Tallent v. Liberty Mutual Insurance Company, 19 Mass. L. Rptr. No. 20, 460 (MA 4/25/2005)

• Court: Supreme Judicial Court of Massachusetts
• Writing for the Court: Haggerty, S. Jane
• Citation: Tallent v. Liberty Mutual Insurance Company, 19 Mass. L. Rptr. No. 20, 460 (MA 4/25/2005), 19 Mass. L. Rptr. No. 20, 460, No. 19971777H. (Mass. Apr 25, 2005)
• Decision Date: 25 April 2005
• Docket Number: No. 19971777H.,19971777H.
• Parties: Raymond Tallent et al.<SMALL><SUP>1</SUP></SMALL> v. Liberty Mutual Insurance Company.

Page 460

19 Mass. L. Rptr. No. 20, 460

Raymond Tallent et al.¹ v. Liberty Mutual Insurance Company.

No. 19971777H.

Commonwealth of Massachusetts Superior Court.

Suffolk, Ss.

Memorandum Dated April 25, 2005.

Trade Regulation — Unfair Insurance Practices Act — Failure to Make a Reasonable Settlement Offer — Unreasonable for an Insurer to Reach a Decision to File an Appeal from a Plaintiff's Verdict Based Solely on the Unobjective Advice of Trial Counsel; an Evaluation of the Merits of an Appeal Should Be Obtained from Experienced and Independent Appellate Counsel.

It is unreasonable and therefore an unfair settlement practice in violation of M.G.L.c 176D, §3(9)(f) and M.G.L.c. 93A, for an insurer to reach a decision to appeal from a plaintiffs verdict based solely on the advice of trial counsel, at least where trial counsel (a) will also prosecute the appeal and therefore has both an emotional and financial stake in pursuing an appeal, (b) has had an especially acrimonious relationship with plaintiff's counsel that is likely to cloud an assessment of the merits of an appeal, and (c) has only limited appellate experience. Expert opinion introduced by the plaintiff

Page 461

and accepted by the court indicates that the general practice in the insurance industry following a plaintiff's verdict is to obtain advice from an objective attorney that specializes in appellate practice before proceeding with an appeal, and that in this case at a minimum the insurer should have retained separate, outside counsel to evaluate the merits of the appeal independent of evaluations provided by trial counsel and the insurer's inside counsel.

Trade Regulation — Unfair Insurance Practices — Failure to Conduct a Reasonable Investigation — Claimant Is Awarded Double Damages of $4,100,000 Plus Attorneys Fees for an Insurer's Prosecution of an Appeal from a Plaintiff's Jury Verdict Based Solely on the Advice of Trial Counsel and Without an Independent Evaluation by an Experienced Appellate Attorney.

Pursuant to the provision of Chapter 176D authorizing damages against an insurer for an unfair settlement practice in the amount of interest on the amount recovered if the matter is settled, or up to three times the amount of recovery if the matter does not settle and a court judgment is entered, this opinion enters an award in favor of a claimant against an insurer of double the amount of the underlying judgment, including the jury verdict plus costs and interest, for the insurer's unreasonable prosecution of an appeal. Total damages of $4,100,000 (plus as yet undetermined attorneys fees) are awarded on the Chapter 93A/176D claim, to be added to the plaintiff's $2,050,000 judgment in the underlying matter.

HAGGERTY, S. JANE, J.

INTRODUCTION

The plaintiffs, Raymond and Alice Tallent ("the Tallents"), bring this G.L.c. 93A claim against the defendant, Liberty Mutual Insurance Company ("Liberty Mutual"), for violations of G.L.c. 176D. In the underlying action, the Tallents sued Turner Construction Company, Inc. ("Turner"), an insured of Liberty Mutual, for negligently erecting scaffolding that collapsed and caused permanent injuries to Mr. Tallent. The Tallents allege that Liberty Mutual violated G.L.c. 176D by refusing to settle without conducting a reasonable investigation and failing to settle their claim despite the fact that Turner's liability was reasonably clear. After a trial, without a jury, and based upon all the credible evidence, the court makes the following findings of fact and rulings of law.

FINDINGS OF FACT

I make the following factual findings based on the exhibits and testimony produced at trial.

A. The Trial, the Post-Trial Motions and the Appellate Proceedings

On April 9, 1986, Raymond Tallent, an iron worker, was injured at a construction site for a new office building at 150 Federal Street, Boston, Massachusetts. Raymond Tallent crashed to the ground from unsecured scaffolding which ultimately rendered him permanently disabled and unable to work. Turner was the general contractor and was responsible for ensuring safety at the construction site. Turner was insured by the defendant, Liberty Mutual.

Raymond Tallent and his wife Alice Tallent filed suit against Turner in November 1986 seeking damages for Mr. Tallent's injuries and Mrs. Tallent's loss of consortium, resulting from Turner's negligent construction and maintenance of the scaffolding and planking which Raymond Tallent was using at the time of the accident. Turner filed third-party claims against Raymond Tallent's employer, Dorel Steel Erection Corporation ("Dorel") and Owen Steel Company, Inc. ("Owen"), the steel fabricator for the project on claims for contractual indemnification. Dorel was a sub-contractor to Owen and Owen was a sub-contractor to Turner. Prior to trial, Turner admitted in its answers to interrogatories that it had erected the scaffolding. At trial, Turner's defense was three-fold: Raymond Tallent was negligent, which the jury rejected; the planking for the scaffolding did not belong to Turner, despite the fact that there was testimony that Turner employees erected the scaffolding, there were admissions in answers to interrogatories that Turner erected the scaffolding, and there was testimony that Turner employees worked on the scaffolding in the area where the plaintiff fell shortly before his fall; and the damages claimed by Tallent were excessive, despite the fact that there was uncontroverted evidence that Raymond Tallent's past and future loss of earning capacity was in excess of $700,000 and Turner conceded that Raymond Tallent was permanently disabled from employment as an iron worker.

In addition to the negligence and consortium claims against Turner, the trial judge submitted special questions concerning the negligence of Dorel and Owen for a future determination by the court of contractual indemnification obligations. On October 8, 1993, the jury returned a verdict against Turner for Raymond Tallent in the amount of $1,000,000 and for Alice Tallent in the amount of $100,000. The jury found negligence but no causation against Dorel and no negligence against Owen. The value of the verdict in October 1993, including pre-judgment interest, was $2,006,340.

Prior to trial, Turner filed a motion in limine to preclude the introduction of evidence relating to insurance coverage. The motion was allowed. Turner also filed a motion in limine to exclude hearsay testimony that prior to the accident, an employee told Turner that the scaffolding was faulty. This motion was likewise allowed.

At trial, Raymond Tallent testified to the hearsay statement which was the subject matter of the motion in limine. Both parties objected, the objection was sustained and the jury were instructed to disregard the testimony. Turner moved for a mistrial which was

Page 462

denied. During the course of the testimony of an expert for the Tallents, the expert volunteered that he had done work for Liberty Mutual. Turner moved for a mistrial which was denied.

Turner filed post-trial motions raising, inter alia, the denial of the motions for a mistrial based upon the evidentiary issues, a motion for new trial on a claim that the verdict was against the weight of the evidence, and a request for judgment notwithstanding the verdict relating to the indemnification claims against Dorel and Owen. The trial judge heard the motions in November 1993 and denied the motions in a Memorandum of Decision and Order which was docketed on January 27, 1994. In his Memorandum of Decision, the trial judge concluded that "the prejudicial effect of the violations [of the court's orders on the motions in limine] was not such that declaration of a mistrial is warranted in view of the substantial evidence supporting the verdict." Turner filed a notice of appeal in February 1994, after judgment issued on February 7, 1994.

The transcripts of the trial were completed in May 1995. The Appeals Court heard oral argument on December 5, 1996. The centerpiece of Turner's appeal was the issue of contractual indemnity as evidenced by the allocation of more than the first two-thirds of the argument section of the brief to the topic. The final argument in the brief was a claim that the trial judge abused his discretion in failing to give a curative instruction upon mention by the witness of "Liberty Mutual," despite the absence of such a request at trial. Turner also claimed that the judge abused his discretion in failing to declare a mistrial when Raymond Tallent testified to a hearsay statement. Turner additionally claimed that the combined effect of the missteps warranted a new trial, as Turner did in its motion for a new trial before the trial judge.

The judgments of the Superior Court and the denial of Turner's motion for a new trial were affirmed in a Memorandum and Order Pursuant to Rule 1:28, entered on May 1, 1997. The Supreme Judicial Court denied Turner's Application for Further Appellate Review on July 3, 1997. On August 20, 1997, Liberty Mutual paid the Tallents $2,924,665, which included the judgment, and prejudgment and postjudgment interest.

B. The Relationship Between the Attorneys, the In-House Activities at Liberty Mutual, and the Negotiations to Settle

At trial, during the pre-trial proceedings, and post-trial motions, Attorney Ann Marie Maguire ("Maguire") represented the Tallents. Attorneys Henry DuLaurence ("DuLaurence") and Charles Mahanor ("Mahanor") of Liberty Mutual represented Turner. The relationship between Maguire and DuLaurence was acrimonious, at best, and somewhat less so between Maguire and Mahanor. Maguire and DuLaurence did not speak to each other. The "bad blood" between Maguire and DuLaurence found its source in two prior cases in which the attorneys represented opposing parties: Maguire for the plaintiffs and DuLaurence for Liberty Mutual. The intensity of the hostility in the Tallent case led to Maguire's filing an application for a temporary...