Massachusetts Supreme Court Holds that Insurer’s Full Reimbursement of Insured’s Expenses Does Not Bare Insureds G.L. c. 93A Claim

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The Supreme Judicial Court of Massachusetts recently held that an insured could pursue a claim against an insurer which had breached its duty to defend for unfair or deceptive acts or practices under G.L. c. 93A § 11, notwithstanding the insurer’s full reimbursement of the insured’s expenses, plus interest. Auto Flat Car Crushers, Inc. v. Hanover Insurance Co., 469 Mass. 813, No. SJC-11477 (Mass. 2014).

In Auto Flat Car Crushers, the insured, a vehicle-crushing enterprise, sought coverage under a garage insurance policy in connection with a pollution dispute involving the Massachusetts Department of Environmental Protection (“DEP”). The insurer initially denied coverage for the claim and refused to defend the insured. The insured subsequently filed a four-count complaint against the insurer in which it asserted contract and declaratory judgment claims. After a trial court judge ruled that the insurer had breached its duty to defend because the policy provided coverage for the allegations asserted by the DEP, the insured amended its complaint to add a count alleging that the insurer’s failure to defend the claim constituted a violation of G.L. c. 93A, § 11. Shortly thereafter, the insurer agreed to reimburse the insured for all of its legal fees and cleanup costs incurred in connection with the DEP. 

They accepted the insurer’s reimbursement but pursued its claim under G.L. c. 93A § 11, arguing that the statute does not require a showing of uncompensated loss and that a judgment establishing the amount of damages is not a prerequisite to recovery under the statute. The insurer took the position that the insured’s a claim under G.L. c. 93A § 11 failed as a matter of law because the insured could not demonstrate uncompensated loss and because no prior judgment establishing contract damages had been entered.

On appeal, the Supreme Court of Massachusetts held that the statute requires a plaintiff to only demonstrate that it has suffered “actual damages,” i.e., a concrete loss of money or property, but does not require the plaintiff to establish that such loss remains outstanding. The court determined that to the extent that a plaintiff already has received compensation for its underlying loss prior to the resolution of its G.L. c. 93A claim, such compensation is treated as an offset against any damages ultimately awarded, rather than as a bar to recovery.