Appellate Division discusses wiggle room for attorney's fees in PIP cases

Although the PIP statute allows attorney's fees in cases against a PIP insurer, such fees may only be awarded if a judgment is recovered from the insurer on the PIP claim. That rule has been generally understood to mean that an insurer can avoid attorney's fees by paying the disputed amount at any time, even after trial has begun. (Of course, attorney's fees can still be awarded on a 93A claim, but a violation of 93A is much harder to prove.)

In Metro West Medical Assocs., Inc. v. Amica Mut. Ins. Co., 2010 WL 3118636 (Mass. App. Div.), the Appellate Division discussed wiggle room for attorney's fees in a PIP claim.

Metro West alleged that it provided medical services to Cuevos, who was entitled to PIP benefits from Amica. Amica paid some of the bills but rejected the additional bills on the grounds that the services were unreasonable and unnecessary. A few weeks later Amica sent a check for the amount it had originally rejected. Metro West's attorney returned the check and demanded payment for attorney's fees under the PIP statute.

The court stated that it would not be inconsistent with prior case law "to require that the insurer on the § 34M [PIP] claim show more on summary judgment than simply that the bills have all been paid. It should also have to show that there is no genuine issue of fact concerning whether it had a valid reason not to pay, and that it paid an invalid claim for reasons unrelated to its merits, for example, to avoid the cost of litigation or to remove a potential liability off its books."

The court held open the possibility that an insured could reject a tender of late payment from an insurer. "In this light, a check for the balance of bills could be viewed as an offer of settlement, which could be rejected, and not a tender of full payment."

The court granted summary judgment to Amica. Amica had submitted an affidavit in which its claim supervisor averred that the disputed bills were not reasonable and necessary and that Amica paid them as a result of a business decision. "That was sufficient, albeit without a lot to spare" to shift the burden to Metro West to show that there would be a genuine issue at trial concerning the necessity of the services and the reasonableness of the bill." Metro West failed to do so.

Insured really has to send a 93A letter

It is standard practice for insurers and insurance defense counsel to deny that a demand letter met the requirements for a 93A demand letter. 93A suits are dismissed from time to time because the demand letter failed to provide enough information for the insurer to assess liability or damages.

In Robotham v. LaFortaine, 2010 WL 3327826 (Mass. Super.), the Superior Court dismissed a suit against an insurer because a pre-suit letter did not mention at least one of the following six factors:

1) express reference to 93A;

2) express reference to the consumer protection act;

3) assertion that the rights of the claimants as consumers have been violated;

4) assertion that the insurer acted in an unfair or deceptive manner;

5) assertion that the insured anticipated a settlement offer within 30 days; or

6) assertion that the claimant will pursue multiple damages should the claim be denied.

Underinsurance coverage

I've been reviewing my auto coverage policy to make sure that I have the proper coverages for my family's circumstances. I've been looking specifically at underinsured coverage. Underinsurance coverage is when your own insurer pays your loss if you are injured due to the negligence of another driver who has insufficient insurance to cover your damages.

Underinsurance pays only if your underinsurance limit is higher than the limit of the other driver's liability coverage. So if you have $50,000 underinsurance coverage, the other driver has $100,000 liability coverage, and your damages are $120,000, your underinsurance will not kick in.

Even if your underisinsurance limit is higher than the other driver's liability limit, underinsurance will only pay the difference between the two limits. If you have $50,000 in underinsurance coverage, the other driver has a $20,000 liability limit, and your damages are $90,000, you will receive $20,000 from the other driver's policy and $30,000 from your own policy.

Appeals Court holds that policy endorsement does not have to be grammatically correct to be effective; underwriters dance in streets

Michael Daigle was hired to put a new roof on a building in Maine, and to seal two windows. Lavigne visited the job site and, looking for Daigle, climbed up on scaffolding that Daigle's crew used to access the roof. When a portion of the scaffolding snapped, Lavigne fell and broke his neck.

Daigle had a general liability policy with Penn-America. Penn-America denied coverage for Lavigne's claim, and a declaratory judgment lawsuit followed. At issue whether an endorsement effectively precluded coverage for claims arising from roofing.

The endorsement contained preprinted language at the top of the form offering three introductory phrases, each with a box for a checkmark. The phrase that was checked read, "In consideration of the premium charged, it is understood and agreed that . . ."

The form then listed nineteen items, such as "premium" and "coverage," none of which were checked in their corresponding boxes. Below that were four alternative actions, such as "is corrected to read as listed below" and "is amended and changed to read as listed below." None of those boxes were checked.

Finally, typed in bold was the phrase "EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING."

Below that phrase were spaces for a date and initial, both of which were blank.

In Penn-Am. Ins. Co. v. Lavigne, __ F.3d __, 2010 WL 3307367 (1st Cir.), the United States Court of Appeals for the First Circuit held that under the law of Maine the endorsement effectively excluded coverage for claims arising from roofing.

The checked and added phrases read in their entirety, "In consideration for the premium charged, it is understood and agreed that EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING[.]" The court noted that that language is not a complete sentence nor a comprehensible fragment of one.

The court held, however, that the test for interpretation of an insurance policy is not whether the policy is grammatically correct, but whether it is reasonably susceptible of different interpretations. The court held that disregarding the endorsement, as urged by Lavigne, would not "construe the endorsement strictly against the insurer, but rather [] render it meaningless." It held that an ordinary person in the shoes of the insured would understand that the endorsement excluded coverage for claims arising from roofing.

Superior Court applies Boston Gas rule to asbestos case

A little more than a year ago the Supreme Judicial Court adopted in Boston Gas Co. v. Century Indem. Co., 454 Mass. 336 (2009) pro rata time-on-the-risk allocation for long tail losses.

In New England Insulation Co., Inc. v. Liberty Mut. Ins. Co., 2010 WL 3219436 (Mass Super.), Judge Fabricant of the Superior Court applied that rule to an asbestos case. Although her decision does not discuss the facts, one can infer from reading it that a company that (for reasons not addressed by the court) does not have significant insurance available and was a "relatively minor contributor to the injury" is being hit with a large portion of the damages due to the insolvency of other companies.

U.S. District Court adopts broader definition of "part" in collapse coverage

A wall in a building in Holyoke owned by Puerta de la Esperanza settled between six and ten inches, with resulting damage to floors, walls, and plumbing fixtures. The settling was caused by the collapse of a load-bearing brick pier.

Puerta de la Esperanza requested coverage from its insurer, Middlesex, who sought a declaratory judgment that the pier's failure was not a "collapse." The policy defined collapse as "an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose[.]"

The pier was a component of the building but not an area of the building. Middlesex argued that the word "part" refers only to a physical area but not a structural component of the building. Puerta de la Esperanza argued that the term "part" can mean either an area or a component of the building.

In Middlesex Mut. Ass. Co. v. Puerta de la Esperanza, LLC, ___ F. Supp. 2d ___, 2010 WL 2639859 (D. Mass), the United States District Court adopted the broader definition of "part," and held that there was coverage because the pier, a component of the building, collapsed.

Jury awards $12 million against car owners who removed driver from their auto insurance policy

Andrew Caplan of Gilbert & Renton, LLC brought to my attention yet another cautionary tale about why adequate insurance is important. In this article Massachusetts Lawyers Weekly describes a case, Silverio v. Gentile, in which a $12 million jury verdict was awarded in a motor vehicle accident suit in which the defendants did not have auto insurance. (The link to the article will only work if you have a password for the Lawyer's Weekly website).

According to the article, Vittorio Gentile, Jr., 26 years old at the time, was driving his grandparents' SUV when he caused a head-on collision for which he has been found criminally responsible.

The jury found that Gentile's grandparents were liable, because they allowed him to drive the car after they were aware of his extensive driving record. Gentile had been hit with so many surcharges that the grandparents had removed him from their insurance policy even though other grandchildren were still covered and permitted to use their vehicles. The jury found that the grandparents were negligent in their failure to secure the car from Gentile because they routinely left the keys out in the open. The plaintiffs convinced the jury that Gentile had their tacit consent to use the vehicle.

Like the case I posted about here, the injuries in this case were tragic. The plaintiffs were two brothers, Joseph and Douglas Homsi, in their 60's. Before the accident Douglas acted as a caretaker for Joseph, who has mental disabilities. In the accident Joseph suffered broken bones and internal injuries. Douglas incurred more serious injuries, and was left unable to breathe, eat, or speak on his own.

Because Gentile is not covered by insurance and the grandparents were found negligent, if the $12 million verdict stands they will have to pay it out of their personal assets. Early in the case plaintiffs' counsel placed an attachment on their real estate, including their home. Plaintiffs' counsel also obtained an injunction to keep the grandparents from transferring their assets.

The moral:

1. Make sure that anyone who will drive your car is covered by your insurance. Under the standard Massachusetts auto policy, you can lend your car to a friend for an afternoon, but if your friend regularly drives your car they must be added to your policy. Doing so will not affect your premiums if your friend has a clean driving record.

2. Don't drive drunk.

3. Don't let anyone use your car who will drive drunk.

Appeals Court affirms $1,007,342.58 award against Arbella for unfair settlement on $20,000 policy

A cautionary tale for adjusters:

On August 30, 1998 Angelina Dattilo was seriously injured when her car was struck by a car driven by Anthony Caban. Caban had an auto insurance policy with Arbella with a per person limit of $20,000.

Both Dattilo's attorney and Arbella investigated the accident and concluded that Dattilo was not negligent. It was clear that the damages significantly exceeded the policy limits.

Dattilo's attorney sent a letter to Arbella demanding that Arbella tender within 30 days the $20,000 policy limit to Dattilo. The attorney offered to release Caban and Arbella from all additional liability in exchange for the $20,000.

Other than a voicemail message left on the attorney's answering machine, Arbella did not respond to the demand letter for five months. Nor did it notify Caban of Dattilo's demand and offer to release additional liability.

Seven months after the demand letter Arbella offered to settle Dattilo’s claims for $20,000 in exchange for a release. Dattilo refused.

Several months later Dattilo and Caban agreed that a judgment was to be entered against Caban for $450,000. Caban assigned to Dattilo his rights against Arbella for unfair settlement practices. Dattilo agreed not to execute the judgment against Caban. Arbella was aware of the negotiations and waived in writing any claim against Caban for noncooperation under the policy.

Dattilo then sent a 93A demand letter to Arbella demanding $1.4 million to settle the unfair settlement practices claim. Arbella responded with an offer of $23,966. After a jury waived trial, a Superior Court judge awarded Dattilo $1,007,342.58, which included compensatory damages, multiple damages, interest, and costs. Arbella appealed.

In Gore v. Arbella Mut. Ins. Co., 77 Mass. App. Ct. 518 (2010), issued last week, the Massachusetts Appeals Court affirmed the verdict. The decision contains a good review of 93A liability and damages. Of note, the court held that the judgment agreed to by Caban and Dattilo constituted a judgment, not a settlement, for the purpose of calculating 93A damages. (As I discussed here, where a 93A case goes to verdict the actual damages is the verdict amount. Where a 93A case settles, actual damages is lost interest on the settlement.)

It is also worth noting that the court was not unsympathetic to Arbella's claim that it needed more time than the initial 30 days given to it to determine how to proceed. The court noted that the issue was that Arbella never communicated that need to Dattilo's attorney.

Court rules that insurer is not liable for low settlement offer in low impact case, or for not conceding liability

One constant area of contention between personal injury attorneys and insurers is damages from low impact collisions. A low implact collision is one in which there is contact between the vehicles but it is so slight that it often results in little or no damage to the cars. Plaintiffs' attorneys contend that despite the seemingly minor nature of the accidents, severe back injuries can nevertheless result. Insurers are dubious of such claims.

In Lanton v. Lin, 2010 WL 3038719 (Mass. Super.), Superior Court Judge Fremont-Smith held that an insurer did not violate Mass. Gen. Laws ch. 93A by offering $1,500 to settle a low impact case, especially where the jury had found that the plaintiff had not suffered any damages.

The plaintiff contended that the insurer had violated 93A on a second ground, because it did not concede liability even though the plaintiff had been rear-ended. That failure caused the plaintiff to incur additional attorney's fees to prove that the insured defendant was at fault. Judge Fremont Smith ruled in favor of the insurer on this issue as well. He held, first, that there were no damages because liability was not contested at trial and, second, that the plaintiff had not demanded in his 93A demand letter that the insurer concede damages and so it had no obligation to do so.