Massachusetts Ruling Costs Plaintiff More Than $4 Million in Bad-Faith Litigation Lawsuit: Post-Judgment Interest Not a Factor in Punitive Damages Calculations

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In Anderson et al. v. National Union Fire Insurance Company of Pittsburgh PA & Others, the Massachusetts Supreme Judicial Court held that post-judgment interest should not be factored into a punitive damages calculation against an insurer when it was found to have acted willfully and egregiously by engaging in unfair trade practices and refusing to settle the underlying tort suit. In reversing the lower court’s grant of trebled post-judgment interest, the court left other parts of the verdicts undisturbed, ending a case that began with an accident almost two full decades ago.

As background, Anderson, along with his wife and daughter (the plaintiffs) filed suit against Partners Healthcare Systems, Inc. when Anderson was struck by a bus both owned by Partners and driven by one of its employees. At the time, Partners and the bus driver were insured under primary and excess policies by National Union Fire Insurance Company of Pittsburgh, PA (National Union). When National Union rejected the plaintiffs’ settlement demand and refused to enter into settlement negotiations, the plaintiffs filed a personal injury suit against National Union and the bus driver in May 2001, claiming negligence, negligent infliction of emotional distress, and loss of consortium.

In March 2003, the plaintiffs filed a separate suit against the insurer defendants, alleging, in pertinent part, willful and egregious failure to reach a settlement. This action was stayed pending resolution of the underlying tort suit. At trial, Anderson was awarded approximately $2 million, with an additional $1.2 million in post-judgment interest. His wife and daughter were awarded $110,000 each for their loss-of-consortium claims.

After resolving the underlying tort action in 2013, a bench trial found in the plaintiffs’ favor regarding National Union’s violation of Chapter 93A of Massachusetts’ Consumer Protection Law, holding that National Union’s conduct towards the plaintiffs was “deliberate or callously indifferent.” A second Superior Court Judge concluded that National Union willfully and egregiously violated Chapter 93A and entered judgment for “double the amount of the underlying personal injury judgment that had entered in 2003, combined with the post-judgment interest that had accrued between the date of entry and the date of the defendants’ payment in 2008.”

Both parties filed motions seeking to modify the judgment. The plaintiffs maintained that the judge doubling the underlying judgment was improper given the stated purpose of Chapter 93A — to impose the “maximum available sanctions.” In contrast, the defendants maintained that the judge improperly included post-judgment interest in the amount multiplied. In June 2014, the court granted the plaintiffs the maximum sanction available, awarding the punitive damages to be three times the amount of the underlying judgment, retaining the post-judgment interest in the amount to be multiplied.

The Supreme Judicial Court upheld most of the superior court’s findings, except for its holding that a post-judgment interest calculation award was proper here. In reversing this part of the decision, the court refused to add an “additional measure of punishment that the Legislature did not set for explicitly.” While the plaintiffs maintained that the post-judgment interest was necessary to deter Insurers from holding verdicts “hostage,” and pursuing frivolous and time-consuming appeals, the Supreme Judicial Court held that the “plaintiffs have advanced no reason other than further punishing a defendant whose violation was willful or knowing,” as to why the Legislature “intended a departure from the treatment of post-judgment interest in other contexts [in its enactment of Section 93A]”. It reasoned that “several other statutory and procedural means exist to discourage frivolous or bad-faith appeals.” Thus, the High Court applied the rule of lenity — not reading implicitly into the text of the statute an award of post-judgment interest.

The effects of this decision are significant for the insurance industry, as it means extracontractual relief in Massachusetts may not be as punitive as it might have been otherwise. This decision also shows decency for insurers, as the Supreme Judicial Court elected not to exact every potential punitive measure upon an insurer found to have made a mistake.