In Rivera v. Commerce Insurance Company, 84 Mass.App.Ct. 146, 993 N.E.2d 1208,(2013), the Appeals Court recently issued a ruling that increases an insurer’s exposure under G.L. c. 93A.
On Aug. 13, 2003, a dump truck operated by a policyholder of the defendant, Commerce Insurance Co., struck a vehicle driven by plaintiff Efrain Martinez Rivera head on. At the time, Rivera — who was seriously injured in the crash — was returning home from his job as a laborer.
Within nine days, Commerce determined that the accident was solely the fault of its insured.
Rivera filed a tort action in Superior Court in August 2006 to avoid statute of limitations issues. Four months later, his attorney offered to settle for the full policy limits. Commerce, however, declined to make any settlement offer at the time. Rivera’s counsel sent the insurer a Chapter 93A demand letter on June 4, 2007. In response, Commerce offered $340,000 to settle the case. Not until the week of trial, in May 2008, did Commerce offer the full $1 million policy limit. Meanwhile, Rivera claimed he incurred more than $27,000 in litigation expenses pursuing the tort claim. Such expenses included fees for certifying medical records, preparation of trial exhibits and a video deposition of an expert witness. Under the contingency fee agreement with his attorney, Rivera was personally liable for those expenses.
After a May 2010 Superior Court bench trial on the 93A and 176D claims, Judge Cornelius J. Moriarty II found that Commerce had indeed acted in bad faith by failing to offer a reasonable settlement offer of $1 million in a timely manner. Specifically, the judge found that the insurance carrier’s claims adjustor declined to conduct a reasonable investigation as required by law, instead “cherry-picking” his facts, ignoring the unfavorable aspects of his medical expert’s report and his own attorney’s requests for him to investigate further, all in order to justify the lowest offer possible. Judge Moriarty also determined that the adjustor had chanced a deliberate violation of Chapter 93A in hopes that Rivera would feel pressured financially to accept a lower settlement offer than his injuries merited. When calculating damages, however, the judge did not include Rivera’s tort litigation expenses as part of the amount to be multiplied under Chapter 93A. Judge Moriarty found that though the carrier’s conduct constituted unfair settlement practices in violation of Chapter 93A, under the Appeals Court’s 1994 decision in Miller v. Risk Mgmt. Foundation of the Harvard Med. Insts., Inc., the plaintiff had no right to recoup any tort-related expenses as a matter of law.
Rivera appealed. The Appeals Court found that Moriarty erred by not factoring the tort litigation costs into the 93A damages. “We think Miller actually supports the inclusion of expenses as an element of actual damages under Ch. 93A,” Judge Frederick L. Brown wrote for the court. “In Miller … the trial judge found in the Ch. 93A action that the entire expense of trying the tort action was a foreseeable consequence of the defendant’s [delay in settling the underlying tort case] and recoverable under Ch. 93A,” Brown said. “[The Appeals Court] held that while the attorney’s fee component could not stand, the plaintiffs were entitled to recover the uncompensated tort-related expenses incurred and not included in the underlying … judgment.” Brown noted that actual damages under 93A include any foreseeable losses as a result of a wrongdoer’s unfair or deceptive acts. Costs a plaintiff incurred litigating a motor vehicle tort claim that an insurer delayed settling until the eve of trial should have been factored into the damages calculus for the plaintiff’s subsequent bad-faith claim under chapters 93A and 176D, the Appeals Court ruled. The matter was remanded for further proceedings consistent with the Appeals Court’s opinion.
Although each individual case differs in its facts and circumstances, this ruling should be given consideration throughout the claims handling process and possible settlement discussions.