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By: Ben N. Dunlap
A claimant’s demand to settle a case within the limits of a defendant’s liability insurance policy can lead to a variety of outcomes driven by the particular allegations, evidence, liability and damages evaluations, procedural posture, and law of the jurisdiction.
In one case addressing these issues, the First Circuit Court of Appeals is considering arguments that a third-party claims administrator failed to make a reasonable settlement offer when liability became “reasonably clear” in an underlying suit alleging wrongful death and negligence against a nursing home. In Calandro v. Sedgwick Claims Management Services, the First Circuit recently heard arguments by the estate of Genevieve Calandro, seeking to revive claims under the Massachusetts Consumer Protection Statute, Chapter 93A, and Insurance Practices Statute, Chapter 176D, arising from the settlement of the underlying lawsuit. Sedgwick was the third-party claims administrator handling the estate’s claim against the nursing home. With policy limits of $1 million, in the course of the litigation the estate had made demands of $500,000 (twice) and $1 million (again twice). Sedgwick’s best pre-trial offer was $300,000, which the estate declined.
In 2014, a jury awarded the estate $1.4 million in compensatory damages and $12.5 million in punitive damages. After the trial in the underlying suit, the estate served a demand letter on Sedgwick seeking $40 million under Chapters 93A and 176D, alleging the claims administrator had failed to make a reasonable offer of settlement once liability of the nursing home became “reasonably clear.” Sedgwick offered $2 million in response. The estate then filed suit against Sedgwick in Massachusetts federal court alleging unfair settlement practices in violation of Chapters 93A and 176D.
After a bench trial, the Court concluded Sedgwick did not violate Chapters 93A or 176D because it made two “reasonable” offers to settle the estate’s pain and suffering claims prior to trial, and Sedgwick had no obligation to make an offer to settle the wrongful death claim, because causation was fairly disputed and therefore liability on that claim was not “reasonably clear” at any point in the litigation.
The estate argues on appeal that the trial Court misconstrued the significance and timing of the evidence available to Sedgwick as it was evaluating the underlying case, focusing on a particular expert report disclosed by the estate in 2013. Based on the report, the estate argues liability should have been “reasonably clear” long before Sedgwick made an initial pre-trial offer. Sedgwick argues the Court correctly concluded liability was not “reasonably clear,” in part because the estate’s expert report was not disclosed in full until the spring of 2014.
The insurance coverage bar will be paying close attention when the First Circuit issues its decision.
If you have any questions or would like more information, please contact Ben Dunlap at [email protected].