Saturday, September 4, 2010

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.

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