Bingham v. Supervalu, Inc.

• Decision Date: 13 November 2015
• Docket Number: No. 15–1437.,15–1437.
• Citation: 806 F.3d 5
• Parties: Warren BINGHAM, as Executor of the Estate of Marion Bingham, Plaintiff, Appellant, v. SUPERVALU, INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

806 F.3d 5

Warren BINGHAM, as Executor of the Estate of Marion Bingham, Plaintiff, Appellant,

v.SUPERVALU, INC., Defendant, Appellee.

No. 15–1437.

United States Court of Appeals, First Circuit.

Nov. 13, 2015.

Joshua N. Garick, with whom Law Offices of Joshua N. Garick, P.C., was on brief, for appellant.

Wesley S. Chused, with whom Preti Flaherty Beliveau & Pachios LLP, was on brief, for appellee.

Opinion

STAHL, Circuit Judge.

Massachusetts law prohibits those “in the business of insurance” from employing “unfair methods of competition and unfair or deceptive acts or practices,” which include “[f]ailing to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.” Mass. Gen. Laws ch. 176D, § 3(9)(f)(“Chapter 176D”). This appeal requires us to consider what it means to be “in the business of insurance.”

The Appellant, Warren Bingham, proceeding in his capacity as the executor of the estate of Marion Bingham (the “Estate”), brought suit alleging that the Appellee, Supervalu, Inc., acted as an insurer of one of its subsidiaries, and violated Chapter 176D by failing to promptly, fairly, and equitably effectuate the settlement of prior litigation between the subsidiary and the Estate. The district court found that Supervalu was not in the business of insurance and, on this basis, entered summary judgment in Supervalu's favor. The Estate appeals. Finding no error, we AFFIRM.

I. Facts and Background

A. The Prior Litigation

In January 2006, Marion Bingham was shopping at a Shaw's Supermarket in East Boston, Massachusetts when she was struck by a motorized cart. Ms. Bingham suffered a laceration to her right heel in the area of her Achilles' tendon. At the time, Ms. Bingham was in her early-eighties, and the incident seems to have precipitated a rapid decline in her health. Ms. Bingham passed away approximately eight months later in September 2006.

Before she died, Ms. Bingham brought a negligence action against Shaw's in Massachusetts state court. Later, after her death, Ms. Bingham's nephew, Warren Bingham, was appointed as the executor of the Estate, and was substituted as the plaintiff in the suit against Shaw's.

At the time of the January 2006 incident, Shaw's was a subsidiary of Albertson's, Inc. On June 2, 2006, however, Albertson's was acquired by Supervalu. Thus, when Ms. Bingham filed her lawsuit against Shaw's at the end of June 2006, Shaw's was a subsidiary of Supervalu and, pursuant to the manner in which Supervalu structured its relationship with its direct and indirect corporate subsidiaries, Supervalu had the authority to negotiate and settle claims on behalf of Shaw's.

Including Shaw's, Supervalu owned some 228 distinct subsidiaries. Supervalu maintained a centralized risk management system whereby it negotiated and resolved claims made against its subsidiaries that were not otherwise covered by insurance.¹Supervalu employed claims adjusters to perform these functions, and once a self-insured claim was settled, Supervalu would issue payment from a central account on behalf of the subsidiary against which the claim was made. Supervalu did not issue insurance policies to its subsidiaries. However, in order to minimize its total costs and exposure, Supervalu opted to centralize the self-insured claims administration process.

In July 2008, in the liability action, a judge of the Massachusetts Superior Court entered judgment against Shaw's pursuant to Massachusetts Rule of Civil Procedure 33(a), which permits the entry of judgment against a party failing to timely respond to interrogatories. SeeMass. R. Civ. P. 33(a). Approximately a year later, in June 2009, the Superior Court awarded damages to the Estate in the amount of $300,000, plus post-judgment interest.

Rather than pay the judgment, Supervalu filed an appeal to the Appeals Court of Massachusetts, which summarily affirmed the Superior Court's damages award. See Bingham v. Shaw's Supermarkets, Inc.,78 Mass.App.Ct. 1107, 936 N.E.2d 452 (Mass.App.Ct.2010)(unpublished). Then, Supervalu threatened to seek further appellate review in the Massachusetts Supreme Judicial Court (the “SJC”). Rather than risk prolonging the litigation, the Estate accepted a $475,000 settlement offer, which represented a figure slightly below the sum of the original award, plus the post-judgment interest that had accrued to that date.

The Estate contends that Supervalu's decisions to appeal to the Appeals Court of Massachusetts, and then to threaten a further appeal to the SJC, were undertaken contrary to the advice of counsel that, in each instance, an appeal was unlikely to succeed. The Estate argues that Supervalu's sole motive was to protract the litigation in the hopes of achieving a reduced settlement. Ultimately, Supervalu made payment to the Estate on December 8, 2010.

B. The Proceedings Below

All was quiet until April 2013, when the attorney who had represented the Estate in the underlying state court proceedings sent a demand letter to Shaw's and Supervalu asserting that Supervalu had acted as Shaw's insurer and had violated Chapter 176D and Mass. Gen. Laws ch. 93A (“Chapter 93A”) by failing to promptly and fairly resolve the Estate's claim against Shaw's.²The letter demanded payment of just over $1,000,000. Supervalu declined to pay.

The Estate brought suit against Supervalu in Massachusetts Superior Court, asserting claims for violation of Chapter 176D and Chapter 93A based on Supervalu's “willful” and “frivolous” delay in resolving the underlying litigation between Shaw's and the Estate. Supervalu removed the action to federal court and moved for summary judgment, arguing solely that it was not in the business of insurance, and therefore was not subject to regulation under Chapter 176D.

Pursuant to a report and recommendation issued by a magistrate judge, the district court concluded that Supervalu was not in the business of insurance. Relying heavily on the SJC's holding in Morrison v. Toys“R” Us, Inc., Mass.,441 Mass. 451, 806 N.E.2d 388 (2004), the district court reasoned that Supervalu did not act as an insurer because it did not sell insurance policies for profit and was not contractually obligated to settle claims made against Shaw's or its other subsidiaries. Rather, the district court found that Supervalu operated a centralized risk management system to negotiate and settle claims made against any of its subsidiaries that were below the limits of its applicable insurance coverage. Thus, for these claims, as a “self-insurer,” Supervalu was not “in the business of insurance” as that term is contemplated in Chapter 176D and in Morrison.On this rationale, the district court entered summary judgment in Supervalu's favor, prompting the instant appeal.

II. Standard of Review

We review orders for summary judgment de novo, assessing the record in the light most favorable to the nonmovant and resolving all reasonable inferences in that party's favor. Packgen v. BP Expl. & Prod., Inc.,754 F.3d 61, 66 (1st Cir.2014). The entry of summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id.(quoting Fed.R.Civ.P. 56(a)).

III. Discussion

Although a litigant is typically free to mount a vigorous defense, and is under no obligation to make a settlement offer or to otherwise promptly resolve a dispute, seeMass. Const. art. XV, Chapter 176D imposes a statutory obligation on those “in the business of insurance” to “prompt[ly], fair[ly] and equitabl[y]” settle claims in which liability has become reasonably clear. Mass. Gen. Laws ch. 176D, § 3(9)(f). Chapter 176D was “enacted to encourage settlement of insurance claims ... and [to] discourage insurers from forcing claimants into unnecessary litigation to obtain relief.” Hopkins v. Liberty Mut. Ins. Co.,434 Mass. 556, 750 N.E.2d 943, 952 (2001)(quoting Clegg v. Butler,424 Mass. 413, 676 N.E.2d 1134, 1139 (1997)). “One obvious legislative concern was that entities that profit from selling insurance policies not abuse exclusive rights and duties to control litigation vested through those same policies.” Morrison,806 N.E.2d at 390.

The sole issue we must consider is whether Supervalu was in the business of insurance. The Estate proffers a series of arguments suggesting that it was.³First, the Estate contends that the district court erred in concluding, pursuant to the SJC's decision in Morrison,that Supervalu was a “self-insurer” exempt from regulation under Chapter 176D. Second, the Estate argues that Supervalu functions in a manner similar to both a “captive insurer” and a “third-party administrator,” and thus should be deemed to be in the business of insurance. Third and finally, the Estate suggests that because one of Supervalu's many subsidiaries, Risk Planners, Inc. (“Risk Planners”), was an insurance agency, that Supervalu, as its parent company, was by definition engaged in the business of insurance. We consider each of these arguments in turn.

A. The Morrison Exemption for Self–Insureds

In Morrison,the SJC considered the contours of Chapter 93A and Chapter 176D in the context of a suit brought by a Toys “R” Us (“Toys”) patron who was injured while shopping at a Toys store. 806 N.E.2d at 388–89. After the Superior Court entered summary judgment for Toys on grounds that it was not in the business of insurance, the Appeals Court of Massachusetts reversed. See Morrison v. Toys

“R” Us, Inc., Mass.,59 Mass.App.Ct. 613, 797 N.E.2d 405 (2003). On further appellate review, the SJC reinstated the judgment of the Superior Court, finding that Toys was indeed not in the business of insurance. Morrison,806 N.E.2d at 388.

We rehearse the factual background as described by the SJC, augmenting where necessary with the Appeals Court's somewhat more robust account.⁴After she had been injured by a falling sign at a Toys location in Massachusetts, the plaintiff brought suit against Toys “R” Us, Inc., Massachusetts, a wholly-owned...