U.S. District Court holds that even after court judgment in underlying case, measure of 93A damages is lost interest -- and my advice to both sides for handling 93A claims

Victoria Gretzky was injured when she fell on a staircase at an apartment building owned by the Arrudas.  In September 2022 she sued the Arrudas, who were insured by AmGuard.  AmGuard made a number of settlement offers, each of which Gretzky declined.  She demanded the policy limit of $1 million, plus interest.

On the second day of trial the parties settled, with a consent judgment that Gretsky was entitled to $2,250,000 plus interest and costs, and she reserved her right to bring first and third party claims against AmGuard.  AmGuard paid its policy limit of $1 million.  

The 93A Demand and the Safe Harbor Provision Argument

Gretzky then sent a 93A demand letter to AmGuard.  In response, AmGuard offered $232,769, which represented prejudgment interest from the date the lawsuit was filed through the date of the accepted check.  Gretzky rejected the proffer and sued AmGuard for breach of ch. 93A.  

AmGuard filed a motion to limit the damages to the interest payment it had offered, arguing that the offer was reasonable and entitled it to the safe harbor provisions of ch. 93A.  Gretzky argued that prejudgment interest was the wrong measure of economic damages, and that damages for mental anguish and unnecessary prolongment of the litigation should have been included in the offer.  

Mass. Gen. Laws ch. 93A §9 provides that if a recipient of a 93A demand letter timely responds with a written settlement offer that is rejected, damages may be limited to the amount of the offer if the court finds that the relief tendered was reasonable in relation to the injury actually suffered.  This is called the safe harbor provision. 

AmGuard argued that "injury actually suffered" in the safe harbor provision is the loss of use of money (the interest) wrongfully withheld.   Gretzky argued that loss of use of money is not the correct standard when there is an actual judgment in the underlying tort case and the insurer committed a willful violation of ch. 93A.  

Court Agrees that Safe Harbor Provision Applies 

In Gretzky v. AmGuard, 2025 WL 3140762 (D. Mass. 2025) (unpublished),  the United States District Court for the District of Massachusetts sided with AmGuard.  The court held that that AmGuard's offer was to settle the 93A claim only, because the underlying tort action had already been settled.  It then turned to what the 93A loss was.  Prejudgment, AmGuard never had an obligation to settle for more than the $1 million policy limit.  So  Gretzky was deprived of use of the $1 million as a result of AmGuard's failure to timely settle.  Her damages were the interest accrued on that amount.  AmGuard's settlement offer was reasonable relative to the prejudgment injuries.  

Gretzky argued that, after the judgment, AmGuard was obligated to pay the prejudgment interest, and that since it wrongfully withheld that amount, it also owed interest on the interest.  The court held that failure to pay that interest over a two month period resulted in a de minimis $5000 in loss of use damages.  

The court rejected Gretzky's argument that she was entitled to damages for the emotional distress she suffered from loss of use of the funds, because she did not include a request for such damages in her 93A demand letter.  

What to make of this case

Damages under ch. 93A can be very confusing.  This decision is not a model of clarity, but the most important part of the decision is the court’s analysis of why the case is different from Rhodes v. AIG Domestic Claims, Inc., 461 Mass. 486 (2012).  In Rhodes, the SJC had held that single damages to be multiplied when an insurer willfully acted in bad faith was the underlying tort judgment. But in that case, after receiving a post-judgment 93A demand letter the insurer offered less than the tort judgment (and less than the policy limit) to settle both the underlying claim and the 93A claim.  That’s different than in Gretzky, where the insurer had already paid its policy limit before it received the post-judgment 93A demand letter.  The policy limit was the most that the plaintiff could be entitled to under the insurance policy itself. After receiving the 93A demand letter the insurer offered loss of use damages (interest) as 93A damages.  In other words, if the insurer had paid its policy limit at the beginning of the case, the plaintiff would have had use of the money earlier.  The court held that the insurer’s offer was reasonable, so under the safe harbor provisions of 93A the damages would not be multiplied.

My advice to someone who is contemplating bringing a ch. 93A claim against an insurer for bad faith settlement practices is that they should send the 93A demand letter as soon as liability and damages are reasonably clear, laying out in detail in the letter exactly why they are reasonably clear, supported by exhibits.  That provides the evidence they need down the road that the insurer failed to make a reasonable offer of settlement based on the information available to it.  The last paragraph of the Gretzky decision is telling here.  The court rejected a claim of emotional distress damages because those damages were not included in the 93A demand letter.

And of course, on the other side, I would advise any insurer receiving a 93A demand letter to take it seriously.  A large verdict does not retroactively prove that an insurer violated ch. 93A by not meeting the plaintiff’s settlement demand, but the insurer should be prepared to show why the information it had with respect to liability and damages did not justify the settlement sought.

Lawyer's Weekly quoted my comments about the case here.