Under Massachusetts law, Chapter 93A and Chapter 176D encourage the settlement of insurance claims and discourage insurers from forcing claimants into unnecessary litigation. Specifically, Chapter 93A bars insurers from committing “unfair or deceptive acts or practices” and creates a private right of action for consumers injured by those practices. Chapter 176D defines fourteen specific actions as “unfair claim settlement practices” that violate Chapter 93A for firms “in the business of insurance.” Thus, when insurers violate the provisions of Chapter 176D, they also violate Chapter 93A.
An often-litigated provision of 176D requires insurers to effectuate a prompt, fair, and equitable settlement once “liability [has] become reasonably clear.” Mass. Gen. Laws ch. 176D, § 3(9)(f). In other words, as soon as liability is clear, an insurer must put a reasonable settlement offer on the table.
When is liability reasonably clear?
The term “liability,” as used in Chapter 176D, encompasses both fault and damages.
Liability (or fault) is reasonably clear when a reasonable person, with knowledge of the relevant facts and law, would probably conclude, for good reason, that the insured was liable to the plaintiff. Liability is not reasonably clear if an element of the underlying claim is subject to a good faith disagreement.
Massachusetts courts have indicated that a factfinder can consider multiple factors to determine whether damages are reasonably clear. Those factors include: (i) the insurer’s evaluation of the claimants demand; (ii) insurance industry practices in similar circumstances; (iii) expert testimony that the insurer violated sound claims practices; and (iv) whether there was a legitimate difference of opinion or good faith disagreement as to the scope of damages.
What is a reasonable settlement offer?
A settlement offer is considered reasonable if it reflects a fair and appropriate resolution given the circumstances and the claimant’s demands. Importantly, a claimant has no obligation to make a reasonable settlement. In other words, an insurer must attempt to resolve a claim promptly and fairly even if the claimant’s settlement demands are unreasonable.
Experienced Counsel
We recommend claimants consult with experienced counsel to determine if an insurer has violated Chapter 93A and Chapter 176D by failing to make a prompt, fair and equitable settlement offer once liability has become reasonably clear. If a violation has occurred, a claimant may be entitled to double or treble damages along with their attorney’s fees and costs.
