May 1, 2017

[By Brian Amaral,] (April 25, 2017, 7:30 PM EDT) — A Massachusetts federal judge ruled Tuesday that an insurance claims administrator couldn’t escape an unfair insurance practices suit when it allegedly failed to make a reasonable settlement offer before or after an underlying $16 million verdict stemming from a woman’s death at a nursing home.

U.S. District Judge Patti B. Saris said that Sedgwick Claims Management Systems Inc. couldn’t win summary judgment in a suit brought by the family of Genevieve Calandro, who died in 2008 at a nursing home.

In the underlying suit, the Calandro family said her nursing home was negligent and caused her death. Sedgwick, the claims adjuster and administrator for a Hartford Insurance Group subsidiary that insured the nursing home company, allegedly failed to make a prompt, fair and equitable settlement offer under Massachusetts’ consumer-focused insurance laws, chapter 176D and 93A.

Its summary judgment motion seeking to escape the case — it argued that it did make a reasonable offer after the verdict and had “safe harbor” under chapter 93A, and that it wasn’t in the business of insurance at all — was denied.

“The record could reasonably support a conclusion that defendant knowingly and willfully forced plaintiff into unnecessary litigation when liability was reasonably clear,” Judge Saris wrote.

The case involves a somewhat convoluted procedural history that could have been avoided if the defendants had just accepted the first offer: $500,000. Now, with the Calandro family already having won $16 million in the underlying negligence suit, they’re seeking between double and triple damages from the verdict, as contemplated in Massachusetts’ laws.

“Just because the plaintiffs got a collective $16 million from the underlying case, that doesn’t excuse or erase your conduct,” the Calandro family’s attorney, David J. Hoey, said. “The judge got it exactly right.”

According to Judge Saris’ decision, Calandro sued in 2011 for negligence by the nursing home. Hartford farmed out the job of administrating the claim to Sedgwick.

The adjuster got permission to settle for as much as $125,000. That later was bumped to $300,000, but the increased offer was never communicated to the Calandros, Judge Saris said. The company also seemed to want to conceal two witnesses from the Calandro family because of “conflicting versions” of events.

Even though a trial analysis showed it was going to be “very difficult” to defeat liability, and they could be exposed to a $300,000 to $500,000 verdict, the settlement limit still was not increased.

That could reasonably be seen as a failure to fairly settle a claim before a judgment, Judge Saris said.

The jury, in Massachusetts court, then slammed the nursing home with $1.4 million in compensatory damages and a finding of gross negligence, awarding another $12.5 million.

Hartford eventually stepped in, paying the Calandros $16 million and getting a release for the nursing home entities and itself — but not Sedgwick, its claims adjuster.

The Calandros then sent a demand letter to Sedgwick for $40 million under chapter 93A, a consumer-protection law. The offer was countered with an offer for about $2 million. The Calandros sued Sedgwick for insurance misconduct.

Sedgwick argued that the $2 million settlement was reasonable because it was “reasonably related” to the “injury actually suffered,” the loss of use of the money awarded. That, the company said, triggered a “safe harbor” under Massachusetts’ laws.

It did not, Judge Saris said.

“If defendant’s interpretation were correct, insurers could engage in egregious claims settlement practices and simply wait until after judgment to offer the amount of judgment plus interest,” Judge Saris said. “Thus an insurer would have an incentive to delay settlement to force a claimant to take a lower offer.”

The judge also grappled with — and didn’t resolve — exactly how much would represent a reasonable settlement offer post-judgment to trigger the safe harbor.

“That said, even though the judgment is the appropriate benchmark, it is unclear whether in the safe harbor period an insurer need only offer the portion of the judgment that reflects compensatory damages, costs and interest,” Judge Saris said. “Must the offer also include the punitive damages portion of the judgment? Even assuming the answer is yes, the court must determine whether multiplying a judgment that includes punitive damages implicates due process concerns.”

Judge Saris also quickly dispatched with the argument that Sedgwick was not “in the business of insurance” and that the laws on unfair settlement practices didn’t apply to it.

“The court finds this argument to be without merit,” Judge Saris said. “Defendant was hired by an insurer in this case to settle claims.”

The Calandros are represented by David J. Hoey and Allan Galbraith.

Sedgwick is represented by Allen David and Jane Horne of Peabody & Arnold LLP.

The case is Garrick Calandro as administrator of the estate of Genevieve Calandro v. Sedgwick Claims Management Services, case number 1:15-cv-10533-PBS, in the U.S. District Court for the District of Massachusetts.

Article originally appeared at