919 F.3d 26
1st Cir.2019Background
- Sedgwick, a third-party claims administrator for Hartford, handled claims against Radius Danvers nursing facility after resident Genevieve Calandro fell from her wheelchair and later died.
- Plaintiff (administrator of decedent's estate) sued Radius in state court; Sedgwick retained defense counsel and an independent adjuster (Bistany), who initially reported missing documents and uncertainty as to causation.
- Discovery and a Medical Malpractice Tribunal (MMT) proceeded; plaintiff presented an expert outline at the MMT, and full expert reports were exchanged later (plaintiff says May 2013; Sedgwick says April 2014).
- Pretrial settlement negotiations included plaintiff demands ($500,000 then $1,000,000) and various joint and separate offers from defendants (e.g., $275,000 joint; $250,000 to Dr. Wahl; $250,000–$300,000 offers involving Radius). Plaintiff rejected these and proceeded to trial.
- Jury found Radius grossly negligent, awarding $1,425,000 compensatory and $12.5M punitive; Hartford’s $1M policy limit was insufficient; plaintiff then sued Sedgwick under Mass. Gen. Laws ch. 176D (and derivatively ch. 93A) for unfair claim settlement practices in federal court; bench trial resulted in judgment for Sedgwick.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Sedgwick violate Mass. Gen. Laws ch. 176D by failing to settle when liability was reasonably clear? | Calandro: liability (both wrongful death and conscious pain & suffering) was reasonably clear early (as of Oct 2011 and after MMT), so Sedgwick should have made prompt fair offers. | Sedgwick: investigation was ongoing and in good faith; causation was contested so liability was not reasonably clear; it made reasonable offers when appropriate. | Court: No violation. District court’s factual findings that Sedgwick investigated and liability was not reasonably clear (especially for wrongful death) are not clearly erroneous. |
| Was causation reasonably clear for the wrongful death claim before trial? | Calandro: evidence (MMT offer of proof, reports) made causation reasonably clear earlier. | Sedgwick: early adjuster report, missing records, inconsistent witness statements, and competing expert opinions meant causation remained in dispute. | Court: Causation was not reasonably clear pre-trial; district court credited evidence showing ongoing dispute and that full plaintiff expert report arrived later. |
| Were Sedgwick’s pre-trial settlement offers prompt and reasonable as to conscious pain and suffering? | Calandro: offers were insufficient and untimely given clarity of liability. | Sedgwick: it made multiple prompt, reasonable offers (e.g., $275k joint in Feb 2014; $300k joint in May 2014; $250k for Radius in July 2014) once value was clearer. | Court: Offers were within a reasonable range and made promptly in the context of discovery; no Chapter 176D violation on this claim. |
| Did the district court impose an improper burden for derivative Chapter 93A relief or apply a subjective standard to liability? | Calandro: district court required proof that Sedgwick’s unfair acts caused plaintiff’s loss and used subjective rather than objective standard on whether liability was reasonably clear. | Sedgwick: district court applied proper legal standards; plaintiff’s 93A rights are derivative of any 176D finding. | Court: No error. District court correctly treated 93A relief as derivative and applied the objective standard in substance (even if not in magic words). |
Key Cases Cited
- Smith v. F.W. Morse & Co., 76 F.3d 413 (1st Cir. 1996) (bench-trial findings: appellate standard of review explained)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (U.S. 1938) (state substantive law governs in diversity cases)
- Clegg v. Butler, 676 N.E.2d 1134 (Mass. 1997) (insurer not liable under ch. 176D when good-faith investigation leaves liability open)
- Rhodes v. AIG Domestic Claims, Inc., 961 N.E.2d 1067 (Mass. 2012) (Chapter 176D violations give rise to Chapter 93A claims)
- Bobick v. U.S. Fid. & Guar. Co., 790 N.E.2d 653 (Mass. 2003) (insurer must put a fair and reasonable offer on the table when liability and damages become clear)
- Demeo v. State Farm Mut. Auto. Ins. Co., 649 N.E.2d 803 (Mass. App. Ct. 1995) (clarifies objective "reasonable person" test for when liability is reasonably clear)