Auto Flat Car Crushers, Inc. v. Hanover Insurance Co.

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SJC-11477
AUTO FLAT CAR CRUSHERS, INC. vs. HANOVER INSURANCE COMPANY.
Norfolk. May 5, 2014. - October 15, 2014.
Present: Ireland, C.J., Spina, Botsford, Gants, Duffly, & Lenk,
JJ.1
Insurance, Insurer's obligation to defend, Coverage. Consumer
Protection Act, Insurance, Availability of remedy, Damages,
Unfair or deceptive act. Contract, Insurance, Performance
and breach, Damages, Indemnity. Damages, Consumer
protection case, Breach of contract. Indemnity.
Declaratory Relief. Environment, Environmental cleanup
costs.
Civil action commenced in the Superior Court Department on
May 20, 2009.
A motion for partial summary judgment was heard by E. Susan
Garsh, J.; motions for partial summary judgment were heard by
Elizabeth B. Donovan, J.; a motion for summary judgment on the
remaining issue was heard by Raymond P. Veary, Jr., J.; and the
case was reported to the Appeals Court by Kenneth J. Fishman, J.
The Supreme Judicial Court on its own initiative
transferred the case from the Appeals Court.
Donald V. Jernberg (John J. McMaster with him) for the
plaintiff.
1
Chief Justice Ireland participated in the deliberation on
this case prior to his retirement.
2
Aaron R. White for the defendant.
The following submitted briefs for amici curiae:
John P. Ryan & Harry A. Pierce for Massachusetts Insurance
Federation, Inc.
Jonathan M. Feigenbaum for United Policyholders.
J. Michael Conley, Hans R. Hailey, Thomas R. Murphy, &
Danielle M. Spang for Massachusetts Academy of Trial Attorneys.
LENK, J. The plaintiff's insurer refused to defend or to
indemnify the plaintiff in connection with an environmental
dispute involving the Department of Environmental Protection
(DEP). Several years later, the plaintiff, having by then
funded both its own defense and the environmental remediation
ordered, brought suit against the insurer, alleging breach of
contract and seeking declaratory relief; on a motion for partial
summary judgment, the plaintiff obtained declaratory relief
establishing the insurer's duty to defend. The plaintiff then
amended its complaint to assert a claim under G. L. c. 93A, § 11
(§ 11), arising out of the insurer's failure to defend; the
insurer did not avail itself of the statutory mechanism
permitting a defendant to limit its liability to single damages
by tendering with its answer a written offer of settlement. See
G. L. c. 93A, § 11, fifth par. Thereafter, and while reserving
its rights as to its pending claims, the plaintiff accepted
reimbursement from the insurer, with interest, for its expenses
3
in litigating and resolving the DEP matter. It is the
consequence of having done so that gives rise to this appeal.2
The essential question before us is whether the plaintiff,
having been thus compensated for its losses, may nonetheless
continue to press its pending claims, particularly under G. L.
c. 93A. The insurer maintains that, because the plaintiff has
no uncompensated losses, its contract claims must fail as a
matter of law, as must its G. L. c. 93A claim, since, as to the
latter, the plaintiff no longer can establish the requisite
"loss of money or property" constituting actual damages for
purposes of § 11. The insurer also asserts that the G. L.
c. 93A claim must fail for the separate reason that, absent a
judgment on the plaintiff's breach of contract claims
establishing an amount of actual damages, and where the
plaintiff has been made whole, there is no predicate for
calculating multiple damages under G. L. c. 93A.
We conclude that, because the statute does not require a
plaintiff to demonstrate uncompensated loss or to obtain a
judgment on an underlying claim in order to proceed, neither the
plaintiff's acceptance of full reimbursement of its expenses nor
2
We acknowledge the amicus briefs submitted by the
Massachusetts Academy of Trial Attorneys and United
Policyholders on behalf of Auto Flat Car Crushers, Inc. We also
acknowledge the amicus brief submitted by the Massachusetts
Insurance Federation, Inc., on behalf of Hanover Insurance
Company.
4
the absence of a judgment establishing contract damages
precludes the plaintiff from pursuing a claim under G. L.
c. 93A. In the circumstances here, however, the plaintiff may
not press its remaining contract and declaratory judgment
claims.
1. Background and prior proceedings. a. Factual
background. The plaintiff, Auto Flat Car Crushers, Inc. (Auto
Flat), operates a vehicle-crushing service in Millis. At all
relevant times, it has been insured under a garage insurance
policy3 issued by the defendant, Hanover Insurance Company
(Hanover). In February, 2004, Auto Flat was hired to remove 600
vehicles from an automobile salvage yard in Spencer. The
removal process entailed detaching the vehicles' fuel tanks and
emptying their contents into large drums before crushing the
vehicles.
In March of that year, Auto Flat received a notice of
responsibility from the DEP, pursuant to G. L. c. 21E, informing
it that a release of oil or other hazardous material had
occurred at the salvage yard in Spencer. DEP identified Auto
Flat as "a party with potential liability" and ordered it to
take various responsive actions.
3
A garage insurance policy is a commercial policy designed
to address the needs of automobile dealers and others in the
business of servicing automobiles.
5
Auto Flat advised Hanover of the notice and sought defense
and indemnification in the matter. By letter dated June 4,
2004, Hanover denied coverage, claiming that the loss "did not
arise out of the ownership, maintenance or use of the garage
location," nor was it "a result of operations incidental to a
garage business." Hanover also cited the policy's pollution
exclusion as barring coverage for Auto Flat's losses. After
Auto Flat renewed its request for coverage, Hanover issued
another denial letter, dated November 9, 2004, referring to
exclusions not mentioned in its first letter.
In August, 2008, having incurred considerable legal
expenses and remediation costs in connection with the then-
concluded DEP matter, Auto Flat again contacted Hanover,
asserting its "conclusion that Hanover improperly denied both
defense and indemnity coverage." After Hanover reaffirmed its
denial of coverage, citing the reasons given in its first letter
of denial, Auto Flat commenced its action in the Superior Court.
Auto Flat's four-count complaint (1) sought a declaration
that Hanover had a duty to defend Auto Flat against DEP
allegations that it had released hazardous materials into the
environment; (2) alleged breach of contract by virtue of
Hanover's failure so to defend; (3) sought a declaration that
Hanover had a duty to indemnify Auto Flat for the costs of
complying with DEP's cleanup directives; and (4) alleged breach
6
of contract by virtue of Hanover's failure so to indemnify.
Hanover filed counterclaims seeking a declaratory judgment on
the claims concerning the duty to defend and the duty to
indemnify. Three entries of partial summary judgment followed,
which we discuss in turn.
b. Partial summary judgment on duty to defend (count 1)
and subsequent correspondence between parties. In December,
2009, a Superior Court judge allowed Auto Flat's motion for
partial summary judgment on count 1, the duty to defend, ruling
that the policy provided Auto Flat with coverage for a defense
against the DEP allegations. In March, 2010, Auto Flat amended
its complaint to add a fifth count alleging that Hanover's
denial of such defense constituted a violation of G. L. c. 93A.4
On May 6, 2010, at Hanover's request, Auto Flat sent
Hanover an accounting of its expenses to that point. The
accounting included legal fees incurred in connection with the
DEP matter and in establishing Hanover's duty to defend, and
cleanup costs incurred at the behest of DEP. A few days later,
and approximately six years after Auto Flat first made a claim
for insurance coverage, Hanover agreed to reimburse Auto Flat
for all of its expenses, less certain downward adjustments where
it stated that Auto Flat's figures were legally unwarranted or
4
Because both Auto Flat and Hanover are engaged in the
conduct of trade or commerce, G. L. c. 93A, § 11, rather than
G. L. c. 93A, § 9, applies.
7
insufficiently documented. Hanover enclosed a check for
$449,924.47 with its letter; the check included both $314,170.70
for payment of expenses incurred5 and $135,753.77 in interest.
Hanover stated that it would "consider making additional
reimbursement upon the receipt of additional documentation."
Auto Flat did not agree that the amount paid represented
the full amount owed, but accepted the payment "without
prejudice to either the insured's right [to] pursue additional
amounts owed for defense and indemnity or to pursue damages
under [G. L. c.] 93A." Auto Flat thereafter submitted
additional invoices, and Hanover responded with two more checks.
In total, Hanover paid Auto Flat $539,757.48.
By letter dated October 20, 2010, Auto Flat acknowledged
Hanover's payment of expenses incurred in the DEP matter.
Noting, however, the "remaining issues" of postjudgment legal
fees6 incurred after the entry of partial summary judgment
establishing the duty to defend, and the pending G. L. c. 93A
claim, Auto Flat indicated its "willing[ness] at [that] time to
make a final settlement of the remaining claims," and made a
demand for settlement in the amount of $246,007.71. Asserting
that it was undisputed that "Hanover [had] fully reimbursed Auto
5
Auto Flat's asserted expenses, prior to any calculation of
interest, amounted to $405,290.07.
6
Auto Flat later filed a motion to compel the payment of
such fees; the motion was denied.
8
Flat for its defense and indemnification of the claim with
interest," Hanover "denie[d] any allegation that it violated
[G. L.] c. 93A," and declined to offer any additional payment.
c. Partial summary judgment on counts 2 through 5. In
April, 2011, Hanover moved for partial summary judgment on
counts 2 through 4 of Auto Flat's complaint, which sought
contract damages for breach of the already-adjudicated duty to
defend, a declaration that Hanover had a duty to indemnify Auto
Flat, and contract damages for breach of the duty to indemnify.7
Hanover argued that, even if Auto Flat could establish a breach
of contract as to either duty, Auto Flat already had been made
whole by Hanover's reimbursement of all expenses incurred in the
DEP matter, plus twelve per cent interest per annum.
Accordingly, Hanover maintained, Auto Flat could not demonstrate
that it continued to suffer damages, and its breach of contract
claims therefore failed as a matter of law. Hanover asserted
also that Auto Flat was not entitled to a declaration regarding
Hanover's duty to indemnify because "there [was] simply nothing
to indemnify." A different judge allowed Hanover's motion,
incorporating by reference the rationale offered in Hanover's
supporting memorandum.
7
Auto Flat also filed a cross motion for summary judgment
on counts 2 (breach of contract for failure to defend) and 4
(breach of contract for failure to indemnify).
9
Hanover thereafter sought summary judgment on count 5 of
Auto Flat's complaint, which alleged a violation of G. L. c. 93A
by virtue of Hanover's failure to defend Auto Flat in the DEP
litigation. Hanover made much the same argument as it had in
its memorandum in support of its motion for summary judgment on
the breach of contract and indemnification claims, namely that
Hanover's reimbursement of Auto Flat's expenses precluded a
finding that Auto Flat had suffered a loss of money or property,
as required to establish a violation of G. L. c. 93A, § 11.8
A third judge denied Hanover's motion, concluding that Auto
Flat had suffered a monetary loss "as a matter of historical
fact," notwithstanding Hanover's payments, which, in any event,
were made after the commencement of the action. Citing
Ameripride Linen & Apparel Servs., Inc. v. Eat Well, Inc., 65
Mass. App. Ct. 63, 68-70 (2005), the judge reasoned that, "[i]n
actions brought under [G. L. c.] 93A, amounts earlier paid by
one party to another are appropriately considered as a basis for
setoff against a possible award of multiple damages, and not as
a bar to the underlying action."
8
Hanover did not argue that its refusal to defend Auto Flat
in the litigation with the Department of Environmental
Protection (DEP) did not constitute an unfair or deceptive act
or practice. Rather, it maintained that, "even if [Auto Flat
could] establish that [Hanover] engaged in unfair or deceptive
conduct, [Auto Flat] has already been made whole for all alleged
damages," and accordingly could not make out a showing of
damages, as required by G. L. c. 93A, § 11.
10
The parties then filed a joint motion seeking to report the
decisions on counts 2 through 4 and count 5, to the Appeals
Court for interlocutory review, pursuant to Mass. R. Civ. P. 64,
as amended, 423 Mass. 1410 (1996). The motion was allowed, and
we transferred the case to this court on our own motion.
2. Discussion. The central dispute on appeal concerns
Auto Flat's ability to pursue a claim under G. L. c. 93A after
accepting Hanover's payments in reimbursement for expenses
incurred in connection with the DEP matter. Although the
parties now agree that Auto Flat's damages stemming from
Hanover's breach of the duty to defend have been reimbursed
fully, with interest,9 the parties continue to disagree over
whether such compensatory payments eliminated Auto Flat's actual
damages as a matter of law, such that its underlying breach of
contract claim, or its G. L. c. 93A claim, was precluded as a
result.
Hanover argues that, in addition to eliminating Auto Flat's
contract damages, its postcomplaint reimbursement of Auto Flat's
9
As discussed infra, it is not clear whether the parties
agreed, at the time of entry of the order granting partial
summary judgment on counts 2 through 4, that Hanover had
reimbursed Auto Flat fully for losses incurred as a result of
the breach of the duty to defend. Nonetheless, by the time of
the parties' joint motion to report the decisions on counts 2
through 4 and count 5 for interlocutory review, they apparently
agreed that all of Auto Flat's damages had been paid, with
appropriate interest. The record does not indicate, however,
that the parties ever entered into a settlement agreement
covering either the contract claims or the G. L. c. 93A claim.
11
expenses also eliminated all of Auto Flat's actual damages,
establishment of which would be necessary for any recovery under
G. L. c. 93A, § 11. Accordingly, Hanover contends, the denial
of its motion for summary judgment on the G. L. c. 93A claim
(count 5) was error, but the allowance of summary judgment in
its favor on the breach of contract claims (counts 2 and 4), and
on the issue of the duty to indemnify (count 3), was proper.
Auto Flat, on the other hand, contends that it has viable
contract and G. L. c. 93A claims against Hanover. The G. L.
c. 93A claim arises from Hanover's asserted unfair or deceptive
act or practice of refusing, in the circumstances, to provide
its insured a defense in the DEP litigation. Auto Flat's
asserted actual damages for purposes of § 11 are those expenses
it incurred as a matter of historical fact and for which it
belatedly received full compensation, regardless of whether
those expenses were established in a judgment on its claims
alleging Hanover's contractual breaches of the duties to defend
and indemnify.
Auto Flat argues that, if a judgment is needed in order to
establish the amount of actual damages, Hanover's unilateral and
belated tender, absent a settlement between the parties, should
not bar entry of a judgment in its favor on its breach of
contract claims. In particular, Auto Flat maintains an
entitlement to a judgment on count 2, alleging a breach of the
12
contractual duty to defend, for which Hanover's liability was
established by the initial declaratory judgment; such judgment,
it contends, would serve as a predicate for any award of
multiple damages under G. L. c. 93A. Auto Flat argues that the
payments it received from Hanover should be viewed as an offset
against any G. L. c. 93A damages that might be awarded, after
multiplication as appropriate, rather than as a bar to recovery
in the first instance under G. L. c. 93A. Auto Flat accordingly
asks that we affirm the ruling on count 5, the G. L. c. 93A
claim, and reverse the ruling on counts 2 through 4.
We first consider whether the judge properly denied
Hanover's motion for partial summary judgment on count 5 before
addressing whether the allowance of Hanover's partial motion for
summary judgment on counts 2 through 4 was warranted.
a. Partial summary judgment on G. L. c. 93A claim
(count 5). Whether Auto Flat's acceptance of Hanover's payments
eliminated its actual damages, such that it could not proceed on
its G. L. c. 93A claim, presents a question of law appropriate
for resolution in a motion for summary judgment. Our review is
de novo. See Premier Capital, LLC v. KMZ, Inc., 464 Mass. 467,
469 (2013), and cases cited. In reviewing a denial of a motion
for summary judgment in a case in which the opposing party, Auto
Flat, will have the burden of proof at trial, we consider
whether the moving party, Hanover, has "demonstrate[d], by
13
reference to material described in Mass. R. Civ. P. 56 (c), [as
amended, 436 Mass. 1404 (2002),] unmet by countervailing
materials, that the party opposing the motion has no reasonable
expectation of proving an essential element of that party's
case." HipSaver, Inc. v. Kiel, 464 Mass. 517, 522 (2013),
quoting Kourouvacilis v. General Motors Corp., 410 Mass. 706,
716 (1991).
To be successful, a plaintiff bringing a claim under § 11
must establish (1) that the defendant engaged in an unfair
method of competition or committed an unfair or deceptive act or
practice, as defined by G. L. c. 93A, § 2, or the regulations
promulgated thereunder; (2) a loss of money or property suffered
as a result;10 and (3) a causal connection between the loss
suffered and the defendant's unfair or deceptive method, act, or
practice. See G. L. c. 93A, § 11; R.W. Granger & Sons v. J & S
Insulation, Inc., 435 Mass. 66, 80-81 (2001); Jet Line Servs.,
Inc. v. American Employers Ins. Co., 404 Mass. 706, 718 (1989).
Cf. Herman v. Admit One Ticket Agency LLC, 454 Mass. 611, 615-
616 (2009), citing Hershenow v. Enterprise Rent-A-Car Co. of
Boston, 445 Mass. 790, 797 (2006).
10
The requirement that a plaintiff have suffered a loss of
money or property is unique to G. L. c. 93A, § 11, governing
suits between businesses. Under G. L. c. 93A, § 9 (1), by
contrast, which applies to consumer actions, a plaintiff need
only show that he or she "has been injured."
14
Hanover does not dispute that Auto Flat has at least a
reasonable expectation of proving both the first and third
elements. See note 8, supra. As the third judge observed, the
claim that Hanover engaged in unfair or deceptive acts or
practices by refusing to provide a defense in the DEP litigation
"must at least be viewed as reasonably credible, given Auto
Flat's successful motion for partial summary judgment [on count
1 of its complaint seeking a declaration of Hanover's duty to
defend]."11 It is also undisputed, and indeed the parties
acknowledge, that Hanover's refusal to defend Auto Flat caused
the latter to incur substantial out-of-pocket expenses. At
issue, then, is the second element: whether, after accepting
payments from Hanover, which both parties now agree fully
reimbursed Auto Flat's underlying losses incurred as a result of
the breach of the duty to defend, Auto Flat still has a
reasonable expectation of proving that it has suffered actual
damages.
As to this question, the parties dispute two main points.
They disagree, most fundamentally, over whether the damages
element of § 11 requires a showing of uncompensated loss. They
11
We do not address whether Hanover's failure to defend
Auto Flat in the DEP litigation in fact constituted an unfair or
deceptive act or practice in violation of G. L. c. 93A, a point
that Hanover did not raise below and does not press on appeal.
Discovery that might assist in establishing the merits of Auto
Flat's G. L. c. 93A claim appears to have been ongoing at the
time of the summary judgment decisions.
15
also differ over whether a judgment establishing the amount of
damages is a prerequisite to recovery under § 11, and the amount
that can be recovered in the absence of such a judgment. We
consider each point in turn.
i. Whether G. L. c. 93A requires a showing of
uncompensated loss. Hanover argues that its payments to Auto
Flat, made after Auto Flat had obtained a declaratory judgment
establishing Hanover's liability and had asserted a G. L. c. 93A
claim against Hanover arising from the insurer's failure to
defend, negated Auto Flat's actual damages and therefore should
bar a claim under the statute. The cases that Hanover cites in
support of this argument, however, hold only that concrete
monetary or property loss is necessary to support a § 11 claim.
See Transamerica Ins. Group v. Turner Constr. Co., 33 Mass. App.
Ct. 446, 452 (1992) (affirming dismissal of G. L. c. 93A claim
against insurer where insurer paid all defense and settlement
costs upfront, such that insured at no point suffered any loss
of money). Cf. Baldassari v. Public Fin. Trust, 369 Mass. 33,
45 (1975) ("severe emotional distress" does not constitute "loss
of money or property"). As we explain below, the plain language
of § 11 and cases interpreting it, as well as the policy
underlying G. L. c. 93A, make clear that a plaintiff who can
establish that it has sustained such concrete monetary or
property loss will have satisfied the actual damages element of
16
§ 11, without also having to prove that the loss remains
uncompensated.
General Laws c. 93A "is a statute of broad impact which
creates new substantive rights and provides new procedural
devices for the enforcement of those rights." Slaney v.
Westwood Auto, Inc., 366 Mass. 688, 693 (1975). Recovery under
the statute is not "limited by traditional tort and contract law
requirements." Id., quoting Commonwealth v. DeCotis, 366 Mass.
234, 244 n.8 (1974). Although acceptance of a defendant's
tender of payment may affect the continued viability of a
plaintiff's contract claims, see Barron Chiropractic &
Rehabilitation, P.C. v. Norfolk & Dedham Group, ante ,
(2014), such acceptance does not vitiate a claim under G. L.
c. 93A as a matter of course, unless the latter claim has been
expressly settled. See Fascione v. CNA Ins. Cos., 435 Mass. 88,
95-96 (2001) (insured's acceptance of insurer's late tender of
payment extinguishes remedy under G. L. c. 90, § 34M, but
recourse to G. L. c. 93A is preserved). Even if the amount
tendered represents the full amount recoverable as actual
damages under G. L. c. 93A, as Auto Flat concedes is the case
here, that alone does not preclude a claim under the statute.
Section 11, the particular provision governing actions
between businesses, serves "the important public policy of
encouraging the fair and efficient resolution of business
17
disputes"; it is intended to deter misconduct while providing a
remedy for those who have suffered a specific harm as a result
of a defendant's prohibited conduct. R.W. Granger & Sons v.
J & S Insulation, Inc., supra at 83-84, citing International
Fid. Ins. Co. v. Wilson, 387 Mass. 841, 857 (1983). Cf.
Commonwealth v. Fall River Motor Sales, Inc., 409 Mass. 302, 316
(1991). Section 11 bestows a right of action on "[a]ny person
who engages in the conduct of any trade or commerce and who
suffers any loss of money or property, real or personal," as a
result of the unfair or deceptive act or practice, or unfair
method of competition, of another person who engaged in trade or
commerce. G. L. c. 93A, § 11, first par. Such monetary or
property loss constitutes the "actual damages" to which a
prevailing plaintiff is entitled; a plaintiff may recover up to
three times that amount upon a finding of a wilful or knowing
violation of the statute. G. L. c. 93A, § 11, fourth par.
"Said damages may include . . . attorneys' fees and costs,"
G. L. c. 93A, § 11, fourth par., and comprise "all foreseeable
and consequential damages arising out of conduct which violates
the statute." Brown v. LeClair, 20 Mass. App. Ct. 976, 979
(1985), citing DiMarzo v. American Mut. Ins. Co., 389 Mass. 85,
101 (1983).
Thus, under the plain language of § 11, "[i]f any person
invades a [plaintiff's] legally protected interests, and if that
18
invasion causes the [plaintiff] a loss [of money or
property] . . . the [plaintiff] is entitled to redress under our
consumer protection statute." Hershenow v. Enterprise Rent-A-
Car Co. of Boston, 445 Mass. 790, 802 (2006). Where a plaintiff
can demonstrate that it has suffered actual damages, i.e., a
concrete loss of money or property, § 11 does not impose a
further requirement that the plaintiff establish outstanding
uncompensated loss. Cf. United States v. Bornstein, 423 U.S.
303, 314 & n.10 (1976) (because language of False Claims Act
then in effect "sp[oke] of doubling 'damages' and not doubling
'net damages' or 'uncompensated damages,'" Federal government's
recovery of actual damages did not preclude action under that
statute for multiple damages).
The injury requirement of G. L. c. 93A is designed "to
guard against vicarious suits by self-constituted attorneys
general who see a wrong but have not actually been harmed by the
wrong." M.C. Gilleran, The Law of Chapter 93A § 4.18 (2d ed.
2007), and cases cited. Thus, plaintiffs proceeding under
either § 9 or § 11 of G. L. c. 93A are obligated to allege and
ultimately to prove a "distinct injury," Tyler v. Michaels
Stores, Inc., 464 Mass. 492, 503 (2013); under § 11, first par.,
such injury encompasses "any loss of money or property, real or
19
personal."12 See Baldassari v. Public Fin. Trust, 369 Mass. 33,
45 (1975) ("'money' means money, not time, and . . . 'property'
means the kind of property that is purchased or leased, not such
intangibles as a right to a sense of security, to peace of mind,
or to personal liberty"). Where a plaintiff has sustained the
requisite "distinct injury," Tyler v. Michaels Stores, Inc.,
supra, we have allowed recoveries under G. L. c. 93A without
requiring additional elements of proof as to damages. See R.W.
Granger & Sons v. J & S Insulation, Inc., supra at 83-84
(affirming award of double damages as serving important public
policy, even where plaintiff was compensated for underlying
losses, including interest, prior to entry of judgment on § 11
claim). Cf. Chery v. Metropolitan Prop. & Cas. Ins. Co., 79
Mass. App. Ct. 697, 699 (2011) (notwithstanding insurer's
payment of benefits after insured's filing of claim alleging
violation of G. L. c. 90, § 34M, insured showed, "for purposes
12
A plaintiff proceeding under G. L. c. 93A, § 9, need not
demonstrate that he or she has suffered a loss of money or
property. See note 10, supra. Rather, the damages element of
G. L. c. 93A, § 9, requires only that a plaintiff establish an
invasion of a legally protected interest, in the form of "a
distinct injury or harm that arises from the claimed unfair or
deceptive act itself." Tyler v. Michaels Stores, Inc., 464
Mass. 492, 503 (2013). See Hershenow v. Enterprise Rent-A-Car
Co. of Boston, Inc., 445 Mass. 790, 799 (2006), quoting Leardi
v. Brown, 394 Mass. 151, 159 (1985). In the absence of actual
damages, a plaintiff who prevails on a claim under G. L. c. 93A,
§ 9, will be awarded statutory damages of twenty-five dollars,
subject to multiplication where appropriate. See G. L. c. 93A,
§ 9 (3).
20
of surviving summary judgment [on G. L. c. 93A, § 9, claim], an
ascertainable loss caused by [insurer's] dilatory conduct").
To the extent that a plaintiff already has received
compensation for its underlying loss prior to the resolution of
its G. L. c. 93A claim, such compensation has been treated as an
offset against any damages ultimately awarded, rather than as a
bar to recovery.13 See Ameripride Linen & Apparel Servs., Inc.
v. Eat Well, Inc., 65 Mass. App. Ct. 63, 68-71 (2005); Friendly
Fruit, Inc. v. Sodexho, Inc., 529 F. Supp. 2d 158, 166 (D. Mass.
2007). See also Wolfberg v. Hunter, 385 Mass. 390, 399-400
(1982). Treating such compensation as an offset against damages
recovered, rather than as a bar to recovery altogether, comports
13
Courts in other jurisdictions also have addressed whether
a plaintiff's prior recovery of compensatory damages prevents
him or her from stating a claim giving rise to punitive damages.
While not involving statutes that provide for multiplication of
actual damages as the measure of punitive damages, as G. L.
c. 93A does, these cases concern common-law causes of action
requiring showings of injury comparable to actual damages.
These courts have held in pertinent regard that, where a
plaintiff has established a concrete loss, he or she may proceed
with a claim for punitive damages even where such loss has been
fully compensated. See, e.g., Fullington v. Equilon Enters.,
LLC, 210 Cal. App. 4th 667, 689-690 (2012) (plaintiff satisfied
"actual damages" element of fraud cause of action
notwithstanding already having been compensated; "the question
relevant to determining whether a plaintiff may recover punitive
damages is whether he or she suffered a tort for which the law
permits the recovery of damages -- not whether those damages
have [or have not] already been paid"); Turner v. Firstar Bank,
N.A., 363 Ill. App. 3d 1150, 1160 (2006) (in suit against lender
for wrongful repossession of vehicle, payment of compensatory
damages prior to trial did not negate fact of legitimate injury,
which supported claim for punitive damages).
21
with the policy rationale of G. L. c. 93A, and the Legislature's
intent in enacting it. General Laws c. 93A is a "broad
remedial" statute, Holland v. Jachmann, 85 Mass. App. Ct. 292,
299 (2014); "the Legislature's manifest purpose" in enacting it
was to deter misconduct, Commonwealth v. Fall River Motor Sales,
Inc., supra at 316, and to "encourage vindicative lawsuits."
International Fid. Ins. Co. v. Wilson, supra at 857. These
objectives would not be served by precluding claims on the basis
of a lack of uncompensated loss; to the contrary, barring claims
under such circumstances effectively "would undercut the
deterrent purposes of [G. L.] c. 93A." Holland v. Jachmann,
supra at 298.
Equating the payments to Auto Flat after the duty to defend
was established with a settlement under § 11, Hanover argues
that permitting Auto Flat's G. L. c. 93A claim to proceed in
these circumstances would contravene the legislative purpose of
the statute to promote settlement. The Legislature, however,
has set forth a method by which defendants may settle § 11
claims. In an effort to prevent needless litigation, § 11
permits a defendant to tender with its answer a written offer of
settlement, and thereby limit its liability to single damages.
See G. L. c. 93A, § 11, fifth par. Hanover failed to comply
with these requirements; it did not include such an offer with
its answer, or at any other time. A defendant who fails to make
22
a reasonable settlement offer concurrently with its answer, as
the statute provides, risks exposure to an award of multiple
damages, which is "'the appropriate punishment' for forcing
plaintiffs to litigate clearly valid claims." International
Fid. Ins. Co. v. Wilson, supra at 857, quoting Heller v.
Silverbranch Constr. Corp., 376 Mass. 621, 628 (1978).
Under Hanover's interpretation, § 11 would lose its force;
insurers would be free to engage in dilatory conduct, arguably
in violation of G. L. c. 93A, with the knowledge that, so long
as they ultimately reimbursed claimants for their resulting
expenses, statutory liability could be avoided. Even insurers
acting in bad faith would be able to shield themselves from
exposure to multiple damages, including attorney's fees, and to
preempt an otherwise viable § 11 claim by reimbursing claimants
prior to entry of a judgment. Insurers would be able to do so
even where, as here, they initially had declined to tender a
written offer of settlement with their answers, as provided by
the statute.14 Such an interpretation would significantly weaken
14
We are unpersuaded by Hanover's argument that the only
way for a plaintiff to preserve a claim under G. L. c. 93A in
such circumstances is to reject the money offered by the insurer
in reimbursement of its contract claims. Claims for breach of
contract and for violations of G. L. c. 93A are distinct avenues
for relief. See Linthicum v. Archambault, 379 Mass. 381, 383
(1979), citing York v. Sullivan, 369 Mass. 157, 164 (1975).
Where a plaintiff is entitled to contract damages, as Auto Flat
was after Hanover's duty to defend was established, he or she is
not required to reject payment of those damages in order to
23
the existing statutory scheme, "designed to make it
'unprofitable'" for insurers to engage in unfair or deceptive
conduct in the first instance, and would undermine the "prime
goal" of § 11 to promote reasonable settlement offers. See
International Fid. Ins. Co. v. Wilson, supra at 857. We
therefore reject Hanover's argument as "clearly inconsistent
with the scheme of [G. L. c. 93A.]" Commonwealth v. Fall River
Motor Sales, Inc., supra at 316.
Thus, insofar as Auto Flat can establish a loss of money or
property as a result of Hanover's breach of the duty to defend,
and to the extent that failure to defend in the circumstances
constitutes a violation of G. L. c. 93A, Auto Flat may maintain
its claim under § 11, notwithstanding its acceptance of
Hanover's compensatory payments.
ii. Whether G. L. c. 93A requires prior judgment
establishing amount of damages as prerequisite to recovery. The
parties also dispute whether the absence of a judgment in Auto
Flat's favor, establishing the amount of damages incurred,
precludes or otherwise limits recovery under G. L. c. 93A.
Hanover argues that "[r]ecovery of damages under [G. L. c.] 93A
preserve a claim under G. L. c. 93A. See Fascione v. CNA Ins.
Cos., 435 Mass. 88, 95-96 (2001). Cf. Wolfberg v. Hunter, 385
Mass. 390, 398-399 (1982) (tenants who have right to withhold
rent due to landlord's breach of warranty of habitability need
not forgo that right in order to establish actual damages and
thereby maintain G. L. c. 93A claim).
24
is triggered by a judgment." Where there has been no judgment
awarding a plaintiff damages, Hanover contends, the plaintiff
may recover only loss of use damages (here, interest), which, in
any event, also have been reimbursed in this case. Hanover,
however, misapprehends the significance of the second sentence
of G. L. c. 93A, § 11, fifth par., inserted by a 1989
legislative amendment. See St. 1989, c. 580, § 2. That
sentence does not make a prior judgment a prerequisite to
recovery; rather, it provides only that, in certain
circumstances, a judgment may constitute an appropriate basis
for multiplication, as a penalty for a defendant's failure "to
settle a claim reasonably, [thus] obliging the plaintiff to
litigate unnecessarily." Kapp v. Arbella Mut. Ins. Co., 426
Mass. 683, 686 (1998), citing Clegg v. Butler, 424 Mass. 413,
425 (1997).
Before 1989, several appellate decisions had held that the
measure of damages for an insurer's failure to effectuate a
prompt settlement of a claim under a policy was "the damages
directly caused by the insurer's conduct -- typically, loss of
the use of such funds from the time when the claim should have
been paid to the time that a settlement or judgment was paid --
and not the total amount owed to the claimant under the
insurance policy." Rhodes v. AIG Domestic Claims, Inc., 461
Mass. 486, 497-498 (2012), citing Bertassi v. Allstate Ins. Co.,
25
402 Mass. 366 (1988) (Bertassi); Wallace v. American Mfrs. Mut.
Ins. Co., 22 Mass. App. Ct. 938 (1986) (Wallace); Trempe v.
Aetna Cas. & Sur. Co., 20 Mass. App. Ct. 448 (1985) (Trempe).
However, the Legislature amended G. L. c. 93A in 1989, to revise
the calculation of damages in certain circumstances. See
St. 1989, c. 580, § 2 (1989 amendment). As modified by the 1989
amendment, noted with emphasis below, § 11, fifth par., now
provides,
"If the court finds for the petitioner, recovery
shall be in the amount of actual damages; or up to
three, but not less than two, times such amount if the
court finds that the use or employment of the method
of competition or the act or practice was a willful or
knowing violation of said section two. 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 . . . ."15
"There is general consensus among courts and commentators
that the 1989 amendment was intended to increase the potential
penalties for insurers who engaged in unfair claim settlement
practices, in response to the Bertassi-Wallace-Trempe line of
cases." Rhodes v. AIG Domestic Claims, Inc., supra at 498, and
cases cited. See R.W. Granger & Sons v. J & S Insulation, Inc.,
435 Mass. 66, 82-83 & n.21 (2001). The amendment "expanded the
base on which multiple damages may be awarded." Drywall Sys.,
Inc. v. ZVI Constr. Co., 435 Mass. 664, 669 (2002). The general
15
The emphasized sentence also was added to G. L. c. 93A,
§ 9 (3). See St. 1989, c. 580, § 1.
26
rule, as provided by the first sentence of the quoted language,
is that "single recovery shall be 'the amount of actual
damages,' meaning the (foreseeable) loss to the claimant caused
by the violation, this amount to be doubled or tripled where the
violation was in bad faith." Kapp v. Arbella Mut. Ins. Co.,
supra at 685, quoting Yeagle v. Aetna Cas. & Sur. Co., 42 Mass.
App. Ct. 650, 653 (1997). The second sentence, inserted by the
amendment, sets forth an exception to the general rule,
applicable "in the particular situation where a claimant has
recovered a judgment on the underlying claim." Kapp v. Arbella
Mut. Ins. Co., supra, quoting Yeagle v. Aetna Cas. & Sur. Co.,
supra. In that situation, the entire amount of the judgment
will form the basis for multiplication, even if the judgment
represents more than the amount of actual damages attributable
to a defendant's G. L. c. 93A violation. See Kapp v. Arbella
Mut. Ins. Co., supra at 685-686
The point is illustrated in cases involving personal injury
claims under insurance policies, where the insurer fails to
effectuate a prompt settlement after liability has become
reasonably clear, in violation of G. L. c. 176D, § 3 (9) (f).
See, e.g., Rhodes v. AIG Domestic Claims, Inc., supra at 497-
498. In such cases, an insurer's unreasonable delay in settling
a valid claim may cause a claimant to resort to litigation, and
ultimately may result in the claimant's securing a judgment
27
against the insurer. That judgment usually will provide an
amount due under an insurance policy as a result of a covered
event such as an automobile accident. In that event, the amount
of the judgment corresponds to damages sustained due to the
conduct of a third party, e.g., a negligent driver, but does not
represent the actual damages incurred by the claimant as the
result of the insurer's unfair or deceptive act or practice of
unreasonably delaying in settling the claim.16 See, e.g., id. at
492-493. Nonetheless, by virtue of the 1989 amendment, if the
insurer is determined to have engaged in wilful or knowing
misconduct, the entire amount of the judgment is to be
multiplied, as "a stiff penalty . . . on defendants who
knowingly or wilfully fail to settle claims where liability on
an underlying claim is clear." R.W. Granger & Sons v. J & S
Insulation, Inc., supra at 85. See Clegg v. Butler, supra at
425 (provision for multiplication of judgment "intended to
penalize insurers who unreasonably and unfairly force claimants
into litigation by wrongfully withholding insurance proceeds").
However, where no judgment has entered establishing a
defendant's monetary liability because, for example, the parties
have reached a settlement regarding an amount due under an
insurance policy, the provision added by the 1989 amendment
16
In such circumstances, the actual damages attributable to
the insurer's conduct generally constitute loss of use damages.
See Clegg v. Butler, 424 Mass. 413, 425 (1997).
28
pertaining to multiplication of the amount of the judgment has
no application.17 See Rhodes v. AIG Domestic Claims, Inc., supra
at 499 n.19. Nevertheless, in such circumstances, the absence
of a judgment does not preclude recovery under G. L. c. 93A;
rather, the first sentence of § 11, fifth par., governs. That
language provides that a successful plaintiff's "recovery shall
be in the amount of actual damages; or up to three, but not less
than two, times such amount" upon a finding of wilful or knowing
misconduct. Thus, where no prior judgment has entered, a
plaintiff's actual damages, i.e., "all foreseeable and
consequential damages arising out of conduct which violates the
statute," Brown v. LeClair, 20 Mass. App. Ct. 976, 979 (1985),
citing DiMarzo v. American Mut. Ins. Co., 389 Mass. 85, 101
(1983), form the basis of recovery. See Rhodes v. AIG Domestic
Claims, Inc., supra at 499 n.19.
In cases where no judgment has entered, the amount of
damages recoverable pursuant to G. L. c. 93A therefore will
depend on the nature and extent of actual damages flowing from
17
Similarly, where parties submit to arbitration a claim
for reimbursement under an insurance policy, the ensuing
arbitral award does not constitute a "judgment"; as such, the
amount of the award is not subject to multiplication in any
ensuing G. L. c. 93A action. See Bonofiglio v. Commercial Union
Ins. Co., 411 Mass. 31, 37-38 (1991), S.C., 412 Mass. 612(1992). An arbitrator retains authority, however, to award
multiple damages in G. L. c. 93A cases brought before him or
her. See Drywall Sys., Inc. v. ZVI Constr. Co., 435 Mass. 664,
669 (2002).
29
the statutory violation at issue. Where the conduct alleged to
violate G. L. c. 93A is an unreasonable delay in settling a
claim arising under an insurance policy, we have held that a
plaintiff's actual damages generally comprise "the interest lost
on the money wrongfully withheld by the insurer."18 See Clegg v.
Butler, supra at 425, quoting S. Young, Chapter 93A and the
Insurance Industry § 14.19, Chapter 93A Rights and Remedies
(Mass. Cont. Legal Educ. 1996 & Supp. 1996). Here, however, the
alleged violation of G. L. c. 93A is not a failure to effectuate
a prompt settlement, but a breach of the duty to defend.
Damages arising from a breach of the duty to defend may
encompass out-of-pocket expenses incurred by the plaintiff, in
addition to interest; a breaching insurer will be liable for all
"natural consequences of [the breach] that places its insured in
a worse position," including, in appropriate circumstances, the
amount of the settlement reached in the underlying litigation.
See Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747, 764
(1993).
18
There is no indication in the record that the parties
expressly agreed to settle Auto Flat's breach of contract claim
arising out of the breach of the duty to defend, see note 9,
supra, but nothing turns on this point. Even had the contract
claims been settled, Auto Flat's G. L. c. 93A claim would not be
precluded; rather, Auto Flat still would be permitted to seek
recovery of its actual damages under § 11, provided it had not
agreed to release its G. L. c. 93A claim. There was no such
release here, however, and the parties clearly did not agree to
settle the G. L. c. 93A claim.
30
Accordingly, Auto Flat may proceed with its G. L. c. 93A
claim notwithstanding the absence of a judgment in its favor
establishing the amount of contract damages incurred. Discovery
as to the G. L. c. 93A claim presumably will take place, and, if
this matter proceeds to trial, Auto Flat may offer evidence of
"all foreseeable and consequential damages" it contends were
caused by Hanover's asserted unfair or deceptive act or practice
arising from its refusal and failure to provide a defense in the
DEP litigation.19 Brown v. LeClair, supra, citing DiMarzo v.
American Mut. Ins. Co., supra. If Auto Flat establishes that
Hanover's breach of the duty to defend constituted a wilful or
knowing statutory violation, the amount of actual damages proven
to flow from that breach will form the basis for multiplication.
Any award of damages will be reduced by the amount that Auto
Flat already has accepted from Hanover;20 such offset is to be
19
Acknowledging that the amount of money it received from
Hanover is equivalent to the amount of actual damages it
suffered as a result of Hanover's breach of the duty to defend,
Auto Flat apparently does not claim that it has sustained other
consequential damages that remain uncompensated. In proving its
actual damages, Auto Flat must in any event establish that the
amounts it recovered from Hanover are in compensation for
expenses incurred as a result of the breach of the duty to
defend on which its G. L. c. 93A claim is solely predicated.
20
As has been noted, Auto Flat does not claim that it
suffered damages beyond the amount compensated by Hanover. See
note 19, supra. Thus, if Auto Flat successfully proves a G. L.
c. 93A violation but fails to demonstrate that the violation was
wilful or knowing, such that it is awarded single damages only,
31
applied after multiplying Auto Flat's actual damages, if
appropriate.21
Because neither entry of a judgment nor the existence of
uncompensated loss is a prerequisite to recovery under G. L.
c. 93A, Hanover has not met its burden of demonstrating that
Auto Flat lacks a reasonable expectation of proving an essential
the balance after setting off the amount of Hanover's payments
will be zero, not including attorney's fees and costs.
21
For example, in Wolfberg v. Hunter, 385 Mass. 390, 391,
397 (1982), tenants withheld rent after their landlord failed to
remedy certain defects in their apartment, and subsequently sent
the landlord a demand letter pursuant to G. L. c. 93A, § 9 (3).
A judge found that the landlord had violated G. L. c. 93A, and
that his response to the demand letter was not made in good
faith, warranting double damages pursuant to G. L. c. 93A, § 9.
Id. at 397. We held that the tenants were entitled to double
their actual damages -- comprising the difference between the
agreed-upon rent and the value of the apartment with defects,
plus reasonable expenses -- to be offset, after multiplication,
by the amount of rent withheld. Id. at 399-400. We calculated
the damages as follows:
"[T]he agreed rent for five months ($330 times
five, or $1,650) minus the sum of the fair market
value of the apartment, as found for each of those
five months ($525), equals $1,125. To this figure is
added the tenants' reasonable expenses ($195), and the
sum is doubled, since the judge found that the
landlord's response to the tenants' G. L. c. 93A
demand letter was not made in good faith, for a total
of $2,640. From this amount, the rent withheld by the
tenants ($990) is deducted. The tenants' damage award
with respect to their G. L. c. 93A counterclaim is
therefore $1,650."
Id. at 400. See Ameripride Linen & Apparel Servs., Inc. v. Eat
Well, Inc., 65 Mass. App. Ct. 63, 68-70 (2005); Friendly Fruit,
Inc. v. Sodexho, Inc., 529 F. Supp. 2d 158, 166 (D. Mass. 2007).
Cf. United States v. Bornstein, 423 U.S. 303, 316 (1976).
32
element of its case, and the denial of Hanover's motion for
partial summary judgment on count 5 was proper. See
Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716
(1991).
b. Partial summary judgment on claims for breach of
contract and duty to indemnify (counts 2 through 4). As
discussed, the second judge allowed Hanover's motion for partial
summary judgment on the claims alleging breach of contract for
failure to defend, seeking a declaration regarding Hanover's
duty to indemnify, and asserting contract damages as a result of
the failure to indemnify. In allowing the motion, the judge
accepted Hanover's argument that the claims should be dismissed
because all damages had been paid, noting that, "[a]fter summary
judgment was allowed on [c]ount 1 in favor of the plaintiffs,
the defendant paid the cost to clean up together with [twelve
per cent] interest per annum beginning on the various dates on
which the damage occurred."
At the time of Hanover's motion for partial summary
judgment on counts 2 through 4, a declaration already had
entered holding that Hanover had a duty to defend Auto Flat in
the then-concluded DEP litigation. Insofar as Hanover had
declined to defend Auto Flat to that point, and instead had
"disclaimed a duty to defend without first obtaining a judicial
declaration," Metropolitan Prop. & Cas. Ins. Co. v. Morrison,
33
460 Mass. 352, 359 (2011), Hanover stood in breach of its duty.
See Deutsche Bank Nat'l Ass'n v. First Am. Title Ins. Co., 465
Mass. 741, 745 (2013), citing Metropolitan Prop. & Cas. Ins. Co.
v. Morrison, supra at 358-359 ("Any uncertainty as to whether
the pleadings include or are reasonably susceptible to an
interpretation that they include a claim covered by the policy
terms is resolved in favor of the insured, and the insurer must
undertake the defense until it obtains a declaratory judgment of
no coverage"); Sterilite Corp. v. Continental Cas. Co., 17 Mass.
App. Ct. 316, 324 (1983) (insurer who evades duty to defend,
which arises on face of complaint and policy, "by dint of its
own assertion that there is no coverage . . . stands in breach
of its duty").
Thus, when the motion for partial summary judgment was
filed, and on the record before the judge, the only material
issue of fact in dispute as to the claim alleging breach of
contract for failure to defend (count 2) was the amount of
damages for which Hanover was liable; Hanover's liability for
breach of contract otherwise had been established. See
Metropolitan Prop. & Cas. Ins. Co. v. Morrison, supra at 359,
citing Polaroid Corp. v. Travelers Indem. Co., 414 Mass. 747,
763 (1993) ("a breach of the duty to defend is a breach of the
insurance contract, and the insured is entitled to contract
damages caused by the breach").
34
On the limited record before us, it is not entirely clear
whether, at the time of the motion, the parties agreed on the
amount of contract damages attributable to Hanover's breach of
the duty to defend, and the extent to which that amount had been
offered and accepted without qualification. Were this a
material issue of fact in dispute, as it appears, summary
judgment on count 2 well may have been allowed in error. We
need not linger on this possibility, however, since it is plain
that the parties are now in agreement that Auto Flat has
accepted Hanover's payments in full reimbursement for expenses
resulting from the breach of the duty to defend. "Such
acceptance removes the 'foundation of [a potential contract]
suit' and necessitates the dismissal of a suit already
commenced." Barron Chiropractic & Rehabilitation, P.C. v.
Norfolk & Dedham Group, ante , n.11(2014), quoting Davis
v. Harrington, 160 Mass. 278, 280 (1894). Because "[t]he
dispute over [contract] damages . . . ha[s] been resolved,"
Murphy v. National Union Fire Ins. Co., 438 Mass. 529, 533
(2003), the claim for contractual damages for breach of contract
for failure to defend must be dismissed.22
22
Auto Flat has not presented arguments in its brief
concerning the propriety of the allowance of Hanover's motion
for partial summary judgment on the claims pertaining to the
duty to indemnify (counts 3 and 4). As this issue has not been
substantively addressed on appeal, it is deemed waived. See
35
3. Conclusion. For the foregoing reasons, the portion of
the judgment allowing Hanover's motion for partial summary
judgment on count 2 is vacated and the case is remanded for
entry of an order dismissing that count. The remaining portions
of the judgment allowing Hanover's motion for partial summary
judgment on counts 3 and 4, and the judgment denying Hanover's
motion for partial summary judgment on count 5, are affirmed.
So ordered.
Mass. R.A.P. 16 (a) (4), as amended, 367 Mass. 921 (1975); U.S.
Bank Nat'l Ass'n v. Schumacher, 467 Mass. 421, 426 n.10 (2014).