Between the Lines

A Discussion of Case Law and Statutory Law Affecting Commercial Lines of Insurance


Massachusetts Supreme Judicial Court Rejects Interpretation Contrary to Intent of Unfair Trade Practices Law

Interlocutory Appeal Clarifies How Multiple Damages Work Under Chapter 93A:

  1. Even Payment of All Actual Damages with Interest Will Not Preclude Multiple Damages if Payment Comes After the c. 93A Deadline.
  2. A Plaintiff May Seek Multiple Damages Even if There is No Underlying Judgment.
93A means settle - Car Crushers

93A is all about settling early on.

The decision is a reminder that M.G.L. Chapter 93A was intended to encourage prompt settlement, and that recipients of a c. 93A letter or complaint need to carefully evaluate their response before the deadline. As a defendant, if you are going to make an offer, it makes sense to make it when it will – if determined to be reasonable – avoid the risk of multiple damages.

Back in May, I blogged about a rare interlocutory appeal accepted by the Massachusetts Supreme Judicial Court. In a nutshell, it asked whether an insurer defendant in an unfair trade practices case under c. 93A could avoid liability for multiple damages by paying all of the plaintiff policyholder’s actual damages – after the deadline for a multiple damages limiting offer had passed.

It was clear from the hearing that the answer would be “no.” It was less clear how the Court would get to that result. Now we know, and the Court has clarified a couple things about liability for multiple damages under Chapter 93A, Section 11. The opinion is Auto Flat Car Crushers, Inc. v. Hanover Insurance Company, SJC-11477, issued on October 15, 2014.

The facts, briefly: the policyholder, Crushers, sued its insurer for breach of contract for failing to defend and indemnify it against an environmental claim. After the entry of partial summary judgment declaring that the insurer breached the duty to defend, Crushers amended its complaint to add a count asserting that the breach of the duty to defend was a violation of chapter 93A, section 11. That section provides a cause of action to a business that suffers loss of money or property due to another business’s unfair or deceptive trade practice.

The insurer answered the c. 93A count without making an offer of settlement. A reasonable offer of settlement with the answer would have protected the insurer from a double or treble damage award for a willful c. 93A violation. However, after the statutory deadline for making such an offer had passed, the insurer paid (in several installments with some intervening negotiation) all of Crusher’s damages for both defense and indemnification, with interest at the 12% statutory rate.

Voila! said the insurer. Now that we have paid everything we owed, Crushers has suffered no loss and has no c. 93A claim.  Also, multiple damages under c. 93A are calculated by multiplying the underlying judgment, and there is no underlying money judgment, so there is nothing to multiply.  We have made the c. 93A claim disappear!

Timing is Everything

Not so fast, said the Court.  Or rather, not so slow.

Chapter 93A, section 11 includes a safe harbor provision.  If a defendant makes a reasonable offer of settlement with its answer to the c. 93A complaint, its liability is limited to single damages.  Once that window has closed, however, the plaintiff has incurred a loss sufficient to pursue its c. 93A claim, even if the defendant later pays all of the plaintiff’s single damages.  The late payment is offset against any eventual c. 93A award, after any multiplication of that award.

This may be a good place to pause and remember that this case went up on an interlocutory appeal.  There has, as yet, been no determination that the insurer acted unfairly or deceptively in violation of c. 93A.  A breach of the duty to defend would not be a c. 93A violation if it was based on a plausible reading of the policy.  And where, as here, all of the policyholder’s actual damages have been paid, the unfair or deceptive conduct would have to be willful and knowing in order for the policyholder to recover more than its attorney’s fees and costs, by virtue of a multiple damages award.

Which brings us to the second question answered by the Court: a multiple of what?

A Judgment Isn’t the Only Thing

Since the legislature amended c. 93A in 1989, “actual damages” under c. 93A have a split personality.  For a garden variety non-willful violation of the statute, “actual damages” means the actual damages suffered by the plaintiff.  In this case like this one, where the plaintiff contends that the defendant withheld money that should have been paid sooner, the actual damages are interest to compensate the plaintiff for the loss of use of that money.

However, for a willful violation of the statute, subject to double or treble damages, the legislature declared in 1989 that the “actual damages” to be doubled or trebled are “the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence.”  This amendment, the Court noted, was meant to increase the penalty on insurers who fail to promptly settle claims when liability is reasonably clear.

But, said the Court, a judgment is not a prerequisite to the recovery of multiple damages.  If there is a judgment, that’s what gets multiplied.  If there isn’t, then what gets multiplied is the actual loss suffered by the plaintiff as a result of the 93A violation.

The case emphasizes the importance of a prompt and careful assessment during the period specified by the statute for making an offer that may eliminate multiple damages (with the answer for a section 11 claim, and within thirty days of the demand letter for a section 9 claim).

Image Credit: Aiden Jones

About the Author

Harvey Nosowitz – Counsel

Harvey helps clients with commercial litigation, in particular insurance coverage, personal injury and products liability cases.

Please contact him with any questions:
(617) 621-6555.

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