I have been thinking more and more about the tactical questions raised by the recent $90 million bad faith judgment under Massachusetts Chapter 93A against Liberty Mutual, which I discussed here. By sheer good timing, it was issued just as I was leaving to attend a major insurance coverage conference and also just before a number of end of the year meetings and lunches with clients. The decision generated plenty of discussion.

I don’t represent any of the parties and, as I have said before, I don’t have a bias against the statutory enforcement under Massachusetts law of reasonable claims handling practices. Having studied and litigated the issues for decades, including in relation to nuclear verdicts and runaway juries, I believe that the standards governing multiple damages in this scenario are due for rethinking. Maybe that rethinking ends up with the standards exactly where they are now, and if so, that is fine. But too much of the current regime governing this type of claim, and in particular multiple damages awards, has essentially been driven by simple extension of prior precedents, or by the phenomenon whereby bad facts drive an outcome, or both. I think it may be time for the courts to step back and look at the body of law as a whole, and ask whether the legal standards still work correctly and actually fairly address the harm at issue. In fact, I think that’s effectively the same question posed by the trial judge who entered the judgment, who raised the question in her opinion as to whether the $90 million award aligned with the harm but noted that the case law required that outcome.

Judges sometimes write opinions that read like treatises, covering the history of a particular area of the law in depth and synthesizing inherent conflicts or ambiguities already present in the case law. Judge Woodlock, on the federal District Court bench in Massachusetts, did it on the scope and nature of equitable relief under ERISA in a long decision in one of my cases, discussed here in this article. The judge did that here as well, this time for Chapter 93A and multiple damages law in Massachusetts. She thoroughly discussed the historical development of the case law, citing three or four of the decisions in my own cases over the years and even going so far back that she cited the opinion in the first Chapter 93A case I tried, back in 1995.

I don’t know if it was the judge’s intent, but the depth and breadth of the opinion makes it a natural vehicle for asking the Massachusetts appellate courts to revisit the key legal issues that led, here, to a massive multiple damages award, under circumstances where an award of half as much (or less) would have still fully served the remedial and deterrent purposes of the applicable statutes.

It’s a lot to ask, given the amount of the judgment and the interest that accrues on a judgment in Massachusetts, but the insurer here should think long and hard about not settling this action and instead prosecuting an appeal for the exact purpose of advancing the case law under circumstances where additional clarity could be obtained on some of the central issues in bad faith law in Massachusetts.

In my discussions with interested and knowledgable observers, many have pointed towards the ratio of the multiple damages award to the original possible settlement ranges in the underlying tort case as a likely target for appeal and as the basis for a reversal. If I were the insurer, though, I would argue that only as the fallback option for the court on appeal.

Where would I focus an appeal instead? On the standards of when and under what circumstances a violation of the claims handling obligations imposed by Massachusetts law can support the findings necessary to trigger a multiple damages award. Over the years, Massachusetts courts have often addressed these standards with amorphous characterizations and phrasings, or else in very fact specific rulings. As a result, an appellate court could easily clarify these standards, without overruling prior decisions, on the facts of this action, by finding that the claims handling in this action may have violated the relevant statutes but was not sufficient to satisfy the standards for multiple damages. In so doing, the court could establish a clear baseline – namely, the facts of this action – for violations that only warrant single damages, and for what baseline has to be soundly cleared to trigger multiple damages.

Because in my reading of the $90 million bad faith verdict, the issue is only secondarily the amount and how that was driven by the statutory rules governing multiple damages awards in Massachusetts bad faith actions, and instead the primary issue is the bar, which is not high enough, for triggering such an award in the first place.