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“A Norfolk Superior Court jury awarded a Milford driver – paralyzed after her car was rear-ended by a 78,000-pound tanker truck -- $9.5 million in what is said to be the largest verdict in the state for such an injury.  It was a horrible case, with bad damages, and I think the jury gave a fair reward.”

“After reaching the crest (in the highway), the truck driver had 12 seconds and 800 feet of straight road downhill with no obstructions to view between him and (the plaintiff’s car).  There was nobody between the truck and the car.  He did not stop or even slow down, and within that period of 12 seconds he changed Marcia Rhodes’ life forever.”

“After reaching the crest (in the highway), the truck driver had 12 seconds and 800 feet of straight road downhill with no obstructions to view between him and (the plaintiff’s car).  There was nobody between the truck and the car.  He did not stop or even slow down, and within that period of 12 seconds he changed Marcia Rhodes’ life forever.”

“Last, the plaintiffs argue that the judge erred by finding Zurich not liable for its pretrial conduct.  AIGDC cross-appeals, arguing that the judge erred (1) in holding it liable for post-verdict violations of c. 176D; and (2) in the calculation of damages.”


“Conclusion.  Given the foregoing, I dissent from part 1.b., ante, and would rule that, as matter of law, AIGDC's last-minute $3.5 million pretrial settlement offer was not reasonable.  I would therefore remand the matter to the Superior Court for a determination of damages for AIGDC's pretrial violation of G. L. c. 176D, § 3(9)(f), based on the jury verdict, and for a determination whether the damages for AIGDC's willful violation shall be doubled or trebled.”

“Unfortunately, what happened was that the insurance companies hired a company to investigate, then went through staffing changes, and then used their bureaucracy to delay responding to Rhodes’ settlement demand.  They also hired and rehired counsel to delay things further.”

“David W. White Jr. of Breakstone, White & Gluck in Boston represented a plaintiff in a 2003 SJC case involving similar issues.  He criticized the Appeals Court for rejecting the plaintiff’s argument in Rhodes that punitive damage awards are to be calculated by multiplying the underlying judgment.”

“If the damage analysis in Rhodes is not overturned, then one of the concerns created by the decision is whether insurers will now perceive a new way to minimize bad faith damages.  Under the Appeals Court ruling in Rhodes, an insurer needs only to make a marginally good faith offer just before trial, no matter how long its bad faith has been ongoing and no matter how outrageous its conduct, and its damages will be limited to the loss of the use of the money on the lowball offer.  Under this scenario, the purposes of our strong consumer protection statutes may be seriously undercut.

“Impact Going Forward:  Once liability and damages are reasonably clear, an insurer should advance a reasonable offer to the claimant(s), regardless of a claimant’s excessive demand or the claimant’s willingness to accept such an offer.  This practice should protect the insurer from a future bad faith action.  The Appeals Court in Rhodes found that AIG’s pretrial and post-verdict delay in making reasonable offers constituted unfair claims handling practices and rose to the level of willful and knowing conduct.  By multiplying loss of use (i.e. lost interest on the settlement) damages, Rhodes encourages insurers to make a reasonable offer, even if late.”

“AIG was willing to risk a deliberate violation of the law in the hope that the plaintiffs’ mounting frustrations and financial strain would work to the insurer’s benefit, Cypher said, noting that the treble damages provision of Chapter 93A was designed to deter such a strategy.  Cypher concluded, however, that damages should not be measured by using the $11 million judgment obtained at trial.”

“In essence, the SJC will decide whether the measure of damages is the “loss of use” of funds or based on multiplying the judgment amount.  The Rhodes family and their Massachusetts personal injury lawyers argue that a finding of unfair settlement practices should be double or treble damages, per the statute.  The insurance companies argue that the judgment for the 93A case is not the same “traction or occurrence” as the underlying case and should be a different measure of damages.  Stay tuned.  The outcome could determine how the insurance companies treat Massachusetts motor vehicle drivers.”

“No wonder adjusters are encouraged to just say no.  The strategy is to keep the money as long as they can, invest it, and simultaneously use time and delay as a bludgeon to wear down the resolve of the plaintiff and his attorney.  There is a very clever method to their madness.  Money is the only sanction that gets the attention of an insurance company.  Casualty insurance companies and their claims adjusters are not encouraged to fairly, justly and reasonably settle meritorious accident claims.  If they did, there would be less float to invest and less investment income to earn.  Punitive damages, comprising two times or three times a jury award, are the only effective way to deter the bad-faith behavior of insurers in personal injury cases.”

“Without the present monetary sanctions in the Consumer Protection law there  is no incentive for an insurance company to pay claims promptly and fairly.  The incentive is to pay as little as possible for as long as possible.  No adjuster gets promoted for reasonably and promptly paying claims with money that could otherwise be used for investment purposes.”

“The SJC looked at the 1989 amendment to Chapter 93A which said that following a finding of 93A violation, the Court ‘shall’ find ‘up to three but not less than two times such amount…[if the act] was a willful or knowing violation…[and the award] shall be the amount of the judgment on all claims…”.

“Conclusion:  To show that settlement negotiations violated M.G.L. c. 93A, a plaintiff need not prove it would have actually accepted the settlement, only that the settlement negotiations resulted in some harm.  Further, if the c. 93A violation is knowing and willful, and there was a favorable judgment for the plaintiff for the underlying event, the measure of damages is two to three times the judgment for the underlying event.  Such an award is not unconstitutional.”

“The Court determined that AIGDC was willing to risk a deliberate violation of the law in the hope that the Plaintiffs’ mounting frustrations and financial strain would work to the insurer’s benefit, noting that the multiple damages provision of Chapter 93A was designed to deter such a strategy.  As stated in court documents, the SJC ‘recognized that $22 million in c. 93A damages is an enormous sum, but the language and history of the 1989 amendment to c. 93A leave no option but to calculate the double damages award against AIGDC based on the amount of the underlying tort judgment.’ “

“Despite the plain language of the statutes and amendment, an insurance company still chose to knowingly and willfully violate 93A and 176D against a woman who was rendered a paraplegic and her devastated family.  I see absolutely no reason why the Legislature should waste a second of its already overloaded time to help companies that would knowingly and willfully commit such acts.  A far better solution is for insurance companies to simply act in a lawful manner.”

“This case is particularly significant for the little guy who gets hurt once when injured and once again when they just string it out and hope to lowball and stonewall him.  Prior to this ruling, the Massachusetts courts were looked upon as paper tigers on the issue of 93A and 176D.  All this case does is to bring the courts back into line with what is fair and reasonable.”

“It sends a message to insurers that if they’re going to delay until the last possible minute, particularly in cases where liability is clear and there are catastrophic injuries, they run the risk of getting hit with enormous punitive damages.  We viewed the trial court’s decision as creating a roadmap for insurers to delay until the last possible minute and only be faced with what was a slap on the wrist with loss of use damages.  That’s why it was so important to the plaintiff’s family to push the issue to the SJC.”

“This is a story about evil, plain and simple.  It is about the evil of a corporation that puts profit above human decency.  And it is a tale of the virtues of our legal system – a legal system that, sometimes, gives justice to those who persevere.  For non-lawyers, this is a sobering reminder of how evil insurance companies can be.  The story ends well only because Massachusetts has strong pro-consumer laws meant to protect against just this kind of insurance company abuse.  And because our court system is willing to enforce those laws.  Hats off to the Mass SJC for a well-reasoned and just result.  Will AIG and the other insurance companies learn from this?  I sincerely hope so.  But given how AIG demonstrated a total lack of humanity and utter moral depravity, I tend to doubt it.

“The reasoning of the SJC’s decision is in places open to doubt.  For example, while it is true that AIGDC’s settlement delay injured the plaintiffs by depriving them of the use of funds to which they were entitled, this was an injury for which they were separately and fully compensated:  they received pre- and post-judgment interest on the jury verdict at Massachusetts’s generous 12% statutory rate.  Likewise, the Court’s analysis largely ignores the dual arbitrariness problem presented by the result: first, the absence of any rational connection between the size of the punishment and the harm caused by the conduct being punished, and second, the fact that an insurer’s potential punishment for failing to settle a case that is tried to a judgment is astronomically greater than the available punishment for an insurer who delays just as willfully and for just as long, but then settles the underlying case just before a verdict.  For this reason, insurers will watch with interest to see whether AIGDC seeks to pursue its federal constitutional objection via a petition for certiorari.

“Fourth, we remain infuriated and mystified that Justice Ralph D. Gants required 14 months, from March 30, 2007, until June 3, 2008, to reach a decision that was all about the harmful impact of delay to a catastrophically injured plaintiff.  The 14-month wait for this decision was interminable and unbearable for us.”

“Massachusetts is one of a handful of states that allow third party claimants to sue liability insurers for failing to promptly settle their claims.  It is unique in allowing tort claimants to recover punitive damages in such cases.  In the wake of the Supreme Judicial Court’s ruling this week in Rhodes v. AIG Domestic Claims it is evident that the price of failing to settle claims in which liability is reasonably clear can be high indeed.”

“A recent decision from the Massachusetts Supreme Court highlights the serious, and potentially expensive, pitfalls of failing to settle significant injury cases, where liability is not disputed.  The Court reasoned that the plain language of 93A required it to award as 93A damages, double the amount of the judgment entered in favor of the plaintiffs on their underlying negligence claims, or $22 million.”

“While the Rhodes decision has now clarified the measure of damages, if the court finds a willful or knowing violation of Mass. Gen. Law, ch. 93A, § 9, there will be collateral consequences from this ruling.  On the one hand, parties should be more likely to settle Mass. Gen. Law, ch. 93A, § 9 claims where liability is reasonably clear.  On the other, plaintiffs may attempt to leverage the Rhodes decision to garner more favorable settlements, as any verdict could be doubled or tripled if the court finds, in a subsequent proceeding, that an insurer committed an unfair settlement practice.  Given that, insurers should take extra care to document the steps they have taken to promptly, fairly and equitably settle the underlying tort claims.  Such a record should both discourage any effort by plaintiffs to prolong settlement in favor of going to trial and demonstrate the insurer’s good faith compliance with Mass. Gen. Law, ch. 93A,§ 9 and ch. 176D, § 3(9).

“The SJC held that a plaintiff need not prove that they would have accepted a prompt, reasonable settlement offer, had the insurer made such an offer, to prevail on a bad faith case under Chapter 93A/176D.  Instead, the court concluded that the plaintiff need only prove that they suffered a loss, or an adverse consequence, due to the insurer’s failure to make a timely, reasonable offer.  The plaintiff need not speculate about what they would have done with a hypothetical offer that the insurer might have, but in fact, did not, make on a timely basis.

“In a recent case in which a victim of a horrific motor vehicle collision in Medway sued the negligent truck driver that rear ended her, the Appeals Court found that the insurance companies have an obligation to make a reasonable settlement offer no matter what the demand.  This case reassures victims of motor vehicle accidents and other personal injuries that insurance companies must make reasonable offers of settlement.”

Richard E. Brody, Kesten’s co-counsel and partner at Brody, Hardoon, Perkins & Kesten, questioned whether AIG had learned anything from Rhodes.  “You’re not supposed to lie, hide evidence, make things up or hire [experts] who will say anything,” Brody said.  “They did and got caught.”

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