The recent court decision may not be the end of the story for this case
A Massachusetts insured lost its unfair-claims counts because its surplus lines policy stated that New York law applied to any policy disputes. That may not be the end of the story.
Last month, a federal judge in Boston dismissed the Chapter 93A and 176D counts in Callahan, Inc. v. Arch Specialty Insurance Co., a coverage dispute between a Massachusetts construction firm and a surplus lines carrier over a claimed $3.8 million loss. The court’s reasoning was direct: the policy chose New York law, New York has no counterpart to Massachusetts’s unfair-claims statutes, and the bad-faith counts therefore failed.
On one level, that result was routine. Choice-of-law clauses often do exactly that work. But Callahan raises a more important question, and one the case does not appear to have squarely addressed: whether Massachusetts General Laws Chapter 175, Section 22 permits that clause to govern in the first place.
If Section 22 applies, the real fight is not over how broad the New York clause is. It is over whether Massachusetts law allows that clause to stand at all.
The Statute
Section 22 provides, in relevant part:
“No company and no officer or agent thereof shall make, issue or deliver any policy of insurance…containing any condition, stipulation or agreement…providing that any such policy or contract made in the commonwealth on lives, property or interests therein shall be governed by the laws of any state or country other than this commonwealth. Any such condition, stipulation or agreement shall be void.”
That is strong language. But the right reading is not that Section 22 automatically answers every case. It does not. The statute still has to fit the facts. Was the policy made or delivered in Massachusetts? Did it insure property or interests here within the meaning of the statute? Does the section apply in the surplus lines setting?
Still, the text raises a serious point. If a policy delivered in Massachusetts falls within Section 22, then the issue is not just what the foreign choice-of-law clause means. The issue may be whether the clause can be enforced at all.
That is a different argument, and potentially a much more important one.
The Case
The underlying dispute is straightforward. Callahan, a Massachusetts-based construction management firm, bought a subcontractor default insurance policy from Arch Specialty Insurance Company, a surplus lines carrier. The project at issue was in Yonkers, New York. After a subcontractor default, Callahan submitted a claim for about $3.83 million. Arch paid less than $1 million, relying on what it described as a “multiplier cap” in the policy.
Callahan sued in the District of Massachusetts for breach of contract and also brought claims under Chapters 93A and 176D. Those statutes are often the most meaningful private remedies Massachusetts insureds have when they contend that a carrier mishandled a claim.
The policy, however, contained a broad New York choice-of-law clause. The court held that the clause reached the 93A and 176D claims because those claims arose from Arch’s handling and interpretation of the policy. Once the court applied New York law, the Massachusetts statutory counts were dismissed. For details, see Agency Checklists’ March 9, 2026, article, “New York Law Clause Knocks Out Insured’s Right To Sue For Unfair Claim Practices.”
That was the ruling. But it may not have been the only question.
The Question Nobody Asked
What makes Callahan interesting is not just what the court decided. It is what the court was apparently never asked to decide.
The plaintiff argued about the reach of the New York clause. Section 22 raises an earlier question. Assuming the policy falls within the statute, was the clause effective in the first place?
That distinction matters. If Section 22 applies, then the analysis changes. The question is no longer whether the clause is broad enough to sweep in Massachusetts statutory claims. The question becomes whether Massachusetts law permits the clause to govern a Massachusetts-delivered policy at all.
No Massachusetts appellate decision appears to have squarely answered that question in the surplus lines context. That does not make the argument weak. It means the issue may be one of first impression and should be treated that way.
The Surplus Lines Problem
The first pushback will be obvious: surplus lines carriers are not admitted in Massachusetts, so why should Section 22 apply to them?
The answer is that the statute does not speak only in terms of insurers being admitted or non-admitted. It says no company or agent shall “make, issue or deliver” a policy containing a prohibited provision. And “deliver” matters.
A carrier may argue that it does not make or issue the policy in Massachusetts in any regulatory sense. But delivery is different. Delivery happens where the insured receives the policy. For a Massachusetts insured, that can be Massachusetts, even if the carrier is domiciled elsewhere and the claim later arises from an out-of-state project.
That does not end the argument. An insurer would still have room to say that Section 22’s reference to policies made in the Commonwealth on “lives, property or interests therein” does not reach every policy issued to a Massachusetts insured. But that is a fit question under the statute. It is not an automatic exemption for surplus lines carriers.
And the surplus lines statute itself does not appear to supply that exemption. Chapter 175, Section 168 governs how non-admitted coverage is placed. It addresses broker licensing, documentation, and taxes. What it does not appear to do is exempt surplus lines policies from Section 22’s prohibition on foreign choice-of-law clauses.
That omission is worth noticing.
Why This Matters
This is not just a dispute over boilerplate. It is a dispute over remedies.
Chapters 93A and 176D are often the most important private-law tools a Massachusetts insured has when a carrier mishandles a claim. If a foreign choice-of-law clause strips those claims away, the case can shrink from a bad-faith case to a contract case.
For surplus lines insureds, that matters even more. Surplus lines carriers operate outside the admitted market. Their forms and rates are not subject to the same approval structure that applies to admitted insurers. That does not mean Massachusetts has no rules for the market. It does mean that, from the insured’s point of view, Chapters 93A and 176D may be among the most consequential protections left when a claim-handling dispute arises.
So when a Massachusetts-delivered policy selects the law of a state with no comparable unfair-claims remedy, the effect may be substantial. The policyholder may lose more than a legal theory. It may lose the leverage that makes unfair-claims statutes matter.
For a Massachusetts insured, that can change the entire case.
Washington Shows the Way
Massachusetts is not the only state to bar foreign choice-of-law clauses in insurance policies. Washington has a similar statute. Its courts have treated that statute as an expression of strong state policy, not as dead lettering in the insurance code.
Washington does not answer the Massachusetts question, since it is a different statute, different courts, and a different doctrinal setting. But Washington does show something useful: These statutes are not decorative. Courts can give them real force.
That is what makes Section 22 worth another look. The question is not whether Massachusetts must follow Washington. The question is whether Massachusetts should finally take its own statute seriously in this setting.
What This Means
If Section 22 applies to surplus lines policies delivered in Massachusetts, a foreign choice-of-law clause in such a policy would be void under Massachusetts law.
That would be a meaningful result. But it would not be a radical one.
Voiding the clause would not void the policy. Section 22 speaks to the offending “condition, stipulation or agreement.” The better reading is that the prohibited provision falls away while the rest of the policy stays in place.
That means the consequence is narrower, but still important. The coverage remains. The dispute continues. The difference is that Massachusetts law, not foreign boilerplate, may govern the coverage dispute, and any unfair claim practice claims.
For insurers, that would mean that writing surplus lines business for Massachusetts insureds may carry the risk that Massachusetts claim-handling standards and remedies apply. For insureds, it would mean that Massachusetts’ unfair claim practice protections do not necessarily disappear just because the coverage was placed in the non-admitted market. For brokers and counsel, it would mean the choice-of-law clause deserves scrutiny at placement, not just at claim time.
This is not a technicality. It is a shift in leverage.
Can This Be Fixed?
Whether the Section 22 issue can still be raised in Callahan is a harder question.
There is at least a plausible argument that it can. Section 22 says the prohibited provision is “void,” not merely unenforceable if challenged. From that language, one could argue that the enforceability of the New York clause should have been examined before the clause was used to knock out Massachusetts statutory claims.
But there is also a real procedural obstacle. Courts usually decide the issues the parties present. If Section 22 was not squarely raised, a reviewing court could conclude the point was forfeited or not properly preserved. That possibility has to be acknowledged.
Still, the issue is too important to ignore. If the clause is enforceable, then the dismissal of the 93A and 176D counts rests where the district court placed it. If the clause is not enforceable under Section 22, the foundation for applying New York law to those claims becomes much less secure.
The project’s location in Yonkers does not necessarily settle the issue either. Section 22 turns on the character of the policy and the interests it insures, not simply on where the loss happened. A Massachusetts insured would argue that a policy delivered here to insure its interests falls within the statute even if the loss arose elsewhere. An insurer would argue for a narrower reading.
That is exactly the point. The question deserves to be confronted head-on, not stipulated away.
The Bottom Line
Whatever happens next in Callahan, Section 22 should now be part of every serious conversation about foreign choice-of-law clauses in insurance policies delivered to Massachusetts insureds.
Maybe the statute will not apply in every case. Maybe it will not change the outcome in this one. But it raises a question that Massachusetts insurance professionals should not ignore: when a surplus lines policy delivered here selects another state’s law, is that clause enforceable at all?
That is not a side issue.
It may be the whole case.
Owen Gallagher is the publisher of Agency Checklists and a Massachusetts attorney focusing on insurance coverage and regulatory matters. He can be reached at (617) 598-3801. Initial consultations are complimentary.
The views expressed are solely those of the author. The author does not represent any party to the matters discussed in this article.
