The Massachusetts Appeals Court has ruled that Arbella Mutual Insurance Company did not engage in unfair settlement practices by demanding arbitration in a lawsuit involving an underinsured motorist claim.
In the case, Heather Chamberland vs. Arbella Mutual Insurance Company, plaintiff Heather Chamberland pursued civil action against Dylon Maiorano, the other driver involved in a July 2007 accident in which she was injured.
Maiorano’s vehicle was insured under a policy issued by Liberty Mutual Insurance Company, and Chamberland eventually obtained a settlement in the amount of Maiorano’s policy limits.
Her underinsurance carrier, Arbella Mutual Insurance Company, was not a party to the civil action but did consent to the settlement. Chamberland then sought underinsured motorist coverage from Arbella, and Arbella invoked arbitration.
A Superior Court judge initially found that Arbella’s request for arbitration was untimely and should be waived because it waited until the outcome of the civil case between Chamberland and Maiorano to file it.
Arbella appealed this decision, and the Appeals Court eventually reversed the decision in its latest ruling in the case.
After Arbella was notified of the accident, it confirmed in writing that Chamberland’s underinsurance coverage limits under the Arbella policy were $250,000 per person and $500,000 per accident.
Chamberland sued Maiorano and won in the second trial, with the jury concluding the accident was caused by Maiorano’s negligence and Chamberland was entitled to damages. Maiorano appealed.
While Maiorano’s appeal was pending, Chamberland, with Arbella’s consent, reached a settlement with Maiorano and Liberty Mutual, in which Liberty Mutual agreed to pay her the full $100,000 in bodily injury coverage available under Maiorano’s policy.
In exchange, Chamberland released Maiorano and Liberty Mutual from all claims arising out of the accident and acknowledged that Maiorano did not admit liability for the accident by entering into the settlement.
The parties did not correspond again until more than three years later when Chamberland’s attorney notified Arbella of the judgment against Maiorano.
Three Years Later
Chamberland then claimed the issues of liability and damages had been resolved by the judgment against Maiorano and demanded payment of the balance of the judgment pursuant to the underinsurance coverage provision in the Arbella policy.
Arbella refused, stating it was entitled to resolve issues of liability and damages through arbitration.
Chamberland initiated this case against Arbella, claiming she is entitled to the remaining underinsurance coverage limits of its policy and that Arbella had engaged in unfair settlement practices in violation of Massachusetts law.
Although Arbella filed a counterclaim, it was initially dismissed by the Superior Court motion judge. The motion judge granted a required offset of $100,000 for the bodily injury coverage that Chamberland recovered under Maiorano’s automobile insurance policy and declared Arbella liable to Chamberland for $131,565 in underinsurance coverage – the balance of the jury’s damages award in the second trial.
However, Massachusetts automobile insurance policies are required to comply with all applicable statutory provisions and be in a form approved by the Commissioner of Insurance, according to the Appeals Court decision document.
Resolution of a claim for uninsured motorist benefits – both liability and damages – is required to be made through an agreement between the insured and the insurer, or by arbitration if they fail to agree, the document stated.
“Arbella and Chamberland each had the option of demanding arbitration at any time, assuming they were unable to reach agreement on liability and/or damages,” the Appeals Court document said. “Absent other acts inconsistent with its arbitration right, therefore, Arbella did not waive that right merely by waiting to assert it until Chamberland’s action against Maiorano came to a conclusion.”
The motion judge in the Superior Court decision believed that Arbella had wasted judicial time and effort by taking a “wait and see” approach while Chamberland’s action against Maiorano played out, only to demand arbitration when the second jury trial ended favorably for Chamberland on the issues of liability and damages, the Appeals Court document stated.
However, Arbella was not a party to the litigation between Chamberland and Maiorano. Because of this, the Appeals Court found Arbella could not fairly be charged with wasting judicial time and effort because it waited for Chamberland’s action against Maiorano to conclude. As soon as Chamberland finalized her settlement with Maiorano and Liberty Mutual and made a demand for the underinsurance limits of the Arbella policy, Arbella demanded arbitration.
“In short, Arbella’s actions were anything but inconsistent with its arbitration right,” the Appeals Court document said.
With this in mind, the Appeals Court reversed the Superior Court’s previous ruling, finding that although a significant amount of time had passed before Arbella’s demand for arbitration, it did not act inconsistently with its statutory and policy-based rights to arbitrate.
“Here, it is undisputed that Arbella did not explicitly waive its right to arbitrate Chamberland’s underinsurance claim,” the Appeals Court document stated. “Upon review of the undisputed facts in the record, we conclude that the motion judge’s determination that Arbella waived its arbitration right amounted to an abuse of discretion.”
The matter was remanded to the trial court for appointment of an arbitrator and for further proceedings on Chamberland’s claim that Arbella engaged in unfair settlement practices in violation of Massachusetts law.
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