Lead Opinion
We examine in this case (decided in the Superior Court on a motion for summary judgment and brought here by our granting the plaintiff’s application for direct appellate
The undisputed material facts and procedural background may be summarized as follows. On March 11, 1982, the plaintiff sustained injuries when a van driven by Allard struck him as he crossed Route 1A in Revere, outside Wonderland Greyhound Park. The van that Allard was operating at the time was owned by Edward Poulin and was insured by Allstate pursuant to the standard Massachusetts automobile insurance policy issued in that year. The policy provided indemnity in the amount of $25,000 for injuries to one person as a result of one accident. The policy contained provisions setting forth Allstate’s duty to defend and right to settle, and its obligation to pay supplemental costs (in addition to the policy limits). We shall set forth those provisions in full later in this opinion.
In 1984, the plaintiff commenced an action in the Superior Court against Allard and others
On July 31, 1995 (shortly after this court had decided the appeal of Westwood), the plaintiff made a written demand on Allstate for payment of the $25,000 policy limits plus $228,236.29 in postjudgment interest that had accumulated from the date of entry of judgment. Allstate informed the plaintiff that the matter had been forwarded to its New Hampshire office. On February 26, 1996, the plaintiff sent Allstate a written demand, pursuant to G. L. c. 93A, § 9, for payment of the “amount of the underlying judgment of $224,952 [szc], plus accrued interest since October 18, 1990.” In response, Allstate informed the plaintiff that it was not obligated to pay interest that accrued after the initial offer to settle made by Allstate and rejected by the plaintiff, but that it would pay the plaintiff, as “our final offer,” $25,000, plus $18,000 in interest that, according to Allstate’s calculations, had accrued up until the pretrial offer of March, 1990. Despite this offer, on April 26, 1996, Allstate sent the plaintiff a check for $25,000 (with no interest included), marked “final settlement of any and all claims arising from bodily
The plaintiff’s multi-count complaint sought, insofar as relevant here, a declaratory judgment under G. L. c. 231A that Allstate was liable for the postjudgment interest under the terms of its policy and by reason of G. L. c. 175, § 113A,
1. The plaintiff’s argument, in substance, is that Allstate is fiable for postjudgment interest on the judgment, computed from the time of entry of judgment in October, 1990, until the time that Allstate tendered the unconditional payment of the policy limits of $25,000, in July, 1996. He asserts that an offer to pay must be in writing and must be made after a judgment is entered to toll the accrual of the postjudgment interest that Allstate was obligated to pay. Allstate argues (and the judge agreed) that Allstate offered, and paid, the plaintiff all that was due him
Neither the plaintiff nor Allstate has furnished the correct analysis. The judge correctly determined, and the plaintiff does not now persuasively argue otherwise, that there is nothing in G. L. c. 175, § 113A, that required Allstaté’s settlement offer to be in writing. Section 113A does require that reductions or eliminations in coverage to a motor vehicle liability policy be memorialized in a printed notice attached to each policy. There is a clear difference, however, between a reduction of the coverage provided by a policy and an offer to settle a claim that is covered by the policy. As the judge correctly noted, “The former alters the insurance contract; the latter operates within it.” In addition, nothing in the terms of the policy require that an offer to settle be in writing. The plaintiff points to the policy provision entitled “Our Agreement,” which specifies that “[ojral promises or statements made by you or our agent are not part of this policy.” This provision, however, is comparable in substance and intent to G. L. c. 175, § 113A, and cannot fairly be interpreted to require that every offer to settle be made in writing.
Allstate’s reasoning, on the other hand, is also inaccurate.
The correct analysis is based in the terms of Allstate’s policy with its insured. We interpret these terms according to the “fair meaning of the language used, as applied to the subject matter.” Bilodeau v. Lumbermens Mut. Cas. Co.,
(1) defend any lawsuit brought against its insured within the policy’s coverage “even if [the lawsuit] is without merit”;
(3) terminate its duty to settle or defend by paying the claimant the maximum limits of coverage; and
(4) pay postjudgment interest until it offers to pay the limits of coverage.
The policy allowed Allstate, before trial, to attempt to settle the plaintiff’s claim for the policy limits in exchange for a release by him of its insured and Allard. See Lazaris v. Metropolitan Prop. & Cas. Ins. Co., supra at 506. The plaintiff’s refusal of Allstate’s settlement offer required Allstate to defend its insured and Allard at trial. See Aetna Cas. & Sur. Co. v. Sullivan,
When the plaintiff prevailed and judgment entered, Allstate’s obligations changed. It no longer was required to “defend” the action, namely, pursue an appeal, “even if [the action] [was] without merit.” The action now had merit based on the jury’s verdict establishing substantial fault on Allard’s part and liquidating a large amount of damages that were incorporated, together with prejudgment interest, in a judgment. The plaintiff then became a judgment creditor, and he was entitled to have the “insurance money [in Allstate’s policy] applied to the satisfaction of the judgment.” G. L. c. 175, § 113.
Allstate’s decision whether to appeal the judgment was governed by the established rule that an insurer’s duty to defend generally encompasses an obligation to appeal from an adverse judgment against its insured, but only if reasonable grounds exist to believe that the insured’s interest might be served by the appeal. See Aetna Cas. & Sur. Co. v. Sullivan, supra at 157 n.3; Chrestman v. United States Fid. & Guar. Co.,
At this point, Allstate, under the express provisions of the policy, could either terminate all its responsibility to its insured and Allard by paying the plaintiff the policy limits, or it could pursue an appeal, knowing that it would be required to pay postjudgment interest until such time as it had, under the supplemental payments provision of the policy, “offered to pay [the plaintiff] up to the limits of coverage.” If Allstate chose to appeal, as it did, it could still, in order to fulfil its continuing duty to its insured, have attempted to settle, conditioning payment of the $25,000 on the plaintiff’s release of Allard or on the execution of some other suitable document acknowledging that Allard could no longer be pursued on any execution issued on the judgment.
Allstate did not make an unconditional offer to pay, and, consequently, by not doing so, and by continuing to control the litigation by pursuing an appeal, Allstate was responsible for the payment of postjudgment interest until such time as the terms of its policy were satisfied. The clear majority of courts, interpreting a standard interest clause in a motor vehicle liability insurance policy, have held insurers liable for postjudgment interest on the entire amount of the judgment, notwithstanding the fact that the policy limits may cover only a portion of the judgment. The United States Court of Appeals for the First Circuit, in Fratus v. Republic W. Ins. Co.,
“It may, at first, seem shocking to impose this immense obligation on [the insurer] for a failure to deliver a relatively small sum to the plaintiffs. Yet, the clear majority of modem courts that have interpreted a standard interest clause under similar circumstances have concluded that the policies mean what they say. . . .
“[Other] opinions not only apply the straightforward terms of the contracts, but produce sound policy. Compelling the insurer to pay all of the interest which accmes pending appeal protects the insureds, who may wish to pay the portion of the judgment in excess of policy limitsand stop the tolling of interest, but whose lack of control over the litigation prevents them from doing so. . . . The rule also serves to protect plaintiffs from unreasonable delay on the part of insurers, or, as in this case, compensate them for such delays. The rule does not impose an unfair burden on insurers because they remain in control of both the tolling of interest and the litigation, and can fairly be expected to understand how the majority of jurisdictions interpret standard interest clauses.” (Citations omitted.)
See Safeway Ins. Co. v. Amerisure Ins. Co.,
Because the relevant policy language refers to an “offer to pay” rather than an “offer to settle,” and makes no provision for the imposition of conditions on the offer to pay, Allstate was required to make an unconditional offer to pay the policy limits in order to terminate its express obligation to pay postjudgment interest. See Safeway Ins. Co. v. Amerisure Ins. Co., supra at 222-223 (prejudgment and postjudgment conditional offers did not terminate insurer’s liability for postjudgment interest); Southern Gen. Ins. Co. v. Ross,
Comment on the dissent is now in order. The dissent confuses the term “offer to settle” with the term “offer to pay.” These are fundamentally different concepts in insurance law; the former contemplates payment in exchange for a release, the latter encompasses actual payment without a release. The majority rule, stated in both cases and commentary such as Appleman and Couch, set forth above, supports this view, as does the decision in Lazaris v. Metropolitan Prop. & Cas. Ins. Co.,
More to the point, the dissent’s reasoning that an “offer to pay” means only an “offer to settle” does an injustice to the ordinary meaning of those terms. While in insurance parlance, an “offer to pay” may imply an “offer to settle,” there is no question that the terms are commonly understood to have distinct meanings. Thus, where Allstate’s policy sets forth its obligations to make payments to the insured (e.g., “[w]e will pay three kinds of benefits”; “we will pay reasonable expenses”; or “[additional costs we will pay”), the term “pay”
In keeping with this distinction, a reasonable insured would understand Allstate’s promise to pay postjudgment interest (for the benefit of the insured, who is otherwise obligated to pay postjudgment interest) to terminate only after Allstate had offered to pay, with no conditions attached, the limits of the policy. Allstate’s liability to the insured for the payment of post-judgment interest, according to the dissent, would end the first time Allstate offered to settle the case for the policy limits. This interpretation, however, renders Allstate’s promise to the insured an empty promise, because, in every case where liability is both reasonably clear and in excess of the policy limits, an insurer like Allstate merely would extend an offer to the claimant to settle a case for the policy limits, thereby automatically shifting the burden of payment of postjudgment interest to the insured. This result would run directly counter to the purpose of the supplemental payments provision, “to protect the insured when the insurer decides to contest liability and a judgment in excess of the policy limits is returned against the insured.” 12 G. Couch, Insurance, supra at § 170:43, at 170-58. The insured, who, by clear language elsewhere in the policy, has relinquished control over the litigation to the insurer, and who may not wish to appeal, would be obligated to pay the interest that accrues on the judgment while the insurer pursues an appeal.
There is no evidence that the plaintiff acted unfairly or
2. We conclude that there must be further proceedings on the plaintiff’s G. L. c. 93A claim.
In his February 26, 1996, G. L. c. 93A demand letter, the plaintiff asserted that Allstate’s delay in responding to his July 31, 1995, demand for the policy limits plus interest, a demand made nine months after the judgment against Allstate’s insured had become final, constituted a violation of various provisions of G. L. c. 176D, § 3 (9), and, therefore, a violation of G. L. c. 93A. While there may be some adequate explanation for Allstate’s delay, a fact finder must decide whether that delay constituted, in all the circumstances, an unfair or deceptive act or practice.
The other item identified by the plaintiff in his opposition to
3. Summary judgment is vacated. The case is remanded to the Superior Court for such proceedings on the complaint as may remain in dispute, including determination of the final amount of postjudgment interest owed by Allstate and determination of the G. L. c. 93A claim. When all remaining claims are decided, an appropriate new final judgment is to be entered.
So ordered.
Notes
Allstate’s insured, Edward Poulin; Westwood Group (doing business as Wonderland Greyhound Park) (Westwood); the city of Revere; and Trolley’s Food and Spirits.
As an initial matter, we reject the plaintiff’s claim that whether Allstate extended this pretrial offer to him remains a disputed question of fact. The judge who ruled on the motion had before her unequivocal deposition testimony of the plaintiff’s attorney that established the fact that Allstate’s at
The jury found Allard seventy-eight per cent responsible, Westwood thirteen per cent, Davis nine per cent and found for Revere and Poulin. The case against Trolley’s Food and Spirits, a restaurant where Allard had spent time earlier that evening, apparently, was discontinued. Davis v. Allard,
The Appeals Court reversed the plaintiff’s judgment against Westwood, and remanded the case for a new trial. Davis v. Allard,
General Laws 175, § 113A, states in relevant part: “In the event a company . . . eliminates or reduces certain coverages, conditions, or definitions in such policies issued under this section, the company must attach to each such policy a printed notice setting forth what coverages, conditions or definitions have been eliminated or reduced. If explanations of such reductions or eliminated coverages are not contained in such a printed notice attached to such policy, then such coverages, conditions or definitions shall remain in full force and effect without such reductions and eliminations.”
The relevant policy provisions read as follows:
“2. Our Duty To Defend You And Our Right To Settle. We have the right and duty to defend any lawsuit brought against anyone covered under this policy for damages which might be payable under this policy. We will defend the lawsuit even if it is without merit. We have the right to settle any claim or lawsuit as we see fit. Our duty to settle or defend ends when we have paid the maximum limits of coverage under this policy. If any person covered under this policy settles a claim without our consent, we will not be bound by that settlement.
“3. Additional Costs We Will Pay. We will pay, in addition to the limits shown for Compulsory and Optional Bodily Injury To Others . . . [ijnterest that accrues after judgment is entered in any suit we defend. We will not pay interest that accrues after we have offered to pay up to the limits you selected.”
Neither was there any express requirement in the terms of the policy that Allstate’s offer to pay the policy limits be made postjudgment. An insurer that makes an unconditional prejudgment offer to pay the policy limits, however, in certain circumstances, may risk violating the duty it owes to its insured to
Our decision in Lazaris v. Metropolitan Prop. & Cas. Ins. Co., supra at 504, overruled an earlier decision of the Appeals Court, Thaler v. American Ins. Co.,
A minority of jurisdictions follow the rule that the amount of postjudgment interest for which the insurer is liable is limited to interest on the sum of its total liability as designated by the policy limits. See, e.g., Faulkner v. Smith,
The use of the term “offer to pay” in Allstate’s policy rather than the
We are aware of appellate decisions in other jurisdictions that, interpreting policies containing “offer to pay” language in a supplemental payments provision, have declined to hold an insurer liable for postjudgment interest after a conditional offer to settle the case for the policy limits was made. Two of these decisions, cited by the dissent to support the proposition that an “offer to pay” need only be conditional, involve factual circumstances not present here, and do not discuss the significance of the “offer to pay” language. See Overbeek v. Heimbecker,
The fact that, in some cases like this one, the insured may not have funds to pay either the amount of judgment in excess of the policy limits or the postjudgment interest has no relevance to the proper analysis of the provision.
The dissent’s “disturbing ramifications” analysis creates somewhat chimerical problems in an effort to favor insurers in an area that raises problems no different from those insurers face every day. Post at 193-195. The requirement that an insurer pay postjudgment interest if an appeal is pursued will require insurers to reevaluate the case in the face of judicial finding of liability. If an appeal lacks merit or is otherwise weak, an insurer will have strong incentive to pay. There is nothing wrong with this. After all, the whole purpose of the postjudgment interest rule and G. L. c. 176D is to require insurers to pay when liability becomes clear and to penalize them when they stonewall and unnecessarily prolong the litigation. An insurer has no obligation to pursue an appeal that has no reasonable likelihood of success in an effort to grind down a successful claimant until a settlement is accepted. If the insurer seeks to pursue an appeal that has merit, it may be able to control its postjudgment interest obligations by paying the policy limits (with accrued interest) into court. We leave the availability of this procedure for another day because it is not involved in this case. We mention it only to suggest that insurers are not in the hapless situation hypothesized by the dissent.
Concurrence in Part
(concurring in part and dissenting in part). The court imposes on Allstate Insurance Company (Allstate) an obligation to pay postjudgment interest that is contrary to the express provisions of Allstate’s standard automobile insurance policy. In my view, the judge below correctly granted Allstate’s motion for summary judgment on the issue of its liability for postjudgment interest. The court’s opinion also allows the plaintiff to pursue a G. L. c. 93A claim against Allstate based on its refusal to pay that disputed postjudgment interest. While I agree that the plaintiff should be allowed to proceed on a claim that Allstate’s delay in paying the $25,000 policy limit violated G. L. c. 93A, Allstate did not violate G. L. c. 93A merely by litigating the issue of its liability for postjudgment interest.
1. Interpretation of insurance policy’s interest provisions. Under the terms of its policy, Allstate agreed to pay postjudg
Courts interpreting policies with language identical to the Allstate policy have concluded that a conditional offer of the policy limit, such as that extended by Allstate, satisfies the policy requirement of an “offer to pay” the policy limit and terminates the insurer’s liability for interest. See Overbeek v. Heimbecker,
A contrary result has been reached in two cases. See Safeway Ins. Co. v. Amerisure Ins. Co.,
However, no such language appears in the present Allstate policy. Here, the obligation to pay interest ended once Allstate “offered to pay up to the limits” of the policy. Allstate did not have to “tender,” “pay,” or “deposit” the policy limit in order to stop interest from accruing. The contract term “offer to pay” should not be interpreted as the equivalent of “tender,” or “payment,” or “deposit into court.” The term “tender” and the term “pay” have always meant something more than a mere “offer.” See Metropolitan Credit Union v. Matthes,
When interpreting contract language, we should construe terms in their “usual and ordinary sense.” Citation Ins. Co. v. Gomez,
The court’s conclusion that “offer” means “unconditional offer” would transform the term “offer” into a requirement of actual payment. See ante at 183. An “offer” that has no conditions whatsoever will always be accepted, as there is no reason to reject an offer that demands no concessions in return. In the context of personal injury litigation, an “unconditional offer” will inevitably result in payment, as no plaintiff would ever turn down an offer of money that still left the plaintiff free to pursue all claims against all defendants. Ironically, it is those cases
The court reasons that, because the policy terminated interest only on an offer to “pay,” as opposed to an offer to “settle,” we must conclude that only an unconditional offer will suffice. This analysis overlooks the fact that, under an insurance policy, the only thing that an insurer does for a claimant is to “pay” money, be it in satisfaction of a judgment, partial satisfaction of a judgment, or in settlement of the claim. An “offer to pay” can, and routinely does, occur in the context of settlement, as a settlement with an insurance company can only result in “payment.” Nothing about the use of the term “pay” suggests that the “payment” anticipated by the offer can not be a payment in settlement. While quibbling over the ostensible distinction between “offer to pay” and “offer to settle,” the majority ignores the fact that what is required is only an “offer,” not an actual payment.
In terminating an insurer’s liability for interest on an “offer to pay,” the Massachusetts standard automobile insurance policy deviated from the interest provision most commonly used, which terminates liability for interest only when the policy limit is “paid or tendered or deposited in court.”
2. G. L. c. 93A. I concur that further proceedings on the plaintiff’s claim under G. L. c. 93A are required, as Allstate’s delay in responding to the July 31, 1995, demand for the policy limit is potentially a violation of G. L. c. 93A. Once the $224,952 judgment against Allstate’s insured became final, Allstate’s obligation to pay its policy limit of $25,000 became absolute under G. L. c. 175, § 113. While Allstate’s attention may have been focused on the much larger sum of interest then being demanded by the plaintiff, at least $25,000 was undisputably owed by that time. Delay in paying the undisputed portion of its obligation can give rise to liability under G. L. c. 93A, and that aspect of the plaintiff’s G. L. c. 93A claim needs to be tried.
However, as I disagree with the court’s determination that Allstate is liable for postjudgment interest, I obviously disagree with the proposition that Allstate’s failure to pay postjudgment interest could be a violation of G. L. c. 176D, § 3 (9), and thereby a violation of G. L. c. 93A. Beyond the simple disagreement on the merits of the postjudgment interest issue, I do not see how Allstate’s decision to litigate an unsettled question of law, a question on which other courts have reached differing results, could violate G. L. c. 93A. A respected trial judge agreed with Allstate’s interpretation of its insurance policy, as do I, and as have several other courts. See Overbeek v. Heimbecker, 101
There are cases where the policy language required an “offer to pay,” but the fact pattern at issue involved an actual payment or deposit being made by the insurer. See Cox v. Peerless Ins. Co., 774 F. Supp. 83, 87 (D. Conn. 1991); Boston Old Colony Ins. Co. v. Fontenot,
The policy at issue in this case, and the offer to pay the policy limit in Ml settlement, long predated Thaler v. American Ins. Co.,
On the facts of this case, it may well be that Allstate could have made an unconditional offer postjudgment without violating any duty to its insured. I agree with the court that the appeal of the underlying verdict was “a longshot at best," and the duty to defend does not require insurers to take “longshot” appeals. Ante at 187. However, the issue is not whether, at some point in the history of this case, Allstate could have made an unconditional offer to pay without violating its duty to its insured. Rather, the issue is whether, at any point during the history of the case, it did make an “offer to pay up to the limits” of the policy. Nothing in the policy language suggests that the term “offer to pay up to the limits” changes its meaning at different stages of the underlying litigation, and we must therefore give the term a meaning that would include the kind of “offer” that is ordinarily made prior to trial and that, for some cases, will be the only kind of “offer” that an insurer can properly make even after a verdict has been returned.
In practice, an insurance company never makes an “unconditional offer” to pay the policy limit. Plaintiffs make demands for the policy limit, and insurers who do not intend to obtain anything in return simply pay on that demand. There is no “offer” that precedes such a payment, and no purpose would be served by prefacing payment with an “unconditional offer.” Interpreting the interest provision as hinging on an “unconditional offer” makes the termination of interest contingent on an event that simply never occurs.
The duty to defend encompasses a duty to pursue an appeal, and hence the duty to insist on a release of the insured as a condition of payment during the appeal, “if reasonable grounds exist to believe that the insured’s interest might be served by the appeal.” Ante at 180. Where there are such “reasonable grounds” for an appeal, an insurer who pursues an appeal is not “stonewall[ing]” or “unnecessarily prolong[ing] the litigation.” Ante at 187 n.13. There is no justification for penalizing good faith appeals that are taken to protect insureds. The taking of “an appeal that has no reasonable likelihood of success in an effort to grind down a successful claimant,” id,., is a violation of G. L. c. 176D, § 3 (9), and, by way of G. L. c. 93A, § 9 (3) and (4), makes the insurer liable for two to three times the underlying judgment plus attorney’s fees. There is no need to impose interest as a penalty on insurers for taking good faith (but ultimately unsuccessful) appeals simply to have that penalty available for those who take bad faith appeals.
Here, for example, the interest that accrued during the appeals came to almost ten times the policy limit.
The court suggests, in an oblique fashion, that an insurer “may be able to control its postjudgment interest obligations by paying the policy limits (with accrued interest) into court,” but then “leave[s] the availability of this
Nor is there any authority for permitting such a deposit into court. Deposits into court may be made pursuant to Mass. R. Civ. P. 67,
The treatises cited by the court refer to the “paid or tendered or deposited in court” version as the “standard” interest clause. See 8A J.A. Appleman & J. Appleman, Insurance Law and Practice § 4894.25, at 82 (rev. 1981 & Supp. 2000); 12 G. Couch, Insurance § 170.32, at 170-51 (3d ed. 1998). The “offer to pay” version that we address today is sufficiently rare that it is not even mentioned in either treatise.
Albeit in an unpublished opinion, the United States Court of Appeals for the Sixth Circuit has also ruled that this version of an interest provision is satisfied by an offer to pay the policy limit in settlement of the claim. Dicus vs. Laipply, No. 92-3074 (6th Cir. 1992) (where policy terminated interest if insurer made “offer to pay,” offer to pay $100,000 policy limit “in full satisfaction” of $250,000 judgment sufficed to avoid liability for interest). While an unpublished opinion lacks value as precedent, its existence at least confirms Allstate’s view that such an interpretation of the contract is reasonable and plausible.