Tuesday, August 13, 2013

U.S. District Court rules no 93A violation where damages were not clear

Lynne Ingalls hired a lawyer, Michael Goldstein, to file a bankruptcy petition.  Ingalls told him and signed an affidavit affirming that she had filed a homestead declaration on real estate she owned with her sister.  (A homestead declaration protects certain equity in a home from creditors; until recently the exemption was not effective unless a document was filed with the Registry of Deeds.)  She testified on the issue in bankruptcy court.  Goldstein did not independently confirm the homestead declaration.  Eventually it was discovered that there was no homestead declaration of record.  As a result, the real estate was exposed to the claims of creditors.

Ingalls sued Goldstein for malpractice.  He asserted a defense of comparative negligence.  If successful, that defense would reduce or negate his liability.

Ingalls sent a 93A demand letter to Goldstein's Insurer, Minnesota Lawyers Mutual Company, demanding $100,000.  Minnesota offered $10,000, which Ingalls rejected.  Ingalls won at trial against Goldstein and, after post-trial motions, Minnesota paid the judgment of $98,018.95 including interest. 

In the 93A suit, Minnesota argued on summary judgment that liability was never reasonably clear prior to the jury verdict. 

In Ingalls v. Minn. Lawyers Mut. Ins. Co., 2013 WL 3943537 (D. Mass.), the United States District Court for the District of Massachusetts noted under Mass. Gen. Laws ch. 176D liability encompasses both fault and damages.  If damages are contested in good faith, then liability is not reasonably clear.  "This is especially true in cases involving comparative negligence.  In such circumstances, even if fault has been determined, if the percentage of potential damages attributable to the defendant is the subject of a good faith disagreement, then liability is not clear." 

The court held that although Goldstein's negligence was clear, the damages in the malpractice action were never reasonably clear prior to trial.  Ingalls' 93A demand letter did not lay out damages of $100,000, and her discussions of damages during discovery in the malpractice action continually evolved and involved future damages.  There was no evidence of actual out of pocket damages.  Moreover, there was always the possibility that her damages would be reduced by a comparative negligence finding. 

The court granted summary judgment to Minnesota, holding that it was impossible to conclude from the record that no reasonable insurer would have failed to settle the case.  

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