Shaun Harrington was subcontracted to install a well on the McLaughlins’ property (sorry for the bad pun in the title). Unfortunately, in July and August of 2003, this well starting pumping salt water onto the McLaughlin’s irrigation system causing extensive damage.

A claim was submitted to Harrington’s insurer, American States Insurance Company (ASIC) on November 3, 2003. After not hearing back from ASIC’s adjuster for quite some time, the McLaughlins’ insurance agent called the ASIC’s adjuster, Dresner, on January 26, 2004 inquiring about the status of the claim. After the adjuster spoke with Rachel McLaughlin, Dresner documented the call, sent a letter requesting documents from Harrington and then took no further action until the McLaughlins’ agent called ASIC on February 19, 2004. When Rachel McLaughlin spoke to another adjuster at ASIC during Dresner’s absence, they verbally denied coverage stating the plants may have been damaged by other causes. The adjuster for ASIC was verbally abusive to McLaughlin and when pressed why ASIC had not sent an adjuster out to the property to adjust the damages, the adjuster for ASIC said they had no intention of doing so.

In early April 2004, the original claims adjuster, Dresner, left on medical leave and the case was transferred to another adjuster, Sharon Fox, who was prompted to send someone out to inspect the property. On May 18, 2004, almost a year after the loss, a report was filed by the IA documenting the damages. Fox and her supervisor, Tedesco then left ASIC in May of 2004 so the file was transferred to another adjuster, Suzanne Greer. In June of 2004, Greer denied McLaughlins’ claim, but ASIC’s attorney did not advise the McLaughlins’ attorney of the denial.

The McLaughlins’ filed suit against Harrington and ASIC, and both denied liability. After winning their suit against Harrington, the McLaughlin’s filed a bad faith suit against ASIC claiming unfair settlement practices. The Appellate Court of Massachusetts concluded that ASIC failed to conduct a reasonable investigation of the McLaughlins’ claim, and that it failed to make a reasonable offer of settlement after liability of its insured became reasonably clear. The court also ruled that the trial judge erred in his failure to award the McLaughlins damages based on the loss of use of the funds ASIC should have offered in settlement once Harrington’s liability became reasonably clear.1

Massachusetts General Laws Annotated c. 93A, § 2(a), and c. 176D, § 3(9)(f), “require an insurer… ‘promptly to put a fair and reasonable offer on the table when liability and damages become clear, either within the thirty-day period set forth in G.L. c. 93A, §9(3), or as soon thereafter as liability and damages make themselves apparent.’2 “The fact finder determines ‘whether a reasonable person, with knowledge of the relevant facts and law, would probably have concluded, for good reason, that the insure[d] was liable to the plaintiff.’”3 Additionally, “if a c. 93A violation forces someone to incur legal fees and expenses that are not simply those incurred in vindicating that person’s rights under the statute, those fees may be treated as actual damages in the same way as actual damages in the same way as other losses of money or property.”4

The trial judge concluded that Harrington’s liability was reasonably clear by May, 2004 due to the report submitted by the IA claiming the plants were damaged by salt water. The appellate court, in admonishing ASIC, stated that, “it would significantly diminish, if not defeat, a principal purpose of G.L. c. 176D and 93A if an insurer could refuse to make any offer of settlement whatsoever in any case in which potential tortfeasors other than its insured might share liability.” Here, even though the irrigation company, Waterworks, and the McLaughlins’ insurer, Assurance, carried partial liability that did not excuse ASIC from making an offer once Harrington’s liability became reasonably clear.

After determining that a reasonably investigation was not conducted by ASIC, the court awarded the McLaughlins’ attorney’s fees and expenses incurred in prosecution of their underlying tort suit against Harrington, Waterworks and Assurance under G.L. cc. 93A and 176D. The court noted that the trial judge accordingly properly considered the fees incurred by the McLaughlins in prosecution of their claim against Harrington as damages incurred as a consequence of ASIC’s failure to make a reasonable offer of settlement when Harrington’s liability had become reasonably clear.

I leave you with a quote from retired General Colin Powell which is good advice for ASIC, “[n]ever neglect details. When everyone’s mind is dulled or distracted the leader must be doubly vigilant.”

1 McLaughlin v. American States Ins. Co., No. 15-P-729, 2016 WL 4248874 (Mass. App. Ct. Aug. 12, 2016).
2 Bobick v. United States Fid. & Guar. Co., 439 Mass. 652, 659, (2003), quoting Hopkins v. Liberty Mut. Ins. Co., 434 Mass. 556, 566 (2001).
3 O’Leary-Alison v. Metropolitan Property & Cas. Ins. Co., 52 Mass.App.Ct. 214, 217 (2001), quoting Demeo v. State Farm Mut. Auto. Ins. Co., 38 Mass.App.Ct. 955, 956-957 (1995).
4 Siegel v. Berkshire Life Ins. Co., 64 Mass.App.Ct. 698, 703 (2005).