Calandro v. Sedgwick Claims Management Services, Inc.
Chief Judge Patti B. Saris: MEMORANDUM and ORDER entered. For the reasons stated above, the Court finds that Defendants offer in response to the Chapter 93A letter was reasonable and ALLOWS Defendants Motion for Reconsideration (Docket No. 94 ). A trial on the merits and the offset issue will take place on October 30, 2017 at 9 A.M. A final pretrial conference will be held on October 11, 2017 at 3 P.M. (Geraldino-Karasek, Clarilde)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
SEDGWICK CLAIMS MANAGEMENT
GARRICK CALANDRO, AS
ADMINISTRATOR OF THE ESTATE OF
MEMORANDUM AND ORDER
September 6, 2017
INTRODUCTION AND BACKGROUND
Plaintiff alleges that Sedgwick Claims Management Systems,
Inc. (“Sedgwick”) violated Mass. Gen. Laws ch. 176D and Mass.
Gen. Laws ch. 93A (“Chapter 93A”) by failing to make any kind of
reasonable attempt, both pre-judgment and post-judgment, to
settle the wrongful death case involving his mother who died at
a nursing home. The underlying wrongful death case went to trial
in state court and the jury returned a verdict of $1,425,000 in
compensatory damages and $12,514,605 in punitive damages.
After the verdict, Plaintiff sent a demand letter under
Chapter 93A to Sedgwick demanding $40 million. Sedgwick received
the letter on October 2, 2014 and responded to the letter on
October 30, 2014 by offering $1,990,197. This offer appears to
encompass the $1,425,000 compensatory award, prejudgment
interest entered in the amount of $504,966, post-judgment
interest through November 1, 2014 of $58,375 on the compensatory
award, and the costs awarded to Plaintiff of $1,856. Plaintiff
rejected the offer and filed this suit on December 5, 2014.
Defendant filed a motion for summary judgment on the ground
that it made a prompt, fair, and equitable settlement offer
within the “safe harbor” provided by Chapter 93A section 9(3).
The Court denied Defendant’s motion for summary judgment on
April 25, 2017. Docket No. 86. The Court assumes familiarity
with its summary judgment order. Calandro v. Sedgwick Claims
Mgmt. Servs., No. 15-CV-10533, 2017 WL 1496915 (D. Mass. Apr.
25, 2017). The Court rejected Defendant’s position that the
loss-of-use of money standard was the appropriate benchmark for
evaluating the reasonableness of the settlement offer in the
separate Chapter 93A litigation. Id. at *4.
Defendant filed a Motion for Reconsideration on May 3,
2017. Docket No. 94. After a review of the cases cited and the
arguments of the parties, the Court now reconsiders its previous
summary judgment order and holds that the loss-of-use of money
standard was the appropriate benchmark for evaluating the
reasonableness of the settlement offer in the separate Chapter
93A litigation. Defendant’s Motion for Reconsideration (Docket
No. 94) is ALLOWED.
An insurance company commits an unfair claim settlement
practice if it “[f]ail[s] to effectuate prompt, fair and
equitable settlements of claims in which liability has become
reasonably clear.” Mass. Gen. Laws ch. 176D, § 3(9)(f). “[A]ny
person whose rights are affected by another person violating the
provisions of [176D, § 3(9)(f)]” is entitled to bring an action
to recover for the violation under Chapter 93A section 9. Rhodes
v. AIG Domestic Claims, Inc., 961 N.E.2d 1067, 1075 (Mass. 2012)
(citing Mass. Gen. Laws ch. 176D, § 3(9)(f)).
Chapter 93A section 9(3) contains the following provision
relating to the calculation of damages:
At least thirty days prior to the filing of any
such action, a written demand for relief, identifying
the claimant and reasonably describing the unfair or
deceptive act or practice relied upon and the injury
suffered, shall be mailed or delivered to any
prospective respondent. Any person receiving such a
demand for relief who, within thirty days of the
mailing or delivery of the demand for relief, makes a
written tender of settlement which is rejected by the
claimant may, in any subsequent action, file the
written tender and an affidavit concerning its
rejection and thereby limit any recovery to the relief
tendered if the court finds that the relief tendered
was reasonable in relation to the injury actually
suffered by the petitioner. In all other cases, if the
court finds for the petitioner, recovery shall be in
the amount of actual damages or twenty-five dollars,
whichever is greater; or up to three but not less than
two times such amount if the court finds that the use
or employment of the act or practice was a willful or
knowing violation of [ch. 93A, § 2] or that the
refusal to grant relief upon demand was made in bad
faith with knowledge or reason to know that the act or
practice complained of violated [ch. 93A, § 2]. For
the purposes of this chapter, the amount of actual
damages to be multiplied by the court shall be the
amount of the judgment on all claims arising out of
the same and underlying transaction or occurrence,
regardless of the existence or non-existence of
insurance coverage available in payment of the claim.
The underlined portion of the statute was inserted by the
1989 amendment in response to state caselaw which “limited those
damages subject to multiplication under c. 93A to loss of use
damages, measured by the interest lost on the amount the insurer
wrongfully failed to provide the claimant. This amendment
greatly increased the potential liability of an insurer who
wilfully, knowingly or in bad faith engages in unfair business
practices.” Clegg v. Butler, 676 N.E.2d 1134, 1142 (Mass. 1997).
Section 9(3) also provides that a person receiving a demand
letter may, within thirty days of receipt of the letter, make a
written tender of settlement. If the plaintiff rejects the
offer, a defendant can “limit any recovery to the relief
tendered if the court finds that the relief tendered was
reasonable in relation to the injury actually suffered by the
petitioner.” Mass. Gen. Laws ch. 93A, § 9(3) (emphasis added).
Defendant refers to this limitation on recovery as a “safe
harbor.” The meaning of the term “injury actually suffered” in
the safe harbor provision is disputed by the parties. Does it
have the same meaning as “the amount of actual damages” in the
Interpretation of a statute begins with its plain language.
See Anderson v. Nat’l Union Fire Ins. Co. of Pittsburgh PA, 67
N.E.3d 1232, 1237 (Mass. 2017). “All the words of a statute are
to be given their ordinary and usual meaning, and each clause or
phrase is to be construed with reference to every other clause
or phrase without giving undue emphasis to any one group of
words, so that, if reasonably possible, all parts shall be
construed as consistent with each other so as to form a
harmonious enactment effectual to accomplish its manifest
purpose.” Id. (internal citations omitted). The statute provides
that it is for the purposes of the bad faith multiplication that
the amount of the judgment is “the amount of actual damages to
be multiplied.” See Rhodes, 961 N.E.2d at 1078(noting the 1989
amendment only applies to damages “to be multiplied by the
court”). The 1989 amendment does not state that this measure of
actual damages should be used in the safe harbor provision.
My previous summary judgment ruling that “injury actually
suffered” shall be based on the judgment as provided by the 1989
amendment was based on the rationale that an interpretation of
the statute that provides a safe harbor for a post-judgment
offer under the loss-of-use of money standard for pre-judgment
misconduct gives the insurer the perverse incentive to delay
settlement in bad faith “hoping to force the claimant to accept
a lower offer” knowing that worse-comes-to-worse, in the 30-day
safe harbor post-judgment it can simply offer loss-of-use of
money damages. See id. at 1081. This result would thwart the
legislative purpose in enacting the 1989 amendment -encouraging out-of-court settlements of insurance claims and
putting “insurers on notice that if they wilfully fail to
effectuate settlement on a case with high potential for a large
judgment at trial, they are liable for up to treble damages
based on that judgment amount.” Id. at 1079, 1081 (holding in a
different context that “it is clearly the case that if knowing
or wilful prejudgment conduct causes injury, the proper measure
of damages would be the underlying tort judgment.”). The goal of
the 1989 amendment does not dovetail with the goal of the safe
harbor provision in situations involving non-party insurers of
tortfeasors. Any fix, however, will have to come from the
legislature, not the courts.
For purposes of the safe harbor, then, the Court must
determine whether “the relief tendered was reasonable in
relation to the injury actually suffered by the petitioner.”
Mass. Gen. Laws. Ch. 93A § 9(3). The reasonableness of the
October 30, 2014 offer must be judged in relation to “the
interest lost on the money wrongfully withheld by the insurer,
compensating claimants for the costs and expenses directly
resulting from the insurer’s conduct.” Clegg, 676 N.E.2d at
1142. Under this standard, Sedgwick’s offer of $1,990,197 was
reasonable. While the parties disagree on Defendant’s
methodology in calculating this sum, there is no serious dispute
that it is reasonable in relation to the injury actually
suffered under the loss-of-use of money standard.1 Accordingly,
the safe harbor provision applies.
The conclusion, though, does not mean that a trial on
Plaintiff’s claim for a punitive damages award is unnecessary.
Under Rhodes, the Court does have the 93A section 9 statutory
mandate to consider whether there was willful misconduct and
whether bad faith multiplication is required. However, any award
will be cabined by the safe harbor offer.
Defendant argues that no trial is necessary because the
compensatory damages portion of the verdict would be offset by
the settlement already made by Hartford, the nursing home’s
insurance provider. Plaintiff acknowledges that a partial offset
In the circumstances of this case, Plaintiff argues for a
multiplication of the full judgment including compensatory and
punitive damages. Such a doubling or trebling can result in an
award of punitive damages of about 20:1 or 29:1. A
disproportionate award of this magnitude raises serious Due
Process concerns. See generally BMW of N. Am., Inc. v. Gore, 517
U.S. 559 (1996); St. Louis, I.M. & S. Ry. Co. v. Williams, 251
U.S. 63 (1919).
may be necessary but that the Hartford settlement did not fully
resolve the claims against Sedgwick for its own alleged
In November 2014, Hartford settled with Plaintiff for $16
million. Hartford engaged Sedgwick to be a third-party
administrator for the underlying wrongful death case. This
settlement reflected the $1 million policy limit and an
additional $15 million. Of the total settlement, $1,425,000 is
acknowledged to be for the compensatory damages in the
underlying suit. Hartford obtained releases for the nursing home
entities and itself. It did not obtain a release for Sedgwick.
“To the extent that a plaintiff has already 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.” Auto Flat Car Crushers, Inc. v. Hanover Ins.
Co., 17 N.E.3d 1066, 1077 (Mass. 2014). The offset is to be made
after the multiplication of any damages. Id. at 1082. The Court
does not have sufficient information at this time to determine
whether an award in this litigation against Sedgwick for its
misconduct would be doubly paying plaintiffs for Hartford’s
misconduct. Unfortunately, a trial is necessary.
For the reasons stated above, the Court finds that
Defendant’s offer in response to the Chapter 93A letter was
reasonable and ALLOWS Defendant’s Motion for Reconsideration
(Docket No. 94). A trial on the merits and the offset issue will
take place on October 30, 2017 at 9 A.M. A final pretrial
conference will be held on October 11, 2017 at 3 P.M.
/s/ PATTI B. SARIS
Patti B. Saris
Chief United States District Judge
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