In Gretzky v. AmGuard Insurance Co., the United States District Court for the District of Massachusetts evaluated how insurers facing a 176D demand letter post-judgment may limit exposure under the safe-harbor provisions of Chapter 93A, § 9(3).  The court reaffirmed that a timely, well-supported written tender may successfully invoke the safe harbor provisions and prevent exposure to punitive damages in post-judgment allegations of bad faith.  

In Gretzy, after settling the underlying lawsuit for the full policy limit (and payment of the policy limit), the plaintiff sent a demand letter to the insurer alleging unfair claim-handling practices and alleging entitlement to additional damages, including prejudgment interest. The defendant insurer responded with a written tender of $232,769 representing the full 12% statutory prejudgment interest accrued on the one-million-dollar policy limit from the date the underlying tort claim was filed. The plaintiff rejected the offer and filed suit.

Massachusetts General Laws Chapter 93A, § 9(3) provides a “safe harbor” provision to recipients who timely tender a written settlement tender that was reasonable in relation to the injury the petitioner actually suffered. Thus, defendant sought to limit damages under this safe harbor provision, asserting that its written tender was reasonable. The court rejected plaintiff’s position that the written tender should have included a multiplier of the underlying judgment pursuant to the punitive damages statutory scheme and include damages for emotional distress and litigation stress.

Instead, the court reaffirmed that in Chapter 176D/93A cases arising from the alleged failure to effectuate a prompt and equitable settlement, the appropriate benchmark for a written tender is the “loss of use damages.” This “loss of use” damages based on the loss of use of the wrongfully withheld settlement funds is the proper standard. In this case, the written tender fully compensated the plaintiff for the loss of use based on the full policy limit. The offer, therefore, was reasonable as a matter of law. As to the plaintiff’s contentions that the settlement should have included damages for emotional distress, such request was not included in the demand letter. Therefore, the defendant could not have been expected to include compensation for such damages in its written tender. 

Insurers who act promptly and make a timely reasonable written tender to a plaintiff might avoid punitive damages exposure under Chapter 93A.