The Commonwealth of Massachusetts Has it Over the Commonwealth of Pennsylvania in the Handling of Third-Party Lawsuits

To anyone familiar with my blogs or website, it comes as no surprise that I have come to rely upon the law of 93A and 176D to help my personal injury clients. It has been an effective tool in dealing with insurance companies. That law, or actually those two statutory provisions, allows a client to assert that an insurer has a fiduciary duty, even a third-party insurer, to conduct their claims handling in a fair and reasonable manner. This imposes a major obligation on the insurer and it governs, or has been construed to govern, claims investigation and claims handling.

When I say third-party, I am speaking of the B where A is suing B and there is no relationship between the two other than that B caused A’s accident. That is a third-party situation. It leads to a third-party lawsuit and the fact that 93A is applicable in that context is extremely helpful. We are not talking about what’s called first-party insurance. In the scenario of first-party insurance, you are turning to your own insurance company and saying that they have not dealt fairly with you in adjusting the fire damage or adjusting the value of a vehicle or anything of that nature. In contrast, in my practice, we are dealing with tort cases. They are third-party cases where we are dealing with the insurer of the third-party.

As I have said on this website and in these blogs, 93A has been a weapon that has allowed fairplay in litigation and has leveled the playing field. Recently, I was investigating the law of another major industrial state, Pennsylvania, and it was with some surprise to me that I learned that their unfair acts or practices statute is not available to third-party claimants in tort cases. Thus it is not a weapon for third-party lawsuits. Pennsylvania courts will not permit the person who has been hurt to have a direct action against the insurance company of the at-fault person. Regrettably, under the law of the Commonwealth of Pennsylvania, insurers have no duty, to act in good faith to the entities who are suing them.

This is a very different proposition from what we have in Massachusetts. I, as a lawyer of personal injury victims, want to make sure that insurers have their feet held to the fire. They must act in good faith, must investigate claims in good faith and negotiate those claims in good faith. I can rely on the law in Massachusetts that the insurers have a fiduciary obligation to my third-party clients in their third-party lawsuits. Accordingly, the claims of my clients are more likely to be handled in a fair and reasonable manner. The insurance companies who write policies in Massachusetts are not unaware of our consumer protection statute and its applicability to third-party cases. That the law has been strengthened in the past four years by a number of court decisions has not been lost on those insurers. See especially, Rhodes v. AIG omestic Claims, Inc. 461 Mass. 486 (2012).

Please realize that it may not even be necessary to litigate the 93A case. Often, a letter sent pursuant to the statue will be a handy wake-up call to the third-party insurer. In an auto accident case, say the insurance policy is $100,000. If it is a strong claim, it is not uncommon to see an insurer offer $80,000 or $90,000 in an effort to make litigation impractical from a cost-benefit perspective; if this “lowball” offer is accepted, the insurer has saved claim dollars. This can well constitute a 93A, 176D violation. To combat this, I will send a letter to the insurer calling this for what it is: an unfair business act or practice in insurance. I have lost track of how many letters that I have sent to insurers where this has happened. No surprise…the offer is finally made for the full policy limits, as it should have been made from the outset. To be fair, the 93A, 176D letter is not always required, but too often it is. Thankfully, we have that weapon in Massachusetts.