In Massachusetts, manufacturers, distributors, suppliers and
retailers face the grave reality that a product liability lawsuit
brought against them will almost always include a cause of action
under G.L. c. 93A, §§ 2 & 9. The application of this law to
personal injury lawsuits involving products stems from the Supreme
Judicial Court's decision inMaillet v. ATF-Davidson Co.,
407 Mass. 185, 193 (1990), which held that "[g]enerally, a breach
of warranty constitutes a violation of G.L. c. 93A, § 2."
Id. The addition of a G.L. c. 93A claim to a product
liability case increases the stakes both for plaintiffs and for
defendants (and their insurers). Under G.L. c. 93A, § 9, defendants
are faced with the task of evaluating a case prior to litigation,
and before discovery has been completed, based upon minimal
information, in order to make a "reasonable" settlement offer
within 30 days of receiving a demand letter. The consequences for
failing to do so appropriately are no less than the potential
doubling or trebling of damages. Worse yet, the Supreme Judicial
Court held recently in Rhodes v. AIG Domestic Claims,
Inc., 461 Mass. 486 (2012), that a plaintiff may recover the
original tort or contract judgment and up to three times
that judgment amount under chapter 93A on the unfair and deceptive
practices claim (either a breach of warranty claim or a bad faith
settlement claim), for a total recovery to plaintiff of up to four
times the original tort/contract judgment, plus attorneys' fees.
G.L. c. 93A, § 9(3); Rhodes, 461 Mass. At 505. Mishandling
the matter during the pre-suit demand letter stage can have severe
ramifications on the potential damages and may dictate whether the
case will be ultimately settled or tried and, if it is to be
settled, for how much.
The Demand Letter
Section 9 of G.L. c. 93A requires that the plaintiff serve a
demand letter on any "prospective defendant" 30 days prior to
filing suit. The purpose of the demand letter is two-fold.
First, it encourages settlement negotiations by notifying the
prospective defendant/insurer of claims arising from his allegedly
unlawful conduct and thereby reducing the amount of litigation. See
Casavant v. Norwegian Cruise Line Ltd., 460 Mass. 500, 505
(2011). Second, it may limit the amount of damages recoverable by
the plaintiff if he prevails in his claim under c. 93A. Slaney
v. Westwood Auto, Inc., 366 Mass. 688, 689 (1975).
The demand letter is a prerequisite to suit, which must be
alleged and proved by the plaintiff. Spring v. Geriatric
Authority of Holyoke, 394 Mass. 274, 287 (1985); York v.
Sullivan, 369 Mass. 157, 163 (1975). A proper demand letter
must contain certain language which will apprise the recipient that
the letter seeks relief under chapter 93A. Cassano v.
Goqos, 20 Mass. App. Ct. 348, 350 (1985). The Cassano court
listed the following options, any one of which will satisfy the
requirement that the letter characterize the claim as one under
Chapter 93A:
- Any express reference to c. 93A;
- Any express reference to the consumer protection act;
- Any assertion that the rights of the plaintiffs as consumers
have been violated;
- Any assertion that the defendant has acted in an unfair manner
(G.L. c. 93A, §2[a]);
- Any reference that the plaintiffs anticipate a settlement offer
within thirty days; or
- Any assertion that the plaintiff will pursue multiple damages
and legal expenses should relief be denied. Id.
The demand letter must also reasonably describe the unfair or
deceptive act(s) alleged. Richards v. Arteva Specialties
S.A.R.L., 66 Mass. App. Ct. 726, 731 (2006). For instance, the
plaintiff's failure to identify a particular statute or regulation
in the demand letter, the violation of which the plaintiff claims
is a breach of 93A, will foreclose recovery as a matter of law.
Entrialgo v. Twin City Dodge, Inc., 368 Mass. 812 (1975);
Bressel v. Jolicoeur, 34 Mass, App. Ct. 205, 211 (1993). A
demand letter which includes only conclusory statements alleging
that the defendant acted in bad faith, but fails to articulate
specific unfair or deceptive acts provides an insufficient basis
for the recovery of 93A damages. Lingis v. Waisbren, Jr. ,
75 Mass. App. Ct. 464, 468 (2009); Skarupski v. Webman, 74
Mass. App. Ct. 1127, *2 (2009) (unpublished decision).
Thus, it is essential that the demand letter contain a definite
description of the "injury suffered and the relief demanded in a
manner that provides the prospective defendant with an opportunity
to review the facts and the law involved to see if the requested
relief should be granted or denied and enables him to make a
reasonable tender of settlement." Casavant, 460 Mass. at 505
(quoting Spring, 394 Mass. at 288) (internal quotations
omitted). However, the demand letter need not identify every
specific unfair or deceptive violation alleged, so long as the
letter provides the defendant with reasonable notice of the
injuries suffered by those actions. Id. at 506. The letter
must set forth the actual injuries suffered in sufficient detail to
permit the defendant reasonably to ascertain its potential
exposure. Generally, although not specifically required, it would
be prudent for a plaintiff to state a specific figure representing
the amount of damages sought. Simas v. House of Cabinets,
Inc., 53 Mass. App. Ct. 131, 140 (2001); Thorpe v. Mutual
of Omaha Ins. Co., 984 F.2d 541, 544 (1st Cir. 1993); Spring,
394 Mass. at 288.
The Response Letter
A defendant's best opportunity to limit its c. 93A damages
arises at the time it responds to the demand letter. There are
three significant benefits to making a reasonable tender of
settlement in response to the demand: (1) the damages recoverable
by a plaintiff may be limited to the amount of the defendant's
tender if the plaintiff rejects the settlement offer and if the
court finds that the tender was reasonable "in relation to the
injury actually suffered by the plaintiff"; (2) the court's ability
to award double or treble damages maybe restricted; and (3)
attorneys' fees and costs which are otherwise automatic upon a
finding of a c. 93A violation, incurred after the rejection of a
reasonable offer, will not be awarded. However, if the defendant
(or its insurer in a bad faith settlement claim) fails to respond
to the letter or makes an unreasonable settlement offer, then, in
addition to the greater of actual damages or $25.00, G.L. c. 93A, §
9(3), "authorizes the judge to award up to three, but not less than
two, times the amount of actual damages if he finds a wilful or
knowing violation of c. 93A, § 2, or that the refusal to grant
relief on demand was made in bad faith with knowledge or reason to
know that the practice complained of violated [section] 2."
Heller v. Silverbranch Const. Corp., 376 Mass. 621, 626
(1978).
A defendant's response to the demand letter must be made within
30 days of its "mailing or delivery" or within such other time as
the plaintiff may agree to permit. Mass. G.L. c. 93A, §9(3);
York, 369 Mass. at 163-164. In York, the court
determined that the 30 day requirement was not a jurisdictional
requirement and thus, the plaintiff could agree to waive it.
York, 369 Mass. at 163. Further, should the plaintiff
refuse or deny a defendant's request for an extension of time to
investigate and prepare a response, a defendant may make an
application to the court for additional time. Id.at
164.
There is no requirement that the defendant/insurer offer
anything so long as such a null offer is reasonable in relation to
the information at hand. G.L. c. 93A, § 9(3). Whether the offer was
reasonable is a question of fact to be determined in light of "all
the attendant facts and circumstances" at the time the offer was
made. Patry v. Harmony Homes, Inc., 10 Mass. App. Ct. 1, 6
(1980); see Kohl v. Silver Lake Motors, Inc., 369 Mass.
795, 799 (1976). The defendant seeking to take advantage "of the
statutory limitation of damages appearing in § 9(3) has the burden
of proving" that its offer was reasonable in relation to the injury
actually suffered. Kohl, 369 Mass. at 799.
The Investigation
Upon receipt of a demand letter which contains little or no
explanation of the plaintiff's allegations, the defendant cannot
simply respond that it has insufficient information to evaluate the
claim and therefore, must deny it. The defendant has the duty to
take affirmative steps "to investigate the facts and consider the
legal precedents." Heller, 376 Mass. at 627-628; see
Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 583 (1982).
The defendant's failure to undertake and document this
investigation in its response letter will place the defendant in
peril of a double or treble damages award when the court
objectively reviews the circumstances surrounding the denial of the
claim. The defendant's response should (1) set forth the evidence
available to it through diligent investigation and (2) state the
specific reasons that, based upon this evidence, the defendant is
either denying the claim or making the offer proffered.
In traditional contract and fraud type cases, the defendant
quite often has nearly all of the information it needs to conduct a
diligent investigation. However, in the product liability context
much of the information the defendant needs is often in the
exclusive control of the plaintiff.
The defendant can obtain official reports from the police and
fire department, but cannot obtain the plaintiff's medical
information without her consent. Moreover, the product at issue and
any other relevant physical evidence may be in the exclusive
control of the plaintiff. And, the percipient witnesses to the
accident are often members of the plaintiff's family, co-workers or
the plaintiff's friends who will not speak with the defendant's
representatives without the plaintiff's permission. Thus, the
product liability defendant and/or its insurer which has a duty to
investigate the claim, does not have access to the evidence which
can provide the most complete understanding of the claim at the
pre-suit stage. Therefore, as an initial matter, upon receipt of
the demand letter, defense counsel should contact plaintiff's
counsel to request an extension of time to investigate and to ask
for the information needed to assess the demand. Any extension
granted should be confirmed by letter and that initial letter
should request the information needed to conduct the investigation.
All of these exchanges should be in writing so that, later, the
court will have objective proof that the defendant acted reasonably
and complied with the duty to investigate.
Information Request Letter
While there is no exact science as to what should be included in
the defendant's initial request letter, the written request should
inform plaintiff's counsel that the defendant requires additional
information in order to respond adequately and appropriately to the
demand letter. This letter should include specific requests for
information such as:
- A preliminary examination of the product at issue;
- A specific explanation of the precise manner in which the
product was defective and how it caused the plaintiff's accident
and/or injuries;
- Any expert reports regarding the defective condition of the
product at issue;
- Any testing or investigation the plaintiff's retained expert
has performed including any alteration of the evidence;
- Documentation regarding the ownership of the product including
all invoices, owner's manuals and warranty materials which came
with the product;
- Documents concerning repair and maintenance work performed on
the product and a description of all such work to the extent that
the plaintiff knows this information;
- Documentation of the plaintiff's claimed damages including any
lost wages, medical expenses or other losses;
- Plaintiff's complete medical records and any photographs of the
injuries; The names and addresses of any witnesses to the
accident;
- A complete explanation of how the accident happened; and
- Any police reports or other official reports regarding the
accident.
This initial response letter will seek much of the same
information typically sought in an initial set of interrogatories
and documents requests. It is in the plaintiff's best interest and
it is the plaintiff's duty to provide this information as quickly
as possible. Just as the defendant has a duty to conduct a
reasonable investigation, the plaintiff "has a reciprocal duty to
be straightforward and forthcoming in providing the information
necessary to the defendant's evaluation of the case." Beckwith
v. Campbell, 2009 WL 4894463, *4 (2009) (quoting Parker v.
Davollo, 40 Mass. App. Ct. 394, 402 n. 9 (1996) (internal
quotations omitted)). Further, such a duty can be found in the
requirement that the plaintiff reasonably identify the unfair act
or practice complained of. Simas v. House of Cabinets,
Inc., 53 Mass. App. Ct. 131, 139 (2001). If the plaintiff
refuses to cooperate, the plaintiff may be unable to recover under
c. 93A. Beckwith, 2009 WL at 4894463, *4.
In a product liability case, the plaintiff's medical condition
is not only the most relevant evidence on damages, but it is also
often relevant to determining the manner in which the accident
occurred. A full description of the injuries as well as medical
documentation of these damages should be provided. In addition, the
plaintiff will be hard pressed to support a claim for damages under
c. 93A, let alone multiple damages, where she failed to provide the
defendant with an explanation of the product defect prior to
requiring the defendant to tender a settlement offer. Unlike the
bare bones requirements of notice pleading, the c. 93A demand
letter cannot rest simply on the boiler plate language found in
most complaints. The extent to which the plaintiff will have to
provide the details of the defect alleged will depend upon the type
of allegation being made. However, Massachusetts' courts have made
it clear that the plaintiff will have to provide more than a
statement that the product was defective and unreasonably
dangerous. See Simpson v. Liberty Mut. Inc. Co., 1994 WL
879589, * 2-3 (1994).
The Massachusetts Appeals Court has noted that "[t]here is no
requirement that the demand letter be accompanied by documentation
or other proof of the assertions therein made." Whelihan v.
Markowski, 37 Mass. App. Ct. 209, 214 (1994). However,
theWhelihan court was quick to point out that, in that
case, the defendant was not only in a better position than usual to
evaluate the plaintiff's claim because discovery in the underlying
negligence claim had been ongoing for almost a year, but that the
defendant had nearly all of the information that it ultimately
obtained in the case. Id. at 214. Thus, in some cases, the
defendant may be in a better position to evaluate the plaintiff's
claim upon receipt of the demand letter and then must consider what
information may already be available to it before dispatching a
request for information it already has.
In many cases, the negotiation process between the plaintiff and
defendant concerning additional information requests will be
extensive and necessitate multiple communications. As a result, it
is extremely important for the defendant to ensure that all
requests for information are documented. For example, if the
plaintiff verbally refuses to provide certain information necessary
to investigate the claim, the defendant should confirm the
conversation in writing. Time constraints will be especially
problematic if plaintiff's counsel will not grant the courtesy of
an extension and any such denial of a reasonable extension of time
should be documented. The defendant's primary concern throughout
this process is to create a documented record of its reasonable and
diligent investigation of the plaintiff's allegations and the
subsequent tender of settlement or denial. This documentation will
assist the defendant in showing the fact finder at a future c. 93A
hearing, presumably after losing the underlying case in front of a
jury, that it acted in good faith during the pre-suit demand letter
phase.
The Final Response
Ultimately, the defendant/insurer will either have to make an
offer or deny the claim. This response should be made in writing
and should specifically identify what steps were taken during the
investigation. If the defendant has requested information which was
not provided, the letter should set forth each such instance and
explain the importance of the information not provided. Further,
the letter should outline all evidence available to the defendant,
all evidence which was not available to the defendant and what
conclusions may be drawn from the existence of, or lack of, that
evidence. The goal of this letter is to convince the fact finder,
in the event that the defendant is ultimately found liable for
breach of warranty, that the offer, or lack thereof, was reasonable
based upon the information available to the defendant, at the
time, after a duly diligent investigation. Summary denials are
unlikely to accomplish this goal.
A defendant who has undertaken a thorough investigation will be
in a better position approaching trial. There is nothing more
frustrating than having to settle a case where liability is
tenuous, simply out of fear of a multiple damage award because
either no response, or an unreasonable response was made to the
demand letter. In addition, a full investigation and good faith
negotiation may obviate the need to litigate the case at all. The
plaintiff may be convinced that the case is not worth pursuing or
the negotiations may result in a settlement that is satisfactory to
both sides because the litigation costs pre-suit are minimal.
Ultimately, the interests of justice as well as the parties are
well served if the demand letter process is treated seriously by
both sides and not simply as a "fruitless ceremony."
Holly M. Polglase is a shareholder
at Hermes, Netburn, O'Connor & Spearing PC acting as lead
counsel in the defense and trial of complex product liability,
pharmaceutical, medical device, toxic tort, asbestos, general
liability and commercial matters. With over 20 years of experience,
Polglase represents product manufacturers, sellers and other
businesses in cases involving catastrophic losses and other
disputes.
Kevin Polansky counsels
insurers, sureties and businesses in complex coverage disputes,
construction matters and commercial litigation. An associate with
Boston's Hermes, Netburn, O'Connor & Spearing PC, Polansky
resolves claims involving financial institution bonds, commercial
crime policies, contract/commercial surety bonds and liability
policies.