Clegg v. ButlerClegg v. Butler
Lead Opinion
These cross appeals in this case arise from a claim brought by the plaintiffs against the defendant insurer, Utica Mutual Insurance Company (Utica), alleging unfair settlement practices in violation of
I
On May 4, 1991, James Clegg was seriously injured in a two-car automobile accident after the vehicle driven by Jeff Butler struck Clegg’s automobile in a head-on collision. Butler’s vehicle was insured by Utica under a policy issued to his parents which insured bodily injuries up to a limit of $250,000 per person. The Butlers also had coverage pursuant to an excess liability policy issued by Merrimack Mutual Insurance Co. (Merrimack) which had a policy limit of $1,000,000.
In June and November of 1991, and December, 1992, Utica hired investigators to conduct surveillance and “activity checks” on Clegg. Contrary to its own policies which prohibited interviewing claimants represented by counsel, Utica did not inform any of the investigators that the Cleggs had hired an attorney and thus both Clegg and his wife were approached and interviewed as part of these investigations. After the first investigation in July, 1991, an investigator told Utica that this was a serious case that appeared to be a “long term, total disability case” and recommended that Utica make sure its reserves were sufficient to cover the claim.
The Cleggs presented their first settlement demand to Utica on September 20, 1991, in which they asked for $200,000. As part of the settlement demand and pursuant to requests by the insurer, the Cleggs provided Utica with numerous medical records. Utica did not respond to this demand for settlement. On January 23, 1992, the Cleggs sent a demand letter to Utica, claiming that Utica was violating its obligation to “effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear” under
In March, 1992, Utica retained a neurologist to review Clegg’s medical records, and he concluded that Clegg’s injuries were causally related to the accident with Butler. In mid-April, Utica requested additional medical information which was provided over the course of the next month along with new medical data as they became available. In June, 1992, Utica’s claims managers recommended raising the policy reserve to the policy limit of $250,000 and recommended authorization to settle the case at this limit. Although the judge found that Utica’s home office accepted these recommendations within days, Utica did not present the Cleggs with a settlement offer until the beginning of July, at which time the Cleggs were presented with a series of structured settlements, each having a present value of less than $175,000. The Cleggs rejected these offers and commenced action against the Butlers and Utica in February, 1993, after having raised their settlement demand to the combined policy limits of $1.25 million in October, 1992. Utica retained an attorney to represent the Butlers. In the course of his investigation this attorney determined that the probable value of the case exceeded Utica’s policy limit and in September and November of 1993, he recommended that Utica offer the Cleggs $250,000 in settlement, characterizing potential damages as “astronomical.” Despite these recommendations, a second settlement offer was not forthcoming until a mediation session was conducted in May, 1994, just prior to the commencement of the scheduled trial. At that time, Utica finally offered the full $250,000, after which the excess insurer agreed to pay $425,000, and the parties agreed to settle for a combined amount of $675,000.
The Cleggs’s allegations of unfair settlement practices on the part of Utica were not relinquished by this settlement. Following a jury-waived trial on this matter, the judge ruled that Utica had violated
In the meantime, a disagreement had arisen in the settlement process as to how the claims against the Butlers were to be extinguished. After the Butlers’ attorney refused to sign a settlement release denoted “Agreement for Judgment,” the Cleggs’s attorney drafted another release which provided, among other things, “that an appropriate judgment upon the underlying bodily injury claims in the total amount of [$675,000]” would be filed in the trial court. The Cleggs signed this release and forwarded it to the Butlers’ attorney who then forwarded the check for $425,000 from the excess insurer. Utica’s counsel notified the Butlers’ counsel that they objected to the judgment language contained in the release. The Butlers’ attorney repeated this objection when he sent Utica’s check for $250,000 to the Cleggs. Although the settlement had been paid in full, there remained a dispute as to whether the parties had agreed that an agreement for judgment would be executed and filed. Because the Cleggs refused to enter into a stipulation of dismissal, they moved for an entry of judgment. When this motion was denied, the Cleggs moved for reconsideration; the motion for judgment was again denied. Following the conclusion of the trial on the c. 93A claims, on a motion by Utica, the judge allowed a motion dismissing the Cleggs’s complaint against the Butlers.
II
A
Contesting its liability to the Cleggs, Utica argues that the Cleggs, as third-party claimants to the Butlers’ insurance policy, cannot recover against the insurer for its failure to ef
Under Utica’s interpretation, a third-party claimant has no right to a settlement offer by the insurer under this statute prior to a trial or entry of judgment. This proposition is without merit. Utica itself acknowledges that our case law permits third-party claimants such as the Cleggs to bring actions against liability insurers who violate G. L. c. 93A. In Van Dyke v. St. Paul Fire & Marine Ins. Co.,
The duty of fair dealing in insurance settlement negotiations is established by statute under
It is Utica’s further contention that, because the Cleggs and the Butlers eventually entered into a settlement, which the Cleggs denote as “fair and equitable,” that the Cleggs were not adversely affected or injured by Utica’s actions. Whether a settlement is eventually reached or not, unjust delay subjects the claimant to many of the costs and frustrations that are encountered when litigation must be instituted and no settlement is reached. Moreover, when an insurer wrongfully withholds funds from a claimant, it is depriving that claimant of the use of those funds. “This is precisely the type of damage we have described as appropriately being subject to multiplication in an action . . . under c. 93A.” Schwartz v. Rose,
Violation of duty to settle. Utica claims that, even if the Cleggs have a cause of action under G. L. c. 93 A, Utica did not breach its obligations under the statute. Utica contends that the judge made erroneous findings of fact, without which no violation of G. L. c. 93A could be found. We will not disturb a judge’s findings of fact in a c. 93A claim unless those findings are clearly erroneous, Bressel v. Jolicoeur,
Utica’s first factual disputes challenge the judge’s finding that Utica’s response to the Cleggs’s demand letter of January 23, 1992, “was inadequate, constituted statutory unfairness and deception,” and that “Utica’s failure to make an offer of settlement until July 3, 1992, violated the statute.” Our standard for examining the adequacy of an insurer’s response to a demand for relief under G. L. c. 93 A,
On appeal, Utica takes the position that the judge was wrong to find the Cleggs’s demand for $750,000 reasonable because, while this figure may have become reasonable with the passage of time and the collection of further information, it was not reasonable at the time the demand letter was received and thus Utica’s response, or lack thereof, was justi
In this case the evidence supported the judge’s finding that fault was never at issue and “[a]t no time did Utica consider the case to be anything but a so-called 100% liability case against its insured.” As to damages, Utica persistently argues these were a matter of valid dispute, pointing out that even the Cleggs’s brief states that the dollar amount of damages were “undetermined until the agreed upon settlement.” While the eventual combined settlement figure paid by both Utica and Merrimack may have been the subject of uncertainty, the judge found that by the time the demand letter was received, Utica “possessed sufficient [] documentation” to put it on notice that an offer of $250,000 would be reasonable. Further investigation only confirmed those reports and the evidence suggests that after June, 1992, when the judge found “Utica knew or should have known that [Clegg] was permanently and totally disabled from work,” there was no reasonable doubt that damages exceeded the $250,000 available under the Utica policy.
Last, Utica takes issue with the judge’s findings that certain activities not referred to in the Cleggs’s demand letter were independent violations of G. L. c. 93A.
C
Measure of damages under G. L. c. 93A. Finding a violation of
“if the court finds for the petitioner, recovery shall be in the amount of actual damages or twenty-five dollars, whichever is greater; or up to three but not less than two times such amount if the court finds that the use or employment of the act or practice was a willful or knowing violation ... or that the refusal to grant relief upon demand was made in bad faith .... For the purposes of this chapter, the amount of actual damages to be multiplied by the court shall be the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence . . . .”
(emphasis supplied). The italicized portion of this statute was inserted by St. 1989, c. 580, § 1, which was apparently enacted in response to cases such as Bertassi v. Allstate Ins. Co.,
Unlike the case of Cohen v. Liberty Mut. Ins. Co., supra at 755-756, Utica paid the Cleggs the amount due under its policy prior to the c. 93A litigation. When a case has been settled outside the courtroom, there is no “judgment” on which to base the multiple damage calculus. Bonofiglio v. Commercial Union Ins. Co.,
Because the statutory language the judge used to determine liability and to award damages does not apply to settlements, there will have to be a determination under the standard set out here of what damages the defendant caused the Cleggs. The judge will need to determine the date at which Utica should have offered its policy limits and the date at which Merrimack would have been willing to settle in order to determine the period of time during which the Cleggs were wrongfully denied the use of funds from the insurers. See note 11, supra, as to amount.
Ill
The plaintiffs raise several claims regarding the circumstances and the intentions of their settlement agreement with the Butlers, including reliance and estoppel, contract theories, and judicial error, to support their contention that a judg
We remand this case to the Superior Court for a redetermination of damages in accordance with this opinion.
So ordered.
Notes
General Laws c. 93 A,
Utica concedes that an insurer might incur an obligation to the third-party claimant if the insured and the third party conclude a settlement between themselves and thereafter the insurer unreasonably refuses to pay its share under that settlement.
Perhaps attempting to buttress its argument that third-party claimants are not protected under c. 176D,
We note that the settlement here explicitly reserved the Cleggs’s right to proceed against Utica for c. 93A damages and thus these claims were not extinguished by the settlement.
We note that in order to encourage settlements, a demand letter under c. 93A,
We recognize Utica’s point, on which the dissent also focuses, that it would not have paid its proceeds to the Cleggs “until the entire case was settled with whatever contribution Merrimack would make” as the excess insurer, because Utica’s duty to its insureds would not have terminated until the complete settlement was concluded. This fact, however, cannot shield Utica from liability when it was reasonably clear that damages would exceed $250,000.
Until Utica was prepared to address the possibility that the Cleggs were entitled to its policy limits, Merrimack, as the excess insurer, had no reason to know that it would be required to provide compensation from its policy to the Cleggs, and thus no reason to examine or determine the extent of its
Utica also takes issue with the judge’s finding that its G. L. c. 93A response was inadequate because it failed to discuss any possibility of settlement, instead requesting medical information which had been previously supplied. Utica insists this finding is clearly erroneous because its request for these medical records “accurately described the status of the matter shown in [Utica’s] records at the time it was made.” Whatever the state of Utica’s records, the judge’s determination that this request was redundant is supported by the record and the judge’s ruling as to the inadequacy of Utica’s response to the Cleggs’s demand letter was not clearly erroneous.
In a similar vein, Utica challenges the judge’s finding that Utica’s home office accepted the recommendation that its New England office authorized a $250,000 settlement in June, 1992. The judge’s finding is supported by the record. See Schwartz v. Rose,
Utica also challenges the judge’s determination that “had Utica offered its policy limits in late 1992, Merrimack would have made an offer at least equivalent to that which it made in May, 1994 ($425,000), and which [Clegg] accepted.” The record supports the judge’s inference that Merrimack would have settled once Utica tendered its limits. See note 8, supra. As to any uncertainty regarding the amount of an earlier Merrimack settlement, this will need to be resolved when the case is remanded for a recalculation of damages, see infra.
Furthermore, we note that, while two of the investigations had already occurred, the third investigation and the improper attempt to contact Clegg’s nurses had not occurred at the time of the demand letter.
Dissenting Opinion
(dissenting). The complaint in this case contained five counts. The first four counts alleged that James A. Clegg .(Clegg) sustained personal injuries and his wife, Katherine M. Clegg, sustained consequential damages as a result of negligence on the part of the defendants Jeff L. Butler, Louis C. Butler, and Helene M. Butler. In the fifth count, Clegg alleged that the. defendant Utica Mutual Insurance Company (Utica) engaged in unfair settlement practices in violation of
Utica appeals from the judgment against it in connection with the issues raised by Count Five and the plaintiffs appeal from the denial of their motion for the entry of judgment with respect to the first four counts. I concur with the court’s holding that the plaintiffs’ motion for entry of judgment on their motor vehicle tort claims was properly denied. I do not agree, however, that this case should be remanded to the Superior Court for a “redetermination of damages” in the dispute between Clegg and Utica (Count Five). Ante at 426. In my view, after a full and fair opportunity, Clegg has failed to establish Utica’s liability because he has failed to prove any injury or adverse impact on his rights as a result of anything Utica did or failed to do. The court should order the entry of judgment for Utica.
Massachusetts law permits a third-party claimant, as is Clegg with reference to Utica, to sue the insurer of another party when the claimant alleges, as does Clegg here, that he or she has been injured or his or her rights have been adversely affected by the insurer’s violation of G. L. c. 93 A, which incorporates the provisions of
The judge below issued a memorandum of findings of fact and conclusions of law. One of those “findings” and one of those “conclusions of law” are especiaUy important. Finding no. 61 states, “The evidence permits the inference, which I draw, and the finding, which I make, that had Utica offered its poEcy Emits, in late 1992, Merrimack would have made an offer at least equivalent to that which it made in May, 1994 ($425,000), and which [Clegg] accepted.” Notably absent is a finding as to when, or approximately when, or by when, Merrimack would have made, and the tort plaintiffs would have accepted, such an offer. The judge states in conclusion of law no. 15 in relevant part as foEows: “It is Ekely that had Utica tendered the policy Emits earEer, the excess carrier would have settled sooner. However, I cannot determine fairly when such settlement would have occurred.” The court errs when it states, ante at 423 n.ll, in reference to finding no. 61 quoted above, that “[t]he record supports the judge’s inference that Merrimack would have settled once Utica tendered its limits.” The judge made no such determination. Perhaps, standing alone, finding no. 61 could fairly be construed as a determination that Merrimack would have offered at least $425,000 whenever Utica offered the Emits of its poEcy, but the judge’s conclusion of law no. 15 clearly states that the judge was unable fairly to determine when a settlement would have occurred foHowing a $250,000 offer by Utica. The judge was not persuaded, and therefore did not make a determination, as to when or in what circumstances Merrimack would have made an offer, acceptable to the tort plaintiffs, that would have settled them claims and produced the appropriate releases. Indeed, my review of the record satisfies me that the evidence as a matter of law would not have warranted such a finding.
Settlement of the tort claims required the agreement of the plaintiffs and both insurers, Utica and Merrimack. The judge was not persuaded as to when that would have occurred if