Bad Faith Insurance Settlement Case
A recent order from the Massachusetts Superior Court of Massachusetts has sent yet another strong message to insurers who engage in bad faith settlement practices: make a fair offer of settlement when liability is reasonably clear or face severe penalties. In Anderson, et al. v. American International Group, Inc., et al., Superior Court Judge Brian A. Davis ruled that AIG’s conduct was so egregious that he trebled a jury award from $3 million to more than $6.5 million.
The decision resulted from a case in which the plaintiff was hit by a shuttle bus while crossing the street and suffered brain damage. Although insurance company representatives from AIG concluded almost immediately that liability was clear, the company refused to settle the claim. The plaintiff was forced to file suit and it took 5 years before the case was actually tried. At trial, the defense contended that because the plaintiff had an elevated blood-alcohol level, he ran in between two cars and was hit by the bus. The jury found that the plaintiff was 47 percent at fault and awarded him $3 million dollars which was reduced to reflect the comparative negligence finding.
The problem was, however, that there was never any actual witness who saw the plaintiff run between two cars. This was something that was completely fabricated. Additionally, the defendant driver’s initial admission of fault was hidden by the insurance company. Furthermore, AIG’s outside counsel coached the defendant driver into changing his testimony. Also, AIG concocted a defense based on fictitious evidence.
Original Jury Award Tripled by Judge
As such, plaintiff’s counsel sued AIG for 93A and 176D violations, consumer protection laws in Massachusetts. Judge Davis held a two week bench trial in September 2013 and ruled recently that AIG’s conduct was “egregious.” He tripled the jury award and awarded attorneys’ fees to the plaintiff.
This case sent a strong message to insurance companies failing to settle cases when liability is reasonably clear, creating fictitious defenses, and suppressing witness statements will not be tolerated. Severe financial penalties were properly meted out here.