United States Court of Appeals
For the First Circuit
No. 06-1050
FEDERAL INSURANCE CO.,
Plaintiff, Appellant,
v.
HPSC, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Torruella and Lipez, Circuit Judges,
and Smith,* District Judge.
Bradford R. Carver, with whom CharCretia V. DiBartolo, Stephen
R. Swofford and Hinshaw & Culbertson LLP were on brief, for
appellant.
Jillian B. Hirsch, with whom William Shields and Day, Berry &
Howard LLP were on brief, for appellee.
March 15, 2007
*
Of the District of Rhode Island, sitting by designation.
TORRUELLA, Circuit Judge. This case arises from a failed
attempt by defendant-appellee HPSC, Inc. ("HPSC") to recover an
embezzlement loss under an executive protection insurance policy
issued by plaintiff-appellant Federal Insurance Co. ("Federal").
Federal brought this declaratory judgment action against HPSC
seeking rescission of the policy based on a misrepresentation made
by HPSC in its 2001 insurance renewal application. HPSC
counterclaimed, seeking recovery under the policy and damages for
unfair and deceptive trade practices. Judgment was entered in
favor of HPSC on all claims. Federal appeals, claiming that the
district court admitted irrelevant and prejudicial evidence on the
materiality of HPSC's misrepresentation and that it is entitled to
judgment as a matter of law on all claims. After carefully
reviewing the record, we affirm.
I. Relevant Facts
On May 28, 2002, HPSC reported to its long-time insurer,
Federal, that an officer of its asset-based lending subsidiary
American Commercial Finance Corp. ("ACFC"), Kevin Morrison, had
embezzled $4.7 million over the previous five years. HPSC
submitted proof of loss to Federal on July 9, 2002, pursuant to its
Executive Protection Policy, which provided for $1,000,000 of
employee theft coverage, subject to a $25,000 deductible. With its
claim, HPSC included an investigative report by
PricewaterhouseCoopers (the "PwC report") indicating that the theft
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occurred due to Morrison's unsegregated control over account
activities. The PwC report stated that Morrison "exercised sole
control over the factoring [of accounts receivable] business at
ACFC and had full authority to disburse funds, collect payments,
reconcile accounts and report financial performance." As a result,
"ACFC had insufficient segregation of duties in the factoring
operation."
The investigation of HPSC's claim was assigned to Federal
claims examiner Anna MacKay. Upon reading the PwC report, MacKay
concluded that Morrison both reconciled bank statements and signed
checks on the same ACFC accounts, which contradicted information
provided by HPSC on its April 13, 2001 renewal application.
Specifically, HPSC had answered "no" to Question 12 of the
application, "Do the employees who reconcile the monthly bank
statements also either: a. sign checks? b. handle deposits? or c.
have access to check signing machines or signature plates?" MacKay
related her findings up the ladder to her superiors at Federal, who
proceeded on the same assumptions as MacKay. MacKay also engaged
outside coverage counsel, who reviewed HPSC's file and issued an
opinion letter.
Meanwhile, HPSC remained in contact with Federal
regarding the status of its claim. Finally, on September 13, 2002,
HPSC issued an ultimatum to Federal: If Federal did not pay the
claim, HPSC would file suit by September 20, 2002.
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II. Relevant Proceedings
Without further investigation, Federal responded to
HPSC's ultimatum by filing a diversity suit seeking rescission of
the policy for fraud and misrepresentation. HPSC counterclaimed
for recovery under the policy and for damages under Mass. Gen. Laws
ch. 93A for unfair and deceptive trade practices based on Federal's
delay in investigating and paying the claim.
Two weeks after the initial case management conference,
HPSC informed Federal that MacKay had misread the PwC report.1 In
fact, it was not Morrison, but his subordinate, Sylvia Maguire, who
reconciled the bank statements on ACFC's fifteen operating
accounts. Maguire did not sign checks or handle deposits, and ACFC
had no check signing machine or signature plate. All transactions
on these fifteen accounts were accomplished through wire transfers.
The only account for which Morrison both reconciled statements and
signed checks was an imprest petty cash account, which was capped
at $10,000 and could only be replenished each month after HPSC
reviewed ACFC's disbursements.
Federal then shifted its theory of the case, relying on
Morrison's authority over all sixteen of the ACFC accounts.
Federal also contended that Morrison's authority over wire
1
The conversation between the parties' attorneys was memorialized
in a letter dated February 6, 2003.
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transfers was the equivalent of signing checks for the purposes of
Question 12 on the renewal application.
Both sides filed cross motions for summary judgment. The
district court denied both motions, concluding that HPSC's response
to Question 12 was truthful as to the fifteen operating accounts,
given that the question did not ask about an employee's unexercised
authority or about wire transfer authority. The district court
found that the only misrepresentation made by HPSC involved
Morrison's control over the petty cash account,2 but that given the
relatively small size of that account compared to the fifteen
operating accounts, the materiality of the misrepresentation was a
question of fact for the jury. The district judge noted, however,
that if he "were the factfinder, [he] would most likely agree that
the misrepresentation . . . [was] a material one."
Prior to trial, Federal moved in limine to exclude any
evidence regarding Federal's past underwriting practices on the
basis that such evidence was irrelevant to the materiality of
HPSC's misrepresentation. The district court denied the motions.
At trial, Federal's underwriter, Yalonda Mason, testified
that had she known the truth about Morrison's unsegregated duties,
she still would have written the policy, but with a larger
deductible or higher premium because of the increased risk.
2
Outside auditors had alerted HPSC to Morrison's unsegregated
duties on March 27, 2001 -- more than two weeks before HPSC filed
the renewal application.
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Federal also called a risk management expert, Dean P. Felton, who
testified that the lack of segregation between reconciliation and
check-writing duties increased the risk of loss from theft. Felton
further indicated that if HPSC's answer to Question 12 had been
truthful, he would have either increased the deductible, increased
the premium, or excluded the checking account from coverage.
HPSC's expert, Michael Bracken, testified that in his
opinion the imprest petty cash account "did not present a
materially elevated risk of loss to HPSC or [Federal]." Bracken
also concluded that had HPSC answered "yes" to Question 12, it
would have made no difference in Federal's decision to underwrite
HPSC's policy. He explained that he had reviewed HPSC's past
applications to Federal, and that Federal had not followed up on
any of HPSC's past "no" answers or even questioned its "yes" answer
to Question 12 in 1995. Bracken claimed that this question was
important and that, as an underwriter, he would have investigated
an affirmative answer.
At the conclusion of the evidence, Federal moved for a
directed verdict under Rule 50(a), but the district court denied
the motion. The district court instructed the jury that Federal
was not obligated to pay HPSC's claim if HPSC's misrepresentation
was material, meaning that if Federal had known the truth, it would
have declined to issue the policy or charged a higher rate or
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premium in light of the increased risk. The jury found in favor of
HPSC, concluding that its misrepresentation was not material.
The district court then held a bench trial on the chapter
93A claim. At the close of HPSC's case, Federal filed a motion for
judgment as a matter of law, which the district court denied.
After Federal presented its case, the court found that Federal's
initial determination regarding HPSC's misrepresentation was made
in good faith, but that Federal had violated two statutory duties
under Mass. Gen. Laws ch. 176D, § 3(9): Federal's decision to seek
rescission without inquiring into the facts or giving HPSC a chance
to respond breached its duty under subsection (d) to conduct a
reasonable investigation before rejecting a claim, and its failure
to make a reasonable settlement offer upon learning of its mistaken
conclusion regarding Morrison's reconciliation and check-writing
duties on the fifteen operating accounts violated its duty under
subsection (f) to "effectuate prompt, fair and equitable
settlements of claims in which liability has become reasonably
clear." The court concluded that the two statutory violations
constituted unfair business practices within the meaning of chapter
93A, and that Federal's conduct after learning of its flawed
assumptions was a breach of its duty of good faith, which merited
doubling the damages incurred thereafter.
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III. Discussion
On appeal, Federal argues that it is entitled to judgment
as a matter of law on the rescission claim because HPSC's
misrepresentation objectively increased the risk of loss, or
alternatively to a new trial because the district court admitted
irrelevant and prejudicial evidence on the materiality issue.
Federal also contends that it is entitled to judgment as a matter
of law on the unfair trade practices claim because it had a
reasonable, plausible basis for denying HPSC's claim, even after it
learned of its original mistaken conclusion.
A. Preservation of the Issues
As a preliminary matter, HPSC asserts that Federal failed
to preserve any issues on appeal because it did not renew its Rule
50(a) motion and it did not make any evidentiary objections at
trial.
1. Judgment as a Matter of Law
It is now settled that an appellate court "cannot review
the denial of a Rule 50(a) motion based on the sufficiency of the
evidence when the party appealing the verdict failed to renew its
sufficiency challenge in the district court pursuant to Rule
50(b)." Vázquez-Valentín v. Santiago-Díaz, 459 F.3d 144, 148 (1st
Cir. 2006) (citing Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc.,
126 S. Ct. 980, 987 (2006)). Despite our previous case law
establishing a strict "dearth of evidentiary support" standard of
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review when a party failed to comply with the strictures of Rule
50, see, e.g., Surprenant v. Rivas, 424 F.3d 5, 13 (1st Cir. 2005),
the Supreme Court made it abundantly clear in Unitherm Food
Systems, Inc. v. Swift-Eckrich, Inc., that in the absence of a
renewed motion for judgment as a matter of law pursuant to Rule
50(b), we are utterly "without power to direct the District Court
to enter judgment contrary to the one it had permitted to stand,"
126 S. Ct. at 985 (quoting Cone v. W. Va. Pulp & Paper Co., 330
U.S. 212, 218 (1947)).
Federal failed to renew its Rule 50(a) motion after the
jury's verdict, and accordingly we have no power to review the
district court's denial of judgment as a matter of law on the
rescission claim.
The strictures of Rule 50, however, do not apply in non-
jury trials. Fed. R. Civ. P. 50 (specifying the requirements for
judgment as a matter of law in jury trials); see also Colonial Penn
Ins. v. Market Planners Ins. Agency Inc., 157 F.3d 1032, 1037 n.3
(5th Cir. 1998) ("In a jury trial, of course, a party must make
(and renew at the trial's conclusion) a Rule 50(a) motion for
judgment as a matter of law in order to preserve sufficiency of the
evidence for appellate review. But nothing indicates that a
similar rule applies to an appeal of the sufficiency of evidence to
support findings or sufficiency of findings to support a judgment
following a bench trial." (citations omitted)). Rather, we treat
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motions for judgment as a matter of law made during bench trials as
motions for judgment on partial findings under Rule 52(c). See Ne.
Drilling, Inc. v. Inner Space Servs., Inc., 243 F.3d 25, 37 (1st
Cir. 2001); see also Mullin v. Town of Fairhaven, 284 F.3d 31, 36
(1st Cir. 2002). Federal made such a motion at the close of HPSC's
case, but then proceeded to put on evidence, thus waiving its right
to appeal the denial of that motion. Ne. Drilling, Inc., 243 F.3d
at 37. "Consequently, we treat the arguments [Federal] makes on
appeal under the heading of 'motion for judgment as a matter of
law' simply as challenges to the factual and legal sufficiency of
the district court's determinations based on all the evidence,"
id. (emphasis omitted), challenges which Federal may raise for the
first time on appeal, Colonial Penn Ins., 157 F.3d at 1036 ("We see
no reason why [a party], following a bench trial, cannot argue now
for the first time [on appeal] that the court's findings were
clearly erroneous or that they cannot support the judgment."
(footnote omitted)).
2. Improper Admission of Evidence
HPSC also argues that Federal did not preserve its right
to seek a new trial on the basis of improperly admitted evidence
because it did not object to the introduction of the evidence at
trial nor file a motion for a new trial under Rule 59(b).
While Federal did not object to the introduction of any
evidence at trial, it did file motions in limine before trial
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seeking to bar evidence concerning its past underwriting practices.
Motions in limine preserve evidentiary issues for appeal if the
district court made a final and unconditional ruling on the motion;
no further steps, such as filing a Rule 59(b) motion,3 are
necessary. Crowe v. Bolduc, 334 F.3d 124, 133 (1st Cir. 2003).
Of course, to preserve the issue, the motion in limine
must raise the same evidentiary error raised on appeal. HPSC
alternatively argues that Federal's pre-trial motion objected to
the introduction of evidence regarding prior applications and
policies on the ground that such evidence was irrelevant to the
narrow issue at trial, "that is, whether the misrepresentation on
the 2001 policy application regarding the petty cash account was
material," whereas on appeal Federal argues that the evidence was
irrelevant because it went to the underwriter's subjective state of
mind. We fail to see the difference in Federal's arguments as
framed by HPSC, given that Federal's position on appeal is that the
materiality inquiry is an objective one, rather than a subjective
3
While it is true that the failure to move for a new trial
precludes our review of sufficiency of the evidence and
inconsistent verdict claims, see Unitherm Food Sys., 126 S. Ct. at
986; Torres-Arroyo v. Rullán, 436 F.3d 1, 7 (1st Cir. 2006), it
does not affect our review of a district court's decision to admit
or exclude evidence over a party's properly preserved objection,
see Torres-Arroyo, 436 F.3d at 7 (deciding the challenged
evidentiary issue despite the appellant's failure to file a motion
for a new trial). Rather, if we determine that the district court
erred in admitting evidence, the appropriate remedy would be a new
trial. See Sec'y of Labor v. DeSisto, 929 F.2d 789, 796 (1st Cir.
1991). Thus, HPSC's theory that failure to file a motion for a new
trial precludes our review of an evidentiary ruling is flawed.
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one, hence that the underwriter's subjective state of mind is
irrelevant to the issue of materiality.
B. Evidentiary Issue
Having determined that Federal preserved the evidentiary
issue, we turn to the substance of that issue. We review a
district court's ruling on the admission of evidence for abuse of
discretion. Pelletier v. Main Street Textiles, LP, 470 F.3d 48, 52
(1st Cir. 2006).
Federal objects to the district court's admission of
evidence concerning Federal's past underwriting of HPSC's policies
on the ground that such evidence permits a subjective inquiry into
what the underwriter would have done had she known the truth, which
is irrelevant to the objective standard of whether the
misrepresentation increased the insurer's risk of loss. We
disagree with Federal's premise.4
Federal's right to rescind HPSC's policy is governed by
Mass. Gen. Laws ch. 175, § 186, which provides:
No oral or written misrepresentation or
warranty made in the negotiation of a policy
of insurance by the insured or in his behalf
shall be deemed material or defeat or avoid
the policy or prevent its attaching unless
4
Federal's fundamental argument on appeal is that the district
court applied the wrong standard in the case. However, Federal did
not object to the trial court's instructions to the jury, nor did
it preserve its right to appeal the court's denial of judgment as
a matter of law. Our only inquiry, therefore, is whether the
evidence in question is relevant to the objective materiality of
HPSC's misrepresentation.
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such misrepresentation or warranty is made
with actual intent to deceive, or unless the
matter misrepresented or made a warranty
increased the risk of loss.
With respect to the materiality of a misrepresentation in an
insurance application, "[a] material fact, measured by an objective
standard, is one which would 'naturally influence the judgment of
[an] underwriter in making the contract at all, or in estimating
the degree and character of the risk, or in fixing the rate of the
premium.'" A.W. Chesterton Co. v. Mass. Insurers Insolvency Fund,
838 N.E.2d 1237, 1246 (Mass. 2005) (second alteration in original)
(quoting Employers' Liab. Assur. Corp. v. Vella, 321 N.E.2d 910,
913 (1975)).
Thus, the materiality of a misrepresentation depends on
what a reasonable underwriter would have done differently had she
known the truth behind the misrepresentation. See Boston Mut. Ins.
Co. v. N.Y. Islanders Hockey Club, L.P., 165 F.3d 93, 97 (1st Cir.
1999). There are, as a matter of common sense, a variety of ways
to objectively prove what an underwriter would do in a given
situation. The parties could offer the testimony of various
underwriters or other risk management experts as to what they would
have done in the same situation, as both sides did in this case.
See Hanover Ins. Co. v. Leeds, 674 N.E.2d 1091, 1095-96 (Mass. App.
Ct. 1997) (basing a finding of materiality on the testimony of the
insurer's underwriter). Or the parties could provide evidence of
what underwriters have in fact done in the past in similar
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situations. Similarly, it makes sense that an insurer might wish
to establish what it would do in a particular situation by
presenting evidence of its own policies and past practices. See
Boston Mut. Ins. Co., 165 F.3d at 97 ("[T]he statute does not go so
far as to require proof by the insurer that it would have acted
differently (although such proof certainly tends to establish
materiality . . . ).") (citing Barnstable County Ins. Co. v. Gale,
680 N.E.2d 42 (Mass. 1997)); TIG Ins. Co. v. Blacker, 767 N.E.2d
598, 602 (Mass. App. Ct. 2002) (basing a finding of materiality on
evidence of the insurer's own standards).
If Federal could present evidence of its own past
underwriting practices to establish materiality, it follows that
HPSC could do the same to establish immateriality. Thus, it is
clear that the district court did not err in admitting evidence of
Federal's actions on past applications, including HPSC's, since
such evidence provides relevant insight into how specific
information would influence a reasonable underwriter's decisions
regarding a particular policy.
C. Chapter 93A claim
Federal also argues that it is entitled to judgment as a
matter of law on HPSC's unfair and deceptive trade practices claim.
As explained above, we treat this argument as a challenge to the
factual and legal sufficiency of the district court's conclusions.
Following a bench trial on a chapter 93A claim, we review the
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district court's legal conclusions de novo and its underlying
factual findings for clear error. Commercial Union Ins. Co. v.
Seven Provinces Ins. Co., 217 F.3d 33, 40 (1st Cir. 2000). We also
review the district court's "evaluative judgment[s], [when]
applying a legal standard to a particular set of facts," for clear
error. Roland M. v. Concord Sch. Comm., 910 F.2d 983, 990 (1st
Cir. 1990). The determination of whether certain conduct is unfair
or deceptive is a question of fact, but whether that conduct rises
to the level of a chapter 93A violation is a question of law.
Commercial Union Ins. Co., 217 F.3d at 40.
The district court concluded that Federal violated its
statutory duties to undertake a reasonable investigation of the
facts before denying the claim and to make a settlement offer when
liability has become reasonably clear, Mass. Gen. Laws ch. 176D,
§ 3(9),5 and that the violation of these duties constituted an
5
Mass. Gen. Laws ch. 176D, § 3(9) states in relevant part:
The following are hereby defined as unfair methods of
competition and unfair or deceptive acts or practices in
the business of insurance:--
. . .
(9) Unfair claim settlement practices: An unfair claim
settlement practice shall consist of any of the following
acts or omissions:
. . .
(d) Refusing to pay claims without conducting a
reasonable investigation based upon all available
information;
. . .
(f) Failing to effectuate prompt, fair and equitable
settlements of claims in which liability has become
reasonably clear . . . .
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unfair trade practice under Mass. Gen. Laws ch. 93A, § 2(a)
("Unfair methods of competition and unfair or deceptive acts or
practices in the conduct of any trade or commerce are hereby
declared unlawful."). The district court also found that Federal's
conduct was knowing or willful after February 6, 2003, when it
learned that the fundamental premise of its suit was flawed; the
court accordingly doubled the damages incurred by HPSC after that
date. Id. § 11 ("If the court finds for the petitioner, recovery
shall be in the amount of actual damages; or up to three, but not
less than two, times such amount if the court finds that the use or
employment of the method of competition or the act or practice was
a willful or knowing violation of said section two.") Federal
argues that the district court's rulings are not supported by the
record. We disagree.
1. Unfair Trade Practices Determination
The Massachusetts Supreme Judicial Court has concluded
that a violation of General Laws chapter 176D, § 3, which defines
unfair claim settlement practices in the insurance industry, is
evidence of an unfair business practice under chapter 93A, § 2,
which would give rise to a cause of action under chapter 93A,
§ 11.6 See Polaroid Corp. v. Travelers Indem. Co., 610 N.E.2d 912,
6
There may be additional requirements for liability to attach,
such as the requirement that a claimant suffer a loss of money or
property, Mass. Gen. Laws ch. 93A, § 11, and that the unfair or
deceptive conduct "occurred primarily and substantially within the
commonwealth," id.; Kuwaiti Danish Computer Co. v. Digital Equip.
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917 (Mass. 1993); see also Peterborough Oil Co. v. Great Am. Ins.
Co., 397 F. Supp. 2d 230, 244 (D. Mass. 2005) ("Unlike in the
context of consumer plaintiffs under § 9, a violation of chapter
176D is only evidence of a violation of chapter 93A, § 11."). The
question for us then is whether the district court correctly
concluded that Federal breached its statutory duties to investigate
and to effectuate settlement.
With respect to the duty to investigate, the record
supports the district court's determination that Federal did not
conduct a reasonable investigation before filing its suit for
rescission. Specifically, the district court found that MacKay
never confirmed her tentative conclusion regarding Morrison's
authority over the accounts in question, and no one at Federal ever
attempted to contact HPSC to obtain more information regarding the
apparent discrepancy between HPSC's answer to Question 12 on the
renewal application and the conclusions in the PwC report.7 Thus,
other than reviewing the materials submitted with HPSC's claim, it
appears that Federal did no investigation of the available facts
before denying coverage. Consequently, the district court
Corp., 781 N.E.2d 787, 799-800 (Mass. 2003), but none of those
requirements are at issue here.
7
Federal also challenges the district court's factual findings
underlying these conclusions. There is ample support in the
record, however, to support the judge's conclusion that MacKay
misread the PwC report and that her mistaken perception was shared
by her superiors.
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correctly concluded that Federal's failure to investigate breached
its statutory duty under chapter 176D, § 3(9)(d).
The record also supports the district court's finding
that Federal breached its statutory duty to effectuate settlement.
An insurer's duty to make a settlement offer arises when "liability
has become reasonably clear." Mass. Gen. Laws ch. 176D, § 3(9)(f).
The determination as to when liability is reasonably clear depends
on when "a reasonable person, with knowledge of the relevant facts
and law, would probably have concluded, for good reason, that the
insurer was liable to the plaintiff." Nyer v. Winterthur Int'l,
290 F.3d 456, 461 (1st Cir. 2002) (quoting Demeo v. State Farm Mut.
Auto. Ins. Co., 649 N.E.2d 803, 804 (Mass. App. Ct. 1995)). Here,
the district court considered liability sufficiently clear after
Federal learned that Morrison did not have reconciliation and
check-writing duties with respect to ACFC's fifteen operating
accounts. Instead of admitting its error and making a settlement
offer, however, Federal changed its legal theory, and when that one
failed, Federal again shifted its position, finally settling on the
theory that HPSC's misrepresentation regarding the petty cash
account was material enough to warrant denying the claim. While we
have some doubt that a reasonable person would "probably" have
concluded that Federal was liable on HPSC's claim, we are not
prepared to say that the court's conclusion was clearly erroneous.
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Federal contends that it had a plausible basis for
denying coverage at all times, even after it learned that HPSC's
only misrepresentation involved the petty cash account, and that an
insurer who has a good faith, plausible basis for denying a claim
"cannot ordinarily be said to have committed a violation of
[chapter] 93A." Lumbermens Mut. Cas. Co. v. Offices Unlimited,
Inc., 645 N.E.2d 1165, 1169 (Mass. 1995). Even if we were inclined
to agree that Federal's basis for denying coverage was plausible,
in that it was a "[s]eemly or apparently valid" legal theory,
Webster's II New Riverside University Dictionary 901 (1988), the
district court explicitly determined, with sufficient support in
the record, as explained below, that Federal was not acting in good
faith after February 6, 2003. The absence of good faith supports
the district court's unfair settlement practice determination, even
in the face of a plausible coverage position. See Guity v.
Commerce Ins. Co., 631 N.E.2d 75, 77-78 (Mass. App. Ct. 1994) ("A
plausible, reasoned legal position that may ultimately turn out to
be mistaken . . . is outside the scope of the punitive aspects of
the combined application of c. 93A and c. 176D. An absence of good
faith and the presence of extortionate tactics generally
characterize the basis for a c. 93A-176D action based on unfair
settlement practice." (citations omitted)).
In sum, the district court did not clearly err in finding
that Federal failed to conduct a reasonable investigation before
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seeking rescission and then failed to make a settlement offer once
liability was reasonably clear, and thus that Federal breached its
statutory duties. Therefore, we affirm the district court's legal
conclusion that Federal violated chapter 93A by engaging in unfair
claim settlement practices as defined in chapter 176D, § 3(9). See
Cont'l Ins. Co. v. Bahnan, 216 F.3d 150, 157 (1st Cir. 2000) ("We
are persuaded here . . . that the court's finding that [the
plaintiff] satisfied the imperatives of chapter 176D was amply
supported by competent and credible evidence. So, too, were the
court's fairness determinations under chapter 93A. We need go no
further.")
2. Willfulness Determination
Finally, the district court's conclusion that "Federal's
conduct . . ., while not motivated by a dishonest purpose, spite,
or ill will, was after February 6, 2003, a knowing or willful
breach of its duty of good faith" is also supported by the record.8
The district court was convinced based on the evidence before it
that Federal acted in bad faith by, among other things, racing to
litigate without knowing all the facts and then stubbornly refusing
to admit its error. Cf. id. ("The district court, which saw and
heard the witnesses, concluded that Continental had not sailed too
8
February 6, 2003, was the date of the letter memorializing
HPSC's revelation that MacKay had misread the PwC report and that
Federal's assumption that Morrison had reconciled statements and
wrote checks on all sixteen ACFC accounts was flawed.
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close to the chapter 176D winds . . . ."); Correa v. Hosp. S.F., 69
F.3d 1184, 1194 (1st Cir. 1995) ("To be sure, the evidence in this
case is not particularly precise. But facts at trial, as in life,
do not always appear in black and white. Juries and judges
frequently must distinguish between manifold shades of gray.").
Accordingly, the district court properly doubled the damages
incurred after February 6, 2003. Canal Elec. Co. v. Westinghouse
Elec. Corp., 548 N.E.2d 182, 188 n.10 (Mass. 1990) ("In
circumstances of knowing and wilful violation of c. 93A or of bad-
faith refusal to settle, a plaintiff also may be entitled to double
or treble damages under c. 93A itself.")
3. Attorneys' Fees
HPSC asks that we order Federal to pay attorneys' fees
incurred by HPSC in defending this appeal. HPSC is indeed entitled
to "reasonable attorney's fees for [its] successful defense of
[its] award of attorney's fees and costs under [chapter] 93A."
Twin Fires Inv., LLC v. Morgan Stanley Dean Witter & Co., 837
N.E.2d 1121, 1140 (Mass. 2005). Federal did not challenge the
district court's calculation of attorneys' fees and costs below,
and therefore we will not disturb that ruling. With regard to the
calculation on appeal, however, we award only those attorneys' fees
incurred in defending the chapter 93A claim. See Incase, Inc. v.
Timex Corp., 421 F. Supp. 2d 226, 244 (D. Mass. 2006) ("[When t]he
chapter 93A claim was brought together with a number of other
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claims[,] . . . an award of fees and costs under chapter 93A should
generally include an amount only for those fees and costs that were
incurred in connection with the chapter 93A portion of the case.")
The factual basis of the chapter 93A claim is sufficiently distinct
from that of the breach of contract claim that HPSC and its
attorneys should be able to differentiate the time spent on each of
the two claims. See id. However, to the extent that the
attorneys' fees incurred in successfully defending the chapter 93A
claim cannot be excised with any certainty from those related to
HPSC's breach of contract defense, HPSC is entitled to the fees
common to both claims, since the two are based on the same core of
facts. Id. (citing Twin Fires Inv., 837 N.E.2d at 1140).
IV. Conclusion
For the reasons stated above, we affirm the judgment in
favor of HPSC on both the rescission and the unfair trade practices
claims, as well as the doubling of damages after February 6, 2003.
Affirmed.
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