Insurance coverage lawyer Geoffrey Fehling had a great LinkedIn post concerning a Massachusetts court dismissing class action claims against Liberty Mutual because of the failure of plaintiffs’ counsel to identify and then name the correct Liberty Mutual affiliated insurance companies as defendants. I wanted to add three points to it which, in their absence, could make the decision seem either picayune or as unnecessarily elevating form over function. That is not the case here and instead the ruling is consistent with both the history of the insurance industry and the approach of Massachusetts law and courts to interrelated, but legally distinct, defendants.

1. It Isn’t Easy to Pierce the Corporate Veil or Otherwise Intermingle Corporate Defendants under Massachusetts law or in Massachusetts Courtrooms.

Massachusetts courts and Massachusetts law, in a variety of legal areas, tend to strictly maintain the legal separation between companies, even when they are part of the same corporate umbrella or otherwise interrelated, and can be very tough on efforts to pierce the corporate veil or otherwise hold individuals or other corporate entities financially liable for the responsibilities of a particular corporate entity. That is partly why it can be such a relative shock when, such as happened in the context of withdrawal liability for union employers under ERISA, a Massachusetts court breaks new ground in this area. I have litigated, including trying and handling on appeal, pierce the corporate veil cases in other jurisdictions, and they are often not as opposed to allowing it as are Massachusetts courts. That tendency to strictly enforce corporate niceties in Massachusetts and under Massachusetts law hung up the lawyers in this case.

2. These Types of Corporate Distinctions Among Different Insurers and Claims Administration Companies Operating Under the Same Overall Corporate Umbrellas Aren’t Just Niceties.

As an insurance coverage and bad faith lawyer for decades, I have litigated plenty of cases where the proper defendant is one, but not other, insurers in a corporate family. Moreover, many of these corporate families actually have their own separate, free-standing claim administration companies within those families. This has been commonplace for many years and there are often regulatory, capital, and other corporate reasons for this type of segregation – it is not, as decisions like this one can sometimes suggest to readers, something that is random and shouldn’t be respected by courts.

I defended at trial the separate and free standing TPA operation of Liberty Mutual that administered claims covered by the captive insurer of a particular conglomerate when both entities were sued for bad faith in their handling of a multi-million dollar claim. There were a number of reasons that it was important for the two entities to be recognized and understood solely as separate corporations, even though their actions were interlinked. Otherwise, responsibility and legal liability of the two companies, if any (there was none, as the defendants prevailed at trial), could not have been properly assessed and allocated under Massachusetts law. The issue of allocating liability and responsibility in these types of situations in a fair and understandable manner tends to require respecting the corporate form and the legal separation of the various implicated companies.

3. The Separate Corporate Forms Aren’t Nefarious – They Are Often Just Accidents of History.

In some pierce the veil type cases – such as with certain private equity transactions – there are tactical reasons for multiple corporate entities to exist and the distinctions among the entities were deliberately crafted right from the get go. But sometimes they can just be charming artifacts of a bygone era. Many of the different corporate names and forms contained within the overall umbrella of a larger insurance entity are remnants from the combining of different insurers into a larger entity. For instance, years ago, I tried a reinsurance case involving missing reinsurance certificates from the 1960s (I won’t explain here how we ended up in a state court trying the dispute when it is something that would have typically been arbitrated; it is real inside baseball stuff but if you are interested, message or email me and I will explain it). One of my key witnesses was the first General Manager of Lexington Insurance Company, who was put in charge after AIG formed the company – although much has changed since then, Lexington remains a separate insurer within the AIG umbrella many decades later.

This history can be part of the charm of working in the insurance industry or litigating insurance cases, particularly when you get old timers talking, as was the case in my reinsurance trial.