Sunday, February 12, 2012

In huge victory for insureds, SJC holds that measure of multiple damages in 93A claim is underlying judgment

On Friday, in a case which has been closely watched by those on both sides of the insurer/insured divide (and by those of us who straddle the divide), the SJC has overturned in no uncertain terms a ruling by the Massachusetts Appeals Court regarding calculation of multiple damages in a 93A claim against an insurer for unfair settlement practices. The Appeals Court had held that the multiple damages in a 93A claim where the underlying tort claim has gone to judgment are calculated by the loss of use of settlement funds -- in other words, interest from the time a reasonable settlement offer should have been made until it actually was made. I was shocked by the Appeals Court decision when it came out, because it contradicted the plain language of Mass. Gen. Laws ch. 93A s. 2, which states that multiple damages are based on the underlying judgment.

The SJC also held that to recover under ch. 93A the insureds do not have to prove that they would have accepted a reasonable settlement offer had one been made.

In January, 2002, Marcia Rhodes received catastrophic injuries including permanent paraplegia when a tractor trailer rear-ended her car. She and her family sued the truck driver, his employer, and the company to which he had been assigned by his employer.

At trial in September, 2004, the plaintiffs received a trial judgment of approximately $11.3 million. During the appeal process the plaintiffs settled the claim with the defendants' insurers.

Before settlement the plaintiffs filed a 93A claim against the insurers for failing to enter into a prompt, fair, and equitable settlement.

The trial court ruled on the 93A claim that excess carrier AIGDC had violated ch. 93A, but that the violation did not cause the plaintiffs any damages prior to trial because they would not have accepted even a timely reasonable offer prior to trial. The trial court also held that the 93A damages for AIGDC's failure to settle immediately after trial were the loss of use of the settlement funds.

On appeal, the Massachusetts Appeals Court held that the plaintiffs suffered damages as a result of both AIGDC's pre- and post-trial conduct. Like the trial court, it held that the measure of damages was the loss of use of the settlement funds.

On Friday, February 10, 2012, the SJC reversed. In Rhodes v. AIG Domestic Claims, Inc., 2012 WL 401034 (Mass.), the court first held that the plaintiffs are not required to prove that they would have accepted a prompt, reasonable settlement offer if the insurer had made such an offer.

It then held that the measure of damages is the underlying judgment is the plaintiffs' tort action, not loss of use of settlement funds.

The basis for this decision is Mass. Gen. Laws ch. 93A, s. 2, which states, "For the purposes of this chapter, the amount of actual damages to be multiplied by the court shall be the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence."

1 comment:

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