Calculating 93A Damages

18 Feb

Consumers in Massachusetts have long been protected by the strength and force of M.G.L. c. 93A, the Massachusetts Consumer Protection Statute. The statute makes “unfair methods of competition and unfair or deceptive acts or practices” in Massachusetts unlawful. Companies that are found to be in violation of the statute can face penalties in the amount of triple the consumers’ damages and, my favorite part, responsible for the consumers’ attorney’s fees.

Sending a company a 93A letter can be a very effective way of resolving a consumer dispute because the company is far better-off settling the dispute, rather than forcing litigation and face paying triple the damages; plus attorneys’ fees. A few years ago, a friend of mine did not realize the airline on which he was planning to travel required him to bring paper tickets with him to the airport. Even though the airline had a record of his ticket and clearly knew he was the correct passenger, they forced him to buy a second ticket and refused to refund the value of the first ticket. After receiving a 93A letter, the airline quickly refunded his money.

The Supreme Judicial Court in Marcia Rhodes et al. v. AIG Domestic Claims, Inc., et al., SJC-10911, slip op. (Mass. February 10, 2012), was faced with the question of how to calculate damages for a 93A violation in the handling of a tort case.

In January of 2002, Marcia Rhodes was catastrophically injured when an eighteen-wheel tractor-trailer crashed into the rear of her vehicle. The impact fractured Ms. Rhodes’ spinal cord, fractured a number of ribs, and left her with permanent paraplegia. More than two and a half years later, Ms. Rhodes (along with loss of consortium claims by her husband and daughter) obtained a jury verdict in the amount of $11.3 million. See id.

Ms. Rhodes, her husband and daughter, all brought 93A claims against the insurance companies for “failing to effect a prompt, fair, and equitable settlement…” of a claim in which liability became reasonably clear as required by M.G.L. c. 176D, §3(9)(f). The case went to trial in the Massachusetts Superior Court and the judge found the primary insurer was not liable for unfair settlement practices, but found the excess insurer to have engaged in wilful and knowing violations of 93A and 176D. The judge found the plaintiffs’ damages to be the “loss of use” (more commonly known as interest) of the money they received after trial. Due to the fact that the insurer’s violation was wilful and knowing, the judge awarded double damages. See id.

The plaintiffs appealed to the Appeals Court and then sought further appellate review to the Supreme Judicial Court (hereinafter “SJC”). The SJC’s holding focused completely on a straight interpretation of the statute and more particularly, a section of the statute added by amendment in 1989. The SJC noted, “There is general consensus among courts and commentators that the 1989 amendment was intended to increase the potential penalties for insurers who engaged in unfair claim settlement practices….” The significant portion of the 1989 amendment is contained in M.G.L. c. 93A, § 9(3), which states the following:

“‘[I]f the court finds for the petitioner, recovery shall be in the amount of actual damages or twenty-five dollars, whichever is greater; or up to three but not less than two times such amount if the court finds that the use of employment of the act or practice was a willful or knowing violation of [c. 93A, § 2]…. For the purposes of this chapter, the amount of actual damages to be multiplied by the court shall be the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence, regardless of the existence or nonexistence of insurance coverage available in payment of the claim’ (emphasis added).”

Based upon the language of the statute emphasized above, the SJC held that rather than doubling the plaintiffs’ “loss of use,” the Superior Court should have doubled the entire value of the $11.3 million judgment. In a world where insurance companies are being bailed out by the government and being allowed to steam-roll consumers, I see this case as a dramatic victory for the underdog. Unfortunately, in the conclusion, the SJC went on to suggest the Legislature provide an amendment in the future to lessen the compensable damages under 93A or to develop “a special measure of punitive damages to be applied in unfair claim settlement practice cases brought under c. 176D, § 3(9)…” See id.

M.G.L. c. 93A, M.G.L. c. 176D, and the 1989 Amendment were created, combined and fine-tuned to impose heavy penalties on insurance companies who engage in unfair settlement practices and in turn, to encourage prompt settlement practices. Despite the plain language of the statutes and amendment, an insurance company still chose to knowingly and wilfully violate 93A and 176D against a woman who was rendered a paraplegic and her devastated family. I see absolutely no reason why the Legislature should waste a second of its already overloaded time to help companies that would knowingly and wilfully commit such acts. A far better solution is for insurance companies to simply act in a lawful manner.

2 Responses to “Calculating 93A Damages”

  1. pcn February 22, 2012 at 1:32 pm #

    This is an awesome blog! thank you for letting me know about the 93A!! are you willing to meet up with potential clients who can’t make it to your offices?

    • Tort Perform February 22, 2012 at 5:14 pm #

      Thank you, I’m glad you found it helpful. If you are unable to come to one of our offices, I would be more than happy to meet you where it would be most convenient.

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