First Circuit Court of Appeals Allows c. 93A Case to Proceed Against Insurance Company; Previous State Suit did not bar Claim
By David White
The First Circuit Court of Appeals dealt with a novel issue of law late last year: Can an insured split its declaratory judgment and bad faith claims into two separate actions, or is it barred from maintaining the second action against the insurance company for failing to join all claims in the first action. The answer, to the relief of the insured, was that two separate suits can be maintained. Andrew Robinson International, Inc. v. Hartford Fire Insurance Company, 547 F.3d. 48 (Ist Cir. 2008). The special circumstances of the case made that possible, and the case reminds us that ordinarily all claims against a defendant arising from a common issue should be included in the initial action.
In the underlying case, the plaintiffs, a quartet of affiliated companies all named after Andrew Robinson, sought a declaratory judgment in the Massachusetts state court, asking the court to declare that the pollution exclusion clause of its insurance contract did not bar coverage for the damages to its premises. The damage occurred when a neighbor did renovations which caused lead-contaminated dust to infiltrate Robinson's premises. The clean-up was disruptive to the businesses and costly.
The trial court found that the pollution exclusion clause did not apply, making Hartford Fire Insurance Company liable for the claim. Hartford did not appeal; the judgment became final and the loss was paid.
Shortly thereafter, the Robinson companies brought a direct claim against Hartford for unfair and deceptive acts in violation of G.L. c. 93A, 11. Hartford removed the case to the Federal court, and claimed as one of its initial defenses that the action could not be maintained, alleging that the failure of the plaintiffs to bring the c. 93A claim in the original action was a bar to the action under principles of res judicata. The District Court agreed with Hartford and dismissed the case. Plaintiffs appealed.
The First Circuit Court of Appeals disagreed, and reversed the judgment of dismissal. The matter, the parties and court agreed, was governed by Massachusetts law. However, no case in Massachusetts was directly on point, so the Appeals was required to determine what the Massachusetts courts would most likely do. In its opinion, the court analyzed related Massachusetts law, examined precedents around the country, consulted scholarly literature, and weighed relevant policy rationales. The court concluded quite firmly that it believed Massachusetts would follow the majority rule: When the underlying case is a declaratory judgment action, the action does not bar the bringing of a separate, even if closely related, action. The parties were thus permitted to proceed towards trial in the Federal District Court action.
It should be noted that the holding in this case has a fairly narrow application, namely covering declaratory judgment actions, but not other actions when the claims arise from a single transaction or occurrence.
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