Supreme Judicial Court Affirms Award 0f $2,250,000 Plus Interest Against Insurer For Breach Of Duty To Defend And Settle — On $50,000 Policy

In Boyle v. Zurich American Insurance Company, SJC-11791 (Sept. 14, 2015), the Supreme Judicial Court (SJC) affirmed an award of $2,250,000 plus interest against an insurer for failing to defend its insured on a $50,000 policy and for failing to make reasonable efforts to settle the suit. What is remarkable is that the large amount of the award came despite the SJC's rejection of claims under the Massachusetts Unfair and Deceptive Practices Act (Chapter 93A, § 11), which permits the trebling of damages and award of attorneys' fees. Instead, the court found that the award was warranted based upon the insurer's failure to defend its insured prior to the entry of a default judgment and its failure to settle the suit within the policy limits. The award (to the third party claimant through an assignment from the policyholder) was in addition to $ 1,324,357 which the insurer paid to resolve the third party claimant's suit against it for failure to settle, an amount that the court concluded could not be deducted from the $2,250,000 award. The Boyle decision is instructive for all insurers whose policies may be governed by Massachusetts law.

Underlying Bodily Injury Claim and Trial Court Holding

Joseph Boyle was injured by an exploding tire in an automobile repair shop operated by C&N Corporation ("C&N"). Mr. Boyle and his wife, together the "Boyles," sued C&N for bodily injury and loss of consortium.

C&N held a "business auto" insurance policy that required it to provide notice to its insurer (the "Insurer") immediately of any suit brought against it. The coverage limit of C&N's policy (the "Policy") was $50,000. While C&N notified the Insurer of the injury, C&N never provided notice of the Boyles' suit.

C&N defaulted on the Boyles' complaint against it and a judgment of $2,250,000 was entered against C&N. Prior to the damages hearing on the Boyles' claim, the Boyles' attorney notified the Insurer of the proceeding, but a clerk in the Insurer's office neglected to take any action.

After obtaining the $2,250,000 default judgment, the Boyles sued the Insurer for violation of Chapter 93A for failing to settle their claims against C&N. The Boyles also obtained an assignment of C&N's right against the Insurer and sued the Insurer on C&N's behalf for breach of the contractual duty to defend C&N in the underlying litigation and violation of Chapter 93A for failing to effectuate a prompt settlement with plaintiffs. The Insurer ultimately settled the...