1 v. Arbella Mut. Ins. Co..

• Decision Date: 30 August 2010
• Docket Number: No. 09-P-56.,09-P-56.
• Citation: 77 Mass.App.Ct. 518,932 N.E.2d 837
• Parties: Linda GORE, administratrix, 1 v. ARBELLA MUTUAL INSURANCE COMPANY.
• Court: Appeals Court of Massachusetts

77 Mass.App.Ct. 518

932 N.E.2d 837

Linda GORE, administratrix, ¹ v.ARBELLA MUTUAL INSURANCE COMPANY.

No. 09-P-56.

Appeals Court of Massachusetts,Middlesex.

Argued Dec. 10, 2009.

Decided Aug. 30, 2010.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

John R. Hitt, Boston, for the defendant.

Joseph P. Musacchio, Boston, for the plaintiff.

Present: KATZMANN, GRAINGER, & FECTEAU, JJ.

KATZMANN, J.

Following a bench trial, a Superior Court judge found that the defendant, Arbella Mutual Insurance Company (Arbella) had committed unfair insurance practices both against the plaintiff, Angelina Dattilo, and its insured, Anthony Caban. The judge awarded Dattilo damages under G.L. c. 93A and G.L. c. 176D, both directly, as a (third-party) claimant, and as an assignee of Caban's rights against Arbella. Arbella now appeals. Dattilo cross-appeals, claiming error in the calculation of damages.

A. Background. We recite the facts from the judge's findings and the uncontradicted evidence before him, reserving recitation of certain facts as they become relevant to the issues raised.

1. The accident and demand for settlement. On August 30, 1998, while driving in Florida, Dattilo, then approximately seventy-five years old, was seriously injured when her car was struck by a car driven by Caban. Other parties with serious injuries included two passengers in Caban's car. A third passenger had less serious injuries. Caban was insured by Arbella. At the time of the accident, he maintained an insurance policy with liability limits of $20,000 per person and $40,000 per accident. There were thus four injured parties who could make claims on that money.

Soon after the accident, through a family friend, Dattilo retained Florida counsel, Anthony Christian. On September 14, 1998, Attorney Christian wrote to Arbella, informing it that he represented Dattilo and requesting coverage information. An Arbella claim representative responded promptly by requesting a medical records authorization. ² During September, Attorney Christian conducted an investigation, including reviewing the police report, a liability report from his private investigator, and Dattilo's physician's operative report detailing her injuries, surgery, and medical bills. Based on his investigation, Attorney Christian determined that Caban was one hundred per cent at fault for the accident and that Dattilo's injuries exceeded the policy limits. On September 28, 1998, Attorney Christian sent a letter (the demand letter) to Arbella detailing Caban's liability for the accident and Dattilo's injuries, enclosing selected medical records and receipts totaling over $25,000, and demanding that Arbella tender the $20,000 policy limits within thirty days, i.e., on or before October 29, 1998. The demand letter provided that, upon tender of the proceeds, Dattilo would release Caban and Arbella from all liability and would agree to indemnify Arbella for any outstanding liens on the proceeds.

By the time the demand letter was sent, Arbella had conducted its own investigation, and liability and damages were reasonably clear. Caban had admitted that he was at fault, and Arbella's investigator had ruled out any contributory negligence on the part of Dattilo. It was also reasonably clear that the damages exceeded by at least $100,000 the per person policy limits.

During the thirty-day period following the demand letter, Arbella made no written response, and each side attempted only intermittently to speak with the other over the phone. On the final day of the thirty-day period, an Arbella adjuster left a call-back voice mail on Attorney Christian's phone, and he attempted twice that day to return the call but only reached the adjuster's voice mail. During this thirty-day period, Arbella did not communicate the demand letter to Caban.

Upon expiration of the thirty-day period, on November 2, 1998, viewing Arbella's lack of response to the demand letter as a rejection of the offer, Attorney Christian, on behalf of Dattilo, filed suit against Caban in Florida.

When Arbella belatedly notified Caban on November 10, 1998, ³ that he was exposed in excess of his policy limits, it stated, “[W]e have been presented with a bodily injury claim,” but did not mention that a demand letter had been sent to Arbella on September 28, 1998; indeed, Arbella stated that “a formal demand has not been received.” Moreover, Arbella did not mention the offer of settlement provided in Dattilo's September letter.

On February 22, 1999, five months after the demand letter had been sent, a different Arbella adjuster responded in writing to the demand letter, advising Attorney Christian that Arbella was then attempting to determine what claims the other injured persons (passengers in Caban's car) might have, in order to attempt to structure a global settlement.

In a letter dated April 21, 1999, seven months after the demand letter had been sent, Arbella offered the $20,000 policy limits to Dattilo without any conditions other than provision of a release. Dattilo rejected the offer after consultation with Attorney Christian, who, in replying to the offer, wrote, inter alia, that the “release of all claims” demanded as a condition of the offer was “rather presumptuous under the circumstances.” Around the same time, Arbella settled with one other claimant and determined that the others did not intend to pursue their claims. On April 29, 1999, Arbella sent Caban another notice concerning Dattilo's claim, identical to the notice previously sent on November 10, 1998. See note 3, supra.

2. Settlement with Caban. On November 6, 2000, in Florida, Dattilo reached a settlement (the settlement agreement) with Caban whereby a stipulated judgment was to be entered against Caban for $450,000. ⁴ Pursuant to the settlement agreement, Caban assigned to Dattilo his rights against Arbella for unfair settlement practices.

The parties intended in the settlement agreement to shield Caban from personal liability for the $450,000 damages by including a provision whereby Dattilo agreed not to execute against Caban on the stipulated judgment. Arbella knew of the negotiations related to the settlement agreement and waived in writing any claim against Caban for noncooperation under the policy.

B. Procedural history. Although the c. 93A demand letter and response do not appear in the record appendix, materials in the record on appeal indicate that on September 23, 2002, Dattilo sent a c. 93A demand letter to Arbella in the amount of $1.4 million, and Arbella responded with an offer of $23,966.16. On October 25, 2002, Dattilo, individually and as assignee of the rights of Caban, filed suit in Superior Court against Arbella seeking compensatory damages, as well as multiple damages pursuant to c. 93A, arising out of its allegedly unreasonable failure to settle. After a jury-waived trial held in April, 2007, the judge found that Arbella had engaged in “unfair claim settlement practices” under G.L. c. 176D, § 3(9), and G.L. c. 93A by failing to effectuate a prompt and equitable offer of settlement, failing to notify Caban of the settlement offer, and misrepresenting to Caban that a formal demand had not been received. ⁵ A judgment entered for Dattilo, dated July 26, 2007.

In a corrected judgment dated September 19, 2007, the judge awarded Dattilo $1,007,342.58. The award consisted of (a) $670,000 in compensatory and multiple damages, (b) $313,728.77 for prejudgment interest, (c) $23,194.40 in costs, and (d) $419.41 in interest on the costs from the date of judgment (July 26, 2007) to the date of the corrected judgment.

The judge reached his compensatory and multiple damages figure by adding $430,000 (the amount of the settlement agreement over and above the $20,000 per person policy limits) (the excess judgment or assigned claim damages); plus $200,000 (Dattilo's attorney's fees, doubled); plus $40,000 (the per person policy limit Arbella failed to pay when it did not respond to the settlement demand in October, 1998, doubled) (the direct claim damages). The prejudgment interest award of $313,728.77 was calculated based on a single damages amount of $550,000. The judge used this single damages amount because he declined to double the damages on the assigned claim or the prejudgment interest on those damages.

On appeal, Arbella argues principally that the corrected judgment should be reversed because the judge erred in (a) not explicitly considering the reasonableness of Attorney Christian's conduct in sending the demand letter or the fact that Caban was difficult to reach, (b) awarding prejudgment interest on the assigned claim damages, and (c) in finding that Arbella acted wilfully and knowingly in its statutory violations, and thus doubling the award of attorney's fees and damages on the direct claim.

Dattilo cross-appeals, arguing that the judge erred by not doubling the damages on the assigned claim, with interest.

C. Discussion. 1. Unfair claim settlement practices. a. Statutory framework. Arbella challenges the judge's finding that it engaged in unfair claim settlement practices. “We will not disturb a judge's findings of fact in a c. 93A claim unless those findings are clearly erroneous.” Clegg v. Butler, 424 Mass. 413, 420, 676 N.E.2d 1134 (1997). General Laws c. 93A, § 2( a ), inserted by St.1967, c. 813, § 1, makes it unlawful to engage in “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Section 9(1) of G.L. c. 93A, as amended through St.1979, c. 406, § 1, provides a cause of action for “any person whose rights are affected by another person violating the provisions of [G.L. c. 176D, § 3(9) ].” General Laws c. 176D, § 3, inserted by St.1972, c. 543, § 1, bans “unfair or deceptive acts or practices in the business of insurance,” which include “unfair claim settlement practice[s].” G.L. c. 176D, § 3(9). “Those claiming injury by virtue of an insurance...