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Massachusetts Appeals Court Upholds Liability Insurer’s Contractual Right to Settle

On Tuesday, December 12, 2017, the Massachusetts Appeals Court, applying New Hampshire law, held that a professional liability insurer did not breach the implied covenant of good faith and fair dealing by settling a New Hampshire medical malpractice suit over its insured’s objection.  See Johnson v. Proselect Insurance Co., No. 17-P-109 (Mass. App. Ct., Dec. 12, 2017) (Rule 1:28 Decision).

Proselect Insurance Company (“Proselect”) agreed to defend the underlying medical malpractice suit, which alleged that its insured, a doctor, negligently failed to diagnose a stroke.  After a trial, the jury returned a $4.05 million verdict against the doctor.  Rather than pursue post-verdict motions or an appeal, and over the doctor’s objection, Proselect settled the suit for $3.75 million.  Although the settlement was within the policy’s $4 million limit and released the doctor from all financial liability, she objected on the grounds that the settlement would destroy her reputation and sued Proselect alleging negligence, breach of contract, and breach of the implied covenant of good faith and fair dealing.     

A Superior Court judge granted Proselect’s motion for summary judgment, finding that the insured had no viable claim because the policy gave Proselect the right to settle without its insured’s consent.  The policy provided that:

[Proselect] shall not be obligated to obtain [a practitioner’s] consent to settle . . . [a]fter a jury verdict, judgment or any other ruling . . . establishing [the practitioner’s] liability regardless of whether such verdict, judgment or ruling is subject to appeal or further judicial review.

Notwithstanding that language, the insured argued on appeal that Proselect breached the covenant of good faith and fair dealing by declining to pursue post-trial motions and an appeal which, according to the insured, “would have served [her] substantial and compelling interest.”  The insured argued that Proselect was negligent in entering into a settlement agreement that “harmed her professional reputation, her future career prospects, and caused her emotional distress.” 

Assuming, for the purpose of the appeal, that the doctor’s post-trial motions and appeal would have been meritorious, the Appeals Court held that New Hampshire law does not (i) recognize a claim for breach of the implied covenant of good faith and fair dealing where a party merely exercises a right expressly granted under the contract, nor (ii) require an insurer to forego a settlement within policy limits and pursue an appeal of an excess judgment.  The Appeals Court’s decision confirms that, under New Hampshire law, an insurer does not have to give up express policy rights where an insured objects to a settlement within limits.

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About this Author

Nicholas C. Cramb, Mintz Levin, Member, Chair, Real Estate Litigation Practice, Real Estate Litigation Product Liability & Complex Tort Insurance and Reinsurance Problem-Solving & Dispute Resolution

Nick, a litigator with a national practice, represents insurers and reinsurers on all matters of coverage and bad faith. He also represents developers, property owners, and financing agencies with respect to permitting disputes and land use litigation. Nick serves as Chair of the Real Estate Litigation Practice.

Nick is a member in the firm’s Litigation Practice and is based in Boston. His unique practice focuses equally on insurance and reinsurance disputes and real estate litigation.

Nick represents insurers, reinsurers, and insurance brokers on all matters of coverage,...

Lavinia M. Weizel, Mintz Levin Law Firm, Boston, Insurance and Litigation Law Attorney

Lavinia’s practice focuses on complex commercial litigation across a variety of areas, including securities litigation, shareholder suits and insurance disputes in both state and federal court.

Lavinia is also active in the firm’s pro bono practice, focusing on representing survivors of human trafficking in criminal matters and post-conviction relief proceedings.

Prior to joining Mintz Levin as an Associate, Lavinia was a judicial law clerk to the Honorable Bruce M. Selya of the United States Court of Appeals for the First Circuit, and before that clerked for the Honorable Francis X. Spina of the Massachusetts Supreme Judicial Court.

Lavinia graduated first in her class from Boston College Law School and upon graduation received the Philip Joseph Privitera ’95 Award for outstanding scholarship and exceptional contribution to the law school community.

During law school, Lavinia served as executive articles editor of the Boston College Law Review and president of the Boston College Women’s Law Center, and she and her teammate won the Wendell F. Grimes Moot Court Competition. She also worked as a Mintz Levin Summer Associate and was a legal intern for the Policy & Government Division of the Executive Bureau of the Massachusetts Attorney General’s Office. In 2011, she was one of 12 Boston-area law students selected to participate in the Rappaport Fellowship Program in Law & Public Policy.

Prior to law school, Lavinia worked first as the community education and youth violence prevention program coordinator and later as the development director for WISE, a New Hampshire–based nonprofit serving victims of domestic and sexual violence. She also worked as an assistant director of undergraduate admissions at Dartmouth College.