Summary Judgment in Bad Faith Case / Atty’s Fees Should Not Be Considered in Settlement Offer

Attorneys Scott Ober and Michael Melville obtained summary judgment on behalf of an insurance company in a claim for damages made pursuant to M.G.L. c. 93A and c. 176D. The plaintiff alleged that the insurer acted in bad faith and failed to make a reasonable offer to settle her claim for personal injuries after liability became reasonably clear. The underlying tort action stemmed from a motor vehicle accident in which the insured defendant ran a red light and struck the plaintiff’s vehicle. The plaintiff claimed she sustained personal injuries as a result of the accident.

Prior to suit being filed, the insurer made settlement offers in the amounts of $5,053 and $5,500 in response to plaintiff’s demand package. During the course of the tort action and prior to the tort trial, the insurer increased its offer to $6,500. All offers were rejected by plaintiff counsel who made settlement demands of $25,000 and $19,000 during the course of the action.   The tort case was tried before a jury who returned with an award for the plaintiff in the amount of $14,247. Following an offset for Personal Injury Protection benefits in the amount of $8,000, and after calculating interest and costs, the net award to the plaintiff was $7,038.28.

Plaintiff argued that the insurer failed to make a prompt settlement offer even after liability was clear. Further, plaintiff argued that subsequent offers were unreasonable because after payment of outstanding medical bills, the plaintiff would have been left with $255 for costs, pain and suffering and attorney’s fees. Plaintiff counsel further argued that in practice attorney’s fees are part of the settlement equation and should be considered by the insurer when calculating any offer of settlement.

Defense counsel argued that the insurer made its initial offer as soon as liability became reasonably clear. Further, the insurer’s final offer was, in essence, what the jury awarded to the plaintiff, and the offer was reasonable as a matter of law. Further, defense counsel argued that the plaintiff’s contention that the insurer should have included costs and attorney’s fees in the calculation of its offer misconstrued the place of costs and attorney’s fees in American dispute resolution. Further, the defense argued that Massachusetts adheres to the “American Rule” which requires that a party bear the cost of its litigation in the absence of statute and, as such, the insurer has no obligation to consider attorney’s fees or medical liens when making an offer.

Justice Patricia Poehler agreed that the defendant insurer’s offers of settlement were reasonable and prompt and that that attorney’s fees and costs should not be considered in determining what constitutes a reasonable offer of settlement.   Summary judgment was entered in favor of the defendant insurance company.