Massachusetts Court Properly Applies Narrow Construction to Exclusion

In Nichole Sliney Realty Team, Inc. v. Mount Vernon Fire Ins. Co., Civil Action No. 25-11145-FDS, 2026 U.S. Dist. LEXIS 27127 (D. Mass. Feb. 10, 2026), a Massachusetts federal court ruled that an insurer must defend a real estate company accused of copyright infringement in connection with marketing materials for a newly built home. Mount Vernon Fire Insurance Co., which had issued an Errors & Omissions (“E&O”) policy to the realty company, denied coverage based in part on an exclusion for claims involving misappropriation or improper use of “funds, account information or other property.”

In granting partial judgment on the pleadings for the insured, the court rejected the insurer’s broad reading of the exclusion, concluding it did not apply to copyright infringement claims. The judge reasoned that the term “other property” must be interpreted in light of the specific terms preceding it—funds and account information. The exclusion was meant to address financial assets, not intellectual property. He also found that terms like “misappropriation” and “improper use” should be understood in the context of intentional misconduct, not claims like copyright infringement that may arise from negligence or statutory violations. The absence of the word “infringement” in the exclusion further supported this narrower interpretation. Finally, the court emphasized that reading the exclusion as broadly as the insurer suggested would undermine the purpose of the policy, since real estate professionals commonly use marketing materials and could inadvertently use protected content. As a result, the exclusion was deemed inapplicable and had to be construed in favor of coverage.

The court’s ruling upholds one of the most fundamental rules of coverage law: Exclusions must be narrowly construed against the insurer. The same is true of any policy language limiting coverage, regardless of whether it is presented in the form of an explicit exclusion. Cases across the country agree that insurers cannot escape this rule of construction simply by structuring the policy in a manner that incorporates provisions functionally reducing coverage even if they are not labeled as exclusions. Pennsylvania Gen. Ins. Co. v. Am. Safety Indem. Co., 185 Cal. App. 4th 1515, 1526–27 (2010) (“When construing an insurance policy, we must resolve ambiguities in coverage clauses most broadly in favor of coverage, and we concomitantly must narrowly construe exclusions and limitations on coverage.”); In re Adelphia Commc'ns Corp., 638 B.R. 506, 515 (Bankr. S.D.N.Y. 2022) (“In the absence of such a clear expression of limitation, or if the policy provisions are inconsistent or ambiguous, the insurance contract must be construed in favor of coverage and against limitations.”); RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113, 129 (Tex. 2015) (applying exclusion rules of construction to a “Limits of Liability” provision).