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Caira v. Zurich American Insurance Co.

Appeals Court of Massachusetts, Essex

April 21, 2017

MICHAEL CAIRA
v.
ZURICH AMERICAN INSURANCE CO.

          Heard: February 2, 2017.

         Motor Vehicle, Insurance. Insurance, Unfair act or practice, Settlement of claim. Consumer Protection Act, Unfair act or practice, Insurance. Practice, Civil, Consumer protection case, Summary judgment, Continuance, Discovery. Civil action commenced in the Superior Court Department on April 9, 2015.

         A motion for a continuance was heard by Timothy Q. Feeley, J., and the case was heard by him on a motion for summary judgment.

          Mark T. Rumson (Paul F.X. Yasi also present) for the plaintiff.

          Jane A. Home (Allen N. David also present) for the defendant.

          Present: Grainger, Sullivan, & Lemire, JJ.

          LEMIRE, J.

         In this case, we consider whether a judge in the Superior Court erred in granting summary judgment to Zurich American Insurance Co. (Zurich) on a complaint alleging that Zurich committed unfair claim settlement practices in violation of G. L. c. 176D, § 3(9) (f_), and G. L. c. 93A, § 2. We conclude that Zurich did not violate these statutory provisions when it conditioned the payment of its primary insurance policy limit on a release of all claims against its insureds, notwithstanding the availability of excess insurance. Accordingly, we affirm.

         Background.

         Shortly after midnight on September 14, 2013, Daniel Madigan-Fried was driving a rental car in Swampscott when he was involved in a one-vehicle accident. The plaintiff, Michael Caira, who was a passenger in the front seat, suffered life-threatening injuries, and the two passengers in the back seat sustained serious injuries. A few weeks before the accident, Madigan-Fried had rented the vehicle in his capacity as an employee of Groom Construction Co., Inc. (Groom). Zurich had issued to Groom the primary commercial automobile insurance policy that was in place at the time of the accident. The bodily injury coverage under the policy was $1 million. In addition, Groom had two excess insurance policies issued by Starr Indemnity & Liability Company (Starr Indemnity) and Navigators Insurance Company (collectively, excess insurers) that provided coverage of $5 million each.[1]

         On October 29, 2013, Caira filed a complaint in the Superior Court against Madigan-Fried and Groom, alleging negligence.[2] Caira claimed that excessive speed caused Madigan-Fried to lose control of the vehicle and to crash into a granite wall. Zurich undertook the defense of Madigan-Fried and Groom.

         Between December 23, 2014, and July 15, 2015, thirteen letters were exchanged between Caira and Zurich regarding the settlement of Caira's negligence claims against Madigan-Fried and Groom. In his initial demand letter dated December 23, 2014, written pursuant to G. L. c. 176D, § 3(9) (f_) and (n), Caira asserted that it was reasonably clear that Madigan-Fried was liable for both the accident and the resulting damages (which purportedly exceeded $1 million), [3] and that Zurich had an obligation to tender a settlement to Caira.[4] The letter stated that in exchange for the $1 million insurance policy limit, Caira would release Zurich from further claims of any kind. This proposed settlement, however, did not include an offer to release either Madigan-Fried or Groom because Caira intended to continue litigating his claims for additional damages. Caira stated, however, that if Zurich met his demand for the $1 million policy limit, he would enter into an agreement with Madigan-Fried and Groom to seek recovery of any future judgments only from one or both of the excess insurers. Caira demanded a response within sixty days.

         Zurich responded by electronic mail message (e-mail) dated February 4, 2015, declining Caira's offer to release Zurich, but not Madigan-Fried and Groom, from any additional claims in exchange for the $1 million policy limit. Zurich stated that, because discovery had just begun and because there had not yet been any independent medical examinations, the matters of liability and damages remained substantially unresolved. In addition, Zurich stated that paying the policy limit without receiving a release could expose Zurich to a claim of bad faith by its insureds (Madigan-Fried and Groom), and could jeopardize any excess insurance coverage to which Madigan-Fried and Groom might be entitled in the event that Zurich's policy was exhausted.

         In a subsequent demand letter dated February 10, 2015, written pursuant to G. L. c. 93A, § 9(3), Caira asserted that Zurich's failure to conduct a reasonable investigation and to make an equitable offer of settlement constituted wilful and knowing violations of G. L. c. 176D, § 3(9) (c0, (d), and (f_), and per se violations of G. L. c. 93A, § 2. The letter reiterated Caira's demand for Zurich's $1 million policy limit in exchange for the partial resolution of Caira's claims against Madigan-Fried and Groom. Caira stated that an untimely response or an unreasonable offer of settlement would result in the amendment of his complaint to include a claim for unfair claim settlement practices against Zurich.

         By letter dated February 13, 2015, Zurich responded that, in reliance on Lazaris v. Metropolitan Property & Cas. Ins. Co., 428 Mass. 502 (1998), it properly could condition the payment of its policy limit on the receipt of a release of its insureds. In Zurich's view, nothing in Lazaris or its progeny turned on the existence or nonexistence of excess insurance. Assuming for purposes of its response that liability was reasonably clear and that Caira's damages exceeded the $1 million policy limit, Zurich stated that it would only entertain settlement proposals that provided for a release of Madigan-Fried and Groom.

         On March 19, 2015, Caira moved to amend his complaint to add a claim against Zurich for unfair claim settlement practices in violation of G. L. c. 176D, § 3(9) (f_), and G. L. c. 93A, § 2. A judge allowed the motion, and he stayed the claim ...


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