Mutual Ins. Co., Ltd. v. Murphy
| Decision Date | 01 July 2009 |
| Docket Number | Civil No. 07-11532-PBS. |
| Citation | 630 F.Supp.2d 158 |
| Parties | MUTUAL INSURANCE COMPANY, LIMITED, Plaintiff, v. The Honorable Ernest B. MURPHY, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Stephen J. Brake Nutter, Sarah P. Kelly Nutter, McClennen & Fish, LLP, Elizabeth A. Ritvo, Brown Rudnick Berlack Israels LLP, Boston, MA, for Defendant.
Joseph S. Sano, Prince, Lobel Glovsky & Tye LLP, Boston, MA, for Plaintiff.
Former state court Judge Ernest B. Murphy alleges that Mutual Insurance Company, Limited ("Mutual") engaged in unfair and deceptive acts in violation of Massachusetts law when it failed to make a prompt offer of settlement to him. Mutual moves for summary judgment on the ground that it owed no duty to effectuate a settlement pursuant to Mass Gen. Laws chs. 176D and 93A because Mutual did not control either the defense or settlement of the claim. Mutual moves for summary judgment on Count I of its complaint seeking a Declaratory Judgment and on Murphy's counterclaim alleging that Mutual violated Mass. Gen. Laws chs. 176D and 93A. After a hearing and review of the submissions, I ALLOW Mutual's motion for summary judgment.
The following facts are undisputed except where stated.
On June 3, 2002, Murphy commenced a defamation action in the Massachusetts state courts against the Boston Herald and four Herald reporters and columnists. At that time, the Herald held an insurance policy ("the Policy") issued by Mutual which covered, inter alia, claims for damages arising out of "libel, slander . . . or other forms of defamation or tort related thereto. . . ." (Policy, Section I) (Pl.'s Statement of Undisputed Material Facts ("Pl.'s SOF") [Docket No. 44], Ex. 7.) Under the Policy, the Herald was responsible for the first $50,000 of loss (including defense expenses) for any event. (Policy, Declarations, Item 5.) After the exhaustion of this $50,000 "retention," the Herald was responsible for twenty percent of all remaining defense expenses up to a maximum of $500,000. (Id.) The Policy had a total liability limit of $15 million. (Policy, Renewal of Certificate (amending limit of liability to $15 million).)
A trial on the defamation action was held in January and February 2005. See generally Murphy v. Boston Herald, Inc., 449 Mass. 42, 46-47, 865 N.E.2d 746 (2007) (). The law firm Brown Rudnick, which has handled all of the Herald's general liability and media liability work since 1994, represented the Herald. At the conclusion of the evidence, the trial court directed verdicts for two of the four individual defendants, but submitted the majority of the remaining claims (sixty-one of sixty-seven alleged defamatory statements) to the jury. After four days of deliberations, the jury returned a verdict of $2.09 million in damages against the Herald and one individual defendant, the reporter Mr. David Wedge. The Herald and Mr. Wedge filed a motion for judgment notwithstanding the verdict, or, in the alternative, for a new trial and for remittitur. The judge denied the motion for a new trial, but concluded that three of the twenty-two statements for which the jury had held defendants liable were "protected statements" and reduced the damages award to $2.01 million. See Murphy, 449 Mass. at 46-47, 865 N.E.2d 746. In November 2005, the defendants filed a timely appeal and Murphy cross-appealed. On May 7, 2007, the Massachusetts Supreme Judicial Court affirmed the judgment as modified by the trial court. Id. at 43, 70, 865 N.E.2d 746. The Supreme Judicial Court denied the Herald and Mr. Wedge's petition for rehearing on June 4, 2007. Three days later, Mutual (through counsel) paid Murphy $3,414,687 in satisfaction of the judgment, including post-judgment interest and costs.
Just over a month after receiving the payment, on July 17, 2007, Murphy sent a demand letter to Mutual.1 (See Pl.'s SOF, Ex. 4.) In the letter, Murphy alleged that Mutual had violated Mass. Gen. Laws chs. 176D and 93A by engaging in unfair and deceptive acts and practices, specifically citing "Mutual's refusal to effect a prompt offer of settlement to Judge Murphy after the liability of Mutual's insured The Boston Herald . . . became reasonably clear" and "Mutual's refusal to first conduct a reasonable investigation of all the relevant facts and circumstances before refusing to satisfy the judgment in favor of Judge Murphy." (Id.) The letter demanded that Mutual pay $6.8 million (treble the amount of the jury verdict including interest) to Murphy in satisfaction of these chapter 93A and 176D claims. (Id.)
On August 16, 2007, Mutual commenced this action seeking a declaration of its nonliability under Mass Gen. Laws chs. 93A and 176D. In addition to answering Mutual's complaint, Murphy filed a counterclaim, alleging that Mutual violated both Mass. Gen. Laws. chs. 93A and 176D. (See Pl.'s SOF, Ex. 2; Answer and Counterclaim [Docket No. 4].)
The Herald was insured under a media insurance policy issued by Mutual. The Policy indemnifies the Herald for losses in excess of $50,000 (the agreed upon selfretention amount) and up to $15 million from a claim for damages arising out of, inter alia, "libel, slander, product or personal disparagement, trade libel, or other forms of defamation or tort related thereto. . . ." (Policy, Section I.) Under the Policy, the Herald has a duty to retain its own counsel for the defense or settlement of a claim, though the choice of counsel is "subject to the continuing approval of [Mutual]." (Policy, Section VIII.B.(2)(b).) The Herald also is obligated to advise Mutual and its counsel of "the likelihood of the [Herald's] success or failure; an initial estimate of legal costs; offers of settlement, if any; and any special information which would be pertinent to the claim or defense thereof." (Id.) When it is clear that the costs incurred will likely exceed the retention amount (here, $50,000), the Herald is required to notify Mutual and regularly update it as to legal expenses. (Policy, Section VIII.B.(2).) As for Mutual's obligations, the Policy explicitly states, "The company shall not be called upon to assume charge of the settlement, or the defense of any claim made, or suit brought, or proceeding instituted against the insured. . . ." (Policy, Section VIII.B.(3).) The Policy, however, grants Mutual several rights with respect to the defense and settlement of claims:
(3) [Mutual] shall have the right and shall be given the opportunity to associate with [the Herald] in the defense and control of any claim, suit, or proceeding which involves, or appears likely to involve, payment by [Mutual], in which event [the Herald and Mutual] shall cooperate fully in the defense or settlement of such claim, suit or proceeding; or (b) upon dissatisfaction with [the Herald's] retained counsel, suggest the replacement thereof with new counsel to be jointly appointed by [Mutual] and [the Herald], for the defense and control of any claim, suit or proceeding which involves, appears likely to involve, payment by [Mutual]. The suggestion of new counsel by [Mutual] shall not be unreasonably denied by [the Herald]. No settlement shall be made without [Mutual's] consent, such consent not to be unreasonably withheld.
(4) If a judgment is rendered in any suit against [the Herald], and [the Herald] is not willing to appeal therefrom, [Mutual] shall have the right to appeal from such judgment and shall bear the costs thereof plus the interest incidental to such appeal.
(Policy, Section VII.B.(3)-(4).)
Summary judgment is appropriate when "`the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Barbour v. Dynamics Research Corp., 63 F.3d 32, 36-37 (1st Cir.1995) (quoting Fed. R.Civ.P. 56(c)). "To succeed [in a motion for summary judgment], the moving party must show that there is an absence of evidence to support the nonmoving party's position." Rogers v. Fair, 902 F.2d 140, 143 (1st Cir.1990); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
"Once the moving party has properly supported its motion for summary judgment, the burden shifts to the non-moving party, who `may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing there is a genuine issue for trial.'" Barbour, 63 F.3d at 37 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). " Rogers, 902 F.2d at 143 (quoting Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505) (citations and footnote in Anderson omitted). The Court must "view the facts in the light most favorable to the nonmoving party, drawing all reasonable inferences in that party's favor." Barbour, 63 F.3d at 36.
Section 3 of Mass. Gen. Laws ch. 176D regulates unfair acts and practices in the business of insurance and explicitly forbids "unfair claim settlement practices." Mass. Gen. Laws. ch. 176D, § 3(9). The prohibitions on unfair settlement practices "were enacted to encourage settlement of insurance claims . . . and discourage insurers from forcing claimants into unnecessary litigation to obtain relief." Morrison v. Toys "R" Us, Inc., 441 Mass. 451, 454, 806 N.E.2d 388 (2004) (internal quotation marks omitted). The section prohibits "[f]ailing...
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