February 10, 2012 – SJC issues decision in Rhodes v. AIG Domestic Claims, Inc., 461 Mass. 486 (2012) –
Margaret Pinkham of Pinkham Busny LLP won a major victory in a case that has been described as an insurance “game-changer” after ten years of litigation. The Massachusetts Supreme Judicial Court overturned a trial court and Appeals Court decisions limiting damages against American Insurance Group (AIG) for engaging in unfair insurance practices in handling Marcia Rhodes’ personal injury claims. In 2002, Mrs. Rhodes was rear-ended by a tractor-tanker and paralyzed from the waist down. She and her husband and teenage daughter filed suit that year. In February 2012, the Supreme Judicial Court awarded the Rhodes family $22.7 million in punitive damages under the consumer protection laws, which award is in addition the damages they were awarded by a jury in 2004.
In 2004, Pinkham was trial counsel in the personal injury action in which a Norfolk Superior Court jury awarded the Rhodes family a verdict of $9.4 million, the largest jury award in Massachusetts that year. With interest, the verdict was valued at more than $11 million. National Union was the AIG affiliate that provided $50 million of excess coverage to the defendants in the personal injury case, and AIG Domestic Claims was its claims adjuster. After AIG appealed the 2004 jury verdict, Pinkham and the trial team sued AIG under Mass. Gen. Law chapters 93A and 176D for unfair insurance practices by failing to make a prompt offer to settle the case, and for appealing the verdict as “excessive” despite the fact that the personal injury defendants stipulated to liability before trial.
The 93A/176D action was tried in the Business Litigation Session of the Superior Court in early 2007. In 2008, the BLS judge found willful and knowing violations of the statutes by AIG, before and after the 2004 trial, but only awarded damages for the post-verdict violations, and did not use the underlying judgment as the measure of punitive damages under c. 93A. The Massachusetts Appeals Court, 78 Mass. App. Ct. 299 (2010), reversed the portion of the BLS decision addressing pre-verdict damages for unfair insurance practices, but did not address the measure of punitive damages. Pinkham sought further appellate review, and the Massachusetts Supreme Judicial Court (“SJC”) reversed the BLS decision on damages and determined the Rhodes family was entitled to punitive damages equal to twice the value of the underlying judgment in the 2004 personal injury case. The SJC held that c. 93A leaves “no option but to calculate the double damages award against AIG based on the amount of the underlying tort judgment.”