references to the

misconduct that the 2011 Order contains and thus that their

proposed construction prevails due to the contra proferentem

interpretive rule. But we do not see how such an argument can

succeed in this case.

To be sure, ambiguities must be construed in favor of

coverage for the insured. See Metro. Prop. & Cas. Ins. Co., 951

N.E.2d at 671. But, as AXIS notes, the appellants seek in this

very case to show that the 2012 subpoenas triggered AXIS's duty to

defend under the Policy, even though the Policy is clear that a

"Claim" must "allege[]" a "Wrongful Act" in order for it to trigger

the duty to defend. As a result, the 2012 subpoenas could be

covered under the Policy only if the word "allege[]" could be

construed to encompass an SEC investigative filing that makes no

mention of "Wrongful Acts" and merely refers back to a filing that

denotes them in a qualified manner. As favorable as the contra

proferentem rule may be to insureds, the appellants may not rely

upon that interpretive guide to advance an argument that would

require us to construe the same word -- here, "allege[]" -- to

mean two diametrically opposed things in this very case. Cf.

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Hartford Cas. Ins. Co. v. Am. Dairy and Food Consulting Labs.,

Inc., No. 09–CV–00914–OWW–DLB, 2009 WL 4269603, at *12 (E.D. Cal.

Nov. 25, 2009) ("[I]f a pled claim is internally inconsistent with

itself, the inconsistencies may cancel each other out and render

the claim subject to dismissal for failure to state a claim.");

Steiner v. Twentieth Century–Fox Film Corp., 140 F. Supp. 906, 908

(S.D. Cal. 1953) ("[N]o authority is known . . . which permits

blowing hot and cold in the same cause of action."). Yet the

appellants' logic would require us to do just that.8

It may be that the appellants also separately mean to

argue that the 2012 subpoenas cannot be said to be part of any

"Claim" that was "first made" when the 2011 Order was issued,

because those subpoenas do not contain any "Wrongful Acts." The

appellants are right that, insofar as the subpoenas do not contain

any "Wrongful Acts" they cannot be treated as part and parcel of

a "Claim" that was first made when the 2011 Order was issued on

the basis of the Interrelated Wrongful Acts Provision. But, a

necessary premise of this contention is that each subpoena is a

"Claim" in its own right. As we explained earlier, see supra

8 To avoid this inconsistency, the appellants in their reply
brief argue for the first time that they are entitled to coverage
for the 2012 subpoenas because the Policy is ambiguous as to how
it treats a "Claim" that does not contain any "Wrongful Acts" and
that ambiguity should inure to the benefit of the insured party.
But in addition to the fact that new arguments in reply briefs are
waived, see United States v. Torres, 162 F.3d 6, 11 (1st Cir.
1998), the plain terms of the Policy preclude this contention.

- 24 -
Section III, however, the plain terms of the definition of a "D&O

Claim" compel the conclusion that the 2012 subpoenas are -- by

virtue of the second component of that definition -- merely

components of the "Claim" constituted by the

"civil . . . administrative or regulatory proceeding against"

BioChemics and Masiz.9

And, in any event, the appellants cannot rightly contend

that the 2012 subpoenas, which they concede contain no references

to misconduct, nonetheless somehow allege "Wrongful Acts" for

purposes of triggering the duty to defend, while simultaneously

contending that the 2011 Order, which indisputably does contain

references to misconduct, does not allege "Wrongful Acts." But,

for reasons we have explained, the plain language of the Policy

requires the appellants to make such an internally inconsistent

argument if they are to explain how the subpoenas could trigger a

9 We suppose it is not entirely clear whether the "Claim" of
which the 2012 subpoenas are best understood to be a part was the
"Claim" that was "commenced by" the "investigative order" that the
SEC issued on May 5, 2011 or the "Claim" that was "commenced" by
the filings of the first of the subpoenas. But, that ambiguity is
of no significance here. Insofar as the subpoenas are part of the
"Claim" commenced by the issuance of the 2011 Order, they are
plainly part of a "Claim" that was "first made" prior to the policy
period. And, insofar as the subpoenas are part of a "Claim" that
commenced upon the first of those subpoenas having been issued and
that then culminated in the 2012 Action, that "Claim" -- at least
given the arguments presented here -- would still have been "first
made" prior to the start of the policy period, if the "Wrongful
Acts" contained in the 2012 Action share a "common nexus" with the
"Wrongful Acts" that the 2011 Order may fairly be construed to
have contained.

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duty to defend, given that such a duty is only triggered by a

"Claim" "alleging a Wrongful Act."

2.

We turn, then, to the appellants' next contention. Here,

the appellants challenge the way in which the District Court

applied the Interrelated Wrongful Acts Provision in deeming the

"Claim" that encompassed the 2012 Action and the "Claim" that

encompassed the 2011 Order to be "one Claim." The appellants press

this point by arguing that, even if the 2012 Action contained

"Wrongful Acts," the 2011 Order described the misconduct that it

may be said to have "alleged" in too diffuse a manner to permit

the conclusion, pursuant to the Interrelated Wrongful Acts

Provision, that it contained "Wrongful Acts" that share "a common

nexus" with those contained in the 2012 Action.10 Thus, the

appellants contend, the Interrelated Wrongful Acts Provision

affords no basis for deeming these two otherwise distinct

"Claim[s]" to be "one Claim."

The appellants fail to identify any authority, however,

to support the proposition that the Interrelated Wrongful Acts

Provision implicitly establishes some threshold of specificity

that was not met here but that must be met before a "Wrongful Act"

10The appellants do not separately contend that we should
grant them relief for the 2012 Action -- which clearly contains
"Wrongful Acts" -- even if we find that they are not entitled to
relief for the 2012 subpoenas.

- 26 -
contained in one "Claim" may be said to "share a common nexus"

with a "Wrongful Act" contained in another. Instead, the

appellants rely for the assertion that such an implicit threshold

of specificity exists -- and that it has not been met here -- only

on cases that require courts to perform a "detailed comparison of

the facts underlying pre and post Policy claims." See, e.g.,

Allmerica Fin. Corp. v. Certain Underwriters at Lloyd's, London,

871 N.E.2d 418, 430 (Mass. 2007); Mass. Insurers Insolvency Fund

v. Redland Ins. Co., 891 N.E.2d 718 (Mass. App. Ct. 2008) (table).

But, those cases just show that a detailed comparison of "Wrongful

Acts" in distinct "Claims" is required before a determination that

they are "interrelated" can be made. They do not purport to

establish a threshold of specificity that must be met before that

inquiry even can be undertaken, let alone one that was not met

here.

We proceed, then, to consider a related contention that

the appellants make. Here, the appellants argue that a detailed

comparison of the "Wrongful Acts" contained in the 2011

Order -- insofar as there are any -- with the "Wrongful Acts" that

are contained in the 2012 Action reveals that they do not share a

"common nexus [in] fact, circumstance, situation, event, [or]

transaction" and thus are not "Interrelated Wrongful Acts."

The appellants stake this contention on the fact that

the 2012 Action includes a reference to at least one "Wrongful

- 27 -
Act" that occurred after the 2011 Order and the 2011 subpoenas

were issued. Specifically, the 2012 Action "allege[s]" that

BioChemics misled investors regarding the results of a clinical

trial on the effectiveness of a new ibuprofen cream.

The appellants note that the preliminary results of that

trial were not available until five months after the SEC issued

its 2011 Order and two months after it issued the last of its 2011

subpoenas. On that basis, the appellants contend that this

"Wrongful Act" could not have been contemplated as part of the

SEC's initial investigation and thus that the 2012

Action -- insofar as it is a "Claim" (or, we may posit, part of a

"Claim") -- does not contain "Wrongful Acts" that share a "common

nexus [in] fact, circumstance, situation, event, transaction, [or]

cause" with those referenced in the 2011 Order.

In pressing this point, the appellants appear to accept

that the "substantial overlap" test from Federal Ins. Co. v.

Raytheon Co., 426 F.3d 491 (1st Cir. 2005), is also the test that

we should use to determine whether the Policy's requirement that

"Interrelated Wrongful Acts" share a "common nexus" has been met.11

The appellants thus appear to argue only that, even if we assume

11 The appellants appear to do so, we note, even though
Raytheon was interpreting a different type of exclusionary
provision. See id. at 495 (noting that parties in Raytheon were
contesting the applicability of the policy's "prior and pending
litigation clause").

- 28 -
that the 2012 Action contains many "Wrongful Acts," there is

one -- misrepresentation concerning the ibuprofen trial -- that

does not "overlap" with any of the "Wrongful Acts" that are

referenced in the 2011 Order and that, for this reason alone, the

"substantial overlap" of the "Wrongful Acts" alleged that would

otherwise require the aggregation of the "Claim[s]" under Raytheon

fails to exist.

But, Raytheon forecloses the conclusion that, under the

"substantial overlap" test, the existence of a single

non-overlapping "Wrongful Act" can suffice to preclude the

aggregation of distinct "Claim[s]" that the Policy's Interrelated

Wrongful Acts Provision would otherwise require. In Raytheon, we

compared a 2002 ERISA complaint with an earlier securities fraud

complaint to determine if the two were "substantially similar" for

the purposes of a policy exclusion. Id. at 500. We recognized

that the ERISA complaint contained several allegations that

occurred after the fraud case's completion. See id. We

nevertheless held that "substantial [factual] overlap" existed

between the two matters, because many of the factual allegations

in the ERISA action were identical to those in the earlier fraud

suit. Id. Accordingly, we fail to see how the reference to the

ibuprofen trial misrepresentation in the 2012 Action in and of

itself suffices to show that there is no "substantial overlap"

- 29 -
between the "Wrongful Acts" referenced in 2011 Order and those

referenced in the "Claim" encompassing the 2012 Action.

The appellants do cite to multiple cases that, they

contend, stand for the proposition -- seemingly in contravention

of Raytheon -- that where a single allegation in a recent "Claim"

differs from the "Wrongful Acts" contained in a pre-policy "Claim,"

the insured is entitled to coverage for the entire recent "Claim,"

notwithstanding a prior acts exclusion. But, even if we were to

treat the appellants' reliance on these cases as an implicit

argument that some test other than the one set forth in Raytheon

governs whether the relevant set of "Wrongful Acts" are

interrelated for purposes of this Policy's "Interrelated Wrongful

Acts Provision," each of these cases is readily distinguishable

from this one.

Brown v. American Int'l Grp., Inc., 339 F. Supp. 2d 336

(D. Mass. 2004), for example, appears to be interpreting Kentucky

law and therefore hardly sheds light on how we should treat the

described scenario under Massachusetts law. See id. at 345 n.5.

Allmerica, moreover, compared a pre-policy "Claim" containing a

single allegation of wrongdoing with a "Claim" made during the

policy period that contained multiple allegations and determined

that, based on the record, the court could not conclude that any

overlap existed between the two cases. See Allmerica, 871 N.E.2d

at 430. Thus, Allmerica does not even appear to address the

- 30 -
situation where it is uncontested that some "overlap" in factual

allegations does exist, notwithstanding some non-overlapping

allegations.

The appellants do also rely on Redland, which is a

Massachusetts case applying Massachusetts law. There, the court

compared two pre-policy "Claims" with a "Claim" issued during the

policy period. The court determined that, despite the existence

of some overlapping allegations, the "bulk" or "heart" of the more

recent allegations occurred well after the pre-policy "Claims"

were issued. 2008 WL 3342991 at *2. The court therefore

determined that there was not enough overlap to trigger the

exclusion. Id. But, the appellants do not explain why the one

point of non-overlap that they identify -- the ibuprofen

trial -- suffices to show that the "bulk" or "heart" of the

"Wrongful Acts" contained in the 2012 Action do not "substantially

overlap" with those contained in the 2011 Order. Indeed, it

appears that the court in Redland is tacitly endorsing the

"substantial overlap" test from Raytheon.

Thus, at least given the arguments advanced to us on

appeal, the appellants' argument that the "Wrongful Acts" listed

in the 2012 Action are not "interrelated" with those contained in

the 2011 Order due to the diffuse nature of the allegations those

filings contain is not persuasive. Accordingly, we reject the

appellants' contention that, due to the diffuse nature of the

- 31 -
description of the acts in the SEC filings, the District Court

erred in relying as it did on the Interrelated Wrongful Acts

Provision in granting summary judgment to AXIS.

V.

We must consider one last argument, which concerns only

a portion of the District Court's grant of summary judgment to

AXIS. The appellants contend that, even if we disagree with the

appellants' arguments regarding AXIS's duty to defend the

"Claim[s]" encompassing the 2012 subpoenas and 2012 Action

generally, we must still hold that AXIS has a duty to defend the

"Claims" against Masiz individually.

The contention relies on language in the Policy covering

"Claims" "first made against such Insured . . . during the Policy

Period." The argument is that this language indicates that the

duty to defend is only triggered when a "Claim" "is first made

against [a] particular insured." The argument then proceeds that

even though a "Claim" had been made against BioChemics at the time

the 2011 Order was issued, no "Claim" had been made against Masiz

as of that time. The contention is that the earliest point in

which a "Claim" had been made against Masiz was the moment that he

was served by the SEC with one of the 2012 subpoenas, which is an

event that occurred during the policy period.

In so arguing, the appellants rely on the analysis in

TranSched Sys. Ltd. v. Fed. Ins. Co., 958 F. Supp. 2d 331 (D.R.I.

- 32 -
2013). But, the dispute there centered on whether the phrase "such

Insured" applied to a party who was neither an "insured" nor

seeking coverage. Id. at 336-37. Here, by contrast, the dispute

concerns whether the 2011 Order and pre-Policy subpoenas were clear

enough to inform Masiz, who is an insured seeking coverage, that

he was a target of the SEC's investigation commenced by the 2011

Order. Given that the Court's analysis in TranSched does not speak

at all to that type of question, we fail to see how that case is

instructive here.

To the extent that this argument rests on the fact that

the 2011 Order did not "allege[]" "Wrongful Acts" performed by

Masiz due to the qualified nature of the only misconduct therein

described, we have already explained why that contention is

untenable here. Qualified though these references to misconduct

were, they did suffice to "allege[]" "Wrongful Acts."

It is possible that the appellants mean to argue that

the 2011 Order does not constitute a "Claim" made against Masiz

because, although he was served with certain of the 2012 subpoenas

and named as co-defendant in the 2012 Action, he was not similarly

served with or named in the 2011 Order. But, here too, we are

unpersuaded.

The appellants do invoke, seemingly in support of this

contention, a number of precedents that concern private suits in

which the complaints named particular defendants, the most

- 33 -
directly analogous of which is Medical Mut. Ins. Co. of Maine v.

Indian Harbor Ins. Co., 583 F.3d 57 (1st Cir. 2009). There, we

held that a suit against an insured company that alleged wrongdoing

by some of its officers did not constitute a claim against those

officers. Id. at 63. But, the relevant document here is not a

complaint in a private suit naming a particular defendant. It is

an SEC Order authorizing a private investigation by that agency

into alleged wrongdoing by a company and persons associated with

it. The appellants identify no precedent that supports the

proposition that a filing of that type must be formally

served -- as a suit or subpoena must be -- on the insured for it

to constitute a "Claim" against him.

Moreover, the Policy expressly identifies an

"investigative order" as a component of a "D&O Claim." The 2011

Order opens with a full paragraph that, in the course of describing

Masiz's past securities violations and the terms of his probation,

identifies him to be the "sole officer and director of BioChemics."

The document then proceeds to describe misconduct that, for the

reasons that we have already given, see supra Section IV.B.1,

suffices to "allege[]" "Wrongful Acts" within the meaning of the

Policy and that attribute that possible misconduct to a range of

persons that include not only the company itself but its

"officers." Finally, the Order goes on to state that the SEC

"ORDERS . . . that a private investigation be made to determine

- 34 -
whether any persons or entities have engaged in, or are about to

engage in, any of the reported acts or practices or any acts or

practices of similar purport or object." Accordingly, the "plain

language" of Masiz's Policy shows that the 2011 Order -- in

announcing an investigation of BioChemics's officers and expressly

naming Masiz as the only one -- is properly deemed a "Claim"

against not only BioChemics but also Masiz himself. See Nat. Stock

Exch., 2007 WL 1030293, at *4-5 (emphasis added).

VI.

For the foregoing reasons we affirm the District Court's

decisions granting summary judgment in favor of AXIS and denying

the appellants' Motion for Partial Summary Judgment. The parties

shall bear their own costs.

- 35 -