Thursday, August 1, 2019

Massachusetts Appeals Court holds that verdict against insured does not make liability or damages reasonably clear until appeal is resolved

Surabian Realty Co. and Maja Hospitality Corporation sued Central One Federal Credit Union and two of its officers, David L'Ecuyer and Craig Madonia in connection with a failed attempt to obtain a commercial loan to develop a hotel on property in Shrewsbury.  A jury returned a verdict in favor of the plaintiffs, and the trial judge ruled in favor of the defendants on ch. 93A claims. Both sides appealed.

While the appeals were pending the plaintiffs sent a 93A demand letter to CUMIS, the insurer for Central One and its officers, demanding that it settle the claims against L'Ecuyer (but not the other two parties).  CUMIS responded that the appeal rendered liability unclear, and declined to pay the judgment against L'Ecuyer.  The plaintiffs then sued CUMIS.  Subsequently the trial court decisions in the underlying case were affirmed.

In Surabian Realty Co., Inc. v. CUNA Mutual Group, 95 Mass. App. Ct. 1118, 2019 WL 2591286 (unpublished), the Massachusetts Appeals Court held that the cross-appeal injected uncertainty as to L'Ecuyer's liability and the amount of damages, so that CUMIS did not act in bad faith in refusing to settle.  In particular the court noted that the memorandum of the trial judge on the 93A claim in the underlying case made clear that the judge disagreed with the determination of the jury.  In addition, CUMIS was relying on the advice of counsel in declining to settle. 

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