Davis v. Allstate Insurance Co.

• Decision Date: 11 January 2001
• Citation: 434 Mass 174,747 N.E.2d 141
• Parties: (Mass. 2001) RUFUS W. DAVIS vs. ALLSTATE INSURANCE COMPANY & another. <A HREF="#fr1-1" name="fn1-1">1 8402
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

747 N.E.2d 141 (Mass. 2001)

RUFUS W. DAVIS vs. ALLSTATE INSURANCE COMPANY & another.¹

8402

Supreme Court of Massachusetts

January 11, 2001.

May 18, 2001.

County: Suffolk.

Present: Marshall, C.J., Greaney, Ireland, Spina, Cowin, Sosman, & Cordy, JJ.

Summary: Insurance, Motor vehicle insurance, Settlement of claim, Insurer's obligation to defend, Construction of policy. Contract, Insurance. Consumer Protection Act, Insurance, Unfair or deceptive act.

Civil action commenced in the Superior Court Department on June 19, 1996.

A motion for summary judgment was heard by Linda E. Giles, J., and entry of final judgment was ordered by Vieri Volterra, J.

The Supreme Judicial Court granted an application for direct appellate review.

Owen Gallagher for the plaintiff.

Thomas M. Neville (Mary Millis with him) for Allstate Insurance Company.

GREANEY, J.

We examine in this case (decided in the Superior Court on a motion for summary judgment and brought here by our granting the plaintiff's application for direct appellate review) the obligation of Allstate Insurance Company (Allstate), to pay postjudgment interest on the recovery obtained by the plaintiff, Rufus W. Davis, in his personal injury action against the defendant Robert Allard. The judgment for Davis embodied the actual damages that had been awarded by the jury together with prejudgment interest on those damages, and it exceeded the limits of coverage available to Allstate's insured. We conclude that Allstate was liable for postjudgment interest until it unconditionally offered to pay the plaintiff the limits of its policy. We also conclude that there must be further proceedings in the Superior Court to decide whether Allstate committed any violations of G. L. c. 93A.

The undisputed material facts and procedural background may be summarized as follows. On March 11, 1982, the plaintiff sustained injuries when a van driven by Allard struck him as he crossed Route 1A in Revere, outside Wonderland Greyhound Park. The van that Allard was operating at the time was owned by Edward Poulin and was insured by Allstate pursuant to the standard Massachusetts automobile insurance policy issued in that year. The policy provided indemnity in the amount of $25,000 for injuries to one person as a result of one accident. The policy contained provisions setting forth Allstate's duty to defend and right to settle, and its obligation to pay supplemental costs (in addition to the policy limits). We shall set forth those provisions in full later in this opinion.

In 1984, the plaintiff commenced an action in the Superior Court against Allard and others² to recover for his injuries, and Allstate defended Allard and its insured in the lawsuit. At some time during, or prior to, a pretrial conference on March 8, 1990, Allstate communicated to the plaintiff's attorney, an oral offer of the $25,000 policy limits in exchange for the plaintiff's agreement to release Allard from all liability relating to the accident.³ The plaintiff rejected the offer, and the case went to trial.

On October 4, 1990, a jury returned a verdict in favor of the plaintiff against Allard and one codefendant, Westwood Group (doing business as Wonderland Greyhound Park) (Westwood), in the amount of $224,952.⁴ Judgment entered on October 18, 1990, in an amount slightly in excess of $400,000 (the jury's award of damages plus prejudgment interest). On October 20, 1994, the Appeals Court affirmed the judgment against Allard, Davis v. Allard, 37 Mass. App. Ct. 508 (1994), and Allstate did not seek further appellate review.⁵

On July 31, 1995 (shortly after this court had decided the appeal of Westwood), the plaintiff made a written demand on Allstate for payment of the $25,000 policy limits plus $228,236.29 in postjudgment interest that had accumulated from the date of entry of judgment. Allstate informed the plaintiff that the matter had been forwarded to its New Hampshire office. On February 26, 1996, the plaintiff sent Allstate a written demand, pursuant to G. L. c. 93A, § 9, for payment of the "amount of the underlying judgment of $224,952 [sic], plus accrued interest since October 18, 1990." In response, Allstate informed the plaintiff that it was not obligated to pay interest that accrued after the initial offer to settle made by Allstate and rejected by the plaintiff, but that it would pay the plaintiff, as "our final offer," $25,000, plus $18,000 in interest that, according to Allstate's calculations, had accrued up until the pretrial offer of March, 1990. Despite this offer, on April 26, 1996, Allstate sent the plaintiff a check for $25,000 (with no interest included), marked "final settlement of any and all claims arising from bodily injury caused by [the accident]." The plaintiff did not indorse or negotiate this check. It was not until July 1, 1996, approximately two weeks after the plaintiff filed this action against Allstate, that Allstate issued an unconditional draft in the amount of $25,000 to the plaintiff.

The plaintiff's multi-count complaint sought, insofar as relevant here, a declaratory judgment under G. L. c. 231A that Allstate was liable for the postjudgment interest under the terms of its policy and by reason of G. L. c. 175, § 113A,⁶ and a determination that Allstate violated G. L. c. 93A by its insistence on conditioning payment of the policy limits on a release of the plaintiff's claims. The judge entered summary judgment for Allstate. The judge concluded that (1) under the express terms of the policy, Allstate had no duty to pay postjudgment interest that accrued after its conditional pretrial settlement offer of the policy limits; (2) G. L. c. 175, § 113A, requires written notice only when an insurer eliminates or reduces coverage provided by a policy, and does not apply to settlement offers; and, (3) under Lazaris v. Metropolitan Prop. & Cas. Ins. Co., 428 Mass. 502, 504 (1998), an insurer does not violate G. L. c. 93A when it conditions payment of policy limits on a release by the claimant, even when, as in this case, liability is undisputed and damages clearly exceed the available insurance.

1. The plaintiff's argument, in substance, is that Allstate is liable for postjudgment interest on the judgment, computed from the time of entry of judgment in October, 1990, until the time that Allstate tendered the unconditional payment of the policy limits of $25,000, in July, 1996. He asserts that an offer to pay must be both in writing and must be made after a judgment is entered, to toll the accrual of the postjudgment interest that Allstate was obligated to pay. Allstate argues (and the judge agreed) that Allstate offered, and paid, the plaintiff all that was due him because, under the terms of its policy, Allstate was not required to pay postjudgment interest after its initial prejudgment offer of the policy limits, notwithstanding the fact that Allstate's offer was expressly made conditional on a release by the plaintiff of his claims.⁷

Neither the plaintiff nor Allstate has furnished the correct analysis. The judge correctly determined, and the plaintiff does not now persuasively argue otherwise, that there is nothing in G. L. c. 175, § 113A, that required Allstate's settlement offer to be in writing. Section 113A does require that reductions or eliminations in coverage to a motor vehicle liability policy be memorialized in a printed notice attached to each policy. There is a clear difference, however, between a reduction of the coverage provided by a policy and an offer to settle a claim that is covered by the policy. As the judge correctly noted, "The former alters the insurance contract; the latter operates within it." In addition, nothing in the terms of the policy require that an offer to settle be in writing. The plaintiff points to the policy provision entitled "Our Agreement," which specifies that "[o]ral promises or statements made by you or our agent are not part of this policy." This provision, however, is comparable in substance and intent to G. L. c. 175, § 113A, and cannot fairly be interpreted to require that every offer to settle be made in writing.⁸

Allstate's reasoning, on the other hand, is also inaccurate. Allstate asserts that our decision in Lazaris v. Metropolitan Prop. & Cas. Ins. Co., supra, controls this case. In Lazaris, we held that, in settlement discussions, an insurer may condition payment of the policy limits on the plaintiff's execution of a release, even when liability is reasonably clear and damages exceed the limits of the policy.⁹ Id. at 505-506. Allstate reasons that its pretrial offer to pay the plaintiff the policy limits, conditioned on the plaintiff's release of all claims against its insured and Allard, constituted a valid offer under Lazaris, which, when rejected by the plaintiff, extinguished Allstate's liability for postjudgment interest. The Lazaris decision, however, dealt solely with a pretrial settlement offer, specifically, whether an insurance company violates G. L. c. 176D, § 3 (9) (f), and G. L. c. 93A, by insisting that a claimant release all claims against its insured before it pays a claim. See id. at 502-503. Lazaris is not dispositive of the issue whether a pretrial offer to settle terminates an insurer's contractual obligation to pay postjudgment interest.

The correct analysis is based in the terms of Allstate's policy with its insured. We interpret these terms according to the "fair meaning of the language used, as applied to the subject matter." Bilodeau v. Lumbermens Mut. Cas. Co., 392 Mass. 537, 541 (1984), quoting Sav-Mor Supermarkets, Inc. v. Skelly Detective Serv., Inc., 359 Mass. 221, 226 (1971). The relevant policy terms are provisions 2 and 3 of the general provisions, set forth at note 7, supra. Fairly interpreted, these provisions together authorized and obligated Allstate, in this case, to:

(1) defend any lawsuit brought against its insured within the policy's coverage "even if [the lawsuit] is...