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Calandro v. Sedgwick Claims Management Services

United States District Court, D. Massachusetts

September 6, 2017

GARRICK CALANDRO, AS ADMINISTRATOR OF THE ESTATE OF GENEVIEVE CALANDRO, Plaintiff,
v.
SEDGWICK CLAIMS MANAGEMENT SERVICES, Defendant.

          MEMORANDUM AND ORDER

          PATTI B. SARIS, Chief United States District Judge

         INTRODUCTION AND BACKGROUND

         Plaintiff alleges that Sedgwick Claims Management Systems, Inc. (“Sedgwick”) violated Mass. Gen. Laws ch. 176D and Mass. Gen. Laws ch. 93A (“Chapter 93A”) by failing to make any kind of reasonable attempt, both pre-judgment and post-judgment, to settle the wrongful death case involving his mother who died at a nursing home. The underlying wrongful death case went to trial in state court and the jury returned a verdict of $1, 425, 000 in compensatory damages and $12, 514, 605 in punitive damages.

         After the verdict, Plaintiff sent a demand letter under Chapter 93A to Sedgwick demanding $40 million. Sedgwick received the letter on October 2, 2014 and responded to the letter on October 30, 2014 by offering $1, 990, 197. This offer appears to encompass the $1, 425, 000 compensatory award, prejudgment interest entered in the amount of $504, 966, post-judgment interest through November 1, 2014 of $58, 375 on the compensatory award, and the costs awarded to Plaintiff of $1, 856. Plaintiff rejected the offer and filed this suit on December 5, 2014.

         Defendant filed a motion for summary judgment on the ground that it made a prompt, fair, and equitable settlement offer within the “safe harbor” provided by Chapter 93A section 9(3). The Court denied Defendant's motion for summary judgment on April 25, 2017. Docket No. 86. The Court assumes familiarity with its summary judgment order. Calandro v. Sedgwick Claims Mgmt. Servs., No. 15-CV-10533, 2017 WL 1496915 (D. Mass. Apr. 25, 2017). The Court rejected Defendant's position that the loss-of-use of money standard was the appropriate benchmark for evaluating the reasonableness of the settlement offer in the separate Chapter 93A litigation. Id. at *4.

         Defendant filed a Motion for Reconsideration on May 3, 2017. Docket No. 94. After a review of the cases cited and the arguments of the parties, the Court now reconsiders its previous summary judgment order and holds that the loss-of-use of money standard was the appropriate benchmark for evaluating the reasonableness of the settlement offer in the separate Chapter 93A litigation. Defendant's Motion for Reconsideration (Docket No. 94) is ALLOWED.

         DISCUSSION

         I. Safe Harbor

         An insurance company commits an unfair claim settlement practice if it “[f]ail[s] to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.” Mass. Gen. Laws ch. 176D, § 3(9)(f). “[A]ny person whose rights are affected by another person violating the provisions of [176D, § 3(9)(f)]” is entitled to bring an action to recover for the violation under Chapter 93A section 9. Rhodes v. AIG Domestic Claims, Inc., 961 N.E.2d 1067, 1075 (Mass. 2012) (citing Mass. Gen. Laws ch. 176D, § 3(9)(f)).

         Chapter 93A section 9(3) contains the following provision relating to the calculation of damages:

At least thirty days prior to the filing of any such action, a written demand for relief, identifying the claimant and reasonably describing the unfair or deceptive act or practice relied upon and the injury suffered, shall be mailed or delivered to any prospective respondent. Any person receiving such a demand for relief who, within thirty days of the mailing or delivery of the demand for relief, makes a written tender of settlement which is rejected by the claimant may, in any subsequent action, file the written tender and an affidavit concerning its rejection and thereby limit any recovery to the relief tendered if the court finds that the relief tendered was reasonable in relation to the injury actually suffered by the petitioner. In all other cases, if the court finds for the petitioner, recovery shall be in the amount of actual damages or twenty-five dollars, whichever is greater; or up to three but not less than two times such amount if the court finds that the use or employment of the act or practice was a willful or knowing violation of [ch. 93A, § 2] or that the refusal to grant relief upon demand was made in bad faith with knowledge or reason to know that the act or practice complained of violated [ch. 93A, § 2]. 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, regardless of the existence or non-existence of insurance coverage available in payment of the claim.

         The underlined portion of the statute was inserted by the 1989 amendment in response to state caselaw which “limited those damages subject to multiplication under c. 93A to loss of use damages, measured by the interest lost on the amount the insurer wrongfully failed to provide the claimant. This amendment greatly increased the potential liability of an insurer who wilfully, knowingly or in bad faith engages in unfair business practices.” Clegg v. Butler, 676 N.E.2d 1134, 1142 (Mass. 1997).

         Section 9(3) also provides that a person receiving a demand letter may, within thirty days of receipt of the letter, make a written tender of settlement. If the plaintiff rejects the offer, a defendant can “limit any recovery to the relief tendered if the court finds that the relief tendered was reasonable in relation to the injury actually suffered by the petitioner.” Mass. Gen. Laws ch. 93A, § 9(3) (emphasis added). Defendant refers to this limitation on recovery as a “safe harbor.” The meaning of the term “injury actually suffered” in the safe harbor provision is disputed by the parties. Does it have the same meaning as “the amount of actual damages” in the 1989 amendment?

         Interpretation of a statute begins with its plain language. See Anderson v. Nat'l Union Fire Ins. Co. of Pittsburgh PA, 67 N.E.3d 1232, 1237 (Mass. 2017). “All the words of a statute are to be given their ordinary and usual meaning, and each clause or phrase is to be construed with reference to every other clause or phrase without giving undue emphasis to any one group of words, so that, if reasonably possible, all parts shall be construed as consistent with each other so as to form a harmonious enactment effectual to accomplish its manifest purpose.” Id. (internal citations omitted). The statute provides that it is for the purposes of the bad faith multiplication that the amount of the judgment is “the amount of actual damages to be multiplied.” See Rhodes, 961 N.E.2d at ...


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