Superior Court of Massachusetts, Suffolk, Business Litigation Session
Michelle Williamson-Green as Administratrix of the Estate of James W. Williamson, IV
Interstate Fire and Casualty Company No. 137203
MEMORANDUM AND ORDER DENYING DEFENDANTS MOTION FOR
PARTIAL JUDGMENT ON THE PLEADINGS
Kenneth W. Salinger, Justice of the Superior Court.
W. Williamson, IV died from injuries sustained while he was
inspecting a roof from a bucket lift that tipped over. His
estate brought a wrongful death action against both the lift
manufacturer and the company that had had rented out the
lift, Equipment 4 Rent, Inc. (" E4R"). The jury
found that the manufacturer and E4R were both negligent and
awarded compensatory damages of $4.3 million. It also found
that " E4R's conduct was grossly negligent, willful,
wanton, or reckless" and awarded additional punitive
damages of $5.9 million, as allowed under G.L.c. 229, §
2. Interstate Fire and Casualty Company had insured E4R. It
paid E4R's share of the compensatory damages but refused
to pay any part of the punitive damage award.
action Plaintiff claims that Interstate failed to settle the
claims against E4R after its liability had become reasonably
clear. She asserts one claim on behalf of Mr.
Williamson's estate and four claims as E4R's
assignee. The assigned claims allege that E4R's damages
include " being exposed to an uncovered punitive damages
award that would have been avoided had Interstate settled the
" Underlying Action."
has moved for judgment on the pleadings on the assigned
claims. It argues that requiring an insurer to pay any part
of a punitive damages award, even as consequential damages
arising from the insurer's failure to settle a
meritorious claim, would be against public policy. The Court
must DENY Interstate's motion because Massachusetts law
does not insulate an insurer from liability for damages
incurred because its insured caused bodily injury, engaged in
reckless or grossly negligent misconduct, or did both. The
limitation on insurers' liability sought by Interstate
would be inconsistent with G.L.c. 175, § 47, cl. Sixth
(b), which " codifies the entire public policy" of
Massachusetts regarding the insurability of losses resulting
from reckless misconduct. Andover Newton Theological
Sch., Inc. v. Cont'l Cas. Co., 409 Mass. 350, 353
n.2, 566 N.E.2d 1117 (1991).
Insurers' Liability for Failing to Settle Claims
insured's liability for a particular claim has become
reasonably clear, the insurer has a duty under Massachusetts
law to make a fair offer to settle the claim and to do so
promptly. This duty is imposed on all insurers by statute.
See G.L.c. 176D, § 3(9)(f); Hopkins v. Liberty Mut.
Ins. Co., 434 Mass. 556, 566-67, 750 N.E.2d 943 (2001).
In many cases it is also an implicit part of the
insurer's contractual obligations. When insurance policy
imposes a duty to defend on an insurer, that duty carries
with it an implicit obligation " to make reasonable,
prudent efforts to settle" the claims against the
insured. Boyle v. Zurich American Ins. Co., 472
Mass. 649, 659, 36 N.E.3d 1229 (2015); accord Murach v.
Massachusetts Bonding & Ins. Co., 339 Mass. 184,
186-87, 158 N.E.2d 338 (1959) (duty to defend includes duty
" to act in good faith" to settle claims). Thus,
where liability has become reasonably clear, an insurer with
a duty to defend also has a duty " to settle the case
within the . . . policy limits when it had the opportunity to
do so." Medical Malpractice Joint Underwriting
Ass'n of Massachusetts v. Goldberg, 425 Mass. 46, 60
n.33, 680 N.E.2d 1121 (1997).
insurer that violates its duty to make reasonable efforts to
settle a claim may be sued in contract for breaching the
insurance policy, in tort for negligently breaching its duty
to settle, or for violating G.L.c. 93A by committing an
unfair claims settlement practice in violation of G.L.c.
176D. See generally Boyle, supra, at 654-55 &
659 (contract claim); Hartford Cas. Ins. Co. v. New
Hampshire Ins. Co., 417 Mass. 115, 120-21, 628 N.E.2d 14
(1994) (negligence claim); Rhodes v. AIG Domestic Claims,
Inc., 461 Mass. 486, 494, 961 N.E.2d 1067 (2012) (claim
under G.L.c. 93A, § 9); Silva v. Steadfast Ins.
Co., 87 Mass.App.Ct. 800, 803-04, 35 N.E.3d 401 (2015)
(claim under G.L.c. 93A, § 11).
insurer breaches its duty to settle a claim, the insured
party may recover from the insurer for " all
losses" that were " foreseeable consequences"
of the failure to settle, even if those losses exceed what is
covered by the insurance policy. DiMarzo v. American Mut.
Ins. Co., 389 Mass. 85, 101-02, 449 N.E.2d 1189 (1983).
For example, " [i]f the insurer violated the law in
failing to settle for the policy limits, then the insurer
will be liable to the insured for the damages exceeding the
policy limit." Gore v. Arbella Mut. Ins. Co.,
77 Mass.App.Ct. 518, 526, 932 N.E.2d 837 (2010); accord
Boyle, 472 Mass. at 654 & 660. The losses
recoverable by the insured include all consequential damages
caused by the insurer's breach of its duty to settle; the
insured's recovery is not limited to compensatory damages
awarded against it in the underlying tort action. See, e.g.,
Rivera v. Commerce Ins. Co., 84 Mass.App.Ct. 146,
149, 993 N.E.2d 1208 (2013) (insurer liable for litigation
expenses incurred by insured after breach of duty to settle).
rule, that an insurer that breaches a duty to settle a claim
is liable for all consequential damages suffered by its
insured, applies whether the insurer is found liable for
breach of contract or for engaging in unfair or deceptive
conduct in violation of G.L.c. 93A. See Boyle, 472
Mass. at 659-60 & n.15 (breach of contract damages);
Polaroid Corp. v. Travelers Indem. Co., 414 Mass.
747, 762-64, 610 N.E.2d 912 (1993) (breach of contract
damages); DiMarzo, supra (c. 93A
No Public Policy Exception for Reckless Misconduct
claims that Interstate failed to settle the underlying tort
claims after E4R's had liability become reasonably clear,
that E4R would not have been ordered to pay punitive damages
if Interstate had settled the case, and that as E4R's
assignee Plaintiff is therefore entitled to recover the $5.9
million punitive damage award as consequential damages for
Interstate's breach of its duty to settle the case. The
amount of damages recoverable under the assigned claims is
not affected by whether E4R has paid or is able to pay any or
all of the punitive damage award. See Boyle, 472
Mass. at 660; DiMarzo, 389 Mass. at 95 n.9;
Jenkins, 349 Mass. at 702-03.
argues that allowing an insured (or its assignee) to seek
compensation for punitive damages imposed as a result of the
insurer's unreasonable failure to settle a claim "
would defeat the socially useful purpose of punitive
damages--to punish and deter--and would violate
Massachusetts' public policy prohibiting a party from
obtaining indemnity for a punitive damages award." It
asks the Court to recognize a public policy exception to the
rule that an insurer is liable for foreseeable damage caused
by a breach of its duty to settle a claim against its
insured. Specifically, Interstate argues that Plaintiff
" should be precluded from recovering damages, as
E4R's assignee, to compensate E4R for the punitive
damages imposed against it."
highest courts in California, Colorado, and New York, plus a
federal appeals court applying Pennsylvania law, have adopted
some version of the rule advocated by
Interstate. These courts all held that allowing
insureds to obtain compensation from their insurer for a
punitive damage award that could have been avoided if the
insurer had not breached its duty to settle the case would
violate those State's public policies against allowing
insurers to indemnify for punitive damages.
urges the Court to read a similar public policy exception
into Massachusetts law. In response, Plaintiff argues that
these four out-of-state decisions " are all
distinguishable because the holdings in each are based on the
clear law of their respective states that punitive ...