Chiulli v. Liberty Mutual Insurance, Inc.

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18-P-1288 Appeals Court
ROBERT CHIULLI vs. LIBERTY MUTUAL INSURANCE, INC., & another.1
No. 18-P-1288.
Suffolk. November 12, 2019. - April 2, 2020.
Present: Meade, Maldonado, & Massing, JJ.
Consumer Protection Act, Insurance, Offer of settlement, Unfair
act or practice, Damages. Insurance, Settlement of claim,
Unfair act or practice. Damages, Consumer protection case.
Statute, Construction.
Civil action commenced in the Superior Court Department on
March 18, 2013.
Following review by this court, 87 Mass. App. Ct. 229
(2015), the case was heard by Rosemary Connolly, J.
Andrew M. Abraham (Martin R. Sabounjian also present) for
the plaintiff.
Myles W. McDonough (Christopher M. Reilly also present) for
the defendant.
MASSING, J. This case, involving unfair insurance claim
settlement practices, see G. L. c. 176D, § 3 (9), began with an
1 Everest Re Group, Ltd. Everest is not a party to this
appeal.
2
argument over a barstool at a restaurant on Newbury Street in
Boston. The argument simmered over the evening and spilled onto
the street, culminating in an exchange of blows that left the
plaintiff, Robert Chiulli, with a traumatic brain injury. Two
lawsuits followed. In the first case, which was tried in the
United States District Court for the District of Massachusetts
(Federal court case), a jury concluded that the operator of the
restaurant, Newbury Fine Dining, Inc., doing business as Sonsie
(Sonsie), and an associated entity, Lyons Group, Ltd. (Lyons
Group), were each forty-five percent at fault for Chiulli's
injuries and awarded compensatory damages of approximately $4.5
million. In the second case, which was tried jury-waived in the
Superior Court and is the subject of this appeal (State court
case), Chiulli asserted a G. L. c. 93A claim against Sonsie's
and Lyons Group's insurer, defendant Liberty Mutual Insurance,
Inc. (Liberty Mutual), for its failure to effectuate a prompt,
fair, and equitable settlement of the Federal court case once
liability had become reasonably clear. See G. L. c. 176D,
§ 3 (9) (f).2 The trial judge found that liability became
2 In the early stages of the State court case, Liberty
Mutual filed a special motion to dismiss under G. L. c. 231,
§ 59H, the anti-SLAPP (Strategic Lawsuit Against Public
Participation) statute. A Superior Court judge denied the
motion, Liberty Mutual appealed, and we affirmed the order
denying the motion. See Chiulli v. Liberty Mut. Ins., Inc., 87
Mass. App. Ct. 229 (2015).
3
reasonably clear after closing arguments in the Federal court
case, that Liberty Mutual violated c. 93A from that time until
six weeks later, and that Liberty Mutual's violation was not
willful or knowing. The trial judge awarded Chiulli damages of
$25, see G. L. c. 93A, § 9 (3), plus attorney's fees and costs.
Both parties appeal. We affirm in part and reverse in part.
Background. 1. The physical altercation. While the
precise events that led to Chiulli's injury have been fiercely
contested, no one disputes the following facts for purposes of
this appeal. One evening in June 2008, Chiulli went to Sonsie
with a group of friends. At some point in the evening, Jeffrey
Reiman sat on a barstool that had been previously occupied by
someone in Chiulli's group, prompting a heated argument between
Chiulli's group and Reiman. A bartender overheard the argument
and summoned his manager, Ivan Daskalov, who spoke with
Chiulli's group and Reiman and also asked the doorman to keep an
eye on them. Reiman moved to a different barstool.
Once Chiulli's group and Reiman were separated, Reiman
spoke by telephone with his friend, Victor Torza, who came to
Sonsie within minutes. Another friend, Garret Rease, joined
Reiman and Torza. Torza attempted to approach Chiulli's group
but was intercepted by Sonsie's manager, Daskalov, who continued
to separate the groups but permitted them to remain at the
restaurant. Shortly thereafter, Reiman approached Chiulli's
4
group, said something, and walked out of the restaurant,
followed directly by Daskalov, then Chiulli's group, and then
Torza and Rease. A fight broke out. While the parties dispute
who threw the first punch, and in particular whether it was
Chiulli, the fight ended when Rease knocked Chiulli unconscious.
Chiulli suffered a traumatic brain injury that required him to
relearn basic daily living skills, and he incurred medical bills
in excess of $600,000.
In the Federal court case, Chiulli asserted negligence
claims against Reiman, Torza, Rease, Sonsie, and Lyons Group.3
Chiulli's theory of the case, which he presented in part through
expert opinion testimony, was that Sonsie and Lyons Group
engaged in negligent security practices by failing to remove
Reiman and his friends, who were acting in a disruptive fashion,
and by failing to ensure that the sparring factions did not
leave the restaurant together. Although neither Sonsie nor
Lyons Group offered its own expert witness, they nonetheless
took the position that they had reasonably responded to the
barstool incident and that Chiulli bore ultimate responsibility
for throwing the first punch. After a three-week trial, the
jury largely agreed with Chiulli and, on November 19, 2012,
3 Chiulli initially filed his complaint in the Superior
Court; the case was removed to the United States District Court
for the District of Massachusetts on Sonsie's motion.
5
rendered a verdict finding that Sonsie and Lyons Group were each
forty-five percent at fault, that Chiulli and Rease were each
five percent at fault, and that Chiulli's damages were
$4,494,665.83. Acting on Chiulli's motion to amend the judgment
and add prejudgment interest, filed on November 21, 2012, the
Federal trial judge entered an amended judgment on September 30,
2013, in the amount of $4,501,654.74.4
2. The insurance dispute. Sonsie and Lyons Group had
liability coverage through two different policies: a policy
with Liberty Mutual that provided primary coverage up to a
$1 million limit, and a policy with defendant Everest Re Group,
Ltd. (Everest) that provided excess coverage. Liberty Mutual
was responsible for controlling the defense of the Federal court
case -- and thus controlled any settlement with Chiulli -- until
Liberty Mutual concluded that its policy limit was exhausted, at
which point it was required to tender its policy limit to
Everest so that Everest could assume control. Liberty Mutual
did not make any settlement offers to Chiulli during the course
of the Federal court case, except for one offer of $150,000
during the trial. Liberty Mutual refused to tender its policy
4 The judge reduced the jury's award of damages by five
percent, the fault attributed to Chiulli, then added twelve
percent prejudgment interest on the amount of Chiulli's past
medical expenses.
6
limit even after the jury reached its verdict awarding Chiulli
damages well over the limit.
On December 5, 2012, sixteen days after the verdict in the
Federal court case, Chiulli sent a c. 93A demand letter to
Liberty Mutual and Everest. Chiulli alleged that Liberty Mutual
and Everest had failed to effectuate a prompt, fair, and
equitable settlement of the Federal court case once liability
became reasonably clear and requested $5,701,822.25 "to resolve
[the Federal court] case, and to avoid further litigation in
which [Chiulli] will seek double or treble damages under c.
93A." By December 27, 2012, Everest was also frustrated by
Liberty Mutual's reluctance to settle and sent its own c. 93A
letter demanding that Liberty Mutual tender its policy limit
plus interest. Liberty Mutual complied the following day.
Around the same time, Chiulli sent a second c. 93A demand letter
to Liberty Mutual and Everest.5 In that letter, Chiulli
clarified that the demand of $5,701,822.25 was to resolve the
Federal court case, and that he was seeking $10 million if
Liberty Mutual and Everest also wanted a release of his c. 93A
claims. On January 4, 2013, Everest, now in control of
5 The first page of Chiulli's second demand letter was dated
December 27, 2012, but the remaining pages were dated December
31, 2012. Just before receiving this letter on January 2, 2013,
Everest made an oral settlement offer to Chiulli in the amount
of $5,101,741.
7
settlement negotiations, sent Chiulli a written offer of
$5,507,597.60 to settle the Federal court case. Chiulli
accepted the offer and signed a settlement agreement release,
which expressly excluded "any and all claims pursuant to G. L.
c. 93A et seq. and/or G. L. c. 176D, et seq." On January 30,
2013, Liberty Mutual replied to Chiulli's first demand letter,
denying any liability under c. 93A or c. 176D.
Chiulli pursued his c. 93A claim against Liberty Mutual by
filing a complaint in the Superior Court, alleging that his
damages and Sonsie's and Lyons Group's liability were reasonably
clear well before the trial of the Federal court case.6
Following a jury-waived trial in the Superior Court, the trial
judge concluded that liability became reasonably clear on
November 16, 2012, after closing arguments in the Federal court
case. "[I]ndulging Liberty [Mutual]," the judge found that
legitimate questions about Chiulli's culpability and Sonsie's
and Lyons Group's duties remained as the trial date in the
Federal court case approached. The judge also found that
Chiulli had prepared a strong case that, because of negligent
security practices, Sonsie and Lyons Group were liable
regardless of who threw the first punch -- a theory that Liberty
6 Chiulli also asserted a c. 93A claim against Everest, as
to which Everest obtained summary judgment. Chiulli does not
press any claim against Everest on appeal.
8
Mutual "never seemed to really grasp," and that Sonsie and Lyons
Group were unprepared to rebut. Going into trial, the defense
team reported to Liberty Mutual that Sonsie and Lyons Group had
a seventy percent likelihood of prevailing; Liberty Mutual's
claims adjuster believed the company's chances were closer to
eighty percent. As the trial progressed, the defense team's own
estimation of a favorable verdict for their clients dwindled to
fifty-five percent. In the judge's view, the defense team and
Liberty Mutual did not realistically assess the plaintiff's case
and overestimated their own likelihood of success. The judge
concluded that "after the last words had been spoken in closing
arguments, Liberty [Mutual] knew at that moment all it needed to
know," and that "a reasonable insurer could make an objective
review of all the evidence as it actually unfolded during the
course of the trial" and conclude that liability and damages had
become reasonably clear.
The trial judge further found that after the verdict was
returned, Liberty Mutual, by its own assessment, knew that
success on appeal or in posttrial motions was unlikely. The
judge found that Liberty Mutual had information that Chiulli
"was in dire need of cash," and that Liberty Mutual decided that
threatening an appeal "might take the wind out of [his] sails."7
7 A claim note dated November 26, 2012, regarding Liberty
Mutual's "post-trial strategy," observed, "The indication has
9
The judge found that after liability had become reasonably
clear, using Chiulli's financial condition "as a negotiating
lever," Liberty Mutual "made Chiulli continue to wait over
Thanksgiving [and] Christmas," refused to negotiate, and "hoped
that the plaintiff's deteriorated financial condition would lead
to more favorable settlement terms." Indeed, Liberty Mutual
never attempted to settle the case, but finally tendered its
policy limit to Everest on December 28, 2012, after Everest
threatened legal action.
The trial judge assessed nominal damages of $25, reasoning
that Chiulli ultimately suffered no loss of use of money from
Liberty Mutual's withholding of a reasonable settlement offer
because the ultimate settlement with Everest far exceeded the
verdict in the Federal court case. The judge further found that
Liberty Mutual's failure to make a prompt, fair, and equitable
settlement offer was not willful or knowing. The judge awarded
Chiulli his attorney's fees and costs from the day liability
became reasonably clear through the trial of the State court
case.
always been that [Chiulli] is in desperate need of money . . . .
It was agreed that when & if he calls that [defense counsel]
would feel him out & he would do so by indicating that we are
going to go forward w/an appeal. This might take the wind out
of his sails."
10
Discussion. 1. Liberty Mutual's appeal. a. Settlement-
offer defense. Liberty Mutual contends that the trial judge
erred by failing to apply the settlement-offer defense set forth
in G. L. c. 93A, § 9 (3), (4).8 This defense limits the damages,
attorney's fees, and costs that a plaintiff would otherwise be
entitled to recover for a violation of c. 93A if the plaintiff
rejects a reasonable written offer of settlement made within
thirty days of service of a c. 93A demand letter.9
Liberty Mutual argues that it is entitled to this defense
based on Everest's written settlement offer dated January 3,
2013, which was made to Chiulli within thirty days of his demand
8 In reviewing the parties' arguments, we accept the trial
judge's findings of fact unless they are clearly erroneous, but
review her conclusions of law de novo. See T.W. Nickerson, Inc.
v. Fleet Nat'l Bank, 456 Mass. 562, 569 (2010).
9 General Laws c. 93A, § 9 (3), requires plaintiffs to mail
or deliver a written demand letter before filing suit and sets
out a defense to damages, with procedural requirements (none of
which Liberty Mutual satisfied) for asserting the defense:
"Any person receiving such a demand for relief who, within
thirty days of the mailing or delivery of the demand for
relief, makes a written tender of settlement which is
rejected by the claimant may, in any subsequent action,
file the written tender and an affidavit concerning its
rejection and thereby limit any recovery to the relief
tendered if the court finds that the relief tendered was
reasonable in relation to the injury actually suffered by
the petitioner."
Section 9 (4) calls for attorney's fees and costs to be
assessed, but also states that attorney's fees and costs
"incurred after the rejection of a reasonable written offer of
settlement" timely made shall not be awarded.
11
letters.10 Citing Rhodes v. AIG Dom. Claims, Inc., 461 Mass. 486
(2012), Liberty Mutual reasons that because of the relationship
between primary and excess insurers, it could not extend its own
settlement offer to Chiulli, and that it instead had to tender
its policy limit to Everest. See id. at 505-506 (excess insurer
takes over obligation to settle insurance claim once primary
insurer tenders its policy limit). Therefore, Liberty Mutual
argues, any written settlement offer made by Everest necessarily
included Liberty Mutual's contribution.
The main flaw in Liberty Mutual's reasoning is that it
conflates the settlement of two different claims: Chiulli's
underlying claim against Sonsie and Lyons Group in the Federal
court case, which Liberty Mutual insured, and the c. 93A claim
that Chiulli asserted directly against Liberty Mutual.11
Settling the underlying insurance claim, even within thirty days
10Liberty Mutual also asserts that contract principles
required Chiulli to drop his c. 93A claims because Everest's
verbal settlement offer of $5,101,741 on January 2, 2013, see
note 5, supra, constituted acceptance of Chiulli's first demand
letter, in which he offered "to drop any 93A claim upon Liberty
and Everest's offering any reasonable amount." We need not
discuss the legal merits of this argument, as it lacks a factual
basis in the record. Chiulli's first demand letter requested
$5,701,822.25, not "any reasonable settlement offer," to drop
his c. 93A claim.
11The impediments that arise from the relationship between
primary and excess insurers all go to the primary insurer's
ability to settle the underlying claim against the insured, not
the c. 93A claim asserted directly against the insurer or
insurers.
12
of a c. 93A demand letter, does not necessarily resolve the
associated c. 93A claims, as those claims allow a plaintiff to
remedy the separate harm caused by the insurer's unfair
settlement practices. See Clegg v. Butler, 424 Mass. 413, 419 &
n.6 (1997) (recognizing that eventual settlement of underlying
claim does not settle or remedy distinct injury from unjust
delay in making settlement offer). Because of the distinction
between the two types of claims, acceptance of an insurer's
tender of payment for an insured claim "does not vitiate a claim
under G. L. c. 93A as a matter of course, unless the latter
claim has been expressly settled." Auto Flat Car Crushers, Inc.
v. Hanover Ins. Co., 469 Mass. 813, 822 (2014).
Chiulli never received a written settlement offer to
resolve the c. 93A claim he asserted against Liberty Mutual. In
its written settlement offer, Everest offered to settle only
"the underlying litigation" against Sonsie and Lyons Group. The
release agreement Chiulli signed on January 22, 2013, in
connection with the settlement of his claims against Sonsie and
Lyons Group specifically excluded his claims under c. 93A and
c. 176D. Subsequently, Liberty Mutual itself also responded to
Chiulli's c. 93A demand letter without making any offer to
settle. In these circumstances, Liberty Mutual may not properly
avail itself of the settlement-offer defense to limit its
liability for Chiulli's c. 93A claim. We do not suggest that
13
when an insurer receives a c. 93A demand alleging the failure to
effectuate a prompt, fair, and equitable settlement, it may not
make a written settlement offer to resolve both the underlying
insurance claim and any associated c. 93A claims, or that a
reasonable universal settlement offer would not entitle the
insurer to the settlement-offer defense. That is simply not
what happened here.
b. When liability became reasonably clear. The trial
judge determined that Liberty Mutual violated c. 93A12 because
Sonsie's and Lyons Group's liability had become reasonably clear
by the time the Federal court case was submitted to the jury,
yet Liberty Mutual did not make a reasonable offer to settle
Chiulli's claim against Sonsie and Lyons Group, refusing to
tender its policy limit until the excess insurer, Everest,
insisted. Liberty Mutual contests the judge's conclusion on
several grounds.
"Failing to effectuate prompt, fair and equitable
settlements of claims in which liability has become reasonably
clear" is an unfair claim settlement practice. G. L. c. 176D,
12Under G. L. c. 93A, § 9 (1), "any person whose rights are
affected by another person violating the provisions of clause
(9) of section three of chapter one hundred and seventy-six D
may bring an action in the superior court . . . for damages."
The provisions of G. L. c. 176D, § 3 (9), list numerous acts or
omissions of insurers that constitute "[u]nfair claim settlement
practices."
14
§ 3 (9) (f). The standard used to determine whether liability
is "reasonably clear" is an objective one that "calls upon the
fact finder to determine whether a reasonable person, with
knowledge of the relevant facts and law, would probably have
concluded, for good reason, that the insurer was liable to the
plaintiff." Demeo v. State Farm Mut. Auto. Ins. Co., 38 Mass.
App. Ct. 955, 956-957 (1995). Accord McLaughlin v. American
States Ins. Co., 90 Mass. App. Ct. 22, 29-30 (2016); O'Leary-
Alison v. Metropolitan Prop. & Cas. Ins. Co., 52 Mass. App. Ct.
214, 217 (2001). "[T]he 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."
McLaughlin, supra at 31. Liability is not "reasonably clear" if
there is "a legitimate difference of opinion as to the extent of
[the insured's] liability," or a "good faith disagreement" over
the amount of damages. Bobick v. United States Fid. & Guar.
Co., 439 Mass. 652, 660 (2003).
Liberty Mutual takes issue with the above-quoted
formulation of the standard in Demeo, which the trial judge
cited in her decision. Based on selective quotation of isolated
language in other cases, Liberty Mutual argues that an insurer
need not make a reasonable settlement offer unless liability is
15
"plain" and "clear"13 -- so clear, Liberty Mutual insists, that a
plaintiff must be able to demonstrate entitlement to judgment on
the issues of liability and damages as a matter of law.
We reject any notion that decisional law has changed the
standard under c. 176D, § 3 (9) (f), from "reasonably clear" to
"clear," as such an interpretation would be "contrary to the
basic tenet of statutory construction that we must strive to
give effect to each word of a statute so that no part will be
inoperative or superfluous." Ciani v. MacGrath, 481 Mass. 174,
179 (2019). Nor is entitlement to judgment as a matter of law
the governing standard.14 Where, as here, coverage is not in
dispute, whether and when the insured's liability and damages
13For the proposition that liability must be "plain,"
Liberty Mutual relies on a passing reference in a footnote in a
single case, Miller v. Risk Mgt. Found. of the Harvard Med.
Insts., Inc., 36 Mass. App. Ct. 411, 422 n.17 (1994), which was
clearly meant as a shorthand reference to the standard. Liberty
Mutual also cites three instances where decisions refer to
liability and damages becoming "clear," omitting the statutory
modifier "reasonably." See Bobick, 439 Mass. at 659, quoting
Hopkins v. Liberty Mut. Ins. Co., 434 Mass. 556, 566 (2001);
Bolden v. O'Connor Café of Worcester, Inc., 50 Mass. App. Ct.
56, 67 (2000). Nothing in those cases, read in their entirety,
is inconsistent with the Demeo formulation. Indeed, Bolden,
supra at 63 n.12, quotes the Demeo formulation as "[t]he test
used to determine whether a defendant's liability became
'reasonable clear.'"
14For this proposition, Liberty Mutual relies on dicta in a
New Jersey case, Pickett v. Lloyd's, 131 N.J. 457, 473 (1993)
(liability not reasonably clear where insurer raises good-faith
defense based on substantive issue of noncoverage). The case is
inapposite, as here there was no dispute as to coverage.
16
become reasonably clear, which is based on the insurer's
assessment of the facts known or available at any given time, is
not susceptible of precise legal certainty. Indeed, an
insurer's obligation to tender a reasonable settlement offer
under c. 176D, § 3 (9) (f), may arise even where triable issues
of fact remain. See 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"). The
purpose of c. 176D is to prevent insurers from exercising their
superior bargaining power to "forc[e] claimants into unnecessary
litigation to obtain relief." Clegg, 424 Mass. at 419. "[W]hat
matters in the G. L. c. 93A case is whether the [insurer]
reasonably believed that [the insured's] liability was not
clear, or was unreasonable in holding that belief." Bolden v.
O'Connor Café of Worcester, Inc., 50 Mass. App. Ct. 56, 67
(2000). The proposition that an insurer owes no duty to a
third-party claimant "until both liability and damages have been
determined in an appropriate, legal forum or agreed upon" has
been rejected. Clegg, 424 Mass. at 418.
Liberty Mutual further argues that requiring an insurer to
settle a claim before liability is established as a matter of
law violates the insured's right to a jury trial under the
17
Seventh Amendment to the United States Constitution,15 and that
the canon of "constitutional avoidance"16 should guide our
interpretation of c. 176D, § 3 (9) (f). We are not persuaded.
Liberty Mutual was contractually and statutorily required to
make an independent assessment of Sonsie's and Lyons Group's
liability, provide for their defense, and make a reasonable
offer to settle when and if their liability became reasonably
clear. See McLaughlin, 90 Mass. App. Ct. at 31 ("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 view
the insured's liability"); Bolden, 50 Mass. App. Ct. at 67
(insurer "need only demonstrate that [insured's] liability was
not 'reasonably clear' to the [insurer], not to the jury that
heard the [underlying] liability case"). We thus agree with the
trial judge's conclusion that requiring Liberty Mutual to
effectuate a prompt, fair, and equitable settlement of the
15We note that the Seventh Amendment right to a jury trial
in civil cases applies only in Federal court; it is one of the
few provisions of the Bill of Rights that has never been held to
apply to the States. See González-Oyarzun v. Caribbean City
Bldrs., Inc., 798 F.3d 26, 29 (1st Cir. 2015).
16 Under the canon of constitutional avoidance, when faced
with "competing plausible interpretations of a statutory text,"
courts avoid the interpretation that "raises serious
constitutional doubts." Clark v. Martinez, 543 U.S. 371, 381
(2005).
18
Federal court case once liability had become reasonably clear
did "not implicate []or offend [Sonsie and Lyons Group's] right
to a jury trial in the underlying tort case."
Similarly, given that the insurer's obligation to make a
reasonable settlement offer is independent of how a jury might
view the question of liability, we reject Liberty Mutual's
contention that the trial judge "committed legal error as [she]
found 'reasonably clear' liability where the jury split fault
among the defendants and the plaintiff." We have previously
rejected the "suggestion that liability of an insured can never
be reasonably clear, as [a] matter of law, so long as other
potential tortfeasors are apparent." McLaughlin, 90 Mass. App.
Ct. at 31.
c. Causation. Liberty Mutual's argument that the trial
judge erred in finding that its delay in making a reasonable
settlement offer caused Chiulli harm is also without merit.
"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" (quotation and citation omitted). Auto
Flat Car Crushers, Inc., 469 Mass. at 829.17 While, as the trial
17Thus, Liberty Mutual's failure to effectuate a prompt
settlement caused Chiulli injury even if, as Liberty Mutual
19
judge noted, the settlement that Chiulli received to resolve the
Federal court case offset his loss of use damages, the
settlement of the underlying claim did not preclude Chiulli from
recovering on his c. 93A claim. See id. at 824 ("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 [is] treated as an offset against any
damages ultimately awarded, rather than as a bar to recovery").18
d. Conclusion with respect to Liberty Mutual's appeal. We
have no basis to disturb the trial judge's determination that
argues, the evidence did not support the judge's finding that
"Chiulli had to press his counsel to aggressively litigate even
after the verdict to pursue his recovery." The fact that Sonsie
and Lyons Group may have had nonfrivolous grounds on which to
base posttrial motions in the Federal court case does not
require the conclusion, as Liberty Mutual contends, that
liability was not reasonably clear or that Chiulli was not
injured. We are not persuaded by Liberty Mutual's repeated
assertion that it prevailed on the only posttrial issue that was
litigated in the Federal court case -- the issue of prejudgment
interest. That issue was raised in Chiulli's motion to amend
the judgment, not in any posttrial motion filed by the
defendants.
18While loss of the use of funds is the typical measure of
damages from the failure to make a prompt offer of settlement,
we note that where, as here, the claimant has recovered a
judgment on the underlying claim, the entire amount of that
judgment (here, $4,501,654.74) is subject to multiplication if
the violation is found to be willful and knowing. See Auto Flat
Car Crushers, Inc., 469 Mass. at 827-828; Rhodes, 461 Mass. at
498-499; G. L. c. 93A, § 9 (3) ("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").
20
Sonsie's and Lyons Group's liability were reasonably clear by
the time the Federal court case was submitted to the jury,19 or
that Chiulli was injured by Liberty Mutual's unfair insurance
settlement practices.
2. Chiulli's appeal. a. Whether the violation was
willful or knowing. Chiulli contends that the trial judge erred
in concluding that Liberty Mutual's violation was neither
willful nor knowing. See G. L. c. 93A, § 9 (3) ("if the court
finds for the petitioner, recovery shall be in the amount of
actual damages or twenty-five dollars, whichever is greater; or
up to three but not less than two times such amount if the court
finds that the use or employment of the act or practice was a
willful or knowing violation").
To determine whether Liberty Mutual's conduct "rose to the
level of a wilful and knowing violation of G. L. c. 93A, § 2,
our task is limited to reviewing the legal standard applied to
the subsidiary facts found by the judge." Hyannis Anglers Club,
Inc. v. Harris Warren Commercial Kitchens, LLC, 91 Mass. App.
Ct. 555, 560-561 (2017). However, "where a judge's ultimate
findings are inconsistent with [her] subsidiary findings, we
19Given Everest's exposure as the excess insurer, its
"prompt decision to settle, once [Liberty Mutual] paid its
limit, reinforces our determination that the extent of . . .
liability was not a matter of serious doubt." Clegg, 424 Mass.
at 421 n.8.
21
shall set aside the ultimate findings." Simon v. Weymouth
Agric. & Indus. Soc'y, 389 Mass. 146, 148-149 (1983). See
Hyannis Anglers Club, supra at 561 & n.16. Chiulli does not
challenge any of the trial judge's subsidiary findings as
clearly erroneous, but instead argues that those subsidiary
findings compel the conclusion that Liberty Mutual acted in a
willful or knowing manner. We agree.
The trial judge found that Liberty Mutual knew it had
little chance of success on appeal. Liberty Mutual also knew
that Chiulli owed money for his medical bills and was "in dire
need of cash." Faced with a $4.5 million verdict, instead of
making a reasonable offer to settle, Liberty Mutual decided to
take advantage of Chiulli's vulnerable financial condition "in
an attempt to leverage a better settlement" for itself.
Accordingly, Liberty Mutual embarked on a strategy to threaten
an untenable appeal to "take the wind out of [Chiulli's] sails."
The judge explicitly found that after liability had become
reasonably clear, "Liberty made Chiulli continue to wait over
Thanksgiving, over Christmas, forcing him to continue to
litigate and to fight to recover his verdict."
The trial judge's subsidiary findings require the
conclusion that Liberty Mutual's violation was willful or
knowing. "To be wilful or knowing, a violation need not be
malicious, but must constitute more than negligence. Within
22
that range is conduct that is intentionally gainful, . . . or
demonstrates a wilful recklessness or conscious, knowing
disregard for its likely results" (quotation and citations
omitted). Rass Corp. v. Travelers Cos., 90 Mass. App. Ct. 643,
657 (2016). Liberty Mutual's conduct, as found by the judge,
falls squarely within conduct that is "intentionally gainful":
when Liberty Mutual had an obligation to effectuate a prompt,
fair, and equitable settlement, it instead made the deliberate
choice to exploit Chiulli's financial distress for its own
gain.20 See Gore v. Arbella Mut. Ins. Co., 77 Mass. App. Ct.
518, 531-533 (2010). Nothing about this conduct could be
described as anything short of willful or knowing.21
20In concluding that Liberty Mutual's violation was not
willful or knowing, the trial judge observed, "There was good
reason at the outset for Liberty's skepticism about Sonsi[e]'s
[and Lyons Group's] liability at least up and until all the
evidence at the trial had closed." The judge's reliance on the
period "at the outset" as a basis for concluding that the
violation was not willful or knowing focuses on the wrong period
of time -- long before the closing arguments in the jury trial,
which, the judge found, was the timeframe in which Liberty
Mutual's obligation to effectuate a prompt, fair, and equitable
settlement was triggered. It was only after liability became
clear that Liberty Mutual engaged, willfully and knowingly, in
unfair settlement practices.
21Chiulli also argues that he should have been allowed to
amend his complaint, which alleged the failure of Liberty Mutual
to effectuate a prompt, fair, and equitable settlement once
liability had become reasonably clear. See G. L. c. 176D,
§ 3 (9) (f). Chiulli waited until eight years after the
incident, after a summary judgment motion had been served in the
State court case, to assert a claim based on Liberty Mutual's
failure to conduct a reasonable investigation of Sonsie's and
23
Conclusion. So much of the November 8, 2017, amended
judgment as determined that Liberty Mutual's violation of G. L.
c. 93A was not willful or knowing is vacated, and the case is
remanded to the Superior Court for entry of a finding that
Liberty Mutual's violation was willful or knowing, and for a
determination whether the amount of the judgment on all claims
arising out of this case and the underlying occurrence shall be
doubled or tripled under G. L. c. 93A, § 9 (3). In all other
respects, the amended judgment of the Superior Court is
affirmed.
So ordered.
Lyons Group's liability. See G. L. c. 176D, § 3 (9) (d). We
discern no abuse of discretion in the denial of Chiulli's motion
to amend as untimely. See Castellucci v. United States Fid. &
Guar. Co., 372 Mass. 288, 292-293 (1977).