Calandro v. Sedgwick Claims Management Services, Inc.

Filing 86

Chief Judge Patti B. Saris: ORDER entered. MEMORANDUM AND ORDER DENYING 65 MOTION for Summary Judgment. (DaSilva, Carolina)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
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Plaintiff,
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v.
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SEDGWICK CLAIMS MANAGEMENT
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SERVICES,
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Defendant.
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___________________________________)
GARRICK CALANDRO, AS
ADMINISTRATOR OF THE ESTATE OF
GENEVIEVE CALANDRO,

Civil Action
No. 15-10533

MEMORANDUM AND ORDER
April 25, 2017
Saris, C.J.
INTRODUCTION
Plaintiff Garrick Calandro, as administrator of the estate
of Genevieve Calandro, alleges that Sedgwick Claims Management
Systems, Inc. (“Sedgwick”) violated Massachusetts General Laws
Chapter 176D (“Chapter 176D”) and Massachusetts General Laws
Chapter 93A (“Chapter 93A”) by failing to make any kind of
reasonable attempt both pre-judgment and post-judgment to settle
the negligence and wrongful death case involving his mother who
died at a nursing home. Defendant Sedgwick has moved for summary
judgment on the ground that it did make a prompt, fair, and

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equitable settlement offer within the “safe harbor” provided by
Chapter 93A. After hearing, Defendant’s Motion for Summary
Judgment (Docket No. 65) is DENIED.
FACTUAL BACKGROUND
The facts below are interpreted in the light most favorable
to the non-moving party and are undisputed except where stated.
On August 12, 2011, Plaintiff filed a wrongful death action
against the Radius Group (“Radius”) alleging that his 92 yearold mother’s death was caused by negligence on August 16, 2008
at a nursing home. Radius, the nursing home operator, was under
a liability insurance policy issued by Pacific Insurance
Company.1 The policy is an occurrence policy in the amount of $1
million covering the period from June 1, 2008 to June 1, 2009.
Pacific Insurance Company is a member of the Hartford Insurance
Group (“Hartford”).
Hartford engaged Sedgwick to be a third party administrator
(“TPA”) for the underlying wrongful death case. As a TPA,
Sedgwick was authorized to handle claims under Hartford’s
policies and provide claims adjusting and administrative
services. Mary Blair was Sedgwick’s claim handler and supervisor
for the underlying wrongful death claim. Ms. Blair’s settlement

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There were five or six Radius entities, four of which were
covered by the liability insurance policy.
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authority was capped by Hartford at $125,000. She needed to get
authority from Hartford to settle above that amount.
While the case was pending, Plaintiff made the following
settlement demands:
1.
2.
3.
4.

October 12, 2011: $500,000;
November 12, 2013: $500,000;
March 2014: $1,000,000;
July 3, 2014: $1,000,000.

In early July 2014, a co-defendant physician settled with
Plaintiff for $250,000.
The case went to trial. On July 21, 2014 the jury returned
a verdict of $1,425,000 in compensatory damages and made a
finding of gross negligence. On July 22, 2014, following
additional testimony, the jury awarded Plaintiff $12,514,605 in
punitive damages. On July 31, 2014, Hartford offered to settle
for $1 million, Plaintiff rejected this offer. On August 1,
2014, the Court entered judgment in the amount of $14,447,906.51
including pre-judgment interest and costs.
On September 30, 2014, Plaintiff sent a demand letter under
Chapter 93A section 9 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 represented 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

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award, and the costs awarded to Plaintiff of $1,856. Plaintiff
rejected this offer and filed this suit on December 5, 2014.
In November of 2014, Hartford settled with Plaintiff for
$16 million, reflecting the $1 million policy limit and an
additional $15 million. Of the total, $1,425,000 is acknowledged
to be for the compensatory damages in the underlying suit.
Hartford obtained releases for the Radius entities and itself.
It did not obtain a release for Sedgwick.
DISCUSSION
I.

Summary Judgment Standard
Summary judgment is appropriate when there is “no genuine

dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). To succeed
on a motion for summary judgment, the moving party must
demonstrate that there is an “absence of evidence to support the
nonmoving party’s case.” Sands v. Ridefilm Corp., 212 F.3d 657,
661 (1st Cir. 2000) (citing Celotex Corp. v. Catrett, 477 U.S.
317, 325 (1986)). Once such a showing is made, “the burden
shifts to the nonmoving party, who must, with respect to each
issue on which [it] would bear the burden of proof at trial,”
come forward with facts that demonstrate a genuine issue. Borges
ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010)
(citing Celotex, 477 U.S. at 324).

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II.

Chapter 93A Framework
a. The Statute
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
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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.

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b. The Rhode to Recovery
The key case on point is Rhodes v. AIG Domestic Claims,
Inc., 961 N.E.2d 1067 (Mass. 2012), which involved the
calculation of multiple damages under Chapter 93A for postjudgment unfair insurance settlement practices in personal
injury actions. In Rhodes, plaintiffs suffered catastrophic
injuries in a tractor-trailer crash. At trial the plaintiffs
secured judgment of $11.3 million. Prior to trial, the
plaintiffs had made settlement demands on the primary and excess
insurers. More than eight months after the jury verdict, the
insurers and the plaintiffs settled the tort action, and the
appeals were dropped. Before the settlement, though, plaintiffs
brought a separate action against the primary insurers, the
excess insurer and its claims administrator, AIGDC. The
plaintiffs alleged willful and knowing violations of Chapters
93A and 176D both before the underlying tort action and after
judgment entered. Post judgment, AIGDC offered $7 million,
(substantially less than the judgment amount) to resolve all
claims. The trial judge called this offer “insulting.”
The Supreme Judicial Court concluded that the plaintiffs
were entitled to recover damages under Chapter 93A on account of
the defendants’ post-judgment violation -– i.e., the pathetic
post-judgment offer of settlement. Specifically, it held that
the calculation of multiple damages was based on the underlying
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judgment in the plaintiffs’ tort action, stating: “Under the
plain language of the 1989 amendment, if a defendant commits a
wilful or knowing c. 93A violation that finds its roots in an
event or transaction that has given rise to a judgment in favor
of the plaintiff, then the damages for the c. 93A violation are
calculated by multiplying the amount of the judgment.” Id. at
1078. The Supreme Judicial Court stated that “nothing in the
text of c. 93A, § 9, states that damages are to be calculated
differently in the case of a postjudgment rather than a
prejudgment failure to effectuate settlement, and 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.” Id. at 1079. It declined to address whether the
pre-judgment insurance settlement violation before the verdicts
in the tort case caused injury to plaintiffs because, it
reasoned, plaintiffs may not recover twice for pre- and postjudgment violations. Id. at 1071, 1077.
The Supreme Judicial Court rejected the argument that
multiplying the amount of the judgment in the tort action
created a “grossly excessive” award of punitive damages under
the Fourteenth Amendment due process clause. It held:
Under c. 93A, the award of punitive damages is
significantly circumscribed. The judge may only award
them if the defendant acted willfully or knowingly,
and the award must be between two and three times
compensatory damages included in a judgment on any
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claim arising from the same and underlying transaction
or occurrence. G.L. c. 93A, § 9(3).
Id. at 1081 (emphasis added). If a judge finds that an insurer’s
conduct is wilful and knowing, the plaintiff is entitled to an
award of multiple damages based on the judgment only, not
“compensatory damages for loss of the use of funds.” Id. at
1082.
In sum, in cases involving personal injury claims under
insurance policies where the insurer fails to effectuate a
prompt settlement after liability has become clear, the judgment
in the underlying tort action is the amount that is to be
multiplied where an insurer is determined to have engaged in
willful or knowing misconduct even though it “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.” Auto Flat Car Crushers, Inc. v.
Hanover Ins. Co., 17 N.E.3d 1066, 1080 (Mass. 2014). The Court
could find no cases analyzing the proper method of calculating
damages for a claim of unfair insurer settlement claims
practices where the underlying tort judgment includes both
compensatory and punitive damages.
c. Safe Harbor
Defendant claims its post-judgment settlement offer of
$1,990,197 in response to the Chapter 93A demand letter was

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reasonable and therefore cabins its chapter 93A liability under
the safe harbor provision. Defendant’s argument rests on its
view of section 9(3) that an offer is reasonably related to the
“injury actually suffered” if it reflects the plaintiff’s loss
of use of the money awarded. Because it made its offer within
thirty days of receipt of the demand letter, Defendant argues
that its liability is limited to the amount offered.
Plaintiff responds that if an insurer commits a willful or
knowing Chapter 93A violation either pre- or post-judgment, it
is liable for damages calculated by multiplying the amount of
the full judgment in the underlying litigation, not by
calculating the injury actually suffered under the loss-of-use
of money standard. The underlying judgment, he argues, is the
benchmark for evaluating the reasonableness of the settlement
offer in the separate Chapter 93A litigation. Thus, in his view,
the safe harbor protects Defendant only if it offered the full
amount of the underlying judgment of $14 million.
Defendant’s argument presents a novel question. In this
case, judgment entered in the underlying litigation, thus
triggering the 1989 amendment. As such, in the typical case
involving insurers’ unfair settlement practices, “actual
damages” are “taken to be the amount of the judgment for the
purpose of the bad faith multiplication.” R.W. Granger & Sons v.
J&S Insulation, Inc., 754 N.E.2d 668, 682 (Mass. 2001).
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Defendant argues that it is entitled to the more limited lossof-use of money measure of damages because it offered a
settlement within the statutory safe harbor of thirty days of
the demand post-judgment which provides a separate standard for
evaluating “injury actually suffered.” However, that
interpretation would essentially vitiate the 1989 amendment to
the same statutory section by failing to punish an insurer for
pre-judgment misconduct in claims settlement practices. It is
also inconsistent with the holdings in Rhodes and Auto Flat that
the actual injury suffered for the purpose of calculating
damages post-judgment is taken to be the amount of the judgment.
If Defendant’s interpretation were correct, insurers could
engage in egregious claims settlement practices and simply wait
until after judgment to offer the amount of judgment plus
interest. Thus an insurer would have an incentive to delay
settlement to force a claimant to take a lower offer. Here
Defendant cites no cases that the settlement offered in the
“safe harbor” must be reasonable under a loss-of-use standard
measure once judgment has entered. That said, even though the
judgment is the appropriate benchmark, it is unclear whether in
the safe harbor period an insurer need only offer the portion of
the judgment that reflects compensatory damages, costs, and
interest. Must the offer also include the punitive damages
portion of the judgment? Even assuming the answer is yes, the
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Court must determine whether multiplying a judgment that
includes punitive damages implicates due process concerns.
d. Claim of Pre-Judgment Misconduct
Interpreting the facts in the light most favorable to
Plaintiff, a reasonable factfinder could easily find that
Defendant engaged in a willful and knowing pre-judgment
violation of Chapter 93A and, as such, Plaintiff would be
entitled to damages in multiplication of the compensatory
damages of the judgment.
Defendant received Plaintiff’s claim on August 17, 2011. At
the time the suit was filed, Plaintiff made an initial demand of
$500,000. Docket No. 73, Ex. 15, SED00706. The complaint alleged
a wrongful death and included an allegation of gross negligence.
Defendant, through Ms. Blair, set up a paper claims file, set a
reserve for the claim in the amount of $85,000, assigned
Lawrence Kenney as counsel in the case and directed Kenney to
hire an investigator. Ms. Blair did not consider making a
settlement offer at that time.
After the complaint was filed and discovery was ongoing,
Ms. Blair provided Hartford with an update on the claim. On
August 16, 2013, she informed Hartford that she was having
trouble locating witnesses and a portion of Ms. Calandro’s
medical chart, but maintained that a reserve of $85,000 was
still appropriate. On August 21, 2013, Ms. Blair discussed the
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pending claim on a call with Kenney. Ms. Blair’s handwritten
notes from the phone call suggest Defendant was planning to
withhold the identity of two nurses involved in the underlying
wrongful death case because “of their conflicting versions and
the lack of the incident report and internal investigation
report.” Docket No. 73, Ex. 15, SED00441.
Plaintiff made a second settlement demand of $500,000 on
November 13, 2013 during the deposition of co-defendant Dr.
Wahl. No immediate response was made to this demand. Dr. Wahl’s
adjuster emailed Kenney on January 14, 2014 following up on a
previous unanswered email he sent to Kenney regarding joint
settlement of the case. Kenney responded sixteen days later
stating that Ms. Blair was willing to work with Dr. Wahl’s
insurer on a fifty-fifty basis and could contribute up to
$200,000 if necessary, but would prefer a lower amount. Docket
No. 73, Ex. 15, SED01015. Ms. Blair was copied on that email and
in response asked Kenney to conduct a “trial analysis” report to
send to Hartford so she could get additional settlement
authority.
On February 7, 2014, Kenney emailed Ms. Blair his trial
analysis report, finding that “[d]efending this case on
liability will be very difficult,” and estimated the likely
verdict range to be “$300,000-$500,000.” Docket No. 73, Ex. 15,
SED01002. He also wrote, “[i]t is very likely if not assured
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that there will be an award against our insured at least and
probably against both your insured’s [sic] and the defendant
physician.” Docket No. 73, Ex. 15, SED00997-01003. Ms. Blair
stated during her deposition that she did not request any
additional settlement authority from Hartford at that time. On
February 7, 2014, Dr. Wahl’s insurer made a joint offer to
settle for $275,000, Defendant contributing $125,000. Plaintiff
did not accept that offer.
On April 8, 2014, Plaintiff advised Defendant that he
withdrew his initial demand of $500,000 and had a new joint
demand of $1,000,000. Docket No. 73, Ex. 15, SED00951-952. In
that letter, Plaintiff also suggested Defendant may be engaging
in unfair settlement practices under Chapters 176D and 93A due
to its failure to settle the case in a reasonable time.
The case went to trial in July 2014. On July 7, 2014, Ms.
Blair requested an increase in settlement authority to $300,000,
which was granted. Docket No. 73, Ex. 15, SED01162-64. Ms. Blair
never made an offer to settle with Plaintiff for $300,000. On
July 15, 2014, Ms. Blair sent an email to update Hartford on the
status of the case: “I am not going to attend tomorrow’s motion
hearing or the impaneling, but I will however attend the trial
proceedings. Plaintiff’s counsel has known me for many years and
I do not want to be available with settlement authority (Do I

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still have $250K?) until after the trial starts.” Docket No. 73,
Ex. 15, SED01396.
Under such facts, a reasonable factfinder could find that
Sedgwick engaged in unfair settlement practices that compelled
Plaintiff into litigation. Plaintiff originally filed the
complaint almost three years before the case went to trial. The
only offer Sedgwick made to settle the case was in a joint
resolution with Dr. Wahl for $275,000. Even though Ms. Blair was
given settlement authority of $300,000, she never made an offer
to settle at that amount even when Kenney’s trial analysis
suggested that defending the case on liability would be “very
difficult” and estimated a verdict range of $300,000-$500,000.
The record could reasonably support a conclusion that Defendant
knowingly and willfully forced Plaintiff into unnecessary
litigation when liability was reasonably clear.
e. Business of Insurance
Defendant claims it is not subject to Chapter 176D because
it is not engaged in the “business of insurance.” The Court
finds this argument to be without merit. Defendant was hired by
an insurer in this case to settle claims. In Rhodes, the TPA
that was responsible for handling the administration of
plaintiff’s claims on behalf of the excess insurer was
determined to be liable along with the excess insurer for
violations of Chapter 93A. 961 N.E.2d at 1075 n.4. To be sure,
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the Supreme Judicial Court was not faced with a challenge to the
TPA’s liability under the statute. Still, Plaintiff has the
better argument that Sedgwick is in the “business of insurance.”
Because Defendant is a TPA responsible for handling the
administration of Plaintiff’s claims on behalf of the insurer,
Hartford, Defendant is subject to Chapter 176D.
Defendant claims an entity is only subject to Chapter 176D
liability when it “interposes” itself between the claimant and
an insurer in an effort by the insurer to “evade its statutory
duties imposed by G.L. c. 176D by delegating its work.” Morrison
v. Toys “R” Us, Inc., 806 N.E.2d 388, 391 (Mass. 2004) (citing
Miller v. Risk Mgmt. Found. Of the Harvard Med. Insts., Inc.,
632 N.E.2d 841, 845-46 (Mass. App. Ct. 1994)). Defendant tries
to argue that since Defendant and Hartford are independent
entities, and Defendant’s settlement authority was limited by
Hartford, Defendant cannot truly interpose itself between the
claimant and the insurer and therefore is not regulated by
Chapter 176D.
Nowhere in the Miller opinion did the court rely on the
fact that the claims administrator was a subsidiary of the
insurance company to reach its decision. Instead, the Miller
Court stated that “Risk Management, as claims negotiator and
potential settler, has been interposed between the insurer CRICO
and the claimant, and nothing seems more appropriate than to
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apply to it the standards of fair dealing expressed in c. 176D
§ 3(9).” 632 N.E.2d at 846.
Defendant is a TPA. It was hired by Hartford to negotiate
and settle claims on its behalf, and its role was to interpose
itself between the insurer and the claimant. As such, it is
subject to Chapter 176D. See Miller, 632 N.E.2d at 846 (finding
liability when the claims negotiator interposed itself between
the insurer and the claimant); Cf. Bingham v. Supervalu, Inc.,
806 F.3d 5, 11-12 (1st Cir. 2015) (finding that unlike a TPA,
the Defendant, did not “interpose” itself between the claimant
and the insurer).
ORDER
Defendant Sedgwick’s Motion for Summary Judgment (Docket
No. 65) is DENIED.

/s/ PATTI B. SARIS
Patti B. Saris
Chief United States District Judge

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