Massachusetts General Law Chapters 93A and 176D, long a compelling and formidable mechanism for consumers, has been extended beyond its usual
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An employee for a subcontractor sustained
injuries in a fall on a project site and sued the general contractor of the
project for negligence. The insurance carrier of the general contractor agreed
to indemnify the general contractor subject to a reservation of rights that
included reimbursement of defense costs in the litigation. Instead, however,
the insurance carrier waited eight months before paying any of the general
contractor’s defense costs and only did so after the general contractor sued
the insurance carrier for breach of contract, as well as violations of Chapter
93A and Chapter 176D.
The trial court found that the insurance
carrier fulfilled its contractual obligations by acknowledging its obligations
to pay defense costs at the outset of the litigation. The Appeals Court,
however, disagreed. It determined that an unnecessary and unreasonable delay in
payment can constitute a violation of both Chapters 93A and 176D. Although the
Court refused to define unreasonable delay, the delay of seven months in this
litigation was long enough for the insurance carrier to be liable for any
penalties imposed by Chapters 93A and 176D.
The decision serves as a serious warning
to insurance carriers that delay reimbursement as courts may find that the
insured may still have damages, even if the legal fees are eventually paid,
because it may alter the manner in which an insured defends a litigation.
Certainly, the threat of suffering the penalties of Chapters 93A and 176D may
be enough to limit the number of disputes between insurance carriers and their
insured.
Casey Sack is an Associate in the Boston
law firm of Rudolph Friedmann LLP focusing her practice on all aspects of
commercial litigation. She can be
contacted by email at csack@rflawyers.com
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