Demeo v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 16 May 1995
• Docket Number: No. 94-P-289,94-P-289
• Citation: 38 Mass.App.Ct. 955,649 N.E.2d 803
• Parties: Michael J. DEMEO v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
• Court: Appeals Court of Massachusetts

Page 803

649 N.E.2d 803

38 Mass.App.Ct. 955

Michael J. DEMEO v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.

No. 94-P-289.

Appeals Court of Massachusetts.

May 16, 1995.

Hans R. Hailey, Boston, for plaintiff.

Robert P. Turner, Belmont, for defendant.

RESCRIPT.

The single issue before us is whether the defendant failed to "effectuate prompt, fair and equitable settlement of [a] claim[ ] in which liability has become reasonably clear." G.L. c. 176D, § 3(9)(f), as inserted by St.1972, c. 543, § 1.

The essential facts of the controversy are not in dispute: ¹ the defendant's insured (Wallace) was in her automobile travelling in the passing lane of a divided highway. The light was red at the approaching intersection, but as Wallace came closer to the intersection, the light turned green. Apparently confused about her location, Wallace stopped at the green light for about five seconds. The automobile behind Wallace stopped safely, as did the following automobile, which contained the plaintiff. The fourth automobile (Robichaud) did not stop; it hit the rear of the plaintiff's automobile, causing injuries. The defendant declined to make any offer in settlement on the ground that the Robichaud vehicle was the exclusive cause of the accident, ^{2 2} and this suit was brought alleging a violation of G.L. c. 176D, § 3(9)(f ). See G.L. c. 93A, § 9(1). ³

Following a bench trial, the judge entered his findings. He concluded that the defendant did not violate either c. 93A or c. 176D. ⁴ The judge found that the decision of the defendant's claims specialist (Collins) to make no settlement offer was made in good faith and was not an unreasonable business judgment because (the judge found) Collins believed that the defendant had a fifty percent chance of prevailing and that the cost of defending the action was far less than the amount of the plaintiff's settlement demand.

Whether the defendant's liability in this case became "reasonably clear" calls for an objective standard of inquiry into the facts and the applicable law. See Van Dyke v. St. Paul Fire & Marine Ins. Co., 388 Mass. 671, 677 n. 8, 448 N.E.2d 357 (1983). Compare Heller v. Silverbranch Constr. Corp., 376 Mass. 621, 627-628, 382 N.E.2d 1065 (1978). Compare also Thaler v. American Ins. Co., 34 Mass.App.Ct. 639, 642-643, 614 N.E.2d 1021 (1993); Guity v. Commerce Ins. Co., 36 Mass.App.Ct. 339, 343, 631 N.E.2d 75 (1994). The judge applied factors not relevant under the statute; the cost of the defense, the size of the plaintiff's demand, and the insurer's "business judgment" are all unrelated to the likelihood of the defendant's liability. Moreover, the judge made no independent, objective assessment, based on the evidence before him, ⁵ regarding the defendant's chance of prevailing at trial.

Nevertheless, we conclude that the decision would have been no different had the judge applied the required objective test of whether the defendant's liability became reasonably clear. See Gabbidon v. King, 414 Mass. 685, 686, 610 N.E.2d 321 (1993) ("It is well established that, on appeal, we may consider any ground apparent on the record that supports the result reached in the lower court"). See also Magliozzi v. P & T Container Serv. Co., 34 Mass.App.Ct. 591, 593-594 n. 5, 614 N.E.2d 690 (1993). That objective test calls upon the fact finder to determine whether a reasonable person, with knowledge of the relevant facts and law, would probably have concluded, for good reason, that the insurer was liable to the plaintiff.

The closest authority to which we have been referred by the parties is Stamas v. Fanning, 345 Mass. 73, 185 N.E.2d 751 (1962), overruling Conrey v. Abramson, 294 Mass. 431, 2 N.E.2d 203 (1936), where the court held on (somewhat) similar facts ⁶ that "it was open to the jury to find that the negligent act of the defendant set in motion a train of events which, unbroken by any new cause, continued as an operative factor down to the time of the accident and was the proximate cause of it." 345 Mass. at 77, 185 N.E.2d 751. Thus, the court held that causation was a question of fact to be decided by the jury.

We are of opinion that on the facts presented to the judge, a reasonable person, with knowledge of those facts and the Stamas case, would probably conclude that the defendant was liable to the plaintiff. We have in mind the plaintiff's argument that the plaintiff need only prove, as we have said in note 2, that Wallace's conduct merely contributed to the accident. Nevertheless, we are of the opinion that the probability of the jury concluding that Robichaud--who, alone among the three trailing vehicles, was unable to stop his automobile--was solely responsible for the accident, see Frazier v. Cordialino, 356 Mass. 465, 466, 253 N.E.2d 843 (1969), was approximately equal to the probability that the jury would find that Wallace's five-second stop at a green light contributed to the accident. On that basis, it cannot be said that the defendant's liability was reasonably clear. Compare Van Dyke v. St. Paul Ins. Co., 388 Mass....