Massachusetts Consumer Protection Statute, 93A Damages

In an important decision by the Massachusetts Supreme Judicial Court last week, it was determined that the insurance companies used unfair settlement schemes against a victim of a Massachusetts auto accident. As a result, the Court determined that is was necessary to double the jury verdict against the insurance companies. Under the law, insurance carriers are required to make prompt and fair settlement offers, or they will be subject to double to treble damages.

In this case, Rhodes et al v. AIG Insurance et al, SJC-10911, decided on February 10, 2012, a Massachusetts tractor-trailer rear-ended Marcia Rhodes’ car in 2002. The crash was so severe that Ms. Rhodes fractured her spinal cord, resulting in paraplegia, multiple broken ribs and other injuries. She was hospitalized for months, and returned to the hospital twice for injury related treatment. Her medical bills exceeded $413,000; her out of pocket expenses were $83,984; and, future expected medical bills were expected to exceed $2,000,000.
Ms. Rhodes and her family retained a Massachusetts injury lawyer and filed a claim against the driver, his employer, and the owner of the vehicle. The insurance companies for those entities hired Crawford & Company to “adjust” the claim. Crawford investigated and determined that, indeed, the claim was valid and that the value was between $5 million and $10 million. Unfortunately, the insurance companies, Zurich, GAF and AIG, refused to make any offer of settlement. (Zurich actually tendered their $2 million policy to the lead insurance companies, and was not ultimately responsible for 93A violations.) Even after the driver plead guilty to the criminal act of operating to endanger, the insurance companies refused to make any reasonable offer settlement offer – they offered nothing near what their own adjusting company recommended.
Wherefore, Ms. Rhodes and her family were forced to try their case. A jury verdict of $11.3 million in September 2004 was rendered. This was, in the ballpark of what the insurance adjusting company had recommended. The law that when a victim receives a judgment on a case and the insurance company is later determined to have refused to make a fair settlement offer, the trial judge may make a finding of violations of Chapter 176d and Chapter 93A and double or triple the verdict as damages for that violation. The judge did so. Thus, the Rhodes family was entitled to $22 million, plus attorney fees, pursuant to 93A and 176d.
The insurance companies appealed. In the Rhodes case, the higher courts, the Appeals Court and the Supreme Judicial Court, were looking at the proper measure of damages. That is, they were not looking at the validity or amount of the jury verdict, nor were they looking at the trial judge’s determination that the insurance companies failed to make a fair offer of settlement. They were charged with making a determination as to how to calculate damages against the insurance companies for having clearly violated the settlement law in Massachusetts. The insurance companies, of course, were advocating that damages be calculated to give the victims the minimum amount of money following the 93A verdict. They posited various theories, however, the SJC rejected them.
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…”
This case serves as an example of how insurance companies often operate in Massachusetts. In a case where liability, or responsibility, is contested, such as an intersection collision where both drivers say they had the green light, they can await a jury verdict as to responsibility. However, when liability is clear, as it was in the Rhodes case, Chapter 176D requires them to “effectuate prompt, fair and equitable settlement” of victims claims. Chapter 93A offers a remedy if they do not offer such settlement: multiple damages and attorney fees.