City of Taunton Settles Lawsuit against Its Former Insurance Agent for $3,125,000

On September 25, 2018, the City Solicitor for the City of Taunton, Jason Buffington, advised the Taunton City Council that city had settled it lawsuit with its former insurance agency, FBinsure, arising rising out of allegations that the agency had negligently “failed to properly advise the city as to appropriate insurance coverage.”

The suit arose out of the inadequacy of the ordinance and law coverage the city had purchased on its antiquated city hall. When the building burned down in 2010, the city’s insurance limits for ordinance or law coverage were insufficient to fund upgrade costs required to rebuild the structure in compliance with the building code.

The city claimed its agent did not properly advise it regarding the availability of substantially higher limits for ordinance and law coverage that was available for a relatively small additional premium.

As previously reported by Agency Checklists (See below), on February 7, 2018, a Bristol County jury, after a two-week trial, found against the agency and awarded the city $2 million in damages as required by Massachusetts law, add an additional $1.3 million to the jury’s verdict as statutory prejudgment interest.

On July 9, 2018, after the agency’s post-trial motions were denied, the agency filed an appeal with the Massachusetts Appeals Court. After the agency had filed its appeal, the agency’s insurer, Utica National Insurance Company, negotiated a settlement paying $3,125,000 to Taunton to settle the case.

Agency Checklists article on the original jury verdict is below:

$2 Million E&O Verdict Against Taunton Agency And Its President

On February 7, 2018, after a 13-day jury trial, a Bristol County jury found The FBInsure Insurance Agency, Inc. (“FBInsure”) and its President, Russel F. Martorana, liable to the City of Taunton for $2 million for failing to advise on adequate limits for ordinance or law coverage.

City Hall fire loss had only million dollar limit for increased building cost

FBInsure handled all the insurance business for the City of Taunton for ten years. The city’s premiums totaled over $600,000 per year. One of those buildings, the one-hundred-year-old Taunton City Hall, was placed with Axis Insurance for the policy-year 2010.

On August 17, 2010, Taunton’s City Hall, at the start of the workday, an arsonist setting a fire in the fourth-floor attic of the building.

The Taunton Fire Department quickly responded and extinguished the fire in a little more than a half-hour. However, the volume of water poured into the attic soaked the walls and ceilings of the lower three floors of City Hall. Because of the dousing, the building’s internal walls received, the City decided to take down most of the walls to avoid having mold develop.

For the last seven years, the Taunton city government has been operating out of a vacant school building.

In 2017, the City decided to rebuild and upgrade the original City Hall building. The redesign and rebuilding plans total almost $26 million.

An inadequate limit for ordinance or law coverage

In 2011, the City administration settled its property claim with its insurer, Axis Insurance. The total amount of the settlement was $4,818,345.45. Not all of that sum was paid, however. Axis withheld $1,587,905.41 in code upgrade expenses, recoverable depreciation, and reimbursement of the $100,000 deductible based upon the city rebuilding City Hall within a two-year deadline.

By 2012, Axis refused to pay the City the withheld $1,587,905.4. The City itself, by this time, also had determined it was “woefully underinsured” for the losses it had suffered. The City’s insurance policy with Axis had a $1,000,000 limit for code upgrade coverage. However, the estimates the City received for the code upgrade expenses alone were more than $5,000,000.

City sues its insurance agent for negligence and its insurer for withheld payments

In August 2012, the City of Taunton sued Axis Insurance for breach of contract, FBInsure and its President, Mr. Martorana, for negligence. The complaint also contained claims under M.G.L. c. 93A for unfair and deceptive business practices.

In its complaint, the city alleged it had relied upon the expert advice and counsel of FBInsure and Mr. Martorana, who had personally handled the placement of insurance for the city’s building, to coordinate and meet the City’s complex insurance needs. As a result of this alleged negligence, the City claimed it had a lack of appropriate coverage that it claims it should have had. In particular, the City alleged that FBInsure and Mr. Martorana had failed to advise the City that for an additional premium of $5,000 per year, the limit of its law or ordinance coverage of $1 million could have been increased to the $10 million limit the City claimed it should have had to have been adequately insured.

For additional information, see Agency Checklists’ article of November 26, 2012, entitled: “City of Taunton Sues The Farrell Backlund Insurance Agency.”

Additional proceedings on 93A claim scheduled for February 20

Before the jury began to hear the case, Axis Insurance settled with the city for $600,000. FBInsure and Mr. Martorana went to trial and the jury found against them for $2 million of the City’s $6 million claim.

After the verdict, Mr. Martorana was quoted as saying that the agency and he were “disappointed in the verdict”, and that there would be an appeal.

In addition to the negligence claim tried to the jury, the City also had a claim for violations of M.G.L. c. 93A. Suits alleging unfair and deceptive business practices under this statute are not tried to a jury because of a Supreme Judicial Court decision.

The trial judge has scheduled this claim for a hearing on February 20, 2018.

The $2 million award will also have interest added of more than $1,315,000

The Superior Court Docket doesn’t yet reflect a judgment on the jury verdict; however, under Massachusetts law, any final judgment bears interest from the filing of the suit at twelve percent interest (12%) per annum. In the present case, the City of Taunton sued FBInsure then know as Farrell Backlund Insurance Agency, LLC, on August 16, 2012. Based on that date, the $2 million award will have more than $1,315,000 added to it for prejudgment interest. Any unsuccessful appeal bears twelve percent interest on the total of the verdict and the prejudgment interest.

[update April 16, 2018: on March 28, 2018, final judgment on the jury verdict entered against the agency and its president in the amount $3,349,273.45, including interest and costs].

About FBInsure

FBInsure can trace its roots back to 1858, employs a staff of 85 insurance professionals in eight locations: Taunton, Rehoboth, Dighton, Middleboro, East Freetown, Attleboro, North Attleboro and New Bedford. It boasts a client base of over 20,000 personal and commercial clients and has been designated as a Five-Star Agency by the Massachusetts Association of Insurance Agents.