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Capitol Specialty Insurance Corp. v. Higgins

United States District Court, D. Massachusetts

March 25, 2019

Capitol Specialty Insurance Corporation Plaintiff
Kailee Higgins Defendant




         In the early morning hours of November 28, 2010, Kailee Higgins was seriously injured in an automobile accident after leaving her employ as an exotic dancer at a nightclub in Worcester called Centerfolds II, owned by P.J.D. Entertainment of Worcester, Inc. (“P.J.D.”). P.J.D. was insured by Capitol Specialty Insurance Corporation (“Capitol”). Ms. Higgins alleges that she was served alcohol while underage that made her intoxicated and that she was allowed to drive despite being obviously intoxicated. Ms. Higgins claims that Capitol violated M.G.L. C. 176D by “failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies” (Count III); that Capitol violated M.G.L. C. 176D by “refusing to pay her claim against P.J.D. without conducting a reasonable investigation based upon all available information” (Count IV); and that Capitol violated the M.G.L. C. 176D by “failing to effectuate prompt, fair, and equitable settlements of her claim against P.J.D. in which liability has become reasonable clear” (Count V).[1] After careful consideration, review of the evidence in this case and the proposed findings and rulings from counsel I find for the Defendant, Plaintiff in Counterclaim, Ms. Higgins in the amount of $5, 400, 000.00. .

         Findings of Fact

         On November 27, 2010 the Plaintiff Kailee Higgins was 20 years old. She lived by herself, owned her own automobile, and was by all accounts an attractive, intelligent, young woman. She began working at P.J.D. approximately three months before the accident. When she was hired, P.J.D. required her to provide a driver's license which demonstrated that she was not old enough to drink. As an exotic dancer at P.J.D. she was not paid an hourly rate or salary but relied on tips from customers for her income. As part of her employment she had to pay the club a fee to dance and, in order to stay on their good side, tip the DJ, bouncers, and waitstaff at the end of her shift.

         Ms. Higgins was advised upon hiring, and it was her experience at other clubs where she worked, that she was to pressure customers to buy drinks. This resulted in customers buying her drinks which required Ms. Higgins to drink alcohol, even though she was underage. During her time at P.J.D. she was never refused a drink, or asked for proof of age by the waitstaff or bartenders and Ms. Higgins regularly drank to excess while performing at P.J.D. P.J.D. also maintained a “Champagne Room” which enabled the dancers to give private dances to a customer. The dancer would make significantly more money in tips in the Champagne Room than dancing on the stage.

         “Shot Girls” were present on the floor in order to enhance the opportunities for customers to purchase alcohol for themselves and the dancers. It was common, and expected, for P.J.D. to serve alcohol to the dancers purchased by customers, which occurred regularly and without any restrictions by management. As one of the “perks” of the job, the dancers were given a free shift drink before beginning their shift. Ms. Higgins was in the habit of ordering Patron Tequila as her shift drink, and was often observed by her friend Deanna Macleod, who was also a dancer, drinking to excess while at work.

         P.J.D. had a policy of having a bouncer escort every dancer to their car at the end of their shift, or to call a cab to take a dancer (or customer) home who was intoxicated. As part of this policy P.J.D. employed Duane Prince as a bouncer who was in charge of the safety of the dancers.

         On November 27, 2010 Ms. Higgins worked a shift at P.J.D. Before starting her shift she had three shots of Patron Tequila. During her shift she consumed at least 12 more shots of Tequila in the club and the Champagne Room and she became heavily intoxicated. At no time did personnel from P.J.D. try to prevent her from drinking. Ms. Macleod, who was also working that evening, had seen Ms. Higgins intoxicated before and knew that she was intoxicated because she was unsteady on her feet and her voice was unusually loud. Ms. Macleod's shift ended at approximately 11:30 p.m. and, as was the custom, she was escorted to her car by Mr. Prince. Ms. Macleod believed that she was visibly intoxicated and was stumbling as she walked, but was allowed to drive away. Ms. Higgins' shift ended around 2:00 a.m. (on November 28) and she too was escorted to her car by Mr. Prince. Mr. Prince had to take her keys from her in order to open the car door and physically sit her into the driver's seat. He then gave the keys back to her and watched as she started her car. Before Ms. Higgins drove away she texted a friend “he he maaad drunk lol” (tt2-116, 16-20). Ms. Higgins was allowed to drive away in a heavily intoxicated condition.

         Within minutes of leaving P.J.D., Ms. Higgins was involved in a two-car collision with an off-duty Worcester Police Officer. She suffered serious and permanent injuries including traumatic brain injury, multiple facial bone fractures, including a dislocation fracture of her left orbit socket, and a shattered nose. Her teeth were knocked out, a lip was ripped open, she sustained a large laceration on the left side of her face, and her left arm was permanently damaged. She has had over a dozen surgeries to rebuild and reconstruct her face. The surgical repair of her left eyeball has left her with a permanently damaged, mis-matched left eye. After leaving the hospital she went to the Spaulding Rehabilitation Center for several weeks. Her medical expenses and lost wages are in excess $375, 000.00.

         The owner of P.J.D. is Richard McCabe. Immediately after learning of the accident, Mr. McCabe spoke with Duane Prince. Mr. Prince denied to Mr. McCabe that Ms. Higgins was intoxicated when he walked her to her car. Mr. McCabe duly reported the accident to his insurance broker, Donald Bunker, who put Capitol on notice of a potential claim via an ACORD, general liability notice of an occurrence. That ACORD advised Capitol that Higgins, had sustained serious bodily injury in a car accident shortly after leaving the workplace and that she was underage.

         On December 15, 2010, Capitol referred the claim to Norfield & Associates, an adjustment agency with instructions to do a “limited investigation” of the accident. The “limited investigation” is significant because the policy issued to P.J.D. by Capitol was an eroding limits policy which means that once a claim is made the cost of investigation and defense are deducted from the policy limits. Until a claim is made, the costs are born by Capitol. Because the ACORD was not a claim, the expense of the investigation fell on Capitol.

         Not surprisingly, the P.J.D. employees interviewed maintained that Ms. Higgins was not drinking at the club, or if she was, she was drinking alcohol she brought with her. This is “not surprising” because the accident had generated a great deal of media publicity which included a criminal investigation and an investigation by the Alcohol Beverage Board.

         Norfield began its investigation on December 16, 2010 and on December 28th, sent a preliminary report of its investigation to Capitol. That preliminary investigation relied solely on statements from Richard McCabe, his brother Robert, who was the General Manager at PJD, and one bartender, all of whom denied that Ms. Higgins was drinking at the club or that she appeared intoxicated when she drove away. By December 28th Norfield had not secured an employee list for the evening of the incident, or a copy of the sign-in sheet identifying the dancers who were present that evening. Nor was there any indication that Norfield (or Capitol) had any idea of P.J.D.'s policy of having the dancers encourage patrons to drink and to buy them drinks or had done anything else to verify the self-serving statements of the McCabes or the bartender.

         In the preliminary report that Norfield sent to Capitol, they advised that they were about to schedule a meeting with Centerfolds to obtain further liability information and to obtain a list of the employees who were present that evening. However, before that could happen Capitol, through its claim manager, Michael Wedwick terminated Norfield's investigation. Significantly, that was the extent ...

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