a. First-Party Claims - Disputes with Insureds: These claims are based upon an insurance agreement (policy) giving rise to an action in contract triggered by a denial of coverage, failure to defend, failure to indemnify; or failure to settle collateral actions, which acts or omissions are alleged to have violated G.L. c. 93A and 176D.
b. Third-Party Claims - Misconduct of Insurer: These claims revolve around an insurer's duty to a third-party claimant to resolve claims against an insured. The most common basis is a violation of G.L. c. 176D, §3(9)(f) - "[f]ailing to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear."
c. Hybrid Claims: G.L. c. 93A claims may be pursued individually or in combination with other claims, such as third party actions for personal injury.
An Insured may assign rights to a third-party to pursue G.L. c. 93A claims, or may bring direct action against an insurer for failure to effectuate a settlement in a third-party claim against him or her.
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a. Statute of Limitations: A claimant must bring suit under G.L. c. 93A within four years from the time the action accrued. G.L. c. 93A; G.L. 260, §5A.
b. Demand Letter: Consumer to business context - Service of a formal demand letter is a prerequisite to initiation of an action under G.L. c. 93A, §9. The demand letter must be sent at least 30 days prior to filing suit, and must contain: a detailed statement of the alleged misconduct; a statement of the damages incurred by the claimant; reference to the possibility of an award of multiple damages, notice that response should be made within 30 days; and a reasonable demand for settlement.
However, it should be noted that no demand letter is required where claims under G.L. c. 93A, §9 are asserted through a crossclaim or counterclaim; or if the alleged wrongdoer does not keep assets in Massachusetts or maintain a place of business in Massachusetts.
Business to business context - A demand letter is not required prior to initiation of an action under G.L. c. 93A, §11.
c. Theories of Recovery: A bad faith claim may be filed with an underlying third-party liability claim or maintained in a separate action. If filed together, generally a G.L. c. 93A/176D claim will be severed and stayed pending the outcome of underlying case. If instituted after resolution of the underlying case, a plaintiff must be mindful of the statute of limitations for a G.L. c. 93A claim.
Multiple violations of G.L. c. 176D are not required to constitute violation of c. 93A, §9. In fact, a single violation of G.L. c. 176D, §3(9) constitutes a violation of G.L. c. 93A, §9. See G.L. c. 93A, §9; Hopkins v. Liberty Mutual Insurance Co., 434 Mass. 556, 563-65 (2001).
Generally, single damages, plus attorney's fees, will be awarded in cases of negligent unfair or deceptive practices under G.L. c. 93A.
By contrast, multiple damages (double or treble), plus attorney's fees, are available in cases of willful or knowing violations of the statute. The judgment in the underlying case is the multiplicand. In cases of settlement, interest on money improperly withheld may be the multiplicand.
Attorney's fees on plaintiff's successful appeal may also be awarded. Notably, a plaintiff must now demonstrate a causal connection between the violation of G.L. c. 93A and any purported damages. Hershenow v. Enterprise Rent-A-Car Co. of Boston, Inc., 445 Mass. 790, 791 (2006).
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Responding to the 93A Demand Letter.
(i.) Written Response: A written response to the demand is required within 30 days of mailing or delivery of the demand.
(ii.) Content of Response: The author of the response should assume that the written response will be an exhibit at trial. Given the importance of the response, obtaining legal advice or a formal opinion is recommended.
The response should include either a reasonable offer of settlement or a well-reasoned decision as to why no settlement offer is forthcoming. Inclusion of a reasonable offer in the response can limit the plaintiff's recovery to the amount of the offer in a claim under G.L. c. 93A, §9, and can preclude award of attorney's fees incurred subsequent to rejection of the offer.
In either instance, the response should reflect the respondent's thorough investigation of the claim. If additional time or additional information is necessary to complete the investigation, such a request should be made in the response.
Finally, although not required, the response should be sent via Certified Mail, Return Receipt Requested.
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(i.) Denial of coverage or refusal to defend insured
If an insurer can demonstrate good faith in reaching its denial of coverage, even if it is later determined to be mistaken, it will not be held to have violated G.L. c. 93A, so long as the grounds underlying the denial are reasonable. Therefore, a good faith, plausible interpretation of insurance policy language as the basis of denial will not violate G.L. c. 176D.
(ii.) Denial of third-party claim or low settlement offer
In order to defend a G.L. c. 93A claim premised upon an outright denial of a third-party claim or an allegedly low settlement offer, an insurer should demonstrate that it conducted a thorough investigation and provide a good faith, well reasoned explanation as to the basis for the denial or the amount of the settlement offer. This explanation should include a discussion as to why liability is not reasonably clear, such as unresolved questions of fault, damages, causation, and/or a failure of the claimant to provide adequate information to properly and timely assess the claim.
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(i.) Concurrent G.L. c. 93A/176D claim and underlying tort claim
If a G.L. c. 93A/176D claim is brought concurrently with the underlying third-party liability action, immediately move to sever and stay the G.L. c. 93A/176D portion of case. When the G.L. c. 93A/176D action is revived, conduct reasonable discovery and obtain experts.
(ii.) Injury Requirement and Causation
A plaintiff is required to prove that he or she experienced a loss as a result of the defendant's unfair or deceptive act. Therefore, in order to sustain a claim under G.L. c. 93A, the defendant's unfair or deceptive act must have caused some sort of damage-whether economic or non-economic-to the plaintiff, and the plaintiff must prove a causal connection between the act and the damage claimed. Hershenow v. Enterprise Rent-A-Car Co. of Boston, Inc., 445 Mass. 790, 791, 802 (2006).
(iii.) Damages
G.L. c. 93A provides single damages as compensatory, with the possibility for multiple damages as a punitive measure in cases involving a willful and intentional violation of the statute. If the plaintiff rejects a reasonable settlement offer made within thirty days of the required demand letter, then the plaintiff can be limited to the amount of the offer in a G.L. c. 93A, §9 case.
For claims in the business to business context under G.L. c. 93A, §11, where no demand letter is required, a defendant may be able to avoid multiple damages by making a reasonable offer of settlement with its Answer to the Complaint. If the offer is determined to be reasonable but is rejected, the plaintiff can be limited to recovery of single damages. See G.L. c. 93A, §11; Halper v. Demeter, 34 Mass.App.Ct. 299 (1993).
Generally, if a plaintiff is successful on a claim under G.L. c. 93A, §9, he or she is automatically entitled to an award of reasonable attorney's fees. By contrast, if a reasonable settlement offer was made within thirty days of the required demand letter but rejected by the plaintiff, he or she is not entitled to an award of attorney's fees incurred subsequent to the date the offer was rejected.
Attorney's fees are not automatically awarded in claims brought under G.L. c. 93A, §11. In any event, if awarded, the plaintiff may only be awarded those attorney's fees incurred in prosecuting the c. 93A portion of his or her case.
Generally, an award of attorney's fees may not be multiplied under G.L. c. 93A. However, attorney's fees determined to constitute a part of a plaintiff's actual damages are subject to multiplication with the remainder of the actual damages. Siegel v. Berkshire Life Ins. Co., 64 Mass.App.Ct. 698 (2005), rev. den. 446 Mass. 1102 (2006).
Moreover, prejudgment interest can be awarded on attorney's fees that are awarded as actual damages. Siegel v. Berkshire Life Ins. Co., 70 Mass.App.Ct. 318 (2007).
No credit is provided to a defendant in a G.L. c. 93A claim for payment of the underlying tort judgment.
Finally, while available in some jurisdictions outside Massachusetts, the "Reverse Bad Faith" Defense is of limited value in G.L. c. 93A litigation.
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(a.) Plaintiffs in arbitration cases may not seek to reduce award to a "judgment" in the Superior Court simply to form the basis for the G.L. c. 93A multiplicand if timely payment of an award is made by the insurer. Mahan v. Arbella Mut. Ins. Co., 438 Mass. 1010 (2003); Murphy v. National Union Fire Ins. Co., 438 Mass. 529 (2003).
(b.) The fact that damages are unliquidated does not militate against their being reasonably clear. Bobick v. United States Fid. & Guar. Ins. Co., 57 Mass.App.Ct. 1 (2003) reversed on other grounds, Bobick v. United States Fid. & Guar. Ins. Co., 439 Mass. 652 (2003). The insurer is not required to settle all tortfeasors' liability, but only its own.
(c.) Arbitrators may be authorized to determine and make c. 93A awards of multiple damages and attorney's fees. The scope of an arbitrator's authority depends upon the language of the arbitration provisions in the agreement between the parties. Compare Drywall Systems, Inc. v. ZVI Const. Corp., 435 Mass. 664 (2002) with M. O'Connor Contracting, Inc. v. City of Brockton, 61 Mass.App.Ct. 278 (2004); White v. Safety Ins. Co., 65 Mass.App.Ct. 607 (2006).
(d.) A single act or claim can constitute a violation of G.L. c. 176D § 3(9)(f). Hopkins v. Liberty Mut. Ins. Co., 434 Mass. 556 (2001).
(e.) Resolution of a bad faith claim depends on insurer's knowledge and intent - an award is not determinative of the reasonableness of the offer ($20,000 offer; $125,000 verdict); an insurer's good faith, but mistaken, valuation of damages is not violative of G.L. c. 176D. O'Leary-Alison v. Metropolitan Property & Cas. Ins. Co., 52 Mass.App.Ct. 214 (2001).
(f.) In an action for violations of G.L. c. 93A, resolution of the claim will depend upon a factual determination of the insurer's knowledge and intent, not the insured's liability. Bolden v. O'Connor Café of Worcester, Inc., 50 Mass.App.Ct. 56 (2000).
(g.) A self-insured entity, not in the business of insurance, cannot be held liable under G.L. c. 93A for bad faith settlement practices. Morrison v. Toys "R" Us, Inc., 441 Mass. 451, 458 (2004).
(h.) An employee pursuing claims for unfair or deceptive business practices against their workers' compensation insurer must bring those claims under the provisions and regulatory scheme of G.L. c. 152, and may not pursue claims under G.L. c. 93A. Fleming v. National Union Fire Ins. Co., 445 Mass. 381, 385-86 (2005).
(i.) In some instances, such as where a plaintiff is forced by a G.L. c. 93A violation to "incur legal fees and expenses that are not simply those incurred in vindicating that person's rights under the statute, those fees may be treated as actual damages in the same way as other losses of money or property," and may be subject to multiplication. Siegel v. Berkshire Life Ins. Co., 64 Mass.App.Ct. 698, 703 (2005), rev. den. 446 Mass. 1102 (2006). In addition, prejudgment interest can be awarded on attorney's fees that are awarded as actual damages. Siegel v. Berkshire Life Ins. Co., 70 Mass.App.Ct. 318 (2007).
(j.) In order to sustain an action under G.L. c. 93A, §9, a plaintiff must prove that the defendant's unfair or deceptive act caused some sort of loss to the plaintiff, whether economic or non-economic. "Proving a causal connection between a deceptive act and a loss to the consumer is an essential predicate for recovery under our consumer protection statute [G.L. c. 93A]." Hershenow v. Enterprise Rent-A-Car Co. of Boston, Inc., 445 Mass. 790, 791 (2006).
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