Heard: May 19, 2016.
action commenced in the Superior Court Department on
February 21, 2008.
case was heard by Paul D. Wilson, J.
F. Brosnan (James E. Harvey, Jr. with him) for the defendant.
Matthew N. Kane for the plaintiffs.
Present: Kafker, C.J., Cohen, & Green, JJ.
the well installed by Shaun Harrington began pumping salt
water through the plaintiffs' (McLaughlins) irrigation
system, causing extensive damage to their landscaping, the
McLaughlins sought recovery from Harrington and his insurer,
the defendant, American States Insurance Company (ASIC). Both
denied liability, and the McLaughlins eventually filed an
action against Harrington and two others. After the
McLaughlins obtained a judgment in their favor against
Harrington, they commenced this action against ASIC, claiming
unfair insurance settlement practices. A judge of the
Superior Court entered judgment against ASIC, and awarded the
McLaughlins damages based on the legal expenses they incurred
in prosecuting their suit against Harrington, but declined to
award multiple damages as permitted by the statute. See G. L.
c. 93A, § 9(3). On the parties' cross appeals, we
conclude that the judge correctly determined that ASIC failed
to conduct a reasonable investigation of the McLaughlins'
claim, and that it failed to make a reasonable offer of
settlement after liability of its insured became reasonably
clear. We also discern no error of law or abuse of discretion
by the judge in his refusal to award the McLaughlins multiple
damages. However, we conclude that the judge erred in his
failure to award the McLaughlins damages based on the loss of
use of the funds ASIC should have offered in settlement once
Harrington's liability became reasonably clear.
summarize the written findings of fact entered by the judge
in his detailed and thorough memoranda of
2003, Assurance was nearing completion of construction of a
home for the McLaughlins in Osterville. The home is on a
peninsula, surrounded on three sides by salt water bodies
connected to Nantucket Sound. The project included a
substantial landscaping installation. Incident to the
landscaping, Assurance subcontracted Waterworks to install a
multizone irrigation system, to be served by a
well.Waterworks, in turn, subcontracted
Harrington to drill the well.
drilled the well in April, 2003, in the only location on site
that his drilling rig would fit, approximately 110 feet from
the shoreline. Though local ordinances required him to obtain
a municipal permit before drilling a well, Harrington did not
apply for a permit. In addition, though State regulations
required him to submit a well completion report to the
Department of Environmental Management immediately upon
drilling the well, Harrington did not do so until after the
dispute underlying this lawsuit arose.
drilling the well, Harrington tested the water it produced by
tasting it. Satisfied that it tasted fresh, and that the well
produced water at a rate more than adequate to meet the
requirements of the irrigation system, Harrington considered
his work complete and left the site.
his experience, Harrington was aware that wells on Cape Cod
drilled close to sea water might turn from fresh to salt
water, by means of a phenomenon known as
"upconing." In such circumstances, as fresh water is
pumped out of the well, salt water is drawn in to replace it.
Eventually, the supply of fresh water is exhausted or largely
infiltrated by salt water, and the well thereafter produces
salt water. Though Harrington was concerned about the
possibility that upconing could eventually occur in the
McLaughlins' well, he did not advise Waterworks or the
McLaughlins of the possibility. Prudent practice of well
drillers on Cape Cod in 2003, in circumstances of wells
drilled near salt water bodies, was to test the water
produced by the well at regular intervals after drilling, but
Harrington did not do so and did not advise Waterworks or the
McLaughlins that they should.
and ornamental landscaping plantings were installed in May
and June, 2003, at a cost of approximately $185, 000. In July
and August, 2003, the plantings began to show signs of
distress. In late August, after trying unsuccessfully to
reverse the damage by adjusting the watering schedule, the
McLaughlins discovered that the damage was caused by salt
water produced by the well and pumped through the irrigation
identifying the cause of the damage, the McLaughlins asked
Assurance to submit a claim to Harrington's insurer for
the damage caused by salt water produced from the well
Harrington had drilled. Assurance submitted a claim to
Harrington's insurance agent on October 22, 2003, and the
claim reached ASIC on November 3, 2003. As submitted by
Assurance, the claim included an invoice for plants killed by
salt water as of that time, in a total amount of $28, 224.62.
The claim form submitted to ASIC by Harrington's agent
indicated that Harrington did not believe he was at fault.
assigned Debra Dresner as claims adjuster to handle the
McLaughlins' claim. Dresner wrote to Rachel McLaughlin at
the address of her primary residence in Connecticut on
November 4, 2003, asking her to contact Dresner as soon as
possible. When Dresner received no response, she sent a
second letter on November 11, 2003, again asking Rachel
McLaughlin to contact her. On November 5, 2003, Dresner
telephoned the nursery whose invoice accompanied the claim,
requesting a "legible copy" of the invoice. The
nursery responded promptly, and the requested copy arrived on
November 5, 2003, Dresner also called Harrington and took a
recorded statement from him. In his statement, Harrington
described the transition of the well from fresh to salt water
as an "act of God." Harrington also advised Dresner
that a certified hydrogeologist had done a conductivity test
when Harrington installed the well. See note 5,
supra. When Dresner asked if the hydrogeologist had
prepared a report of the test, Harrington said that he
believed so and would find out. Dresner wrote to Harrington
later that day, requesting all paperwork he had relating to
the loss and specifically requesting a copy of the report
prepared by the hydrogeologist.
time she received the claim, Dresner had authority to settle
claims up to $10, 000 and was required to inform her
supervisor of any claim for a larger amount. Though the
McLaughlins' claim was for more than $28, 000, Dresner
did not inform her supervisor of it.
thereafter took no further investigative or other action on
the McLaughlins' claim until January 26, 2004, when the
McLaughlins' insurance agent left a voice mail message
inquiring about the claim status. Dresner called the agent
back that day; during their conversation, the agent gave
Dresner the McLaughlins' telephone number. Dresner called
and spoke to Rachel McLaughlin, who expressed concern over
the length of time the claim process was taking and attempted
to correct various factual assertions Harrington had made to
Dresner. On January 26, 2004, after the telephone call,
Dresner documented the call, sent a confirmation letter to
Rachel McLaughlin, and sent a letter to Harrington requesting
documents, including a document from the hydrogeologist, and
contact information for Waterworks. ASIC took no further
action until the McLaughlins' agent called ASIC on
February 19, 2004.
occasion, Dresner was out of the office and another claims
adjuster, Julio Maisonette, handled the call. Maisonette
adopted an aggressive and hostile approach toward the
McLaughlins' agent, to the extent that the agent asked to
speak to his supervisor (a request Maisonette refused).
Rachel McLaughlin called Maisonette the following day. During
that call, Maisonette stated that, in his view, Harrington
was not liable for the damage because the well was pumping
fresh water when Harrington completed his work and Harrington
had no reason to believe it would eventually begin pumping
salt water. Maisonette expressed his view that ASIC would not
be liable if the well pumped fresh water even for only one
day; Rachel McLaughlin responded with her disagreement with
that position. Maisonette also suggested that other causes
might have led to the damage to the plantings, including an
unusually harsh winter, and observed that he did not even
have evidence that the plantings were dead. When Rachel
McLaughlin replied that she had lost approximately $72, 000
in plants, Maisonette responded that he had only one invoice,
for $28, 000, and invited Rachel McLaughlin to send
additional documentation of her losses. In response to Rachel
McLaughlin's request for an explanation of ASIC's
failure to send a field claims adjuster to the site,
Maisonette said that ASIC had no intention of doing so.
Rachel McLaughlin threatened to hire an attorney to press her
her frustration with her conversation with Maisonette, Rachel
McLaughlin promptly followed up by sending to him another
copy of the earlier $28, 000 invoice, along with a second
invoice for additional damaged plantings in the amount of
$37, 475.24. In addition, she included thirty-two
photographs, depicting "before and after"
conditions, together with a two-page letter explaining what
each photograph depicted.
weeks later, on March 5, 2004, the McLaughlins' agent
called Dresner to express frustration again with the manner
in which the McLaughlins' claim was being handled.
Following that call, Dresner called Harrington to ask about
the hydrogeologist report he had promised, and Harrington
advised her that he was still waiting for it. Dresner also
gave her supervisor, Ralph Tedesco, a "heads up"
that Rachel McLaughlin was unhappy with the handling of her
claim in Dresner's absence. Tedesco reviewed the file and
criticized Dresner for not bringing the claim to his
attention earlier, since it exceeded her settlement
authority. Tedesco suggested several lines of investigation
for Dresner to pursue, including whether there is a way to
prevent salt water infiltration of a well in close proximity
to the sea, and whether Harrington had warned Waterworks or
the McLaughlins about the risk of salt water infiltration. As
a more experienced ...