In Rhodes v. AIG Domestic Claims, Inc., the Massachusetts Supreme Judicial Court recently granted plaintiff’s petition for further appellate review of a case in which the trial court and the Appeals Court accepted the defendant insurer’s argument that the judgment in an underlying tort case against the insured’s policyholder should not be the basis for doubling or trebling to determine the punitive damages under M.G.L. c. 93A.
Though the statutory language deems the actual damages for the purpose of multiplying as the “judgment on the same an underlying transaction or occurrence,” the trial judge, Judge Gants, (now an Associate Justice on the SJC) found the actual damages caused by bad faith to be the delay in the payment of the judgment, which he calculated to be $500,000. He also found that there was no injury in the delay in the pre-verdict offer, because plaintiffs testified they never would have accepted an offer that he found was reasonable, and there was no causal nexus between the post-verdict bad faith refusal to settle and the damages reflected in the judgment on the underlying motor vehicle injury case. Though Judge Gants did not explicitly reach the constitutional issue, he implicitly recognized that if the underlying judgment of $12 million were multiplied, the statutory punitive damages would be 24 or 36 times the compensatory damages and would fail to meet the constitutional due process standard.
Rhodes Decision.pdf (3.68 mb)
Rhodes App. Ct. Decision.pdf (208.87 kb)