United States Court of Appeals For the First Circuit
No. 24-1952
PAULA APPLETON, a/k/a PAULA SWEET,
Plaintiff, Appellant,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, P.A. and AIG CLAIMS, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Margaret R. Guzman, U.S. District Judge]
Before
Barron, Chief Judge, Gelpí and Rikelman, Circuit Judges.
Kathy Jo Cook, with whom Timothy Wilton, Abbie G. Rosen, and Sheff & Cook, LLC were on brief, for appellant.
William A. Schneider, with whom Morrison Mahoney LLP was on brief, for appellees.
July 29, 2025 RIKELMAN, Circuit Judge. In January 2015, Paula
Appleton suffered severe injuries after a pickup truck struck her
car from behind. Appleton filed an insurance claim against the
driver, whose policy was administered by AIG Claims, Inc. ("AIG").
Over the next four years, Appleton and AIG exchanged settlement
offers and attended three mediations but were unable to reach a
settlement. Following a trial, a Massachusetts state court jury
ultimately awarded Appleton $7.5 million in damages in March 2019.
Appleton then sued AIG and a related defendant in federal
court. She contended that the defendants failed to meet their
statutory obligations under Massachusetts law to conduct an
independent, objective investigation into her insurance claim and
to extend a prompt and fair settlement offer after the value of
her damages became clear.
The federal district court granted the defendants'
motion for summary judgment in full. It concluded that the
undisputed facts established that the defendants did conduct a
reasonable investigation into Appleton's case and that their duty
to extend a prompt and fair settlement offer was not triggered
because the value of her damages never became clear. Because we
determine that a reasonable jury could find that Appleton's damages
became clear in early 2018 and that the defendants failed to extend
a prompt and fair settlement offer afterwards, we vacate the
- 2 - district court's summary judgment ruling in part and remand for
trial on Appleton's settlement claim.
I. BACKGROUND
In reviewing the district court's grant of summary
judgment to the defendants, we recite the facts in the record in
the light most favorable to Appleton and draw all reasonable
inferences from those facts in her favor. See Sutherland v.
Peterson's Oil Serv., Inc., 126 F.4th 728, 734 (1st Cir. 2025).
A. The Accident and Initial Claims
In January 2015, when she was 34 years old, Paula
Appleton sustained life-altering injuries in a car accident.
Appleton was the passenger in a car that her fiancé (now husband)
was driving when a pickup truck struck their car from behind and
propelled it underneath the tractor-trailer in front of them,
nearly flattening their vehicle. Emergency responders had to
extricate Appleton from the car and then transport her to a
hospital via helicopter. There, Appleton was diagnosed with severe
injuries, including a hemorrhage, pelvic fracture, hip fracture,
leg fractures, and a ruptured bladder. She remained in the
hospital for nearly three weeks and then spent an additional four
months in inpatient rehabilitation facilities. Appleton
eventually filed an insurance claim against the driver of the
pickup truck and his employer, a company with a liability insurance
- 3 - policy with National Union Fire Insurance Company ("National
Union"), administered by AIG.
AIG received notice of Appleton's claim and, in December
2015, assigned it to Nicole Washor, an insurance adjuster. In
March 2016, Appleton's attorney, Katherine Bagdis, emailed Washor
to introduce herself and share Appleton's crash-related medical
records and bills. Three months later, in June 2016, Washor asked
Bagdis to share a formal demand package that "summarize[s] all the
medical records, medical treatment, pain and suffering, prior
injuries, explanation of prior disabilities, future medicals, lien
information, [and] liability arguments and [includes] a demand to
settle the case." Washor specified that she needed the complete
demand package "[i]n order to proceed with a resolution of [the]
case."
Appleton's counsel shared the demand package with Washor
in August 2016. The package included a formal demand of $18
million to cover Appleton's $600,000 medical lien, $3.72 million
in future medical care costs, and $13 million in past and future
pain and suffering. It also included an analysis of Appleton's
injuries, various medical reports, a life care plan and economic
analysis, and a "day in the life" video depicting Appleton's daily
experience living with her injuries.
After receiving Appleton's demand, Washor retained
defense counsel for AIG. Next, in December 2016, Washor approved
- 4 - hiring a medical expert and life care planner to review Appleton's
damages claims. Around the same time, defense counsel informed
Washor that AIG could not pursue a liability defense on the theory
that Appleton's injuries were caused by her car hitting the
tractor-trailer in front of her (rather than the insured's pickup
truck hitting her car from behind). In February 2017, Appleton
filed a complaint in state court against the pickup truck driver,
his employer, and related defendants.1 In March 2017, defense
counsel reiterated to Washor: "There is no liability defense to
[this] case and this is a damages[-]only defense."
B. Mediations and Settlement Offers
Over the next two years, from March 2017 to January 2019,
Appleton and AIG exchanged settlement offers and expert reports
but were unable to settle the case, despite participating in three
mediations. Appleton and AIG attended their first mediation in
March 2017. In response to Appleton's initial $18 million demand,
AIG offered $750,000 and then raised its offer to $2 million during
the mediation. Appleton rejected both offers and requested $17
million instead. She then asked to suspend the March 2017
mediation so that she could provide AIG more information about her
1 The parties did not dispute that the pickup truck driver was acting within the scope of his employment at the time of the collision. Because the driver's employer maintained a liability insurance policy administered by AIG, AIG investigated Appleton's insurance claim and defended the driver and his employer in Appleton's state court lawsuit.
- 5 - injuries and damages. In particular, AIG had indicated it needed
additional evidence of Appleton's alleged bladder injury and
urinary incontinence. After the mediation, AIG's defense counsel
suggested to AIG that it should wait for Appleton to share this
additional evidence before retaining medical experts of its own.
The parties scheduled their second mediation for October
2017. A few days in advance, Appleton's counsel shared with AIG
reports from two urologists. According to the reports, Appleton
suffered from "severe incontinence" due to injuries she received
during the crash, and the urologists predicted that the
incontinence would worsen over time. Despite this additional
medical information, however, AIG only increased its settlement
offer from $2 million to $2.65 million. Appleton rejected AIG's
offer and demanded $16 million instead.
After the second mediation was unsuccessful, AIG began
soliciting estimates of a potential jury award in Appleton's case.
AIG received three independent estimates between October 18, 2017,
and January 4, 2018. First, defense counsel estimated a jury
verdict of between $6.5 million and $8.5 million. Second, a group
of senior AIG claims professionals reviewed Appleton's claim and
valued it at an average of $4.9 million. After receiving these
estimates, Washor increased the reserves to pay Appleton's claim
from $4 million to $7.5 million. Third, AIG hired an external
jury consulting firm to conduct a mock trial of Appleton's case
- 6 - and simulate the results of 500 juries. On January 4, 2018, the
consulting firm reported an average total damages award of $7.53
million. Despite receiving these three estimates of a potential
jury award ranging from $5 million to $8.5 million by early January
2018, AIG did not increase its prior $2.65 million settlement offer
to Appleton for nearly one year (until mid-December 2018).
Appleton and AIG began preparing for trial in the second
half of 2018. In July 2018, Appleton's claim was transferred
internally at AIG from Nicole Washor to Christina MacIsaac. In
October and November 2018, defense counsel deposed Appleton and
retained additional medical experts, including an orthopedic
surgeon, gynecologist, neurologist, and urologist, to evaluate her
damages claims.
At AIG's urging, Appleton and AIG participated in a third
mediation on December 17 and 18, 2018. Appleton's counsel
requested that AIG make a $6 million offer in advance of this
mediation to ensure that it would be productive for her client.
Although MacIsaac declined to make such an offer, she assured
Appleton's counsel that it would be worthwhile for Appleton to
attend the mediation. Nevertheless, at the mediation, AIG
increased its previous offer by only $600,000, from $2.65 million
to $3.25 million. Appleton rejected that offer and made a
counter-offer of $15.5 million.
- 7 - About two weeks after the third mediation concluded, on
the eve of trial, AIG increased its offer again to $5 million. In
January 2019, Appleton served AIG with a Chapter 93A demand letter
alleging multiple unfair insurance claims settlement practices and
seeking $17.5 million. AIG denied the Chapter 93A claims and
reiterated its most recent offer of $5 million, adding on $25 for
the new unfair settlement practices claims. The day before the
state court trial began, MacIsaac began sending Appleton proposals
for a high-low agreement based on a potential verdict.2 Appleton
rejected each of the high-low proposals.
C. State Court Trial
Appleton's state court trial was held from March 11 to
26, 2019. On March 27, the jury awarded Appleton $7.465 million
in damages. The jury award consisted of $655,000 in past medical
expenses; $3.2 million in future medical expenses; $210,000 in
lost earnings; $1.5 million in past pain and suffering; and $1.9
million in future pain and suffering. In issuing the final
judgment, the state court deducted $600,000 for prior settlements
2 In a high-low agreement, the parties agree in advance to a minimum and maximum payment based on the ultimate verdict at trial. For example, AIG's last high-low proposal before trial was for $4 million to $12.5 million. Under this proposal, AIG offered to pay Appleton $4 million if the verdict were equal to or less than $4 million (a result that was unlikely based on AIG's own internal estimates), the actual value of the verdict if it fell between $4 million and $12.5 million, and $12.5 million if the verdict were equal to or greater than $12.5 million.
- 8 - received3 and added $1.78 million in pre-judgment interest, for a
total of $8.65 million. Shortly afterwards, Appleton sent a
supplemental Chapter 93A demand letter to AIG and National Union.
D. Federal Court Proceedings
In August 2021, Appleton sued AIG and National Union in
federal court, alleging only Massachusetts state law claims and
invoking diversity jurisdiction under 28 U.S.C. § 1332.
Specifically, she contended that AIG and National Union engaged in
unfair insurance claims settlement practices in violation of
Chapters 93A and 176D of the Massachusetts General Laws by
"fail[ing] to investigate Mrs. Appleton's claim" and "fail[ing] to
make a reasonable offer of settlement in the underlying case,
and . . . in response to Mrs. Appleton's [Chapter] 93A Demand
Letter." See Mass. Gen. Laws ch. 176D, § 3(9)(d), (f) (2012).
The defendants moved for summary judgment.
The district court granted summary judgment to the
defendants in full. See Appleton v. Nat'l Union Fire Ins. Co.,
No. CV 21-40081, 2024 WL 5344449, at *13 (D. Mass. Sep. 30, 2024).
3 Before the state court trial, Appleton had already received $600,000 in settlements, including one from another insurance company providing liability insurance to the pickup truck driver's employer. Because the state court deducted the amount Appleton received in prior settlements from the jury award, AIG's settlement offers were functionally worth $600,000 more than an "equivalent" jury award. Thus, AIG's final pretrial $5 million settlement offer was worth $5.6 million in comparison to the $7.5 million jury award.
- 9 - It held that the undisputed facts demonstrated that AIG began its
investigation of Appleton's insurance claim "within weeks of
receiving its first notice," "went beyond simply 'reviewing the
materials submitted with [the] claim,'" and "continued to
investigate . . . throughout the course of the underlying action"
Id. at *12 (citation omitted). It then concluded that such an
investigation was reasonable as a matter of Massachusetts law and
thus granted the defendants summary judgment on Appleton's
section 3(9)(d) claim. See id. The court also determined that
the defendants were entitled to summary judgment on Appleton's
section 3(9)(f) claim. See id. at *13. In its view, the
undisputed facts established that liability never became
reasonably clear and, as a result, AIG's duty to extend a prompt
and fair settlement offer was never triggered. See id.
Appleton timely appealed.
II. STANDARD OF REVIEW
"We review a district court's grant of summary judgment
de novo, taking the record in the light most favorable to the
nonmoving party," here Appleton. Sutherland, 126 F.4th at 737.
"Summary judgment is appropriate only where 'there is no genuine
dispute as to any material fact and the movant is entitled to
- 10 - judgment as a matter of law.'" Id. (quoting Mancini v. City of
Providence, 909 F.3d 32, 38 (1st Cir. 2018)).
III. DISCUSSION
Appleton challenges the district court's grant of
summary judgment to the defendants. She contends that the record
was replete with genuinely disputed material facts and that a jury
should have decided both her section 3(9)(d) and section 3(9)(f)
claims. We begin by setting out the legal framework for these
claims and then address each in turn.
To evaluate Appleton's state law claims, we apply
Massachusetts substantive law under the Erie doctrine. See Andrew
Robinson Int'l, Inc. v. Hartford Fire Ins. Co., 547 F.3d 48, 51
(1st Cir. 2008) (citing Kathios v. Gen. Motors Corp., 862 F.2d
944, 946 (1st Cir. 1988)). The Massachusetts Supreme Judicial
Court (SJC) is the final authority on Massachusetts law, and its
decisions bind both lower state courts and federal courts sitting
in diversity. See id. When the SJC "has not spoken directly to
an issue," we also look to lower state court decisions for
guidance. Id.
Under Massachusetts law, Chapter 93A and Chapter 176D
"operate in tandem 'to encourage the settlement of insurance
claims . . . and discourage insurers from forcing claimants into
unnecessary litigation to obtain relief.'" Terry v. Hosp. Mut.
Ins. Co., 195 N.E.3d 441, 449 (Mass. App. Ct.) (alteration in
- 11 - original) (quoting Caira v. Zurich Am. Ins. Co., 76 N.E.3d 1002,
1009 (Mass. App. Ct. 2017)), rev. denied, 197 N.E.3d 866 (Mass.
2022). Chapter 93A bars firms from committing "unfair or deceptive
acts or practices" and creates a private right of action for
consumers injured by those practices. Mass. Gen. Laws ch. 93A,
§ 2 (1978). And Chapter 176D defines fourteen specific actions as
"unfair claim settlement practices" that violate Chapter 93A for
firms "in the business of insurance," like the defendants. Mass.
Gen. Laws ch. 176D, §§ 2, 3(9)(a)-(n). Thus, when insurers violate
any provision of section 3(9) of Chapter 176D, they also, by
definition, violate the prohibition in section 2 of Chapter 93A.
See Bobick v. U.S. Fidelity & Guar. Co., 790 N.E.2d 653, 659 (Mass.
2003).
Appleton contends that the defendants engaged in two
unfair claims settlement practices identified in Chapter 176D:
"[r]efusing to pay claims without conducting a reasonable
investigation based upon all available information" and "[f]ailing
to effectuate prompt, fair and equitable settlements of claims in
which liability has become reasonably clear." Mass. Gen. Laws ch.
176D, § 3(9)(d), (f). The district court granted summary judgment
to the defendants on both claims.
We disagree with the district court's ruling on
Appleton's section 3(9)(f) claim. As we explain, the record
contains genuine disputes of material fact as to whether liability
- 12 - became reasonably clear and whether the defendants extended a
prompt and fair settlement offer afterwards. And, viewing the
evidence in the light most favorable to Appleton, we find that a
reasonable jury could conclude that the defendants did not satisfy
their section 3(9)(f) obligations. Thus, we vacate the grant of
summary judgment on that claim and remand for trial. We agree
with the district court, however, that the defendants are entitled
to judgment as a matter of law on Appleton's section 3(9)(d) claim.
A. Section 3(9)(f) Settlement Claim
Under section 3(9)(f), the defendants had an obligation
to "effectuate [a] prompt, fair and equitable settlement[]" once
"liability had become reasonably clear." Mass. Gen. Laws ch. 176D,
§ 3(9)(f). As the SJC has held, this provision requires an insurer
"promptly to put a fair and reasonable offer on the table . . . as
soon thereafter as liability and damages make themselves
apparent." Bobick, 790 N.E.2d at 658 (quoting Hopkins v. Liberty
Mut. Ins. Co., 750 N.E.2d 943, 951 (Mass. 2001)).
To evaluate whether a reasonable jury could conclude
that the defendants failed to meet this statutory obligation based
on the record here, we must engage in a two-step inquiry.
Initially, we consider whether a reasonable jury could find that
liability, which encompasses both fault and damages, was
reasonably clear at any point prior to judgment. See id. If so,
we then assess whether a reasonable jury could find that the
- 13 - defendants failed to extend a prompt, fair, and equitable
settlement offer after that point. See id.
The defendants concede that these assessments involve
"determination[s] of reasonableness" that are "normally
. . . question[s] of fact." Nevertheless, they contend that
summary judgment was warranted because "undisputed material facts
in the record demonstrate that [Appleton had] 'no reasonable
expectation of proving an essential element' of [her] case," namely
that liability ever became reasonably clear. Id. (quoting
Kourouvacilis v. Gen. Motors Corp., 575 N.E.2d 734, 740 (Mass.
1991)). The defendants also maintain that, in the alternative,
even if liability had become reasonably clear, their settlement
offers were prompt and fair, given disputes regarding the amount
of damages and Appleton's purportedly excessive demands.
The district court agreed with the defendants' initial
argument. It held that "no reasonable factfinder could conclude
that liability was reasonably clear at the time of trial" and,
thus, the defendants' obligation to settle under section 3(9)(f)
was not triggered. Appleton, 2024 WL 5344449, at *13. Appleton
responds that a reasonable jury could find that liability became
reasonably clear by at least January 2018 and that the defendants
failed to extend a prompt and fair settlement offer afterwards.
We agree with Appleton on both points. Viewing the
record in the light most favorable to her, we conclude that a
- 14 - reasonable jury could find that AIG's failure to increase its
settlement offer of $2.65 million for almost a year after it
received multiple estimates placing likely damages at about $7.5
million was unreasonable.
1. Did liability become reasonably clear?
We begin with step one of the section 3(9)(f) analysis,
whether "liability had become reasonably clear." Mass. Gen. Laws
ch. 176D, § 3(9)(f). Although the term "liability" as used in
Chapter 176D "encompasses both fault and damages," AIG conceded
fault during its negotiations with Appleton. River Farm Realty
Tr. v. Farm Family Cas. Ins. Co., 943 F.3d 27, 38 (1st Cir. 2019)
(quoting Clegg v. Butler, 676 N.E.2d 1134, 1140 (Mass. 1997)). As
a result, we consider only whether a reasonable jury could have
found that Appleton's damages became reasonably clear before
judgment.4
To do so, we apply an objective test and look to "whether
a reasonable person, with knowledge of the relevant facts and law,
In her opposition to the defendants' motion for summary 4
judgment, Appleton contended that section 3(9)(f)'s liability determination only requires showing that it was "reasonably clear" that she had suffered some damages, not that the amount of damages itself was "reasonably clear." But Appleton does not raise this same argument in her briefs to us. For purposes of this appeal, we follow the lead of the parties in analyzing whether the amount of damages Appleton suffered was "reasonably clear." We leave it to the district court on remand to address whether this focus on the amount of damages -- rather than the existence of at least some damages -- is the proper inquiry under Massachusetts law.
- 15 - would probably have concluded, for good reason" that damages were
reasonably clear. Silva v. Norfolk & Dedham Mut. Fire Ins. Co.,
75 N.E.3d 1132, 1136 (Mass. App. Ct. 2017) (quoting O'Leary-Alison
v. Metro. Prop. & Cas. Ins. Co., 752 N.E.2d 795, 798 (Mass. App.
Ct. 2001)). Critically, an insurer does not need to know the exact
"dollar amount of damages" to be liable under section 3(9)(f).
Clegg, 676 N.E.2d at 421-22.
To determine whether damages are reasonably clear under
this objective test, Massachusetts courts have indicated that a
factfinder can consider multiple factors. Those factors include:
(i) "the defendant's own evaluation of the plaintiff's claim,"
O'Leary-Alison, 752 N.E.2d at 798 n.3; (ii) "insurance industry
practices in similar circumstances," id.; (iii) "expert testimony
that the insurer violated sound claims practices," id.; and
(iv) whether there was a "legitimate difference of opinion" or
"good faith disagreement" as to the scope of damages, Bobick, 790
N.E.2d at 659.
The first factor, "the defendant[s'] own evaluation of
[Appleton's] claim," provides strong evidentiary support for a
finding that the value of Appleton's damages became reasonably
clear by January 2018. O'Leary-Alison, 752 N.E.2d at 798 n.3.
The record shows that, between November 2017 and January 2018, AIG
solicited and received three independent estimates of a potential
damages award as part of its evaluation of Appleton's claim, and
- 16 - a reasonable jury could find that these estimates converged on an
average of $7.5 million. Initially, AIG's own defense counsel
estimated a jury verdict between $6.5 million and $8.5 million.
Next, a group of senior AIG adjusters reviewed Appleton's claim
and estimated an average verdict of $4.9 million, prompting Washor
to increase the reserves to pay Appleton's claim from $4 million
to $7.5 million. Finally, AIG hired an external jury consulting
firm, which conducted mock trials of Appleton's case and simulated
results from 500 juries. On January 4, 2018, the consulting firm
informed AIG that the average total award from the mock trials was
$7.53 million. Thus, this factor points to a genuine dispute of
material fact about whether Appleton's damages were reasonably
clear by January 2018.
As for the second and third factors, Appleton's expert
on insurance practices and standards opined that AIG violated sound
industry practices when it "fail[ed] to make a reasonable offer of
settlement" after January 4, 2018. According to the expert,
damages became reasonably clear by that date, when AIG received
its third estimate of the likely jury verdict.
Finally, there were no "legitimate difference[s] of
opinion" regarding the scope of damages here that would have
precluded Appleton's damages from becoming reasonably clear under
Massachusetts law. Bobick, 790 N.E.2d at 659. For example,
Massachusetts courts have found "good faith disagreement[s]"
- 17 - preventing damages from becoming reasonably clear when the insurer
had reason to believe that the plaintiff did not suffer any injury
at all. See, e.g., Silva, 75 N.E.3d at 1134, 1136-37 (quoting
Bobick, 790 N.E.2d at 659) (affirming, under clear error standard,
bench trial finding that damages were not reasonably clear when
plaintiff continued working immediately after accident, waited one
year to claim disability, and did not give insurer access to his
medical records for three years); O'Leary-Alison, 752 N.E.2d at
798 (affirming factual finding that damages were not reasonably
clear when independent medical expert found no injuries warranting
treatment, plaintiff did not report any injuries at accident scene,
and plaintiff continued working for months afterwards). Courts
also have found a "legitimate difference of opinion" on damages
when a plaintiff filed claims against multiple tortfeasors and
witness reports provided conflicting evidence about whether an
insured party was at fault, and if so, its relative culpability.
See Bobick, 790 N.E.2d at 659 (affirming lower court's summary
judgment grant to insurer after finding, as a matter of law, that
damages were not reasonably clear because reports revealed
"differing accounts of events" with varying implications for how
multiple tortfeasors "shared responsibility for failing to ensure
- 18 - the plaintiff's safety"). No such concerns are present in this
case, and the defendants do not argue otherwise.
Instead, the defendants contend that damages were not
reasonably clear by early 2018 because the parties continued to
disagree about "the nature of [Appleton's] damages, particularly
her noneconomic damages . . . [for] her conscious pain and
suffering." But, as we have explained, disputes regarding the
exact dollar amount of damages do not prevent damages from becoming
reasonably clear under Massachusetts law. See Clegg, 676 N.E.2d
at 421-22.
Thus, we conclude that there is a triable issue on
whether damages became reasonably clear by January 2018,
triggering the defendants' obligation to extend a prompt and fair
settlement offer under section 3(9)(f).
2. Did the defendants extend a prompt and fair settlement offer?
We now turn to the second and final step of the
section 3(9)(f) analysis. Even if damages became reasonably clear
in early 2018, a jury could find that the defendants violated
section 3(9)(f) only if they "failed to effectuate [a] prompt,
fair and equitable settlement[]" afterwards. Mass. Gen. Laws ch.
176D, § 3(9)(f). As the SJC put it in Bobick, insurers have a
legal duty "promptly to put a fair and reasonable offer on the
table . . . as soon thereafter as liability and damages make
themselves apparent." 790 N.E.2d at 658 (quoting Hopkins, 750
- 19 - N.E.2d at 951). The relevant legal standard for examining the
defendants' response "is 'whether, in the circumstances, and in
light of the complainant's demands, the offer is reasonable.'"
Id. (quoting Clegg, 676 N.E.2d at 1140). Importantly, the
defendants had this legal duty even if Appleton made excessive
demands. See id. at 660-61. And Appleton had no corresponding
duty under section 3(9)(f) or any other statutory provision to
make a prompt or fair demand.
The question, then, is whether a reasonable jury could
find that the defendants failed to put a prompt, fair, and
equitable offer on the table after January 2018. Massachusetts
law provides several guideposts for a jury evaluating the fairness
of a settlement offer. The jury could compare AIG's offer to AIG's
"own evaluation of [Appleton's] claim," as well as the eventual
state trial jury verdict. Id. at 660 (affirming lower court's
summary judgment grant to insurer after finding, as a matter of
law, that insurer's $50,000 settlement offer was reasonable
because it was similar to the insurer's "own evaluation of [its
share of] the plaintiff's claim" and it was "not substantially
less than" the $60,000 jury verdict); see also Terry, 195 N.E.3d
at 453-54 (upholding, under clear error review, factfinding that
insurer's $25,000 offer was unreasonable in part because it
amounted to one-third of insurer's own $75,000 valuation of
plaintiff's damages). It also could take into account the course
- 20 - of the parties' negotiations, as "[e]xperienced negotiators do not
make their final offer first off, and experienced negotiators do
not expect it, or take seriously a representation that it is."
Bobick, 790 N.E.2d at 660 (quoting Forcucci v. U.S. Fid. & Guar.
Co., 11 F.3d 1, 2 (1st Cir. 1993)). Further, the jury could
consider Appleton's demands "as part of the over-all circumstances
affecting the amount that would qualify as a reasonable offer in
response." Id. at 661. And, finally, an insurer "is not held to
standards of omniscience or perfection," O'Leary-Alison, 752
N.E.2d at 799 (quoting Peckham v. Cont'l Cas. Ins. Co., 895 F.2d
830, 835 (1st Cir. 1990)), so its "good faith, but mistaken,
valuation of damages does not constitute a violation of
[Chapter] 176D," id.
The district court did not evaluate if there was a
genuine dispute of material fact about whether the defendants'
settlement offers in 2018 were prompt and fair. See Appleton,
2024 WL 5344449, at *13. Notably, at any trial, it would be the
defendants' burden "to prove that [$2.65 million] was a reasonable
offer in the circumstances and in light of [Appleton's] demands."
Bobick, 790 N.E.2d at 659. Given the record here, however, we
conclude it is appropriate for us to address this issue on appeal
rather than remanding for the district court to decide it in the
first instance. See Sutherland, 126 F.4th at 741.
- 21 - Viewing the record in the light most favorable to
Appleton, we conclude that there exists a genuine dispute of
material fact on this point. Most importantly, the record
demonstrates that, for almost a year after receiving the three
jury award estimates ranging from $5 million to $8.5 million, AIG
did not increase its previous settlement offer of $2.65 million.
As we have explained, a reasonable jury could find that these
estimates converged on an average award of $7.5 million. Yet when
AIG finally did raise its settlement offer during the parties'
third mediation in mid-December 2018, it did so by only $600,000,
for a total of $3.25 million. This modest increase came fourteen
months after receiving the two estimates ranging from $5 million
to $8.5 million and almost a year after receiving the jury
consulting firm's $7.5 million estimate.
Next, several years had passed since the accident, and
thus the $2.65 million offer on the table in early 2018 was not
AIG's initial offer or even its second offer during the settlement
negotiations. The parties had already attended two previous
mediation sessions by that time. A reasonable jury could conclude
that AIG's decision to stick with this offer for nearly a year
after damages of about $7.5 million became reasonably clear was
neither fair nor equitable, even when considering Appleton's $16
million demand "as part of the over-all circumstances." Bobick,
790 N.E.2d at 661.
- 22 - Finally, in March 2018, a state jury awarded Appleton
$7.5 million in damages. Looking at this factor under Bobick, a
jury in this case could conclude that the actual award Appleton
received in her state trial supports the conclusion that AIG's
settlement posture throughout 2018 was not fair or equitable.
Accordingly, we conclude that a reasonable jury could
find that the defendants did not extend a prompt and fair
settlement offer after liability became reasonably clear in
January 2018. We thus vacate the district court's grant of summary
judgment as to Appleton's section 3(9)(f) claim.
B. Section 3(9)(d) Reasonable Investigation Claim
We now turn to Appleton's claim that the defendants are
liable under section 3(9)(d) for "[r]efusing to pay claims without
conducting a reasonable investigation based upon all available
information." Mass. Gen. Laws ch. 176D, § 3(9)(d). An insurer
has an obligation under section 3(9)(d) to "investigate claims
thoroughly to determine [its] liability" because "an [insurer's]
duty to settle [under section 3(9)(f)] does not arise until
'liability has become reasonably clear.'" Clegg, 676 N.E.2d at
1140 (quoting Mass. Gen. Laws ch. 176D, § 3(9)(f)).
To conduct a reasonable investigation under
section 3(9)(d), insurers must take "basic steps toward obtaining
an independent or neutral assessment" of liability. Terry, 195
N.E.3d at 450 (quoting McLaughlin v. Am. States Ins. Co., 55 N.E.3d
- 23 - 1007, 1016 (Mass. App. Ct. 2016)). Accordingly, courts have
determined that insurers did not conduct a reasonable
investigation under Massachusetts law in two situations: when
those investigations were clearly biased or when the insurers
failed to investigate at all. For example, courts have found
section 3(9)(d) violations when the insurer "engaged in a
results-oriented treatment of the evidence" by "cherry-pick[ing]"
favorable facts and "disregard[ing] unfavorable evidence." Id.
(citations omitted). And we have held that an insurer violated
section 3(9)(d) when, "other than reviewing the materials
submitted with [the plaintiff's] claim, it appear[ed] that [the
insurer] did no investigation of the available facts before denying
coverage." Fed. Ins. Co. v. HPSC, Inc., 480 F.3d 26, 36 (1st Cir.
2007) (finding no clear error in district court's conclusion).5
5 Although section 3(9)(d) bars insurers from "[r]efusing to pay claims without conducting a reasonable investigation based upon all available information," courts have interpreted this provision to apply even when an insurer does not deny the plaintiff's claim altogether. Mass. Gen. Laws ch. 176D, § 3(9)(d) (2012) (emphasis added). Instead, Massachusetts courts have focused on the latter half of the provision, characterizing the requirement as one "to investigate insurance claims promptly and reasonably." Terry, 195 N.E.3d at 449. Thus, courts have found violations of section 3(9)(d) in situations where an insurer has agreed to pay the plaintiff's claim and extended a settlement offer, but the plaintiff rejected the offer as too low (as Appleton did here). See, e.g., id. at 449-51 (affirming trial court's finding that insurer violated section 3(9)(d) despite extending a pretrial settlement offer); see also Urban v. Zurich Am. Ins. Co., 752 F. Supp. 3d 310, 317, 337-39 (D. Mass. 2024) (after bench trial, finding section 3(9)(d) violation even though insurer made
- 24 - Appleton, however, does not argue that the defendants
conducted a biased investigation or failed to conduct any
investigation of their own. Instead, she claims that four specific
acts by AIG violated section 3(9)(d): (i) Washor's failure to
investigate Appleton's claim for the first nine months after she
was assigned to it in December 2015; (ii) Washor's attempts to
pursue a liability defense even after defense counsel advised no
such defense was available; (iii) AIG's failure to document
reviewing, evaluating, or otherwise investigating Appleton's
medical records after receiving them in March 2016; and (iv) AIG's
failure to obtain objective expert reports about Appleton's
damages for the two years after the initial mediation session in
March 2017.
None of Appleton's arguments support sending her
section 3(9)(d) claim to a jury. We begin with Appleton's argument
that AIG waited too long to start investigating her claim. The
record does indicate that Washor was assigned to Appleton's claim
in December 2015 but did not begin investigating it until hiring
defense counsel in September 2016. But, after Appleton shared her
medical records and bills with AIG in March 2016, Washor informed
Appleton's attorney that AIG needed "a complete demand package,"
including her medical records, lien information, liability
"three offers in the course of negotiation in the underlying matter and one offer following a verdict").
- 25 - arguments, and settlement demand, "in order to proceed with a
resolution of this case." And it is undisputed that Appleton did
not share that demand package with AIG until August 2016, at which
point AIG began hiring defense counsel. Appleton has not cited
any case law to indicate that insurance companies must, in all
circumstances, start an investigation even before receiving a
demand package in order to satisfy section 3(9)(d). Nor has
Appleton identified any specific investigative steps that AIG
allegedly should have taken before receiving her demand package.
In this damages-only case, the most important evidence focused on
Appleton's injuries and their impact on her life -- information in
Appleton's control. On this specific record, we see no basis for
a jury to conclude that AIG acted unreasonably in waiting to
receive Appleton's demand package before it began its own
investigation.
Next, Appleton claims that Washor continued to pursue a
liability defense even after defense counsel advised AIG in
December 2016 that this was a damages-only case. But Appleton has
failed to point to any record evidence suggesting that Washor did,
in fact, pursue a liability defense despite counsel's advice.
Thus, we see no genuine factual dispute for a jury to resolve on
this point either.
Appleton's third argument, about AIG's alleged failure
to document reviewing, evaluating, or otherwise investigating her
- 26 - medical records, is also unpersuasive. Appleton concedes that
AIG's defense counsel did, in fact, review Appleton's medical
records in October 2016, about one month after AIG received her
full demand package. She cites no case law that a one-month delay
in reviewing documents can be enough to violate section 3(9)(d).
Thus, we reject this argument as well.
Finally, Appleton mischaracterizes the record in
claiming that AIG failed to obtain objective expert reports.
Although Appleton acknowledges that AIG hired two experts before
the March 2017 mediation, she simultaneously contends that AIG's
failure to "obtain[] any other expert opinions relating to
Plaintiff's damages for [the] two years [afterwards]" violated
section 3(9)(d). It is undisputed, however, that Appleton asked
AIG to suspend the March 2017 mediation so she could provide
additional evidence about her bladder injury and that internal
communications indicate that AIG decided to wait for that evidence
before retaining additional experts of its own. It is also
undisputed that AIG retained four additional medical experts
between October and November 2018 to evaluate Appleton's case,
including an orthopedic surgeon, gynecologist, neurologist, and
urologist, two of whom wrote reports that were disclosed for trial.
Thus, the summary judgment record demonstrates that AIG did retain
medical experts who wrote expert reports about Appleton's damages
in the two years after the March 2017 mediation.
- 27 - To the extent that Appleton is arguing that experts hired
by defense counsel cannot provide objective opinions that satisfy
AIG's own section 3(9)(d) obligation, she does not cite any case
law to support that argument. Nor does she identify any specific
facts from the record to indicate that the experts AIG retained in
2018 were incapable of providing a reliable medical opinion. This
aspect of Appleton's section 3(9)(d) argument is therefore waived
for lack of development. See United States v. Zannino, 895 F.2d
1, 17 (1st Cir. 1990) ("[I]ssues adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation,
are deemed waived."). As a result, we affirm the district court's
grant of summary judgment to the defendants as to Appleton's
section 3(9)(d) claim.6
IV. CONCLUSION
For all these reasons, we vacate the district court's
grant of summary judgment on Appleton's section 3(9)(f) claim,
affirm its grant of summary judgment on her section 3(9)(d) claim,
6 During oral argument, Appleton conceded that the only time period during which AIG's actions could have given rise to a section 3(9)(d) claim was the three-month period between October 2017 and January 2018 because, if AIG had conducted a reasonable investigation, damages would have become reasonably clear in October 2017 rather than in January 2018. We do not rely on this concession in rejecting the four arguments Appleton raises on appeal and do not otherwise address it, as neither party briefed its implications.
- 28 - and remand for further proceedings consistent with this opinion.
The parties shall bear their own costs.
- 29 -