In my last post on the lessons that I have learned in 30 years of representing insurers in Chapter 93A cases, I discussed the crucial – almost outcome determinative – role in such a case against an insurer of the actual facts of the underlying claim and the manner in which the claim was handled. It seems obvious to say that the facts of a case drive the outcome in litigation, but in this context, what I mean is that the real time handling of a claim by an insurer and the real time handling of the covered tort suit by the insurer’s appointed defense counsel represent the most important part of any eventual Chapter 93A failure to settle action against the insurer concerning that underlying claim. The record left by those interactions and decisions during the course of the underlying claim against the insured constrain or instead free the insurer’s defense strategy in any later Chapter 93A action against it for failing to settle that claim. As I pointed out in my initial post in this series, an insurer should therefore have counsel advising it on claims handling decisions during the course of any significant underlying claim – independent of and separate from defense counsel for the insured in that action –for the exact purpose of keeping the insurer out of decisions or actions that could come back to haunt it in a later Chapter 93A action arising from those decisions.

In my last post, I mentioned that in my next post in this series – in other words, this one – I would address “the risks posed when an insurer paints with too broad a brush.” By this, I mean that an insurer defending a Chapter 93A action for failure to settle a claim should identify a specific aspect of the underlying case that justified its defense and settlement decisions – and more importantly the failure to execute a settlement short of a verdict against the insured – and build its case around it, rather than point at general aspects of the case that led it to not settle the underlying action. The two cases I discussed in my first post in this series demonstrate that a defense against a Chapter 93A action based on the former tactic can get the insurer a win in a Chapter 93A action alleging that the insurer failed to timely settle the underlying action, while a defense premised on arguing the latter will almost inevitably result in the insurer incurring additional bad faith liability in the Chapter 93A action above and beyond what it had to pay on the underlying tort suit against its insured.

I could give you multiple examples of Chapter 93A cases where I built the insurer’s defense around specific circumstances and events in the underlying tort action that justified its challenged settlement decisions during the underlying tort suit, leading to a good result for the insurer in the Chapter 93A action. For instance, in a case alleging that the insurer violated Chapter 93A because it did not make a legitimate settlement offer until very late in trial, I focused the defense of the Chapter 93A action – and the court’s attention – on the moment in the trial of the underlying claim where the defense case fell apart, with the argument being that until that moment, liability remained sufficiently in dispute that failing to settle before then could not have been a violation of Chapter 93A.

What I mean when I caution against an insurer “painting with too broad a brush” in defending a Chapter 93A action is the insurer failing to closely link its defense in the Chapter 93A case in that way to factual bases that the court will believe justified the insurer’s settlement decisions in the underlying action. I believe doing so is absolutely crucial to an insurer winning a Chapter 93A case alleging that the insurer unreasonably failed to settle the underlying claim against the insured. The alternative, on which I have seen insurers regularly lose, is to defend the Chapter 93A case by making broad arguments untethered from specific and narrowly defined aspects of the underlying case against the insured, such as arguing that the insurer’s settlement decisions were justified by general aspects of the nature of the case, or because the believability of certain witnesses was at issue which supposedly could not be determined except by the jury at trial, or in light of defense counsel’s ability, or (as has often been the case in Chapter 93A cases that have gone south for the insurer) based on assertions that comparative negligence was in play and required a jury determination in the underlying case before the liability of the insured could be clear and an obligation to settle arise. This type of approach to defending a Chapter 93A action is what I mean by “painting with too broad a brush,” and some form of it can be found at the heart of every significant Chapter 93A ruling in Massachusetts against an insurer for bad faith failure to settle.