“Solely-as-a-Result” Means Exactly That: First Circuit Narrows Additional-Insured Coverage and Reaffirms Strict Notice Duties in Claims-Made Policies

Introduction

In BI 40 LLC v. Ironshore Specialty Insurance Co., Nos. 24-1855/24-1856 (1st Cir. Aug. 25 2025), the United States Court of Appeals for the First Circuit confronted a familiar but nettlesome theme in insurance litigation: how far an “Additional Insured” endorsement can stretch, and what procedural rigor a claims-made policy imposes on insureds who seek a defense. The dispute arose after BI 40, a commercial real-estate lender, sought coverage when residents of an assisted-living facility filed suits (the “Frost” and “Salie” actions) alleging, among other things, wrongful eviction. Ironshore disclaimed a duty to defend, prompting cross-motions for summary judgment in the District of Massachusetts. When the district court split the baby—ordering Ironshore to defend Frost but not Salie—both sides appealed.

The First Circuit reversed as to Frost and affirmed as to Salie, generating two headline holdings:

An Additional-Insured endorsement that conditions coverage on liability “incurred solely as a result of the acts, errors or omissions” of the Named Insured bars any duty to defend if the underlying complaint attributes any causal role to the Additional Insured or others.
Under Massachusetts law governing claims-made policies, an insured who incurs defense costs before giving the insurer written notice and securing consent cannot later shift those costs to the insurer, regardless of the insurer’s actual knowledge or lack of prejudice.

Summary of the Judgment

Frost Action – Reversed: The panel found no duty to defend because Frost’s operative complaint alleged that BI 40 (through its court-appointed receiver KCP) shared responsibility for the January 2022 evictions. Consequently, liability was not “solely” the product of TLG’s conduct, as required by Endorsement #3. Nor could the court “mix and match” independent allegations (unlawful administrative fee vs. eviction) to manufacture coverage.
Salie Action – Affirmed: Even assuming a motion to add BI 40 as a defendant qualifies as a “Claim,” Section I(I)(1) of the policy prohibited BI 40 from incurring defense expenses without Ironshore’s written consent. BI 40 opposed the motion and attended the hearing before notifying the insurer; under Massachusetts’ “strict notice” rule for claims-made policies, that breach is fatal.
Statutory Bad-Faith Claims – Affirmed: Because Ironshore’s coverage position was reasonable, BI 40’s Chapter 93A and 176D claims for unfair or deceptive practices failed as a matter of law.

Analysis

1. Precedents Cited and Their Influence

Billings v. Commercial Ins. Co., 936 N.E.2d 408 (Mass. 2010) – Restates Massachusetts’ “pleading comparison” test: an insurer must defend if allegations are “reasonably susceptible” of covered interpretation.
Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 788 N.E.2d 522 (Mass. 2003) – Duty to defend vanishes when complaint “lies expressly outside” policy coverage.
President & Fellows of Harvard College v. Zurich Am. Ins. Co., 77 F.4th 33 (1st Cir. 2023) – Reiterates that for claims-made policies, prejudice to the insurer is irrelevant; failure to comply with explicit notice provisions defeats coverage. The panel deployed Harvard College to reject BI 40’s “actual notice” argument.
New England Mut. Life Ins. Co. v. Liberty Mut. Ins. Co., 667 N.E.2d 295 (Mass. App. Ct. 1996) – Instructs courts to look at the “source of the plaintiff’s injury,” not artful theories, when testing for policy triggers. Used to conclude that a $3,500 administrative fee was a pure economic injury, not “wrongful eviction” personal injury.
Stormo v. State Nat’l Ins. Co., 116 F.4th 39 (1st Cir. 2024) – Cited for basic definition of claims-made policies and for reaffirming no-prejudice rule.

2. Court’s Legal Reasoning

The First Circuit applied the three-step Massachusetts framework:

Compare the “four corners” of each complaint with policy language.
Liberally construe ambiguities in favor of the insured—but cannot distort the complaint’s plain source of injury.
If any count triggers coverage (“in for one, in for all”), the insurer must defend the entire suit.

Key interpretive moves:

Literal reading of “solely.” Because Frost alleged that BI 40 and receiver KCP failed to maintain the property, the wrongful eviction was not “solely” due to TLG, defeating Endorsement #3.
Rejecting “mix-and-match” coverage theory. BI 40 tried to combine TLG’s fee collection (an act arguably “solely” TLG’s) with a different injury definition (wrongful eviction) to bootstrap coverage. The court refused: coverage must arise from a single claim that independently satisfies all endorsement conditions.
Strict enforcement of notice/consent clause. Section I(I)(1) barred reimbursement of defense costs incurred without written consent. Invoking Harvard College, the court held that actual knowledge or lack of prejudice cannot cure non-compliance.

3. Impact of the Judgment

This decision tightens the reins on two recurring insurance-coverage battlegrounds:

Additional Insureds in Real-Estate/Healthcare Financing. Lenders or private-equity sponsors frequently secure “blanket additional insured” status in operator-purchased liability policies. The First Circuit’s “solely means solely” interpretation will make it markedly harder for financiers to extract a defense once receivers, property managers, or the financiers themselves are alleged to have played any role in the loss.
Notice duties under claims-made forms. Insureds often argue that an insurer’s early participation or informal awareness excuses technical notice breaches. By leaning on Harvard College, the panel reinforces a bright-line rule: no notice + no written consent = no reimbursement, even when the insurer has contemporaneous knowledge.

Expect insurers to cite BI 40 to resist “creative” pleading-based trigger arguments and to defeat untimely tenders of defense costs. The decision may also prompt lenders to negotiate broader (or separate) liability coverage rather than rely on the operator’s policy with restrictive AI endorsements.

Complex Concepts Simplified

Claims-Made vs. Occurrence: An occurrence policy covers events that happen during the policy period (even if sued years later). A claims-made policy covers lawsuits (or demands) that are made during the policy period, regardless of when the acts occurred. Timely notice is therefore a gating condition, not a technicality.
Additional Insured Endorsement: A contractual add-on making a third party (here, BI 40) “insured” for certain risks. The scope can be narrow (“solely” due to named insured’s acts) or broad (“arising out of”).
Duty to Defend vs. Duty to Indemnify: Defense obligation attaches if the complaint could potentially fall within coverage; indemnity concerns actual liability after facts are proven.
“In for One, In for All” Rule: If any claim in a lawsuit triggers the duty to defend, the insurer must defend the entire action.
Mass. Gen. Laws ch. 93A & 176D: State statutes penalizing unfair or deceptive insurance practices; require proof of unreasonable denial or bad-faith conduct. A reasonable coverage position is a complete defense.

Conclusion

BI 40 LLC v. Ironshore crystallizes two practical morals for policyholders and insurers in Massachusetts and across the First Circuit:

When an Additional-Insured endorsement hinges on liability “solely” attributable to the named insured, any shared blame destroys the duty to defend. Courts will not splice allegations to fashion coverage.
In a claims-made world, prompt, written notice and insurer consent are non-negotiable. The absence of prejudice will not rescue late or self-help defense expenditures.

Coupled with last year’s Harvard College ruling, the First Circuit has now painted a bright-line roadmap: observe the policy’s notice and consent conditions scrupulously, and do not rely on artful pleading gymnastics to expand Additional-Insured coverage. The decision will resonate in sectors—health-care, real estate, construction—where layered ownership structures routinely spawn such coverage battles.