176D Claim Violation: Zurich Hit With A $2.8m Penalty
On September 30, 2024, the federal court entered an order awarding an additional $2.8 million in damages against Zurich American Insurance Company, based on a $1.4 million state court judgment it had already paid for a 2014 motorcycle accident where its insured was found 90% at fault. After Zurich paid the state court judgment, a new action was filed alleging unfair claim handling practices under G.L. c. 93A, § 9 in state court. Zurich removed the suit to the federal court. Following a five-day bench trial, United States District Court Judge Angel Kelley found Zurich violated the Massachusetts Unfair Claim Practices Act by failing to conduct an objective investigation and not making reasonable settlement offers once liability became clear.
Judge Kelley’s forty-two-page decision is one that claim professionals and insurance attorneys may wish to consider going forward. A copy of the decision is available at the end of this article.
The underlying accident
On September 12, 2014, at 7:04 A.M., Justin Urban was riding his motorcycle southbound on Boston Road (Route 3A) in Billerica, Massachusetts. As he entered the intersection of Boston Road and Treble Cove Road, his motorcycle collided with a van driven by Keith Weston, an employee of Interstate Electrical Services Corporation (IESC).
Urban suffered extensive and serious medical injuries in the collision. Court documents reveal that he sustained fractures in his pelvis, left hip, left fibula, left tibia, left femur, left ankle, left shoulder, left humerus, and left ulna. He also suffered injuries to various organs, joints, and muscles. As a result of these injuries, Urban underwent multiple surgeries and medical procedures. He was hospitalized for a total of 26 days, resulting in medical bills totaling $318,639.29.
Zurich’s investigation
Zurich American Insurance Company, the insurer for IESC and Weston, assigned the claim to Charles Murray, a Major Case Unit (MCU) Specialist, on or near September 18, 2014. Murray, an experienced claims professional who had worked in the insurance industry since 1984, immediately identified four critical factors for determining liability in this case:
1. Whether Weston’s van was moving at the time of impact
2. Where the impact occurred within the intersection
3. Whether Urban was weaving between lanes or creating his own lane prior to entering the intersection
4. Urban’s speed riding through the intersection
On September 18, 2014, Murray retained Todd Butler of George Butler Adjusters Inc. to investigate the motorcycle’s speed before the incident and whether there were any “visual obstructions” that may have impacted Weston’s vision before striking Urban’s motorcycle.
On September 24, 2014, Attorney Richard McLaughlin, Urban’s then-counsel, sent a letter to Butler requesting the amount of the insured’s liability coverage under M.G.L. 175, § 112C. Butler responded on September 30, 2014, indicating Zurich’s policy limit for IESC was $1,000,000 per occurrence.
As Butler’s investigation progressed, conflicting accounts of the accident emerged. Weston provided an unsworn, written statement on September 12, 2014, indicating that he was stopped in the intersection when “a motorcycle appeared suddenly and hit the left front portion of [Weston’s] vehicle.” However, Marie Richards, a witness to the accident, provided a recorded statement on September 29, 2014, stating that Weston “started to make [a] turn” after she waved him through and that the van was moving when the collision occurred.
Butler submitted his Preliminary Report to Murray and Zurich on October 31, 2014. His investigation involved interviewing witnesses, reviewing police reports and accompanying documents, and obtaining background information on Weston and Urban.
Urban provided a written statement on March 24, 2015, stating that as he approached the intersection, he noticed Weston’s van approaching to make a left-hand turn. Urban claimed he slowed his motorcycle to ensure the van would stop. According to Urban, the van came to a complete stop, and as he proceeded through the intersection with the green light, the van “suddenly” started to move forward and turn. Urban stated he “did not have any time to react” and his motorcycle “struck the driver-side front corner of the van and [he] was thrown from the motorcycle.”
Counsel retained to “get an accident reconstructionist on board”
On December 16, 2014, Murray reported to IESC that he wanted to retain counsel as soon as possible “to get an accident reconstruction expert on board.” Two days later, on December 18, 2014, Murray emailed Todd MacDermott, IESC’s insurance broker, and representatives of IESC, indicating his intention to refer the defense of IESC and Weston to Attorney Scott Carroll of Boyle Shaughnessy P.C., IESC’s preferred defense counsel. Murray reiterated his plans to retain an accident reconstruction expert.
Urban’s $1,500,000 settlement demand and Zurich’s $100,000 offer.
On November 29, 2016, Urban’s attorney submitted a comprehensive settlement demand package to Zurich. The package contained doctor’s reports, medical bills, lost wage documentation from Urban’s employer, photographs of both the accident scene and Urban’s injuries, and a collision analysis report.
The collision analysis report submitted to Zurich was prepared by Kerry Alvino, a former Massachusetts State Police Lieutenant Urban who was retained as a collision reconstructionist specialist. The Alvino report concluded that Weston’s van was moving at 5-10 mph when it struck Urban’s motorcycle. According to Alvino’s analysis, Weston was initially stopped in the left northbound lane waiting to turn left, but “unexpectedly” turned and encroached upon Urban’s right-of-way after being waved through by another driver. The report noted that Weston failed to check for oncoming traffic in the left southbound lane. Using witness statements from both Urban and Richards, Alvino based her calculations on Urban traveling at 30 mph when entering the intersection. The report included a disclaimer that not all facts were known at the time of analysis and reserved the right to amend conclusions if new information emerged.
Urban’s demand based on his settlement package was $1.5 million, though his attorney indicated a willingness to settle all Urban’s claims for the payment of Zurich’s $1 million policy limit.
Nearly three months later, on February 23, 2017, Zurich responded with a counteroffer of $100,000.
Trial before three judges results in Urban awarded $1,420,679.13
On March 16, 2017, Urban filed a personal injury suit in the Middlesex Superior Court against Weston and his employer, IESC,
The Covid-19 pandemic significantly altered the course of the legal proceedings. With jury trials suspended in Massachusetts, the parties consented to have the underlying negligence case tried before a panel of three judges in the Superior Court.
On March 3, 2021, the panel returned a verdict finding Weston 90% negligent and Urban 10% negligent, awarding Urban $1,068,944.21. The Superior Court entered a revised judgment on March 4, 2021, for $1,420,679.13, including prejudgment interest.
Zurich promptly paid this judgment in full.
A 93A demand letter and an unfair claim practice lawsuit
On March 5, 2021, Urban served Zurich with a Chapter 93A demand letter, a legal prerequisite to filing a suit for unfair claim practice. The letter alleged Zurich violated G.L. c. 176D § 3(9), (c), (d) and (f). This demand sought an additional payment of $2,872,928.90 to settle Urban’s claims of unfair claim practices.
In response, Zurich made a “safe harbor” settlement offer of $70,000 on April 2, 2021, as provided for under § 9 of Chapter 93A.
Urban rejected this offer and initiated a new lawsuit in Middlesex Superior Court on May 18, 2021, seeking punitive damages against Zurich for its alleged unfair claim practices under Chapters 93A and 176D.
Five-day bench trial in federal court on Zurich’s handling of Urban’s claim
Zurich removed Urban’s lawsuit to the United States District Court under its diversity jurisdiction over suits between residents of different states.
In June 2024, the federal judge assigned to hear the case conducted a five-day bench trial to adjudicate Urban’s claims of unfair claim practices since there is no right to a jury trial under Chapter 93A,
On September 30, 2024, Judge Kelley entered her Findings of Fact and Conclusion of Law based on her assessment of the witnesses and evidence of Zurich’s handling of the Urban claim from the initial investigation through years of negotiation, ultimately led to its finding that Zurich had violated its obligations under M.G.L. c. 93A and Chapter 176D, resulting in significant penalties for the insurer.
Determining When Liability Became Reasonably Clear
The court’s decision focused on determining when liability becomes “reasonably clear” under M.G.L. c. 176D, § 3(9)(f). The court emphasized that this determination “calls for an objective standard of inquiry into the facts and the applicable law.”
In assessing when liability became reasonably clear in this case, the court considered several key factors. These included the evidence available to Zurich, the company’s own evaluation of the claim, and the actions taken (or not taken) during the investigation process.
The court noted that as early as December 16, 2014, Zurich’s MCU Case Summary acknowledged a “rebuttable presumption of negligence and a burden of care on a vehicle operator who attempts to negotiate a left-hand turn across oncoming lanes of traffic.” This recognition of Weston’s duty of care was a crucial starting point in the liability assessment.
Despite this early acknowledgment, Zurich maintained that liability was never reasonably clear throughout the case. Charles Murray, Zurich’s claims adjuster, testified that “We felt that we were going to win the case. For me, my interpretation of liability being reasonably clear, is that there is very little discussion or doubt or question in terms of the facts of, you know, who’s at fault, legal liability.”
The court, however, found that Zurich’s assessment of liability was flawed in several respects.
First, Zurich’s liability analysis “frequently conflated calculations of what a jury may perceive with the evaluation of a party’s actual liability.” The court emphasized that determining whether liability is reasonably clear is “independent” of how a jury may perceive motorcyclists or Urban’s actions.
Second, Zurich placed undue emphasis on Urban’s potential comparative negligence. The court rejected Zurich’s argument that any comparative negligence automatically prevents liability from being reasonably clear. The judge stated, “The standard of ‘reasonably clear’ must not be conflated to mean absolutely certain as to all the details and specific comparative percentages, especially where the tortfeasor’s fault is substantial.”
Third, the court found that Zurich failed to properly weigh and consider evidence that didn’t support its defense. For instance, by June 2018, following the completion of depositions and discovery, the court concluded there was sufficient evidence to indicate that Weston’s van was moving at the time of impact and that the collision occurred in Urban’s travel lane. Despite this evidence, Zurich maintained its position that liability was not reasonably clear.
The court was particularly critical of Zurich’s reliance on the allegation that Urban was weaving through traffic or creating his own lane. The decision states, “By the close of discovery, no evidence supported the fiction that Urban was weaving in between vehicles or creating his own lane on his way to the intersection.” Yet, Zurich continued to include this unsupported claim in its liability assessment reports and pre-mediation reports leading up to trial.
In terms of specific evidence, the court highlighted Marie Richards’ testimony as particularly significant. Richards consistently maintained that Weston’s van was moving at the time of impact, stating in her deposition that the van was “halfway into the left-hand turn at the time of impact.” The court found that Zurich failed to give proper weight to this testimony, instead relying heavily on Weston’s account despite its inconsistencies.
The court also emphasized the importance of Zurich’s failure to obtain an accident reconstruction expert despite repeatedly acknowledging the need for one. This failure was seen as a significant factor in Zurich’s unreasonable investigation and liability assessment.
Ultimately, the court determined that liability became reasonably clear by June 2018. By this time, all depositions and discovery had been completed, and Zurich had received the accident analysis report from Kerry Alvino, Urban’s expert. The court stated, “Based on evidence available to the parties regarding whether Weston was moving and the location of the impact, the Court finds that by July of 2018, there was sufficient evidence to indicate Weston’s van was moving at the time of impact and that Weston’s van hit Urban’s motorcycle in Urban’s lane of travel.”
The court found that the standard for “reasonably clear” liability does not require absolute certainty. Instead, it requires an objective assessment of the available evidence and a good faith evaluation of liability. Zurich’s failure to conduct such an assessment, coupled with its reliance on unsupported allegations and speculation about jury perceptions, led the court to conclude that the company had violated its obligations under M.G.L. c. 176D, § 3(9)(f) to effectuate prompt, fair, and equitable settlements once liability had become reasonably clear.
The Court’s timeline for settlement offers by Zurich
General Laws c. 176D, § 3(9)(f), requires insurers to “effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.”
In making its rulings, the court reviewed the timeline of settlement offers and negotiations between Urban and Zurich, spanning from 2016 to 2021. This chronology showed the disparity between Urban’s demands, Zurich’s internal valuation of the case, and the offers Zurich actually made.
On November 29, 2016, Urban’s attorney made an initial demand of $1.5 million. However, the attorney indicated a willingness to settle for the $1 million policy limit to avoid pursuing Zurich’s assets. This demand package included comprehensive documentation: doctors’ reports, medical bills, a lost wage form from Urban’s employer, a collision analysis report from former Massachusetts State Police Lieutenant Kerry Alvino, photographs of the accident location, and photographs of Urban.
Zurich’s response to this demand came on February 23, 2017, with a counteroffer of $100,000. The court noted that, at this point, Zurich was aware of the severity of Urban’s injuries. In an email dated December 18, 2014, Murray had described Urban’s injuries as “catastrophic” and estimated the medical costs alone to be “at least” in the range of a “quarter million.”
The parties engaged in mediation in July 2017. During this session, Urban reduced his demand to $950,000 and then further to $925,000. Zurich countered with a $125,000 offer. No settlement was reached.
A second mediation took place on October 22, 2018. Urban again reduced his demand, this time to $910,000. Zurich responded with a $200,000 offer. The court found this offer particularly problematic, as by June 2018, all depositions and discovery had concluded, and Zurich had received Alvino’s expert report. The court determined that liability was reasonably clear at this point, yet Zurich’s offer remained significantly below the known damages.
The final pre-trial offer from Zurich came on February 11, 2021, just weeks before the jury trial of the underlying matter. At this time, Zurich offered to settle for $300,000. Urban countered with a demand of $500,000 but withdrew this counteroffer on February 17, 2021.
In assessing the adequacy of these offers, the court highlighted several key factors:
1. Zurich’s internal valuation: The court noted that Zurich’s own internal documents estimated the case to be worth $1,006,500 in 2017. This figure stood in stark contrast to their highest pre-trial offer of $300,000.
2. Known damages: Urban’s medical bills alone totaled more than $300,000. The court found it significant that Zurich’s pre-trial settlement offers never exceeded this amount despite their awareness of additional damages beyond medical expenses.
3. Timing of offers: The court emphasized that Zurich’s duty to make a fair offer arose when liability became reasonably clear, which it determined to be by June 2018. However, Zurich’s subsequent offers did not reflect this shift in the clarity of liability.
4. Disparity with final judgment: While not the sole factor, the court considered the significant difference between Zurich’s offers and the final judgment. The underlying court ultimately awarded Urban approximately $1,420,679.13, including interest. This amount aligned closely with Zurich’s own estimated value of the case, suggesting to the court that the judgment was not an unexpectedly high amount.
The court was particularly critical of Zurich’s $70,000 offer made on April 2, 2021, after the underlying trial and in response to Urban’s Chapter 93A demand letter. Zurich attempted to justify this amount by arguing that it represented the interest calculated at 6% on a hypothetical $500,000 offer. Zurich believed that this amount, if tendered, could have settled the case in October 2018.The court rejected Zurich’s reasoning, finding the offer “demonstrably unreasonable” given the known damages and the proximity of the judgment to Zurich’s own valuation.
In its analysis, the court emphasized that while insurers are not obligated to automatically tender policy limits, they must make good faith efforts to settle claims promptly and fairly when liability becomes reasonably clear. The court stated, “Allowing this would set a dangerous precedent, enabling insurers to dodge their statutory obligation to make settlement offers whenever there is a disagreement over damages—such as disputes overcompensation for pain and suffering, which are quite common.”
The court concluded that Zurich’s settlement offers were inadequate and did not fulfill its obligation under M.G.L. c. 176D, § 3(9)(f). This failure to make fair and reasonable offers, particularly after liability had become reasonably clear, was a key factor in the court’s ultimate finding that Zurich had violated its statutory obligations, leading to significant penalties for the insurer.
The final order for punitive damages of $$2,841,358.26, plus attorneys’ fees
Judge Kelley’s decision concluded that Zurich’s conduct was willful and knowing, marked by an unreasonable investigation that lacked objectivity and relied more on stereotypes about young motorcyclists than on evidence. The court found that Zurich’s biased approach unnecessarily prolonged the case for years, warranting punitive damages under Chapter 93A.
The court took the underlying Superior Court judgment of $962,049.79, plus prejudgment interest of $458,629.34 (totaling $1,420,679.13), and doubled this amount as permitted by statute for willful violations.
Her final order was for judgment to enter against Zurich for $2,841,358.26, plus attorneys’ fees.
Motion for Attorney Fees, Expert Fees, and Costs
Following the Court’s order for entry of judgment on September 30, 2024, Urban filed a motion for attorney fees, costs, and interest. Specifically, Urban’s motion requests:
1. Attorney fees totaling $234,760.00, based on 158.5 hours at $800 per hour for Attorney Richard Sullivan, 41.9 hours at $500 per hour for Attorney Robert Turner, and 248.6 hours at $350 per hour for Attorney James McLaughlin.
2. Expert witness fees of $38,820.00, comprising $20,825.00 for Thomas Bond (44 hours at $475 per hour) and $17,995.00 for Scott Gowen (51.3 hours at $350 per hour).
3. Costs of $3,633.83, including a $310.73 filing fee and $3,323.10 for trial transcript fees.
4. Prejudgment interest of $570,686.81, calculated at 12% per annum on the base damages of $1,420,679.13 from the filing date of May 18, 2021, of the 93A action to its judgment date of October 3, 2024.
The court has not yet ruled on this motion. Zurich has thirty days to file an appeal with the First Circuit Court of Appeals once a final judgment has entered.. The judgment will become final if Zurich does not file an appeal within this timeframe.
Some observations on Judge Kelley’s decision
If upheld on appeal, Judge Kelley’s decision in Urban v. Zurich American Insurance Company will send some clear messages to liability insurers about their claim-handling obligations under Massachusetts insurance law.
At its core, the decision emphasizes that insurers, under G.L. c. 176D, § 3(9)(f) must conduct genuinely objective investigations, not merely create a record to support predetermined conclusions. The judge’s detailed analysis of Zurich’s investigation makes clear that repeatedly stating the need for an expert, then abandoning that plan without credible explanation when the expert’s likely opinions become unfavorable, fundamentally undermines the requirement of reasonable investigation under Chapter 176D.
The decision also establishes that an insurer’s duty to evaluate liability objectively cannot be satisfied by strategically weighing evidence to support a preferred outcome. Judge Kelley’s criticism of Zurich’s disparate scrutiny of evidence – rigorously questioning information favoring the claimant while accepting without serious examination evidence supporting the insured – demonstrates that Massachusetts courts will look beyond the mere fact of investigation to examine its quality and fairness. Particularly significant is the judge’s focus on Zurich’s continued reliance on the “weaving through traffic” narrative even after it was disproven, suggesting that insurers have an ongoing duty to adjust their liability assessment as evidence develops.
Perhaps most importantly, Judge Kelley’s decision clarifies that an insurer cannot avoid its settlement obligations under c. 176D, § 3(9)(f) by conflating objective liability assessment with speculation about jury outcomes. The judge explicitly rejected Zurich’s attempt to justify its low settlement offers based on anticipated jury bias against motorcyclists, making clear that such strategic calculations cannot substitute for honest evaluation of the evidence. The stark contrast between Zurich’s internal valuation of over $1 million and its highest offer of $300,000 serves as a warning that courts will view skeptically any significant disconnect between an insurer’s private assessment and its settlement positions.
This decision puts insurers on notice that Massachusetts courts will carefully scrutinize whether an adequate investigation was conducted to determine if liability is reasonably clear.
Judge Kelley’s emphasis on the timing of settlement offers relative to when liability became clear (here, by June 2018) suggests that courts will examine the entire chronology of claim handling to assess whether delays or inadequate offers reflect genuine uncertainty about liability or strategic positioning to minimize payments. The substantial damages awarded—doubling the underlying judgment—underscore that violations of these obligations may carry serious financial consequences.
You can obtain a copy of the decision by clicking HERE.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
Connect with me directly, by calling me at 617-598-3801.
