Lionbridge eventually filed suit in the U.S. District Court for the District of Massachusetts for its defense costs. Valley Forge counterclaimed for a declaration that it was not obligated to pay more than certain reduced rates of one defense firm
The First Circuit’s opinion set forth the general principles found in Massachusetts law that an insurer must defend its insured where the underlying complaint’s allegations could be reasonably construed as “roughly sketching” a covered claim, provided that no policy exclusion applies. Rather than focusing on the specific causes of action, the court would focus on the types of losses that might be proved within the range of the complaint’s allegations, and determine whether such losses fit the reasonable expectations of coverage of the policy.