In Clear Blue Specialty Ins. Co. v. R-SVP II, L.L.C., the Massachusetts Superior Court applied Chapter 93A to the parties’ dispute despite the existence of a New York choice-of-law provision in the parties’ contract. The case centers around a multi-tiered reinsurance arrangement where the insureds had purchased collateral protection insurance to protect against loan defaults. After borrowers defaulted, resulting in over $125 million in losses, the insurer refused to pay, citing a “pay-as-paid” clause and brought a declaratory judgment action against the insureds. The insureds responded with counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and Chapter 93A violations.

The Superior Court denied the insurer’s motion to dismiss the Chapter 93A counterclaim for the following reasons:

1. New York Choice-of-Law Clause Does Not Bar 93A Claims

The insured argued that because New York law governed the contract, Massachusetts law—and by extension, Chapter 93A—could not apply. Rejecting that argument, the Superior Court explained that, while contract interpretation is subject to New York law, the clause did not bar application of Chapter 93A to the parties’ conduct. Also, the Superior Court noted that, although a Chapter 93A claim based solely on breach of contract generally is barred when the contract includes a foreign choice-of-law provision, the claim here was not based merely on the insured’s alleged failure to pay—it was based on broader allegations of unfair conduct, including systemic mishandling of claims and reliance on alleged fraudulent financial instruments. These claims sounded in tort, not contract. Therefore, the claims fell outside the scope of mere contractual interpretation.

2. Alleged Misconduct Falls Under ‘Trade or Commerce’

The Superior Court reiterated that insurance claims handling—including reinsurance claims—falls squarely within “trade or commerce” under Chapter 93A, §1(b). Allegations that the insurer engaged in unfair and bad faith settlement practices, such as unjustified denial of claims and failure to investigate or pay, are sufficient to support a Chapter 93A claim at the pleading stage.

3. Jurisdictional Reach of Chapter 93A

The insurer also argued that its conduct lacked sufficient connection to Massachusetts; however, the Superior Court concluded that whether the alleged unfair acts occurred “primarily and substantially” in Massachusetts (as required in a Section 11 business-to-business claim) is a factual one that could not be resolved on a motion to dismiss. The insureds, headquartered in Massachusetts, alleged that the insurer specifically directed its conduct at them in Massachusetts and the insured’s loss occurred in Massachusetts, which made the application of Chapter 93A plausible. 

Clear Blue Specialty Ins. Co. v. R-SVP II L.L.C., L.L.C. Takeaways

This decision provides clarity on the reach and resilience of Massachusetts’ Chapter 93A in complex commercial insurance disputes.

1. Reinsurance is not immune from Chapter 93A scrutiny, especially when claims handling affects Massachusetts-based insureds.

2. Choice-of-law provisions do not automatically shield out-of-state insurers from Chapter 93A liability when their actions target Massachusetts businesses.

3. Courts may closely scrutinize insurers’ conduct, especially where systemic mismanagement or bad faith is alleged.

Bottom Line for Policyholders and Insurers

For insured parties in Massachusetts, this ruling affirms the protections Chapter 93A affords—even in sophisticated, cross-border reinsurance arrangements. For insurers and reinsurers, the message is clear: unfair claims practices may carry serious consequences under Massachusetts law, regardless of what the contract says about governing law.