Massachusetts Appeals Court holds insurer did not breach settlement duty where trial verdict resulted in excess judgment

Elsa Villanueva was injured when she was struck by a car owned and operated by Valerie Troiano.  Troiano was insured by Commerce. 


Commerce determined that Villanueva was more than fifty percent at fault in the accident (and therefore under the Massachusetts comparative negligence law Troiano was not liable) because she had stepped out from between two parked cars into a traffic lane, not into a crosswalk, on a dark, rainy morning, wearing dark clothing.  It offered $5,000 to settle the claim.


Troiano was not cited for the accident.  Villanueva, who had no memory of the accident, sued Troiano.


Shortly before trial, after several attempts Commerce was able to obtain a statement from Manuel Martinez, the only witness to the accident.  He told the Commerce investigator that Troiano was driving too fast and left fhe scene of the accident.  He also stated that he could not identify the gender of the driver because it was at night and still dark.  Commerce's investigator indicated that Martinez was a friend of Villanueva. 


Also shortly before trial Commerce received a medical report indicating that Villanueva had a permanent injury from the accident.  Villanueva rejected Commerce's offer of a high-low arbitration with a low of $5,000 and a high of $100,000. 


After Martinez appeared for a deposition Commerce offered the policy limit of $100,000.  Villanueva rejected that offer as well.


At trial, the jury awarded $414,500 to Villanueva.  It determined that Villanueva's comparative negligence was thirty-five percent in the accident.  Commerce immediately paid the policy limit of $100,000.


Villanueva then sued Commerce for unfair claims settlement practices.  After trial the judge granted Commerce judgment as a matter of law on the grounds that Villanueva did not present any expert testimony that Commerce breached its statutory duty, and that, on the facts and the law as presented at trial a reasonable fact finder could not find that Commerce had breached its statutory duty. 


On appeal, Villanueva argued that as soon as Commerce learned that Martinez faulted Troiano for the accident liability was reasonably clear and Commerce was required to make a reasonable offer of settlement.  Commerce's initial offer of $5,000 was unreasonable.  Villanueva also argued that the Commerce's subsequent pretrial offer of the $100,000 policy limit demonstrated that it knew that liability exceeded the policy limit and that its prior $5,000 was unreasonable. 


In Villanueva v. Commerce Ins. Co., 89 Mass. App. Ct. 1124 (2016) (unpublished), the Massachusetts Appeals Court affirmed the dismissal of the case against Commerce.  It held that Commerce's belief that Troiano would win on the merits of the underlying claim because Villanueva was more than fifty percent at fault was reasonable. 


Villanueva argued that the fact that Commerce set a reserve at $100,000 showed that it knew that the case should settle for that amount.  The judge disagreed, noting testimony by a witness for Commerce that the reserve represents a worst-case scenario for the insurer and is based only on a damages assessment without taking liability defenses into account. 


The court also held that the amount of the jury award in the underlying claim did not compel a finding that Commerce acted unreasonably. 


The court also affirmed the holding of the trial court that expert testimony was required to establish that Commerce breached its duty.   It held that although expert testimony may not be required in every case asserting a breach of duty to settle claims, it was needed in the present case.