The court in Rhodes v. AIG Domestic Claims, Inc., 461 Mass. 486 (2012), held that an excess insurer was liable to the plaintiff in an underlying lawsuit against its insured for statutory damages totaling double the amount of the judgment entered against the insured because the insurer’s improper settlement conduct after liability and damages had become “reasonably clear” – including making inadequate settlement offers, delaying mediation by stating that it needed additional discovery, and failing to make an initial settlement offer until a few weeks before trial - constituted unfair claims settlement practices in violation of the Massachusetts Insurance Code, G.L. c. 93A, § 9 and G.L. c. 176D, § 3(9)(f). The underlying claim, which resulted in an $11.3 million judgment against the insured trucking company, arose out of a collision between a passenger car and one of the insured’s trucks. The defendants filed an appeal of the judgment and, while the appeal was pending, the plaintiff sued the excess insurer for failing to effectuate a “prompt, fair, and equitable settlement” of its claim under G.L. c. 176D, § 3(9)(f). In post-trial settlement negotiations, the parties eventually settled the negligence claim for $9 million. Agreeing with the trial court that the excess insurer had “willfully and knowingly” breached its duty to make prompt and sufficient settlement offers to the plaintiff once liability (including damages) had become reasonably clear, the Supreme Judicial Court held that the proper measure of damages under G.L. c. 93A, § 9 and G.L. c. 176D, § 3(9)(f), was a multiple (two or three times) of the amount of the judgment entered in favor of the plaintiff. Therefore, the court held that the excess insurer was liable to the underlying plaintiff for statutory damages of approximately $22 million.
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