Chiulli v. Liberty Mut. Ins., Inc.

97 Mass.App.Ct. 248

146 N.E.3d 471

Robert CHIULLI

v.LIBERTY MUTUAL INSURANCE, INC., & another.¹

No. 18-P-1288

Appeals Court of Massachusetts, Suffolk..

Argued November 12, 2019

Decided April 2, 2020

Andrew M. Abraham, Taunton (Martin R. Sabounjian also present) for the plaintiff.

Myles W. McDonough (Christopher M. Reilly also present), Boston, for the defendant.

Present: Meade, Maldonado, & Massing, JJ.

MASSING, J.

This case, involving unfair insurance claim settlement practices, see G. L. c. 176D, § 3 (9), began with an argument over a barstool at a restaurant on Newbury Street in Boston. The argument simmered over the evening and spilled onto the street, culminating in an exchange of blows that left the plaintiff, Robert Chiulli, with a traumatic brain injury. Two lawsuits followed. In the first case, which was tried in the United States District Court for the District of Massachusetts (Federal court case), a jury concluded that the operator of the restaurant, Newbury Fine Dining, Inc., doing business as Sonsie (Sonsie), and an associated entity, Lyons Group, Ltd. (Lyons Group), were each forty-five percent at fault for Chiulli's injuries and awarded compensatory damages of approximately $4.5 million. In the second case, which was tried jury-waived in the Superior Court and is the subject of this appeal (State court case), Chiulli asserted a G. L. c. 93A claim against Sonsie's and Lyons Group's insurer, defendant Liberty Mutual Insurance, Inc. (Liberty Mutual), for its failure to effectuate a prompt, fair, and equitable settlement of the Federal court case once liability had become reasonably clear. See G. L. c. 176D, § 3 (9) (f ).² The trial judge found that liability became reasonably clear after closing arguments in the Federal court case, that Liberty Mutual violated c. 93A from that time until six weeks later, and that Liberty Mutual's violation was not willful or knowing. The trial judge awarded Chiulli damages of $25, see G. L. c. 93A, § 9 (3), plus attorney's fees and costs. Both parties appeal. We affirm in part and reverse in part.

Background. 1. The physical altercation. While the precise events that led to Chiulli's injury have been fiercely contested, no one disputes the following facts for purposes of this appeal. One evening in June 2008, Chiulli went to Sonsie with a group of friends. At some point in the evening, Jeffrey Reiman sat on a barstool that had been previously occupied by someone in Chiulli's group, prompting a heated argument between Chiulli's group and Reiman. A bartender overheard the argument and summoned his manager, Ivan Daskalov, who spoke with Chiulli's group and Reiman and also asked the doorman to keep an eye on them. Reiman moved to a different barstool.

Once Chiulli's group and Reiman were separated, Reiman spoke by telephone with his friend, Victor Torza, who came to Sonsie within minutes. Another friend, Garret Rease, joined Reiman and Torza. Torza attempted to approach Chiulli's group but was intercepted by Sonsie's manager, Daskalov, who continued to separate the groups but permitted them to remain at the restaurant. Shortly thereafter, Reiman approached Chiulli's group, said something, and walked out of the restaurant, followed directly by Daskalov, then Chiulli's group, and then Torza and Rease. A fight broke out. While the parties dispute who threw the first punch, and in particular whether it was Chiulli, the fight ended when Rease knocked Chiulli unconscious. Chiulli suffered a traumatic brain injury that required him to relearn basic daily living skills, and he incurred medical bills in excess of $600,000.

In the Federal court case, Chiulli asserted negligence claims against Reiman, Torza, Rease, Sonsie, and Lyons Group.³

Chiulli's theory of the case, which he presented in part through expert opinion testimony, was that Sonsie and Lyons Group engaged in negligent security practices by failing to remove Reiman and his friends, who were acting in a disruptive fashion, and by failing to ensure that the sparring factions did not leave the restaurant together. Although neither Sonsie nor Lyons Group offered its own expert witness, they nonetheless took the position that they had reasonably responded to the barstool incident and that Chiulli bore ultimate responsibility for throwing the first punch. After a three-week trial, the jury largely agreed with Chiulli and, on November 19, 2012, rendered a verdict finding that Sonsie and Lyons Group were each forty-five percent at fault, that Chiulli and Rease were each five percent at fault, and that Chiulli's damages were $4,494,665.83. Acting on Chiulli's motion to amend the judgment and add prejudgment interest, filed on November 21, 2012, the Federal trial judge entered an amended judgment on September 30, 2013, in the amount of $4,501,654.74.⁴

2. The insurance dispute. Sonsie and Lyons Group had liability coverage through two different policies: a policy with Liberty Mutual that provided primary coverage up to a $1 million limit, and a policy with defendant Everest Re Group, Ltd. (Everest) that provided excess coverage. Liberty Mutual was responsible for controlling the defense of the Federal court case -- and thus controlled any settlement with Chiulli -- until Liberty Mutual concluded that its policy limit was exhausted, at which point it was required to tender its policy limit to Everest so that Everest could assume control. Liberty Mutual did not make any settlement offers to Chiulli during the course of the Federal court case, except for one offer of $150,000 during the trial. Liberty Mutual refused to tender its policy limit even after the jury reached its verdict awarding Chiulli damages well over the limit.

On December 5, 2012, sixteen days after the verdict in the Federal court case, Chiulli sent a c. 93A demand letter to Liberty Mutual and Everest. Chiulli alleged that Liberty Mutual and Everest had failed to effectuate a prompt, fair, and equitable settlement of the Federal court case once liability became reasonably clear and requested $5,701,822.25 "to resolve [the Federal court] case, and to avoid further litigation in which [Chiulli] will seek double or treble damages under c. 93A." By December 27, 2012, Everest was also frustrated by Liberty Mutual's reluctance to settle and sent its own c. 93A letter demanding that Liberty Mutual tender its policy limit plus interest. Liberty Mutual complied the following day. Around the same time, Chiulli sent a second c. 93A demand letter to Liberty Mutual and Everest.⁵ In that letter, Chiulli clarified that the demand of $5,701,822.25 was to resolve the Federal court case, and that he was seeking $10 million if Liberty Mutual and Everest also wanted a release of his c. 93A claims. On January 4, 2013, Everest, now in control of settlement negotiations, sent Chiulli a written offer of $5,507,597.60 to settle the Federal court case.

Chiulli accepted the offer and signed a settlement agreement release, which expressly excluded "any and all claims pursuant to G. L. c. 93A et seq. and/or G. L. c. 176D, et seq." On January 30, 2013, Liberty Mutual replied to Chiulli's first demand letter, denying any liability under c. 93A or c. 176D.

Chiulli pursued his c. 93A claim against Liberty Mutual by filing a complaint in the Superior Court, alleging that his damages and Sonsie's and Lyons Group's liability were reasonably clear well before the trial of the Federal court case.⁶ Following a jury-waived trial in the Superior Court, the trial judge concluded that liability became reasonably clear on November 16, 2012, after closing arguments in the Federal court case. "[I]ndulging Liberty [Mutual]," the judge found that legitimate questions about Chiulli's culpability and Sonsie's and Lyons Group's duties remained as the trial date in the Federal court case approached. The judge also found that Chiulli had prepared a strong case that, because of negligent security practices, Sonsie and Lyons Group were liable regardless of who threw the first punch -- a theory that Liberty Mutual "never seemed to really grasp," and that Sonsie and Lyons Group were unprepared to rebut. Going into trial, the defense team reported to Liberty Mutual that Sonsie and Lyons Group had a seventy percent likelihood of prevailing; Liberty Mutual's claims adjuster believed the company's chances were closer to eighty percent. As the trial progressed, the defense team's own estimation of a favorable verdict for their clients dwindled to fifty-five percent. In the judge's view, the defense team and Liberty Mutual did not realistically assess the plaintiff's case and overestimated their own likelihood of success. The judge concluded that "after the last words had been spoken in closing arguments, Liberty [Mutual] knew at that moment all it needed to know," and that "a reasonable insurer could make an objective review of all the evidence as it actually unfolded during the course of the trial" and conclude that liability and damages had become reasonably clear.

The trial judge further found that after the verdict was returned, Liberty Mutual, by its own assessment, knew that success on appeal or in posttrial motions was unlikely. The judge found that Liberty Mutual had information that Chiulli "was in dire need of cash," and that Liberty Mutual decided that threatening an appeal "might take the wind out of [his] sails."⁷ The judge found that after liability had become reasonably clear, using Chiulli's financial condition "as a negotiating lever," Liberty Mutual "made Chiulli continue to wait over Thanksgiving [and] Christmas," refused to negotiate, and "hoped that the plaintiff's deteriorated financial condition would lead to more favorable settlement terms." Indeed, Liberty Mutual never attempted to settle the case, but finally tendered its policy limit to Everest on December 28, 2012, after Everest threatened legal action.

The trial judge assessed nominal damages of $25, reasoning that Chiulli ultimately suffered no...