Chapter 93A Damages in Arbitration Cases Clarified by Recent Appeals Court Case
By David W. White
Efforts to obtain multiple damages in G.L. c. 93A and c. 176D cases have usually been constrained by the narrow interpretation of the statutes by the courts. After the appellate courts indicated in a series of decisions in the 1980s that damages would be limited to loss of the use of the money1, G.L. c. 93A, §§ 9 and 11 were amended in 1989 to provide for use of the judgment amount as the multiplicand in the damages calculation.2 However, the prospect of achieving significant amounts of punitive damages against insurers has remained limited by close reading of the amendment, particularly the word "judgment" in the amendment.3
In particular, the amount of an arbitration award in an underinsured motorist claim was held to not be the measure of damages in one of the first cases to consider the 1989 amendments. In the case of Bonofiglio v. Commercial Union Insurance Company, 411 Mass. 31 (1991). the court yet again limited the plaintiff to the loss of the use of money resulting from the improper delay in resolving the insurance claim. The recent case of Metropolitan Property and Casualty Insurance Company v. Choukas, 47 Mass. App. Ct. 196 (1999) now makes it clear that the amount of an arbitration award can be the number to be multiplied, provided certain simple procedures are followed.
The facts of the case were straightforward. Mr. Choukas was injured in an automobile accident. Metropolitan insured both the negligent driver and Mr. Choukas. Metropolitan paid the $10,000 under the bodily injury provisions of the other driver, but contested the value of the underinsured claim. Mr. Choukas demanded $89,000, roughly equal to the full $100,000 policy limits, minus the $10,000 to be set off from the previous settlement. Metropolitan filed a complaint for arbitration in the Superior Court, and Mr. Choukas counterclaimed for violations of G.L. c. 93A and c. 176D. Mr. Choukas received an arbitration award of $25,000. His counsel then sought confirmation of the award in the Superior Court, and final judgment entered in that amount. After execution was issued, Metropolitan satisfied the judgment.
Thereafter it was determined that Metropolitan had indeed violated G.L. c. 93A and c. 176D when it failed to make a settlement offer on the underinsured motorist claim. Significantly, the court rejected Metropolitan's contention that it had no duty to make an offer in the face of the unreasonable settlement demand. The demand had been couched as follows: "Don't bother to make an offer if it is less than $89,000." The court stated,
We reject Metropolitan's argument. Even if Choukas's attorney told the claims adjuster not to make an offer unless the insurer would meet his $89,000 demand, such settlement tactics did not create a genuine issue of material fact as to whether Metropolitan was required to make an offer. Here, the liability was clear and Metropolitan was aware that Choukas had suffered serious injuries. In these circumstances, Choukas's attorney's settlement tactics did not relieve Metropolitan of its statutory duty to attempt to effectuate a prompt, fair settlement of Choukas's claim and therefore tender an offer to reach that goal. [Footnote omitted.]
The court went on to affirm the finding that Metropolitan's violations of the statutes were willful and knowing, and that the claimant was entitled to multiple damages. The court then distinguished the Bonofiglio case. In Bonofiglio the arbitrator's award had not been reduced to a judgment. The simple ministerial act of obtaining the judgment affirming the arbitration award in the trial court allowed the claimant to obtain multiple damages under the 1989 amendment to G.L. c. 93A, § 9. Further appellate review has been denied.
Practitioners take two important lessons from the Choukas case. First, regardless of the unreasonableness of the plaintiff's demand, there is a duty on the insurer to make a reasonable offer. Of course, at the trial of a G.L. c. 93A case, the claimant will be required to demonstrate that such a reasonable offer would have settled the matter, if it had been made. The second important lesson is that, when c. 93A damages are sought in uninsured and underinsured claims, multiple damages based upon the arbitration award are available, provided the award is confirmed as a judgment in court pursuant to G.L. c. 251.
1 See, e.g., Trempe v. Aetna Casualty & Surety Co., 20 Mass. App. Ct. 448 (1985); Wallace v. American Mfrs. Mutual Insurance Co., 22 Mass. App. Ct. 938 (1986).
2 The amendment was St. 1989, c. 580. In pertinent part it amended G.L. c. 93A, § 9 by adding, "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."
3 See, e.g., Cohen v. Liberty Mutual Ins. Co., 41 Mass. App. Ct. 748 (1996) (damages not based upon judgment amount in underlying case where plaintiff fails to establish actual causation); Yeagle v. Aetna Casualty & Surety Co, 42 Mass. App. Ct. 650 (1997) (damages based upon judgment amount only applies to multiple damages for willful violations of bad faith; single damages must be based upon loss of use of money); Kapp v. Arbella Mutual Insurance Company, 426 Mass. 675 (1998) (multiple damages not available when there is not judgment in the underlying tort action).