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In Gretzky v. AmGuard, 2025 WL 3140762 (D. Mass. 2025) (unpublished),  the United States District Court for the District of Massachusetts sided with AmGuard.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.

 

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."

Calculation of punitive damages under 176D/93A

I reported here on a Superior Court case that I stated correctly awarded unfair settlement practices damages based on the lost interest amount. A reader pointed out that the damages that are trebled pursuant to Mass. Gen. Laws ch. 93A are actually the entire trial verdict.

He is correct. Under the current law of Mass. Gen. Laws chs. 93A and 176D, when a case goes to trial and judgment and damages are trebled pursuant to 93A, then the damages that are trebled are the verdict amount. When the underlying case settles, however, and the claimant successfully sues for treble damages under 93A, the amount that is trebled is the interest that was lost because of the delay in settlement. Single damages under 93A are always the lost interest.

More on Sterlin and 93A damages

This is my fourth and final post on Sterlin v. Commerce Ins. Co.

In my last post I discussed the 93A damages awarded by the judge, correctly based on the lost interest resulting from the delay in settlement.

Pierre took out a loan against the settlement. He sought 93A damages for the loss of the payment of $4,855 in loan origination fees and interest through the time the offer of settlement was made. The court denied this claim on the grounds that he had failed to prove his damages--Pierre testified about the loan, but did not support his testimony with documentary evidence.

By leaving open the possibility of paying such damages if proven, the judge has widened the scope of 93A/176D damages beyond lost interest on a settlement, to all damages resulting from the inconvenience of not having funds available. Should Pierre receive 93A damages for extra medical costs he personally incurred as a result of not being able to pay for health insurance? What if the bank had foreclosed on his house because he couldn't pay his mortgage?