Kreindler Litigates $20K Demand Letter into $1.1M Judgement for Client

Insurance Company Ignores $20,000 Policy Limits Demand Letter, so Kreindler Files Bad Faith Case and Client is Awarded $1.1 Million Judgment

Massachusetts is known as a state in which plaintiffs are rarely successful in asserting claims for the bad faith practices of liability insurance carriers. However, attorney Joe Musacchio of Kreindler’s Boston office successfully sued Arbella Mutual Insurance Company and obtained a judgment of $1.1 million, including attorney’s fees, for its refusal to settle a claim within policy limits.

In refusing to pay a policy limits demand of $20,000, the Massachusetts auto insurer now has to pay more than fifty times that amount. And, as a result, our client will receive full compensation for her injuries rather than being limited by inadequate insurance coverage.

On August 30, 1998, while driving in Jupiter, Florida, our client was seriously injured when her motor vehicle was hit by another vehicle driven by defendant Anthony Caban.

Arbella Mutual insured the defendant Caban under an automobile policy which had limits of $20,000 per person and $40,000 per occurrence. The liability of its insured was clear, and the plaintiff’s damages without question exceeded Caban’s meager policy limits, so a demand was made by Kreindler to the insurance company to settle her claims for the full $20,000 policy limit.

In insurance bad faith cases, a key element of a claim is that, based on the injuries and the liability, it is unreasonable to refuse the full policy limit in exchange for a full release. Such a refusal fails to protect the insured against a judgment beyond the policy limits. Along with the demand letter to the defendant's insurance company, we provided a detailed settlement package, including medical records of our client and police reports. The demand was made one month after the accident with an express 30-day time limit for acceptance on it.

Arbella Mutual ignored the policy limits demand and also failed to inform Mr. Caban of the offer from our client to settle the case. Arbella later misrepresented to their customer that they had not received a demand letter from our client.

On November 2, 1998, at the expiration of the 30-day deadline, a lawsuit was commenced against the driver Caban in a Florida State court. Realizing he was at personal risk for a large judgment against him, Caban agreed to the entry of a $450,000 judgment against him and he assigned his rights against Arbella Mutual to our client. Kreindler, on behalf of our client, then sued Arbella Mutual under the assignment of Caban’s rights for acting in bad faith. The essence of our claims against Arbella Mutual was that it had a duty to protect Caban against excess liability, to convey settlement demands to him, and to offer the policy limits when liability and damages are reasonably clear.

At trial, attorney Musacchio established that not only were Arbella’s practices unfair, but the insurer’s conduct was willful. He established that a six-month delay in responding to the demand was patently unreasonable and each excuse offered by Arbella Mutual for the delay was rejected by the Court. In the end, Arbella Mutual was held responsible for the entire judgment against Caban, plus attorney’s fees, legal costs and interest.

This case is another testament not only to the firm’s dogged pursuit of justice for our clients, but also to the creative approaches that we take to ensure full and fair compensation, even when the odds are not in our favor.