Hassett and Warren’s Successful Interlocutory Appeal Featured in Lawyer’s Weekly

New Guidance Given on Motions to Sever, Stay

By: Kris Olson of Massachusetts Lawyer’s Weekly

November 9, 2017

An Appeals Court single justice recently provided what may be the clearest statement yet that a defendant insurer should not have to respond to discovery requests in a severed-and-stayed claim of unfair settlement practices under G.L.c. 93A and G.L.c. 176D during the pendency of an underlying tort claim against the company’s insured.

But the decision is unlikely to put the issue to rest completely, according to local attorneys.

The trial judge in the case, Superior Court Judge C. William Barrett, had severed but not stayed an unfair settlement practices claim. According to the insurance company’s petition for interlocutory relief, the judge explained that this was in keeping with the intent of c. 176D, “to hold the insurer’s feet to the fire.”

The plaintiff argued that Barrett’s denial of the stay was appropriate because of the risk that adjusters and investigators would either leave the company or have their memories dim due to the passage of time, or that relevant documents would be lost or destroyed.

But Judge James Lemire, sitting as a single justice, referenced a long list of prior single-justice and trial court decisions and concluded that “the standard practice is and has long been to stay discovery and trial of an unfair claim settlement practices case until the underlying tort claim has been resolved.”

Departing from that standard practice might have been warranted if there were “some compelling reason” to do so, Lemire continued, but no such circumstances were before him here.

“That plaintiff is of the view that the facts of his case are unique and his unfair settlement practices claims are highly meritorious does not change the order in which his claims should be subjected to discovery and trial,” he said.

Increasing resistance seen

While plaintiffs’ attorneys will sometimes assent to requests to sever and stay c. 93A/176D claims, there “seems to be increasing resistance among members of the plaintiffs’ bar,” said Boston attorney David F. Hassett, co-counsel for the defendant insurer.

In the case before Lemire, both sides cited to the 2014 case of Santacroce v. Sametz, et al., in which Appeals Court Judge Francis R. Fecteau overturned the denial of a motion to sever.
The key language in the Santacroce decision, argued Hassett and colleague Margarita I. Warren, was when Fecteau wrote that the lower court judge “appears to overlook the dual role in which the defendant insurer finds itself: it is both a direct defendant and the insurer for a co-defendant.”

Fecteau did allow the discovery of information in the insurer’s files related to “percipient evidence relevant to the underlying tort action against its insured,” but walled off “claims handling information, which is likely immaterial to the underlying tort action.”

Warren said Lemire’s decision is an acknowledgement that allowing discovery to continue is “clearly chilling to the free flow of information between insurers and their clients.”

Not only is it prejudicial to the interests of the insured to allow discovery to go forward in a broad way, said Hassett, but it is also a potential waste of the court’s time, given the “back and forth” between the parties discovery can require, including motions to compel, quash or for protective orders. All that time and effort could be for naught, he said, if the defense prevails on the underlying tort claim. Such a verdict would necessarily mean that liability was not “reasonably clear,” and thus a settlement offer was not required under c. 176D.

While other attorneys, including Sean T. Carnathan of Burlington, said that motions to sever and stay are “routinely allowed,” the plaintiff’s counsel, George F. Leahy of West Boxford, said that he is batting about .500 in opposing motions to sever and stay.

“I probably have 20 go in my favor, 20 go against me,” he said.

He said what he is generally seeking in discovery on a 93A/176D claim is evidence of the insurance company’s diligence in investigating the claim before making an offer. In many instances, he said, he finds that the company did not engage an independent medical expert or conduct record review.

Leahy said he is not particularly troubled by the lack of guidance on the issue from the full Appeals Court or the Supreme Judicial Court, believing that the hands of trial court judges should not be tied when looking at the facts in each individual case.

“Every one of these cases is so unique, it’s tough to find one ruling that fits all,” he said.

In Leahy’s experience, the success or failure of a motion to sever and stay turns on the facts. For example, in cases with a strict-liability component — for example, a suit against an owner after a dog bite — judges are more inclined to allow the tort litigation and 93A/176D case to proceed on parallel tracks. They may even resist severing the case altogether.

The current case included building-code violations, giving it a strict-liability aspect that Leahy believed worked in his favor with the trial judge.

If the extent of damages is clear — and if the insurance company’s offer pales in comparison — that can also weigh in the plaintiff’s favor, he said.

Even if a judge does grant a motion to sever and stay, plaintiffs may be able to get some of their concerns addressed by asking for a spoliation order, Leahy suggested.

But Carnathan said that the concern about lost evidence is not particularly persuasive, given that insurance companies are “professional litigants” who understand their obligations to preserve evidence.

Fall at work

On or about July 14, 2016, plaintiff Phillip Baram slipped and fell down interior basement stairs at his workplace, the Jerusalem Pita & Grill in Brookline. He suffered a torn rotator cuff, which required surgery.

Baram claimed that the stairs were negligently maintained by defendants Chestnut Hill Corp. and Gladys, LLC. On Dec. 1, 2016, defendant Citizens Insurance Company of America offered Baram $500, which he quickly rejected.

The plaintiff then filed a claim for bad faith settlement practices under M.G.L. c. 93A/176D against Citizens, arguing that no insurer could consider the $500 he was offered to have been a reasonable and good faith offer.

Citizens filed a motion to sever and stay the M.G.L. c. 93A/176D claim on the grounds of improper joinder, ripeness and prejudice. The trial judge issued a ruling from the bench, allowing the 93A/176D claim to be severed but not stayed.

Baram then served requests for admissions, interrogatories and requests for production of documents upon Citizens, prompting the insurer to seek interlocutory appeal.

With the 93A/176D claim stayed, discovery will now continue only in Baram’s underlying tort case.

Some evidence still accessible?

It remains to be seen whether other trial court judges will follow the blanket halt on discovery Baram arguably imposes or instead be guided by Santacroce, which made the distinction between “percipient evidence relevant to the underlying tort action” and claims handling information in the insurer’s files.

Fecteau wrote, “With respect to percipient evidence, given a proper request, compliant with the Massachusetts rules of discovery, and in the discretion of a motion judge, such information in the claims files of the insurer is and likely ought to be discoverable as relevant and material to the underlying tort action, subject to proper claims of privilege under the rules.”

But claims handling information, which Fecteau noted “may be considered as privileged under Mass. R. Civ. Pr. 26 (b)(3),” is off limits under either decision.