A man who has already received $5.5 million for traumatic brain injuries suffered in a fight that started as an argument over a bar stool at Sonsie in 2008 could be eligible for even more money under the Massachusetts Appeals Court ruled today that Liberty Mutual tried to delay paying him anything after it had lost one of two court cases because it knew he was in financial duress at the time and figured it could get him to settle for less than he wanted.
The ruling overturns a Superior Court judge's determination that Liberty Mutual wasn't intentionally out to deny Robert Chiulli his settlement and so Chiulli only deserved $25 from the insurer as recompense - on top of the settlement the second insurance company agreed to pay him after a federal jury decided that Sonsie and the Lyons Group were mostly to blame for his injuries. As she awarded Chiulli $25, she also awarded his lawyer $600,000 in fees and expenses.
At issue was an incident on the night of June 20, 2008, when Chiulli and some friends went out for drinks at Sonsie. One of them got up, another guy sat on his bar stoll and an argument started - which a bartender and manager ended by moving the guy to another stool, according to a court summary of the case. But the guy who had to move felt aggrieved and called a friend, who rushed over to the restaurant, along with another friend. One of those friends decided the best course of action was to resume the verbal feud, but he was intercepted by the manager. Then the other friend tried the same tactic, managed to say something to Chiulli's group, then walked out, followed by the manager - and Chiulli's group, who were in turn followed by their two other newfound enemies.
A fight broke out. While the parties dispute who threw the first punch, and in particular whether it was Chiulli, the fight ended when Rease knocked Chiulli unconscious. Chiulli suffered a traumatic brain injury that required him to relearn basic daily living skills, and he incurred medical bills
in excess of $600,000.
Chiulli, of course, sued. In November, 2012, a federal jury agreed with his lawyer that Sonsie and the Lyons Group were 90% responsible for the injuries because they failed to adequately separate the two parties to prevent the night's denouement and that had they, for example, ordered one group to leave altogether, the life-altering fight wouldn't have happened. The jury found that Chiulli and the guy who knocked him out shared the remaining 10% of responsibility for the fight and Chiulli's injuries and set a judgment of about $4.4 million against Sonsie and the Lyons Group. Almost a year later, a federal judge set Chiulli's judgment at roughly $4.5 million.
Sonsie and the Lyons Group had a $1-million insurance policy with Liberty Mutual for such occurrences, as well as a separate policy with a company called Everest Re Group to cover any settlements about that amount. Because it would be on the hook and was the primary insurer, Liberty Mutual ran defense in the federal case, and at one point during the three week trial, offered to settle with Chiully - for just $150,000, which he rejected. The company then refused to hand over the case to Everest Re's lawyers even after the jury sided with Chiulli.
A couple weeks after the jury decision, Chiulli asked for his money - and then some, $5.7 million in all - to resolve the federal case. Liberty Mutual finally handed over control of the case to Everest Re, which immediately made a settlement offer of roughly $5.5 million - which Chiulli accepted, but with the caveat he was going to sue Liberty Mutual under a state law that basically requires insurers to pay up once it's clear they have to.
Suffolk Superior Court judge Rosemary Connolly agreed with Chiulli that it was obviously clear that Chiulli had a winning case as soon as the end of closing arguments in the federal case and that Liberty Mutual's lawyers "never seemed to really grasp" Chiulli's arguments on why the restaurant was at fault and so never tried to rebut them. But, the appeals court continued:
The trial judge assessed nominal damages of $25, reasoning that Chiulli ultimately suffered no loss of use of money from Liberty Mutual's withholding of a reasonable settlement offer because the ultimate settlement with Everest far exceeded the verdict in the Federal court case. The judge further found that Liberty Mutual's failure to make a prompt, fair, and equitable settlement offer was not willful or knowing. The judge awarded Chiulli his attorney's fees and costs from the day liability became reasonably clear through the trial of the State court case.
This, however, puzzled the appeals court, because evidence presented to Connolly showed that Liberty Mutual was very much willful and knowing - as required by the state law - in its attempt to delay paying anything to Chiulli in an effort to wear him out financially:
The trial judge found that Liberty Mutual knew it had little chance of success on appeal. Liberty Mutual also knew that Chiulli owed money for his medical bills and was "in dire need of cash." Faced with a $4.5 million verdict, instead of making a reasonable offer to settle, Liberty Mutual decided to take advantage of Chiulli's vulnerable financial condition "in an attempt to leverage a better settlement" for itself. Accordingly, Liberty Mutual embarked on a strategy to threaten an untenable appeal to "take the wind out of [Chiulli's] sails." The judge explicitly found that after liability had become reasonably clear, "Liberty made Chiulli continue to wait over Thanksgiving, over Christmas, forcing him to continue to litigate and to fight to recover his verdict."
The trial judge's subsidiary findings require the conclusion that Liberty Mutual's violation was willful or knowing. "To be wilful or knowing, a violation need not be malicious, but must constitute more than negligence. Within that range is conduct that is intentionally gainful, . . . or demonstrates a wilful recklessness or conscious, knowing disregard for its likely results" (quotation and citations omitted). Rass Corp. v. Travelers Cos., 90 Mass. App. Ct. 643, 657 (2016). Liberty Mutual's conduct, as found by the judge, falls squarely within conduct that is "intentionally gainful": when Liberty Mutual had an obligation to effectuate a prompt, fair, and equitable settlement, it instead made the deliberate choice to exploit Chiulli's financial distress for its own gain. See Gore v. Arbella Mut. Ins. Co., 77 Mass. App. Ct. 518, 531-533 (2010). Nothing about this conduct could be described as anything short of willful or knowing.
The court also rejected all of Liberty Mutual's other legal arguments and sent the case back to the Superior Court judge, but only for a determination of whether Chiulli deserves double or triple damages.