Insurer’s Tender of Interest Bars $6.75 Million Treble Damage Claim

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For Massachusetts insurers, a Chapter 93A demand letter following a substantial judgment often signals the beginning of a high-stakes negotiation where the threat of treble damages looms large. However, a recent decision by the United States District Court for the District of Massachusetts provides a clear tactical roadmap for insurers looking to limit their exposure.

Massachusetts law provides a “safe harbor” provision under M.G.L. c. 93A, §9(3), allowing anyone receiving a statutory 30-day demand letter to make a written tender of settlement to limit damages. If the court finds that the relief tendered was reasonable in relation to the injury actually suffered by the petitioner, the court will limit the recovery to the amount tendered.

In Gretzky v. AmGUARD Insurance Company, Judge Nathaniel M. Gorton ruled that an insurer’s tender of settlement based on the “loss of use” of funds—specifically, 12% interest—was reasonable as a matter of law. This decision successfully capped the insurer’s liability, shielding it from a plaintiff’s 93A demand seeking treble damages of $6.75 million for alleged unfair claim practices in a personal injury liability suit.

The Underlying Claim and Severe Injuries

The liability case centered on a breach of the building code within the AmGUARD insureds’ apartment building. On September 26, 2021, Victoria Gretzky fell down what court filings described as a “makeshift,” “do-it-yourself” staircase located in the building’s laundry room. The Plaintiff alleged the structure was “haphazardly constructed” and riddled with building code violations, ultimately causing the fall when a detached handrail gave way under Gretzky’s weight. During the litigation, the Plaintiff produced expert reports confirming these life safety code failures, while the defense notably did not retain an expert to dispute the liability or the dangerous condition of the premises.

The physical and personal toll of the accident was severe. Gretzky suffered multiple fractures in both legs, requiring three major surgeries and an arduous 109-day inpatient hospitalization. The injuries resulted in permanent impairment; she was initially confined to a wheelchair and never fully regained her mobility. By the time the bad-faith demand was issued, Gretzky had incurred over $250,000 in medical bills, with future care costs projected at $750,000. Compounding the damage, the Plaintiff’s filings noted that her immobility prevented her from caring for her daughter, who passed away while Gretzky was still recovering from the fall.

The Procedural Chess Match

Litigation commenced in September 2022. AmGUARD did not make its first offer of $60,000 until about 75 days before trial. On April 22, 2024, it increased its offer to $100,000. On May 2, 2024, it increased the offer to $200,000. On May 9, 2024, the offer was increased to $700,000, and then on May 10, 2024, four days before trial, it offered its policy limits of $1,000,000. On the second day of trial, the parties reached a settlement resulting in a consent judgment of $2.25 million against the property owners, AmGUARD’s insureds. As part of the trial settlement, the owners assigned their rights to bring bad faith claims against AmGUARD to Gretzky. AmGUARD subsequently paid its $1 million policy limit.

In August 2024, Gretzky served a demand letter under M.G.L. c. 93A, alleging unfair claim settlement practices under Chapter 176D. She sought treble damages based on the full $2.25 million judgment, alleging that AmGUARD had committed an unfair claim practice act in failing to make its policy limit offer when liability was reasonably clear, as required by M.G.L. c. 176D and c. 93A.

In response, AmGUARD invoked the “safe harbor” provision of Chapter 93A. Within the statutory thirty-day window, the insurer tendered an offer of $232,769. This figure represented 12% interest on the $1 million policy limit calculated from the date the underlying tort suit was filed (September 1, 2022) through the date payment was received by Gretzky. (August 8, 2024).

Gretzky rejected the offer and filed an unfair claim practice suit, arguing the offer was “unreasonable” and “insulting” because it did not account for the $2.25 million judgment or damages for emotional distress.

The Mechanics of the Chapter 93A, § 9 Safe Harbor

Under M.G.L. c. 93A, § 9(3), a business accused of unfair practices can limit its liability by making a written tender of settlement within thirty days of receiving a 93A demand letter. If the plaintiff rejects this offer, and a court later finds the offer was “reasonable in relation to the injury actually suffered,” the plaintiff’s recovery in the subsequent lawsuit is limited to the amount of that rejected offer.

This provision is designed to encourage settlement and allow businesses to correct errors without facing punitive damages. The central legal battle in Gretzky was defining “the injury actually suffered.” Was it the delay in receiving the money (interest), or was it the consent judgment entered against the insured?

The Court’s Analysis: Loss of Use Prevails

Judge Gorton’s analysis focused on distinguishing the “injury” in a settlement context from the “judgment” in a punitive context.

The Plaintiff relied heavily on the landmark SJC decision Rhodes v. AIG Domestic Claims, Inc., arguing that because a judgment had been entered in the underlying case, the measure of damages must be the judgment amount itself. In Rhodes, the court allowed the multiplication of the underlying judgment because the insurer had acted willfully.

Judge Gorton rejected this comparison. He noted that Rhodes did not involve an analysis of the safe harbor provision’s reasonableness at the pre-suit stage. Furthermore, unlike Rhodes, there had been no judicial finding that AmGUARD had committed a “willful and knowing” violation of Chapter 93A at the time the offer was made.

The Court clarified that for a § 9 tender, the “injury actually suffered” by a delay in settlement is the loss of the money during that delay.

“The loss of use of wrongfully withheld settlement funds is the proper standard that this Court will use to determine whether AmGUARD’s offer was reasonable,” the Court stated.

By calculating the offer based on the $1 million policy limit—which was the maximum Gretzky could have expected to receive from the insurer—AmGUARD correctly identified the base damages. Furthermore, by applying a 12% interest rate from the date the tort action was filed, AmGUARD utilized the statutory prejudgment interest rate for tort judgments, thereby providing her with what the law allowed.

The Court noted that while Chapter 93A settlements can include damages for emotional distress, the Plaintiff’s demand letter had not specifically detailed those injuries. Since the Plaintiff did not include in her 93A demand letter injuries outside of loss of use, Judge Gorton wrote, the defendant cannot be expected to have included compensation for such damages in its offer.

Consequently, the Court found that the $232,769 offer was reasonable as a matter of law and allowed AmGUARD’s motion to limit damages to that amount.

Reasonable Tenders of Settlement Negating Multiple Damage Claims

This decision highlights the usefulness of a M.G.L. c. 93A, §9 tender of settlement in a potential unfair claim practice suit. The insurer’s victory here was not merely about arguing the correct calculation of interest; it was about successfully purging the claim for multiple damages by establishing the objective reasonableness of their offer.

Under § 9, a tender of settlement that a court finds reasonable acts as a complete statutory cap on recovery. As the Supreme Judicial Court ruled in Kohl v. Silver Lake Motors, Inc., 369 Mass. 795 (1976), “if a reasonable offer is made…there is no basis for awarding multiple damages under §9 (3).”

In Gretzky, once the Court determined the $232,769 tender offer under §9 of c. 93A was reasonable in relation to the “injury actually suffered” (the loss of use); the Plaintiff’s ability to seek treble damages on the $2.25 million consent judgment was extinguished.