Insurance bad faith in Massachusetts — c. 176D through 93A, and the multiplier on the judgment

Massachusetts has no common-law tort of insurance bad faith. What it has is better for claimants, and it is assembled from two statutes.

Chapter 176D, § 3(9) lists unfair claim settlement practices but creates no private right of action on its own. Chapter 93A, § 9(1) supplies the private claim, and it does so in express terms — it reaches "any person whose rights are affected by another person violating the provisions of clause (9) of section three of chapter one hundred and seventy-six D."

The combination produces the feature insurers fear: a willful or knowing violation multiplies the amount of the judgment on all claims arising out of the same transaction or occurrence — not the claimant's separate loss from the delay.

What the claim is

An insurer refused to pay, underpaid, or strung out a claim after it was clear it owed the money.

Where the right comes from

G.L. c. 176D, § 3(9), enforced privately through G.L. c. 93A, § 9 for consumers or § 11 for businesses. The contract claim on the policy itself runs alongside.

What a plaintiff has to prove

1. The defendant is in the business of insurance;
2. An unfair claim settlement practice listed in § 3(9);
3. Causation; and
4. Injury — under § 9, being "injured by" the conduct; under § 11, a loss of money or property.

The practices § 3(9) names

The subsection lists specific conduct, and a claim is built by matching facts to one of them. Among those most often used:

• misrepresenting pertinent facts or policy provisions relating to coverage at issue;
• failing to acknowledge and act reasonably promptly on communications about claims;
• failing to adopt and implement reasonable standards for the prompt investigation of claims;
• refusing to pay claims without conducting a reasonable investigation based on all available information;
• failing to affirm or deny coverage within a reasonable time after proof-of-loss statements are completed;
• failing to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear — § 3(9)(f), the provision that carries most of these cases;
• compelling insureds to litigate to recover amounts due by offering substantially less than ultimately recovered;
• attempting to settle for less than the amount to which a reasonable person would have believed they were entitled, by reference to written advertising material; and
• failing to provide a prompt, reasonable explanation of the basis for a denial or a compromise offer.

"Reasonably clear" liability

Section 3(9)(f) is the heart of it, and the standard is objective. The question is not whether the insurer believed it had a defence — it is whether liability had become reasonably clear on the information available.

An insurer may litigate a claim that is truly in dispute. What it may not do is hold a claim it knows it owes in order to force a discount, or manufacture a dispute to justify delay. The distinction turns on the claim file: what the adjuster knew, when they knew it, what the reserves said, what the internal evaluation was, and what was offered against it.

The claim file is therefore the case. Massachusetts practice is built around getting it.

Third-party claimants

This is where Massachusetts departs from most states. A claimant who was injured by the insurer's insured — not a policyholder at all — can bring the 93A/176D claim against the insurer directly.

Section 9(1) says so in terms: it extends to any person "whose rights are affected by" a § 3(9) violation. So the driver injured by an insured motorist may sue that motorist's insurer for failing to settle once liability became reasonably clear, even though there is no contract between them.

That is the structural feature that makes Massachusetts insurance litigation distinctive, and it is why a settlement demand letter in a Massachusetts personal injury case is written with the 93A/176D claim in mind from the start.

How long you have to file

Four years for the 93A claim under G.L. c. 260, § 5A, running from when the claimant knew or should have known of the injury.

Six years on the contract claim against your own insurer, under G.L. c. 260, § 2 — subject to any shorter contractual suit-limitation provision in the policy, which the standard fire policy and some others contain and which Massachusetts enforces.

What has to happen before you file

A 93A § 9 demand letter, 30 days. Required for a consumer claimant unless an exemption applies — and the demand does double duty here. A refusal to grant relief in bad faith after the demand is an independent route to the multiplier under § 9(3), separate from the underlying violation. An insurer that ignores a well-documented demand can be trebled for the refusal alone.

No demand for a § 11 business claimant.

Proof of loss and cooperation, under the policy, on a first-party claim.

What the claim pays

Contract benefits owed under the policy, on a first-party claim.

Actual damages, or $25, whichever is greater under § 9(3).

Double or treble damages on a willful or knowing violation, or a bad-faith refusal after the demand.

And the multiplicand is the judgment. Section 9(3): "the amount of actual damages to be multiplied by the court shall be the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence, regardless of the existence or nonexistence of insurance coverage available in payment of the claim."

That sentence is why these claims matter. Where an insurer failed to settle a $400,000 case within a $100,000 policy, the multiplier does not attach to the interest the claimant lost on the delay — it attaches to the judgment. The phrase "regardless of the existence or nonexistence of insurance coverage" makes the point explicit: the policy limit does not cap the exposure.

Mandatory attorney's fees and costs under § 9(4), on any finding of liability.

Twelve percent prejudgment interest on the underlying damages.

Who can be sued

Your own insurer, on the policy and on the statute.

The other side's insurer, as a third-party claimant.

An adjuster or claims administrator, where they engaged in the practices themselves.

Not the insured, on this claim — the insured's liability is the underlying tort.

Common defenses

• A reasonable basis for the position taken, and a genuine dispute about coverage or damages.
• Liability was not reasonably clear — the central fight.
• The insured breached the policy — late notice, failure to cooperate, misrepresentation in the application.
• No causation, or no injury.
• A defective or omitted demand letter, for a § 9 claimant.
• A reasonable tender in response to the demand, capping recovery and cutting off later fees.
• Limitations, including a contractual suit-limitation clause.

What people get wrong

Chapter 176D gives no private claim of its own. The route is 93A, and pleading 176D alone is an error.

A low offer is not automatically bad faith. The standard is whether liability had become reasonably clear, judged objectively.

The multiplier attaches to the judgment, not to the delay. This is the point most often misunderstood, and it is what makes the claim worth bringing.

Policy limits do not cap the exposure. The statute says so expressly.

You can sue the other driver's insurer. Massachusetts allows a third-party claimant to reach the insurer directly.

The demand letter creates a second violation if it is ignored. Bad-faith refusal after a demand is an independent route to multiple damages.

Where it came from

Chapter 176D was adopted from a model insurance act as a regulatory statute — a list of practices the Commissioner of Insurance could act on. It gave policyholders nothing directly, and for a time that is where matters stood.

The 1979 amendments to chapter 93A changed it by making a § 3(9) violation actionable by a private claimant, and extending the claim beyond policyholders to anyone whose rights were affected. That single drafting decision created the third-party claim.

The 1989 amendments added the sentence that defines the modern claim: the multiplicand is the judgment on all claims arising out of the same transaction, regardless of coverage. Before it, insurers argued that a bad-faith failure to settle cost the claimant only the time value of the money, which made the multiplier nearly worthless. Afterwards, an insurer that refuses to settle a clear claim inside its limits risks a multiple of the whole verdict.

That is the entire economics of Massachusetts insurance litigation, and it is why the demand letter in a serious personal injury case is drafted as carefully as a brief.

Common questions

How long do I have to sue an insurer for bad faith in Massachusetts?

Four years on the 93A claim. Six years on a contract claim against your own insurer, subject to any shorter suit-limitation clause in the policy.

Can I sue chapter 176D directly?

No. Chapter 176D creates no private right of action. You bring it through chapter 93A.

Can I sue the other driver's insurance company?

Yes. Section 9(1) extends the claim to any person whose rights are affected by a § 3(9) violation, which includes third-party claimants.

What counts as bad faith?

Failing to effectuate a prompt, fair and equitable settlement once liability has become reasonably clear, along with the other practices listed in § 3(9).

Are triple damages capped at the policy limit?

No. The statute multiplies the judgment on all claims arising out of the same transaction, "regardless of the existence or nonexistence of insurance coverage."

Do I need a demand letter?

Yes for a consumer claim under § 9 — and a bad-faith refusal after your demand is itself a route to multiple damages. No for a business claim under § 11.

Where these rules live

• Mass. R. Civ. P. 8 — General rules of pleading
• Mass. R. Civ. P. 12 — Defenses and objections
• Mass. R. Civ. P. 26 — General provisions governing discovery
• Mass. R. Civ. P. 34 — Producing documents and electronically stored information
• Mass. R. Civ. P. 56 — Summary judgment
• Motion to compel discovery in Massachusetts