Massachusetts case clarifies standards for when insurers must offer reasonable settlements. Chiulli vs. Liberty Mutual Insurance Mass App Ct (2020)

See my earlier post on the same issue in another decision


Disagreement over a barstool led to a fight just outside the bar. Chiulli one of the battlers, got badly hurt and sued the bar for handling the dispute negligently.  Liberty Mutual insured the bar.

Defending the bar, lawyers and Liberty Mutual considered they had a better than 50% chance of winning in front of a jury. Some proof showed the plaintiff started the fight. The jury found the bar was careless in how it handled the dispute and awarded millions to Chiulli on a verdict just before Thanksgiving. Chiulli demanded payment; the insurer replied, it was considering an appeal. Correspondence in the insurer’s file showed it knew Chiulli was hard up for money.

Chiulli sent a demand for settlement under MGL 93a and 176D to Liberty, claiming their failure to pay was a Massachusetts bad faith insurance claims practice. Liberty and the excess carrier settled with Chiulli paying on the claim against the bar just after the new year, but did not make an offer to settle the bad faith claims practices case within 30 days, as is required.

A whole trial before a judge answered the question, when was liability reasonably clear enough that Liberty ought to have known they were obliged to make a reasonable offer of settlement? The judge found liability was clear just after closing arguments; at that point, Liberty owed a duty to make a reasonable settlement offer. Also, the judge decided Liberty’s talk of taking an appeal was just for settlement leverage.


What standards determine when a Massachusetts insurer’s failure to settle is bad faith?


The time when a reasonable insurer viewing all the evidence, would have concluded that liability and damages were “reasonably clear”, triggers the insurer’s duty to make a reasonable settlement offer.


The insurer did not make an offer in the bad faith claim case with a badly hurt plaintiff.  Is the standard for liability ‘Clear’ or ‘Reasonably Clear’? Even though some triable issues of fact remain open, an insurer can still have the duty to make an offer of settlement. The duty can arise with something less than absolute bullet proof of liability.

The purpose of c. 176D is to prevent insurers from exercising their superior bargaining power to “force claimants into unnecessary litigation to obtain relief”.

The insurer’s belief about its chances of winning must be reasonable to be protected. What a jury did later is not the measure. Even if other parties might share blame, the duty to offer a reasonable settlement can still arise.


What is the basis for multiple damages where there was an underlying bad faith judgment whose payment was delayed?


The entire verdict “the amount of judgment on all related claims” gets multiplied where bad faith is shown (as it was here).  


2 Lessons – insurer’s duty to make reasonable settlements is based on what an objective insurer would have done. 

Don’t get into fights over bar stools.