Insurer Reasonably Disputed Claim of Neurological Injuries From Auto Accident.
The arbitration award in the auto accident case that gave rise to this claim for unfair claim settlement practices was over one hundred times the amount of the insurer’s initial offer. However, one fact does not tell the whole story. The Massachusetts Appeals Court concluded that the responsible party’s insurer acted reasonably in its investigation and settlement negotiations, and reversed the trial court’s award of treble damages for unfair claim settlement practices under Massachusetts unfair trade practices and unfair claim settlement practices statutes.
After her collision with the insured, the claimant accompanied her passenger to the emergency room, but did not seek treatment herself. Afterward, the claimant, the passenger and their children spent the day at an amusement park. Later, she began to have headaches, insomnia and back pain. Over time, she became forgetful, disorganized, irritable and, in the words of the court, “less intelligent than she was prior to the accident.”
The medical records the insurer received from the claimant’s attorney contained conflicting opinions about the existence of her injuries. The insurer obtained three independent medical examinations, and retained a neurologist who opined that the claimant had not suffered any neurological damage. The insurer offered $9,000 less than a year after the accident. In response, the claimant demanded $250,000, and then $300,000. The insurer offered $16,000, and then $35,000. Unable to settle, the parties agreed to arbitrate, subject to a high/low agreement and without waiving the claimant’s unfair settlement practices claims against the insurer. The high was $250,000, the insurer’s policy limit, and the low was $35,000. By agreement, the arbitrator was not aware of the high/low agreement. The arbitration award was $905,000. The insurer promptly paid the claimant $250,000.
The trial court found that the insurer had violated the Massachusetts unfair trade practices and unfair claim settlement practices statutes (Chapters 93A and 176D) by failing to conduct a reasonable investigation and failing to effectuate a prompt, fair and equitable settlement when liability was reasonably clear. The Appeals Court reversed, holding that the insurer justifiably relied on the opinions of the neurologist and its seasoned and long-time counsel and therefore conducted a reasonable investigation. Because the insurer relied on expert medical opinions that the claimant did not suffer from neurological damage, the court determined, the disparity between the insured’s offer and the arbitrator’s award did not support the trial court’s conclusion that the insurer failed to settle when liability was reasonably clear.
It’s worth noting that the trial court not only found unfair settlement practices, but found them to be willful, and awarded treble rather than double damages (the court may double or treble Chapter 93A damages for a willful violation, and trebling suggests that it considered the conduct especially unfair). It’s not clear what caused the trial court to view the insurer’s conduct so differently from the Appeals Court. Some trial judges, however, view an insurer’s relationships with defense counsel and experts with a more jaundiced eye than the Appeals Court did here. For example, in a case I reported on a few months ago, a trial judge observed that “there may be little or no recognizable merit to a claim of independent legal review when there exists a longstanding business relationship between the company and private counsel.” In contrast, the Appeals Court here appears to have viewed the fact that the insurer had worked with its attorney for twenty years as a factor supporting the reasonableness of the insurer’s reliance on the attorney’s opinion.