McLaughlin v. American States Insurance Co.

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15-P-729 Appeals Court
DANIEL McLAUGHLIN & another 1 vs. AMERICAN STATES INSURANCE
COMPANY.
No. 15-P-729.
Middlesex. May 19, 2016. - August 12, 2016.
Present: Kafker, C.J., Cohen, & Green, JJ.
Consumer Protection Act, Insurance, Offer of settlement, Unfair
act or practice, Attorney's fees, Damages. Insurance,
Settlement of claim, Unfair act or practice. Damages,
Attorney's fees. Practice, Civil, Attorney's fees.
Civil action commenced in the Superior Court Department on
February 21, 2008.
The case was heard by Paul D. Wilson, J.
John F. Brosnan (James E. Harvey, Jr. with him) for the
defendant.
Matthew N. Kane for the plaintiffs.
GREEN, J. After the well installed by Shaun Harrington
began pumping salt water through the plaintiffs' (McLaughlins)
irrigation system, causing extensive damage to their
1
Rachel McLaughlin.
2
landscaping, the McLaughlins sought recovery from Harrington and
his insurer, the defendant, American States Insurance Company
(ASIC). Both denied liability, and the McLaughlins eventually
filed an action against Harrington and two others. 2 After the
McLaughlins obtained a judgment in their favor against
Harrington, they commenced this action against ASIC, claiming
unfair insurance settlement practices. A judge of the Superior
Court entered judgment against ASIC, and awarded the McLaughlins
damages based on the legal expenses they incurred in prosecuting
their suit against Harrington, but declined to award multiple
damages as permitted by the statute. See G. L. c. 93A, § 9(3).
On the parties' cross appeals, we conclude that the judge
correctly determined that ASIC failed to conduct a reasonable
investigation of the McLaughlins' claim, and that it failed to
make a reasonable offer of settlement after liability of its
insured became reasonably clear. We also discern no error of
law or abuse of discretion by the judge in his refusal to award
the McLaughlins multiple damages. However, we conclude that the
judge erred in his failure to award the McLaughlins damages
based on the loss of use of the funds ASIC should have offered
2
Assurance Construction, Inc. (Assurance), the general
contractor for the construction of the home to which the
landscaping related, and Waterworks Irrigation, Inc.
(Waterworks), the subcontractor for the irrigation system.
Harrington was subcontracted by Waterworks to drill a well to
furnish water to the irrigation system.
3
in settlement once Harrington's liability became reasonably
clear.
Background. We summarize the written findings of fact
entered by the judge in his detailed and thorough memoranda of
decision. 3
In 2003, Assurance was nearing completion of construction
of a home for the McLaughlins in Osterville. The home is on a
peninsula, surrounded on three sides by salt water bodies
connected to Nantucket Sound. The project included a
substantial landscaping installation. Incident to the
landscaping, Assurance subcontracted Waterworks to install a
multizone irrigation system, to be served by a well. 4
Waterworks, in turn, subcontracted Harrington to drill the well.
Harrington drilled the well in April, 2003, in the only
location on site that his drilling rig would fit, approximately
110 feet from the shoreline. Though local ordinances required
him to obtain a municipal permit before drilling a well,
Harrington did not apply for a permit. In addition, though
State regulations required him to submit a well completion
report to the Department of Environmental Management immediately
3
The judge's memorandum of decision on liability is eighty-
one pages. His memorandum on damages is forty pages.
4
Water for the home itself was supplied by means of a
connection to the Barnstable municipal water system.
4
upon drilling the well, Harrington did not do so until after the
dispute underlying this lawsuit arose.
After drilling the well, Harrington tested the water it
produced by tasting it. Satisfied that it tasted fresh, and
that the well produced water at a rate more than adequate to
meet the requirements of the irrigation system, Harrington
considered his work complete and left the site. 5
From his experience, Harrington was aware that wells on
Cape Cod drilled close to sea water might turn from fresh to
salt water, by means of a phenomenon known as "upconing." 6 In
such circumstances, as fresh water is pumped out of the well,
salt water is drawn in to replace it. Eventually, the supply of
fresh water is exhausted or largely infiltrated by salt water,
and the well thereafter produces salt water. Though Harrington
was concerned about the possibility that upconing could
eventually occur in the McLaughlins' well, he did not advise
Waterworks or the McLaughlins of the possibility. Prudent
5
While Harrington was still on site, a friend of his named
Andrew Miller coincidentally stopped by to see him. Miller, a
hydrogeologist from Florida who was visiting family on Cape Cod,
tested the water with a portable conductivity meter, a portable
pH meter, and iron test strips. Though Miller did not record
the test results, he concluded that the water was fresh, with
neutral pH and acceptable iron levels.
6
A well Harrington previously drilled in a seaside location
not far from the McLaughlins' property had turned to salt water
after initially producing fresh water.
5
practice of well drillers on Cape Cod in 2003, in circumstances
of wells drilled near salt water bodies, was to test the water
produced by the well at regular intervals after drilling, but
Harrington did not do so and did not advise Waterworks or the
McLaughlins that they should.
Decorative and ornamental landscaping plantings were
installed in May and June, 2003, at a cost of approximately
$185,000. In July and August, 2003, the plantings began to show
signs of distress. In late August, after trying unsuccessfully
to reverse the damage by adjusting the watering schedule, the
McLaughlins discovered that the damage was caused by salt water
produced by the well and pumped through the irrigation system.
Upon identifying the cause of the damage, the McLaughlins
asked Assurance to submit a claim to Harrington's insurer for
the damage caused by salt water produced from the well
Harrington had drilled. Assurance submitted a claim to
Harrington's insurance agent on October 22, 2003, and the claim
reached ASIC on November 3, 2003. As submitted by Assurance,
the claim included an invoice for plants killed by salt water as
of that time, in a total amount of $28,224.62. The claim form
submitted to ASIC by Harrington's agent indicated that
Harrington did not believe he was at fault.
ASIC assigned Debra Dresner as claims adjuster to handle
the McLaughlins' claim. Dresner wrote to Rachel McLaughlin at
6
the address of her primary residence in Connecticut on November
4, 2003, asking her to contact Dresner as soon as possible.
When Dresner received no response, she sent a second letter on
November 11, 2003, again asking Rachel McLaughlin to contact
her. On November 5, 2003, Dresner telephoned the nursery whose
invoice accompanied the claim, requesting a "legible copy" of
the invoice. The nursery responded promptly, and the requested
copy arrived on November 10.
On November 5, 2003, Dresner also called Harrington and
took a recorded statement from him. In his statement,
Harrington described the transition of the well from fresh to
salt water as an "act of God." Harrington also advised Dresner
that a certified hydrogeologist had done a conductivity test
when Harrington installed the well. See note 5, supra. When
Dresner asked if the hydrogeologist had prepared a report of the
test, Harrington said that he believed so and would find out.
Dresner wrote to Harrington later that day, requesting all
paperwork he had relating to the loss and specifically
requesting a copy of the report prepared by the hydrogeologist.
At the time she received the claim, Dresner had authority
to settle claims up to $10,000 and was required to inform her
supervisor of any claim for a larger amount. Though the
McLaughlins' claim was for more than $28,000, Dresner did not
inform her supervisor of it.
7
Dresner thereafter took no further investigative or other
action on the McLaughlins' claim until January 26, 2004, when
the McLaughlins' insurance agent left a voice mail message
inquiring about the claim status. Dresner called the agent back
that day; during their conversation, the agent gave Dresner the
McLaughlins' telephone number. Dresner called and spoke to
Rachel McLaughlin, who expressed concern over the length of time
the claim process was taking and attempted to correct various
factual assertions Harrington had made to Dresner. On January
26, 2004, after the telephone call, Dresner documented the call,
sent a confirmation letter to Rachel McLaughlin, and sent a
letter to Harrington requesting documents, including a document
from the hydrogeologist, and contact information for Waterworks.
ASIC took no further action until the McLaughlins' agent called
ASIC on February 19, 2004.
On that occasion, Dresner was out of the office and another
claims adjuster, Julio Maisonette, handled the call. Maisonette
adopted an aggressive and hostile approach toward the
McLaughlins' agent, to the extent that the agent asked to speak
to his supervisor (a request Maisonette refused). Rachel
McLaughlin called Maisonette the following day. During that
call, Maisonette stated that, in his view, Harrington was not
liable for the damage because the well was pumping fresh water
when Harrington completed his work and Harrington had no reason
8
to believe it would eventually begin pumping salt water.
Maisonette expressed his view that ASIC would not be liable if
the well pumped fresh water even for only one day; Rachel
McLaughlin responded with her disagreement with that position.
Maisonette also suggested that other causes might have led to
the damage to the plantings, including an unusually harsh
winter, and observed that he did not even have evidence that the
plantings were dead. When Rachel McLaughlin replied that she
had lost approximately $72,000 in plants, Maisonette responded
that he had only one invoice, for $28,000, and invited Rachel
McLaughlin to send additional documentation of her losses. In
response to Rachel McLaughlin's request for an explanation of
ASIC's failure to send a field claims adjuster to the site,
Maisonette said that ASIC had no intention of doing so. Rachel
McLaughlin threatened to hire an attorney to press her claim.
Despite her frustration with her conversation with
Maisonette, Rachel McLaughlin promptly followed up by sending to
him another copy of the earlier $28,000 invoice, along with a
second invoice for additional damaged plantings in the amount of
$37,475.24. In addition, she included thirty-two photographs,
depicting "before and after" conditions, together with a two-
page letter explaining what each photograph depicted.
Two weeks later, on March 5, 2004, the McLaughlins' agent
called Dresner to express frustration again with the manner in
9
which the McLaughlins' claim was being handled. Following that
call, Dresner called Harrington to ask about the hydrogeologist
report he had promised, and Harrington advised her that he was
still waiting for it. Dresner also gave her supervisor, Ralph
Tedesco, a "heads up" that Rachel McLaughlin was unhappy with
the handling of her claim in Dresner's absence. Tedesco
reviewed the file and criticized Dresner for not bringing the
claim to his attention earlier, since it exceeded her settlement
authority. Tedesco suggested several lines of investigation for
Dresner to pursue, including whether there is a way to prevent
salt water infiltration of a well in close proximity to the sea,
and whether Harrington had warned Waterworks or the McLaughlins
about the risk of salt water infiltration. As a more
experienced adjuster, Tedesco expressed his opinion that
liability of ASIC's insured, Harrington, was likely, and
expressed his skepticism about Harrington's insistence that the
damage was an act of God, since "God didn't install the well."
The following day, Tedesco convened a discussion of the
claim with Dresner and Maisonette. Tedesco suggested that
Dresner might retain an expert to assist in analyzing liability
and that she consult with a Massachusetts attorney to see if the
attorney agreed that an expert is necessary. Tedesco also
suggested that Dresner contact another Cape Cod well driller to
10
ask pointed questions regarding the well and guarantees that
could or should not be made.
Dresner thereafter consulted with Robert Feeney, a
Massachusetts attorney, as suggested by Tedesco. Feeney
explained to Dresner that whether Harrington's work met the
requisite standard of care was a matter for expert testimony.
However, Feeney also offered his lay view that Harrington had
met the standard, based on Harrington's explanation contained in
the claims file Feeney had reviewed.
On March 16, 2004, Miller (the hydrogeologist) prepared a
letter summarizing his recollection of the tests he had
performed on his chance visit to the property in April of 2003.
His letter included a closing paragraph in which he described
the possibility that over-pumping or continuous use of a well in
close proximity to salt water risked contamination of the well
due to upconing.
In early April, 2004, Dresner left ASIC on a medical leave,
and Tedesco transferred the claim to another adjuster, Sharon
Fox. At Tedesco's prompting, Fox arranged for an independent
claims adjuster to visit the property to conduct an assessment
of the damage. On May 18, 2004, 7 the independent adjuster
7
The judge described the report as having been sent on May
16, 2004, but the report appearing in the record at the
reference cited by the judge in his memorandum of decision is
dated May 18, 2004.
11
submitted a report documenting damage to plants and his
consultation with an experienced local nurseryman who confirmed
that the damage had been caused by salt water produced by the
well. The adjuster's report advised that the local nurseryman
offered to furnish an estimate of the cost of the damaged plants
for a fee of $500, which he would waive if the McLaughlins
purchased replacement plants from him. However, ASIC never
responded to the independent adjuster's request for
authorization to have the nurseryman furnish a cost estimate.
Fox left ASIC in early May, 2004, and the file was
reassigned to another adjuster, Suzanne Greer, who was based in
Illinois. At around the same time, Tedesco also left ASIC.
ASIC's claims investigation (such as it was) continued in
like manner thereafter. Greer determined in June of 2004 to
deny the McLaughlins' claim, but ASIC's attorney, Feeney, did
not advise the McLaughlins' attorney of the denial.
On February 1, 2006, the McLaughlins commenced an action in
the Barnstable Superior Court, alleging negligence against
Harrington (the well subcontractor), Waterworks (the irrigation
subcontractor), and Assurance (the general contractor). Shortly
before trial, Waterworks and Assurance each settled with the
McLaughlins for $50,000. The case against Harrington proceeded
to trial, and a jury found Harrington liable, awarding $37,500
12
in damages. On Harrington's motion, the trial judge agreed to
offset against the jury damage award the settlement payments the
McLaughlins received from Waterworks and Assurance, resulting in
a net award against Harrington of zero dollars. A panel of this
court affirmed the judgment in a memorandum and order issued
pursuant to our rule 1:28. See McLaughlin v. Harrington, 76
Mass. App. Ct. 1124 (2010).
On June 8, 2007, the McLaughlins (through their attorney)
sent a demand letter under G. L. cc. 93A and 176D to ASIC. 8 The
McLaughlins then commenced the present action against ASIC,
claiming unfair insurance settlement practices in violation of
G. L. cc. 93A and 176D. The trial judge bifurcated the issues
of liability and damages. After an eleven day jury-waived
trial, the judge concluded that ASIC had failed to conduct a
prompt, thorough, and objective investigation. The judge also
found that Harrington's liability had become reasonably clear by
at least May, 2004, 9 but that ASIC failed to make a reasonable
8
The McLaughlins had sent two previous letters to ASIC, but
the judge found that neither qualified as a proper demand
letter.
9
In his memorandum of decision, the judge based this
conclusion on the report prepared and sent to ASIC on May 18,
2004, by an independent adjuster, describing his consultation
with a local nurseryman who confirmed that the damage had been
caused by salt water produced by the well.
13
offer of settlement for several years thereafter. 10 Following a
six day jury-waived trial on damages, the judge found that the
McLaughlins were entitled to recover their reasonable attorney's
fees and expenses incurred in the prosecution of their claim
against Harrington. The judge declined to award multiple
damages, based on the violation of G. L. c. 93A. The judge also
declined to award damages based on the McLaughlins' loss of use
of funds from the date liability became reasonably clear. Both
parties filed cross appeals.
Discussion. 1. Whether liability and damages were
reasonably clear. Taken together, G. L. c. 93A, § 2(a), and
G. L. c. 176D, § 3(9)(f), "require an insurer . . . 'promptly to
put a fair and reasonable offer on the table when liability and
damages become clear, either within the thirty-day period set
forth in G. L. c. 93A, § 9(3), or as soon thereafter as
liability and damages make themselves apparent.'" Bobick
v. United States Fid. & Guar. Co., 439 Mass. 652, 659 (2003),
quoting from Hopkins v. Liberty Mut. Ins. Co., 434 Mass. 556,
566 (2001). The test whether an insured's liability is
"reasonably clear" is objective. O'Leary-Alison v. Metropolitan
10
The judge found that Feeney communicated a settlement
offer of $50,000 at approximately 4:31 P.M. on June 6, 2008 (the
Friday before the Monday on which the trial began), during
unsuccessful efforts to mediate the case. Feeney made a second
settlement offer, in the amount of $10,000, on the day that the
case was submitted to the jury.
14
Property & Cas. Ins. Co., 52 Mass. App. Ct. 214, 217 (2001).
"The fact finder determines 'whether a reasonable person, with
knowledge of the relevant facts and law, would probably have
concluded, for good reason, that the insure[d] was liable to the
plaintiff.'" Ibid., quoting from Demeo v. State Farm Mut. Auto.
Ins. Co., 38 Mass. App. Ct. 955, 956-957 (1995).
The judge's conclusion that Harrington's liability was
reasonably clear as of May, 2004, is supported by his findings
of fact (which, in turn, find support in the evidence and
accordingly are not clearly erroneous). In particular, by
letter dated May 18, 2004, ASIC's independent adjuster had
submitted to ASIC his report which confirmed that the
McLaughlins' plantings had been killed or damaged by salt water
pumped through the irrigation system supplied by the well
Harrington had drilled. The extent of the damage was
substantiated by invoices supplied by the McLaughlins totaling
more than $66,000. 11 ASIC was also in possession of Miller's
letter, advising of the risk of salt water intrusion into wells
drilled in close proximity to the sea, if the well were used
11
Additional invoices later supplied, as additional damage
developed, increased the total to an amount of approximately
$164,000. The force of ASIC's protest that the amount of damage
was inflated by reason of its source from an out-of-State
supplier is weakened considerably by ASIC's failure to pursue
the offer of a local nurseryman to furnish an independent
estimate.
15
continuously or over-pumped. ASIC had previously been advised
by Harrington that the McLaughlins' irrigation system was a
multizone system that would water plantings on a large site, and
therefore would be used heavily. Moreover, ASIC knew that
Harrington was aware from his own experience of the possibility
that salt water could infiltrate the well, yet failed to advise
Waterworks or the McLaughlins of the possibility of such
contamination, or of the need to monitor water quality as water
was pumped from the well over time. 12 As the trial judge
observed, based on this information "[a] reasonable objective
insurer would have concluded by May 2004 that Harrington was
liable to McLaughlin, at the very least for failure to warn."
On appeal, ASIC raises two principal claims of error
underlying the trial judge's conclusion. First, it contends
that Harrington's liability was never established, much less
reasonably clear, because the judgment ultimately entered
against him was for no monetary damages. Second, ASIC contends
12
Again, ASIC's failure to consult an independent expert
(the need for which Tedesco recognized and Feeney endorsed) on
the standard of care, or on the likely cause of salt water
contamination of the McLaughlins' well, renders its
unquestioning acceptance of Harrington's denial of
responsibility unreasonable. As the trial judge correctly
recognized (and ASIC does not dispute on appeal), in the absence
of an expert assessment of the cause of the contamination and
the standard of care applicable to a well driller in a coastal
area, ASIC could not reasonably rely on the lay opinion of its
counsel, Feeney, that Harrington was not negligent.
16
that the presence of two other joint tortfeasors rendered the
extent of Harrington's potential liability unclear as matter of
law. Both claims are unavailing.
As a threshold matter, we observe that the jury in the
underlying negligence trial concluded that Harrington was
negligent, and that his negligence caused the McLaughlins to
incur damages. More fundamentally, however, the question
whether and when an insured's liability became reasonably clear
is based on an objective assessment of the facts known or
available at the time, and is independent of how a jury in a
separate trial views the insured's liability. See Bolden
v. O'Connor Cafe of Worcester, Inc., 50 Mass. App. Ct. 56, 66
(2000). See also Bobick, 439 Mass. at 662 ("[A] jury's verdict
is not always predictable and may not constitute in all
circumstances a definitive measure of reasonableness"). As we
have observed, there was ample basis for the judge's conclusion
that Harrington's liability for, at least, a failure to warn of
the possibility of salt water contamination of the well, and the
related need to monitor water quality, was reasonably clear as
of May, 2004, and that ASIC was aware of substantiated damages
to plants valued at approximately $66,000 as of that time.
We likewise reject ASIC's suggestion that liability of an
insured can never be reasonably clear, as matter of law, so long
as other potential tortfeasors are apparent. In pressing its
17
assertion, ASIC relies on a comment in Bobick, supra at 660, in
which the court observed that, though fault of the defendant's
insured may have been ascertained by a specified date, "the
percentage of damages attributable to [United States Fidelity
and Guaranty Company (USF&G)] and to Continental [the insurer of
a potential joint tortfeasor] was still the subject of good
faith disagreement. We conclude that the extent of USF&G's
liability to the plaintiff cannot, as matter of law, have been
clear at that time."
In our view, ASIC reads the quoted language from Bobick too
broadly. First, there is no evidence in the record to suggest
that the potential liability of Waterworks and Assurance was a
matter of consideration by ASIC in May, 2004, much less the
subject of a "good faith disagreement" among the defendants in
the McLaughlins' eventual tort suit. Ibid. See Clegg
v. Butler, 424 Mass. 413, 418 (1997). Furthermore, the fact
that the McLaughlins ultimately named Waterworks and Assurance
as defendants in their underlying complaint, or even that both
ultimately agreed to pay the McLaughlins an amount in settlement
of their claims, did not excuse ASIC from its statutory
obligation to make an offer when Harrington's liability became
reasonably clear. 13 See Bertassi v. Allstate Ins. Co., 402 Mass.
13We note that USF&G made a settlement offer in Bobick,
supra at 660, at approximately the time the liability of its
18
366, 372-373 (1988) (affirming violation of G. L. c. 93A by an
insurer, despite presence of, and settlement payments by, other
tortfeasors). Indeed, it would significantly diminish, if not
defeat, a principal purpose of G. L. cc. 176D and 93A if an
insurer could refuse to make any offer of settlement whatsoever
in any case in which potential tortfeasors other than its
insured might share liability. See Clegg, supra at 419
(citation omitted) ("The statutes at issue were enacted to
encourage the settlement of insurance claims . . . and
discourage insurers from forcing claimants into unnecessary
litigation to obtain relief").
2. Failure to conduct a reasonable investigation. We
likewise discern no error in the trial judge's conclusion that
ASIC failed to conduct a reasonable investigation of the
McLaughlins' claim, as required by G. L. c. 176D, § 3(9)(d). As
our summary of the judge's extensive factual findings makes
plain, ASIC failed to subject Harrington's initial denial of
responsibility to serious scrutiny and failed to take even the
most basic steps toward obtaining an independent or neutral
assessment of his potential fault. Of perhaps greatest concern
was ASIC's failure to consult an expert in hydrogeology about
insured became reasonably clear. By contrast, the insurer in
the present case made no settlement offer of any kind or in any
amount until the eve of trial, years after the liability of its
insured was clear. See note 10, supra.
19
the reason for, or foreseeability of, the infiltration of salt
water into the McLaughlins' well, despite Tedesco's recognition
of the need for one. Its approach to the claim overall was at
best inattentive, if not incompetent.
3. Attorney's fees as damages. After concluding that ASIC
was liable for a violation of G. L. cc. 93A and 176D, the trial
judge concluded that the McLaughlins were entitled to recover as
damages the attorney's fees and expenses they incurred in
prosecution of their underlying tort suit against Harrington,
Waterworks, and Assurance. On appeal, ASIC challenges both the
inclusion of such costs as an element of damages and the
reasonableness of the amount. 14 Again, we discern no error.
"If a c. 93A violation forces someone to incur legal fees
and expenses that are not simply those incurred in vindicating
that person's rights under the statute, those fees may be
treated as actual damages in the same way as other losses of
money or property." Siegel v. Berkshire Life Ins. Co., 64 Mass.
App. Ct. 698, 703 (2005). 15 See DiMarzo v. American Mut. Ins.
Co., 389 Mass. 85, 101 (1983); Columbia Chiropractic Group, Inc.
14
The trial judge awarded $175,000 as actual damages,
consisting of the reasonable attorney's fees and expenses in the
underlying tort suit.
15
In Siegel, the attorney's fees and expenses were incurred
in defense of unfair and deceptive acts of creditors in
attempting to obtain ownership of the plaintiff's life insurance
policy.
20
v. Trust Ins. Co., 430 Mass. 60, 63 (1999). Accordingly, where
an insurer's protracted delay in settling the underlying tort
case requires a plaintiff to proceed to trial on that case, the
plaintiff's attorney's fees and expenses incurred in that suit
are properly recoverable as actual damages caused by the
statutory violation. See Rivera v. Commerce Ins. Co., 84 Mass.
App. Ct. 146, 149 (2013). In the present case, the McLaughlins
engaged their trial counsel in the underlying tort case on an
hourly rate basis. 16 The trial judge accordingly properly
considered the fees incurred by the McLaughlins in prosecution
of their claim against Harrington as damages incurred as a
consequence of ASIC's failure to make a reasonable offer of
settlement at a time when Harrington's liability had become
reasonably clear.
We likewise discern no abuse of discretion in the
determination by the judge of the amount of the McLaughlins'
reasonable attorney's fees and expenses. See Twin Fires Inv.,
LLC v. Morgan Stanley Dean Witter & Co., 445 Mass. 411, 432
(2005). The judge applied the correct legal standard to his
review of the McLaughlins' application for fees, both as actual
16
The case in that respect is different from Miller v. Risk
Mgmt. Foundation of the Harvard Med. Insts., Inc., 36 Mass. App.
Ct. 411, 421 (1994), in which the plaintiffs engaged counsel in
the underlying case on a contingent fee basis.
21
damages and in prosecution of their G. L. cc. 93A and 176D
claim, and ASIC does not contend otherwise. 17
4. Loss of use damages. In addition to attorney's fees
incurred as a consequence of ASIC's failure to make a reasonable
settlement offer, the McLaughlins assert in their cross appeal
that they should also have been awarded an amount to compensate
them for the loss of use of the funds ASIC should have offered
in settlement once Harrington's liability became clear.
See Clegg, 424 Mass. at 423-424; Rivera v. Commerce Ins. Co., 84
Mass. App. Ct. at 148. Reasoning that the judgment entered in
the underlying tort action awarded no damages, due to the offset
resulting from the settlement payments made by Waterworks and
Assurance, the trial judge concluded that the McLaughlins are
not entitled to loss of use damages. See Hopkins v. Liberty
Mut. Ins. Co., 434 Mass. at 567 (recognizing right of plaintiff
"to recover interest on the loss of use of money that should
have been, but was not, offered [in settlement of insurance
claim], if that sum is in fact included in the sum finally paid
to the plaintiff by the insurer"). This was error.
See Bertassi, 402 Mass. at 373.
17
We reject ASIC's contention, raised for the first time on
appeal, that the McLaughlins may not recover any fees incurred
after ASIC finally made its first settlement offer, on the eve
of trial. See note 10, supra. Because ASIC did not make the
argument in the trial court, it is waived. See Carey v. New
England Organ Bank, 446 Mass. 270, 285 (2006).
22
As discussed above, the presence of other joint tortfeasors
did not derogate from ASIC's obligation to make a reasonable
settlement offer once Harrington's liability became reasonably
clear. Its failure to do so deprived the McLaughlins of the use
of the funds ASIC should have offered in settlement once
Harrington's liability became reasonably clear, until the
McLaughlins finally received compensation for their lost
plantings. To the extent Harrington's ultimate liability was
reduced by offset of settlement payments made by Waterworks and
Assurance, those settlement offers were not made until the eve
of trial and did not obviate the McLaughlins' loss of use of the
funds prior to that time. Accordingly, the McLaughlins are
entitled to recover loss of use damages "from the time when the
claim should have been paid to the time that a settlement or
judgment was paid," Rhodes v. AIG Domestic Claims, Inc., 461
Mass. 486, 497-498 (2012), adjusted to account for the
settlement payments made by Waterworks and Assurance,
respectively, when they were made. See Bertassi, supra.
5. Multiple damages. The McLaughlins also contend that
the trial judge erred as matter of law in declining to multiply
the damages he awarded them for ASIC's violation of G. L.
c. 93A. Under that chapter, actual damages shall be doubled or
trebled if the violation is knowing, wilful, or in bad faith.
See G. L. c. 93A, § 9(3). The requirement of a wilful violation
23
is satisfied if the violation is reckless. See Kattar
v. Demoulas, 433 Mass. 1, 16 (2000). We review a judge's
decision whether to award multiple damages on a G. L. c. 93A
claim for abuse of discretion. See ibid.The trial judge specifically found that ASIC did not act
knowingly or wilfully in its failure to make a reasonable
settlement offer, and he rejected the McLaughlin's request for a
finding that ASIC's violation was reckless. We discern no clear
error in the judge's factual finding that ASIC's violation was
not knowing, wilful, or in bad faith, and no abuse of discretion
in his refusal to award multiple damages.
6. Attorney's fees for this appeal. The McLaughlins have
requested an award of their appellate attorney's fees incurred
in this appeal. We agree that such an award is appropriate.
See Yorke Mgmt. v. Castro, 406 Mass. 17, 19 (1989). In
accordance with the procedure set forth in Fabre v. Walton, 441
Mass. 9, 10-11 (2004), the McLaughlins may file an application
therefor with the clerk of this court within fourteen days of
the date of the rescript. ASIC shall have fourteen days
following the filing of the McLaughlins' application to respond.
Conclusion. So much of the judgment as declined to award
loss of use damages to the McLaughlins is reversed. In all
other respects the judgment is affirmed. The case is remanded
24
to the Superior Court for further proceedings consistent with
this opinion.
So ordered.