Case Title: Rawan v. Continental Casualty Co.

Citation: 

Docket Number: SJC-12691

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2019-12-16T00:00:00Z

Document:
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SJC-12691 
 
DOUGLAS M. RAWAN & another1  vs. CONTINENTAL CASUALTY COMPANY. 
 
 
 
Worcester.     September 6, 2019. - December 16, 2019. 
 
Present:  Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, 
& Kafker, JJ. 
 
 
Insurance, Consent to settlement, Unfair act or practice.  
Consumer Protection Act, Unfair act or practice, Offer of 
settlement. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
August 16, 2011. 
 
 
The case was heard by J. Gavin Reardon, Jr., J., on motions 
for summary judgment. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
Daniel J. Lyne (Andrea L. MacIver also present) for the 
plaintiffs. 
 
Regina E. Roman (Jessica H. Park & John G. O'Neill also 
present) for the defendant. 
 
The following submitted briefs for amici curiae: 
 
David J. Hatem, Patricia B. Gary, Paul T. Muniz, Jon C. 
Cowen, & Katherine L. Connolly for American Council of 
Engineering Companies of Massachusetts & another. 
 
John J. Barter for Professional Liability Foundation, Ltd. 
                                                          
 
 
1 Kristen A. Rawan. 
2 
 
 
 
Allen N. David, Maureen Mulligan, & Steven E. DiCairano for 
Boston Bar Association. 
 
Steven L. Schreckinger & Harvey Nosowitz for American 
Property and Casualty Insurance Association & others. 
 
Kristen M. Whittle, Alexandra L. Rotondo, & Derek M. Gillis 
for Massachusetts Defense Lawyers Association. 
 
 
 
KAFKER, J.  The defendant, Continental Casualty Company 
(Continental), issued a professional liability policy to its 
insured, Kanayo Lala, an engineer, that contained a consent-to-
settle clause.  After the plaintiff homeowners, Douglas M. Rawan 
and Kristen A. Rawan, sued Lala for engineering design errors, 
he refused to consent to settle as recommended by the insurer.  
Eventually, the homeowners commenced an action under G. L. 
c. 93A against Continental for its failure to effectuate a 
prompt, fair, and equitable settlement once liability had become 
reasonably clear, as required by G. L. c. 176D, § 3 (9) (f).  
The motion judge allowed summary judgment for Continental on all 
counts, finding that the consent-to-settle clause in Lala's 
policy limited Continental's ability to engage in further 
settlement practices with the plaintiffs once Lala refused to 
give Continental consent to settle the claims against him. 
 
The dispositive question at issue in this appeal is whether 
consent-to-settle clauses in professional liability policies 
violate G. L. c. 176D, § 3 (9) (f).  We conclude that they do 
not as a matter of law, but we hold that an insurer still owes 
residual duties to a third-party claimant under G. L. c. 176D, 
3 
 
 
even when an insured refuses to settle.  In this case, 
Continental made good faith efforts to investigate the claim and 
encourage its insured to settle.  Furthermore, given the 
insured's obstinacy, the particular shortcomings of Continental 
identified by the plaintiffs did not proximately cause harm to 
the plaintiffs.  For these reasons, we affirm the decision of 
the Superior Court allowing Continental's motion for summary 
judgment. 
 
1.  Background.  The following facts from the record are 
summarized in the light most favorable to the plaintiffs, the 
unsuccessful opposing party on the parties' cross-motions for 
summary judgment.  See Dzung Duy Nguyen v. Massachusetts Inst. 
of Tech., 479 Mass. 436, 448 (2018).  In 2005, the plaintiffs 
hired Lala, a registered professional engineer, to design 
structural members for their new home.  Lala signed and stamped 
a construction control agreement with the town of Westborough 
(town).  Lala significantly underestimated the building loads 
and stresses in his calculations for the design.  He filed 
eleven construction control reports with the town's building 
commissioner over the course of the project, which falsely 
certified that the project complied with the State building 
code.  After the construction was completed, its beams and 
joists began to crack.  When the design errors became apparent, 
Douglas Rawan raised the issues directly with Lala in an 
4 
 
 
electronic mail (e-mail) message dated December 3, 2010.  That 
message confirmed a prior conversation the plaintiffs had had 
with Lala in which he admitted his miscalculations in designing 
the home. 
 
In August 2011, the plaintiffs commenced an action against 
Lala in Superior Court for professional negligence, negligent 
supervision, breach of contract, breach of the covenant of good 
faith and fair dealing, breach of the implied warranty of 
fitness, and violations of G. L. c. 93A.  The plaintiffs' claims 
against Lala relied on the professional opinion of Neal 
Mitchell, a structural engineer they hired, who reviewed Lala's 
work.  At the time of the underlying acts of negligence and at 
the time of the lawsuit, Continental insured Lala under a 
professional liability policy (policy). 
 
a.  The policy.  The policy provided that Continental would 
"not settle any claim without the informed consent" of Lala.  
The consent-to-settle clause in Lala's policy did not contain a 
so-called "hammer clause" found in other insurance policies.  A 
"hammer clause" generally requires an insurer to obtain the 
insured's approval before settling a claim for a certain amount 
-- however, a hammer clause "allows the insurer to limit its 
liability to that amount if the insured rejects the settlement."  
Mutual Ins. Co. v. Murphy, 630 F. Supp. 2d 158, 166 n.2 (D. 
5 
 
 
Mass. 2009).2  This clause puts pressure on the insured's right 
to refuse consent to settle and thereby increases an insurer's 
ability to effectuate a settlement.  See Freedman vs. United 
Nat'l Ins. Co., U.S. Dist. Ct., No. CV09-5959 AHM (CTx) (C.D. 
Cal. Mar. 1, 2010) (under terms of plaintiff's policy, insurer 
was able to invoke "hammer clause" if policyholder unreasonably 
refused to consent, thus allowing insurer to limit its liability 
under particular circumstances); J. Kesselman, A. Fox, & R. 
Sattler, Professional Liability Insurance Issues, in 
Massachusetts Liability Insurance Manual § 5.6.3 (Mass. Cont. 
Legal Educ. 3d ed. 2017) (Massachusetts Liability Insurance 
Manual) (defining "hammer clause" as "common provision in 
professional liability insurance policies [that] exposes the 
insured to liability for eventual judgments that exceed a 
reasonable settlement offer," somewhat tempering insured's right 
to consent to settlement). 
                                                          
 
 
2 An example of a typical "hammer clause" is as follows: 
 
"The insurer shall not settle any claim without the consent 
of the insured.  If, however, the insured shall refuse to 
consent to any settlement recommended by the insurer and 
shall elect to contest the claim or continue any legal 
proceedings in connection with such claim, then the 
insurer's liability for the claim shall not exceed the 
amount for which the claim could have been settled plus 
claims expenses incurred up to the date of such refusal." 
 
J. Kesselman, A. Fox, & R. Sattler, Professional Liability 
Insurance Issues, in Massachusetts Liability Insurance Manual 
§ 5.6.3 (Mass. Cont. Legal Educ. 3d ed. 2017). 
6 
 
 
 
b.  Factual background of the action against Continental.  
Lala contacted Jack Donovan, a claims representative for 
Continental, in late November 2011 for assistance in resolving 
the plaintiffs' lawsuit against him.  Donovan opened the matter 
as a "pre-claim" assistance file in January 2012, as Lala did 
not yet wish to invoke his coverage and elected to defend 
himself pro se.  Continental retained a law firm to represent 
Lala in January 2012, and attorneys Thomas K. McCraw and Jeff 
Alitz of that firm informally advised Lala until officially 
appearing on his behalf after Lala invoked his coverage under 
the policy in August 2012. 
 
Lala's policy stated that Continental had "the right and 
duty to defend any claim against [Lala] seeking amounts that are 
payable under the terms of this Policy, even if any of the 
allegations of the claim are groundless, false, or fraudulent.  
We will designate or, at our option, approve counsel to defend 
the claim.  We are not obligated to defend any claim or pay any 
amounts after the applicable Limit of Liability has been 
exhausted."  Continental exercised its duty to defend here when 
the attorneys appointed by Continental filed appearances on 
Lala's behalf in September 2012. 
 
Mitchell, the plaintiffs' consulting engineer, met with 
Donovan in April 2012 to discuss and review Lala's work.  
Mitchell concluded that Lala had made serious computational 
7 
 
 
errors based on erroneous engineering assumptions.  Mitchell 
questioned "all of the loading that was used in Mr. Lala's 
initial computations," and stated that Lala's "revised 
computations illustrate a complete lack of understanding of 
structural design." 
 
In May 2012, Donovan suggested engaging a third-party 
engineer to review Lala's engineering work and Mitchell's 
assessment with the hope of "reach[ing] an accord."  Donovan 
also suggested selecting a third-party mediator if the parties 
could not agree on the extent of Lala's liability after meeting 
with the third-party engineer.  More specifically, on June 1, 
2012, Donovan wrote: 
"I will reach out to [Mitchell] . . . to set up a meeting 
in which I will also invite a third engineer so we may have 
a frank and exhaustive discussion of the issues. . . .  I 
think [at] the same time we may think about a mediation in 
an effort to get this matter into a forum where each side 
can express its side of the issues." 
 
Counsel for the plaintiffs agreed to have Thomas Heger act as 
the third-party engineering expert and to have Heger meet with 
Lala and Mitchell.  Donovan also indicated he was reaching out 
to separate mediators at the same time that he was arranging for 
the third-party engineer. 
 
In June 2012, Donovan wrote to Lala and Alitz, stating:  "I 
think we could agree that the case may be six figures," and 
suggested pursuing mediation.  Alitz responded, telling Donovan 
8 
 
 
and Lala that "[t]here is [zero] chance at settling this [case] 
for under $100,000." 
 
On August 4, 2012, Mitchell wrote an e-mail message to 
Donovan summarizing his review of Lala's engineering work.  In 
that message, Mitchell concluded that "this was the worst 
example of improper engineering that I have seen in my 45 years 
of professional practice."  Mitchell identified multiple 
structural design errors, and concluded that the home lacked the 
proper professional structural engineering required by the State 
building code and the town. 
 
In September 2012, the plaintiffs' counsel reached out to 
Heger to ask whether he had come to any conclusions.  Heger 
responded that he was currently putting together a summary of 
his findings, but "need[ed] to defer to Mr. Donovan on whether 
this information can be shared with the various parties."  In 
summarizing his findings, Heger agreed with Mitchell's 
conclusions and concerns about the structural adequacy of the 
plaintiffs' house:  "Bottom line; I found the same serious 
design errors as Neal Mitchell and some additional ones as well 
as overstresses in the repaired beams that Neal did not get 
involved with."  Heger independently reviewed six of the 
nineteen structural issues that Mitchell identified, and found 
that, of those six issues, five failed to meet the minimum 
strength and deflection requirements of the State building code.  
9 
 
 
Heger submitted his review to Donovan on September 6, 2012.  At 
that time, Continental refused to provide a copy of the Heger 
report to the plaintiffs or their counsel. 
 
On September 10, 2012, the plaintiffs served Heger with a 
subpoena, and served a notice of deposition to opposing counsel.  
On September 17, 2012, counsel for Lala claimed Heger was a 
"mediator," and that Heger would therefore not appear in 
response to the subpoena.  The plaintiffs filed a motion to 
compel the deposition of Heger and production of his report, 
which the court granted in November 2012.  On October 1, 2012, 
the plaintiffs wrote a demand letter to Continental pursuant to 
G. L. c. 93A, alleging that Continental violated G. L. c. 176D, 
§ 3 (9) (f), when it failed to effectuate a prompt, fair, and 
equitable settlement of the plaintiffs' claim against Lala 
despite his clear liability.  At the same time, the plaintiffs 
wrote a letter to counsel for Lala demanding damages of 
$272,890.  Continental responded to the plaintiffs' demand on 
October 9, 2012, proposing a mediation in late October or early 
November.  The plaintiffs then moved to amend their complaint, 
adding Continental as a defendant and alleging that it engaged 
in bad faith settlement practices, thus violating G. L. cc. 93A 
and 176D.  The court allowed the plaintiffs' motion to amend, 
but stayed further proceedings against Continental until the 
case against Lala had been concluded. 
10 
 
 
 
In November 2012, Lala consented to a settlement offer to 
the plaintiffs of $100,000 to be paid from the policy.  Thomas 
McCraw, Lala's attorney, extended the offer to the plaintiffs' 
counsel on November 29, 2012. 
 
In January 2013, McCraw wrote to Continental, representing 
that the plaintiffs no longer wished to settle and intended to 
take the matter to trial.  Lala thereupon withdrew his 
authorization for any settlement offers to be made to the 
plaintiffs.  Months later, in May 2013, the plaintiffs made a 
formal demand of $1,324,390, identifying multiple instances of 
worsening conditions in their home.  Lala represented to his 
attorney that he had no interest in making a settlement offer in 
response to that demand. 
 
In May 2013, the plaintiffs moved to compel production of 
Lala's insurance policies issued by Continental from 2005 to 
2013, which the trial court granted on June 10, 2013.  Until the 
motion was granted, Continental had represented the applicable 
claims coverage for Lala as $250,000 per claim and $500,000 per 
policy year, which was the limit of Lala's 2012 policy with 
Continental.  It was not until after the court granted the 
motion to compel that Continental represented the appropriate 
policy period for the matter, which was January 1, 2010, to 
January 1, 2011, with coverage of $500,000 per claim and $1 
million per policy year. 
11 
 
 
 
In June 2013, Continental's claim consultant, Thomas 
Hedstrom, contacted Lala to clarify Lala's coverage under the 
policy.  Hedstrom wrote that Continental would be providing 
coverage for the plaintiffs' claims against Lala, including 
coverage for the claim and claim expenses, and that Lala's 
policy provided a limit on liability of $500,000 for each claim 
and $1 million for all claims made during the applicable policy 
year.  Hedstrom advised Lala that the limit applied to both the 
claim and claim expenses, such as attorney's fees, and that in 
the event of an excess judgment, Lala would be responsible for 
any excess of the remaining policy limits.  Lala still refused 
to consent to any settlement offers in response to the 
plaintiffs' demand. 
In June 2013, counsel for Lala also retained Lisa A. Davey 
to peer review only select structural elements of the 
plaintiffs' home.  Davey's review was based on a limited review 
of particular structural issues, and the scope of her review was 
not the same as Mitchell's or Heger's.  Further, the damages 
Davey assessed in her August 2013 report -- between $100,000 and 
$120,000 -- did not take into account the impact that the 
required work would have on the house as a whole.  In her 
deposition, Davey admitted that her repair estimate was based in 
part on the analysis of an estimator who never inspected the 
property, but with whom she spoke on the telephone. 
12 
 
 
Nevertheless, Davey's narrow review concluded that certain 
members were overstressed and did not comply with the State 
building code. 
 
In November 2013, Hedstrom wrote to Lala to confirm whether 
it was still his position to refuse settlement.  Hedstrom 
suggested extending a $100,000 settlement offer to the 
plaintiffs based on the damages estimated by Davey.  Lala 
agreed, and McCraw extended the offer in December 2013.  The 
plaintiffs rejected this offer, and did not reduce their demand 
of approximately $1.3 million from May 2013. 
 
In March 2014, McCraw sent an e-mail message to Lala in 
which he addressed the real possibility of a verdict at trial in 
excess of the remaining limits of the policy.  In the message to 
Lala, McCraw wrote: 
"If the Rawans succeed in convincing the jury of their 
claims, and the jury awards them all the money they seek, 
you could face a verdict of $1.324 million, tripled under 
Chapter 93A to nearly $4 million, and face paying the 
Rawans' attorneys' fees, likely into the hundreds of 
thousands of dollars.  Any judgment will also carry a 
statutory interest rate of 12% from the date of filing suit 
in September 2011.  Nearly three years later in 2014, that 
will add approximately 36% in interest on top of the 
judgment and attorneys' fees.  Given these factors, any 
significant judgment against you will dwarf your insurance 
limits, leaving your personal assets exposed for the Rawans 
to pursue to satisfy the excess judgment. . . .  With the 
stakes as high as they are given the alleged damages, the 
93A issue, and the relatively low insurance available to 
cover a judgment against you, it would make sense to 
explore settlement in order to avoid the potential exposure 
of your personal assets." 
 
13 
 
 
McCraw thus urged Lala to consider making an offer to the 
plaintiffs to eliminate the possibility of an excess verdict.  
In response, Lala stated the issue should be left to a jury, and 
that he would not initiate any further settlement offers. 
 
In July 2014, McCraw reiterated the real possibility of an 
excess verdict against Lala.  Lala, however, was not willing to 
initiate a settlement offer, despite being advised of the risk.  
McCraw again recommended re-engaging in settlement discussions 
before trial in September 2014.  Jeffrey Alitz, also counsel for 
Lala, "recommend[ed] in the strongest terms" that Lala authorize 
his attorneys to contact the plaintiffs' counsel to determine 
whether a settlement could be reached within the remaining 
limits of the policy.  Lala declined to authorize his attorneys 
to do so.  However, on the eve of trial, Lala instructed his 
attorneys to make an offer to the plaintiffs of $35,000.  When 
the plaintiffs rejected the offer and countered with a demand 
for $900,000, Lala instructed his attorneys to proceed with the 
trial and not to pursue settlement negotiations any further. 
 
The case was tried in September 2014.  The jury found that 
Lala was negligent in his design of the home and awarded the 
plaintiffs $400,000 in damages.  In an advisory verdict, the 
jury also awarded the plaintiffs $20,000 in damages for 
violations of G. L. c. 93A.  After reviewing the jury's verdict, 
the trial judge ruled that Lala's violations of G. L. c. 93A -- 
14 
 
 
misrepresentations to the town that the home construction was in 
compliance with the building codes and misrepresentations to the 
plaintiffs regarding Lala's insurance coverage -- were either 
knowing or reckless.  The court thus doubled the jury's base 
award of c. 93A damages to $40,000. 
 
After trial, Mitchell continued to inform the plaintiffs' 
counsel of the ongoing deterioration of the plaintiffs' home in 
April 2015, stating that "[s]tructural movement and load 
transfer from overloaded members is dramatically increasing the 
damage to this residence."  Mitchell estimated that the initial 
damages he calculated in 2012 increased by more than fifty 
percent as a result of repairs not being made. 
 
In June 2015, Continental tendered a check in the amount of 
$141,435.98 to the plaintiffs, which Continental represented was 
the remaining amount on Lala's policy after deducting the legal 
fees incurred in defending Lala.  Thereafter, Lala paid the 
plaintiffs in full, thus satisfying the judgment against him as 
well as the award of attorney's fees. 
 
Once the suit against Lala had been tried, the plaintiffs 
amended their complaint against Continental, alleging violations 
of G. L. cc. 93A and 176D.  As in their earlier complaint, the 
plaintiffs alleged that Continental violated its duty under 
G. L. c. 176D, § 3 (9) (f), to effectuate a prompt, fair, and 
equitable settlement of their claim against Lala.  The 
15 
 
 
plaintiffs similarly claimed that Continental violated its duty 
to conduct a reasonable investigation pursuant to G. L. c. 176D, 
§ 3 (9) (d).  The plaintiffs also made additional claims under 
G. L. cc. 93A and 176D against Continental for its "pre-verdict 
litigation conduct" in withholding the Heger report and 
misrepresenting Lala's policy limits. 
 
The plaintiffs moved for summary judgment on their claim 
that Continental failed to effectuate a settlement pursuant to 
G. L. c. 176D, § 3 (9) (f), and Continental cross-moved for 
summary judgment on all counts.  A Superior Court judge granted 
Continental's motion for summary judgment, and the plaintiffs 
appealed. We transferred the plaintiffs' appeal to this court on 
our own motion. 
 
2.  Discussion.  a.  Standard of review.  "Summary judgment 
is appropriate when, viewing the evidence in the light most 
favorable to the nonmoving party, all material facts have been 
established and the moving party is entitled to judgment as a 
matter of law" (quotation omitted).  Surabian Realty Co. v. NGM 
Ins. Co., 462 Mass. 715, 718 (2012).  The interpretation of an 
insurance policy is a question of law subject to de novo review.  
Id.  In the instant case, the question whether consent-to-settle 
clauses violate G. L. c. 176D as a matter of law does not 
require the resolution of any disputed facts.  In contrast, the 
question whether the particular acts of the insurer -- other 
16 
 
 
than entering into an insurance contract with a consent-to-
settle clause -- violated G. L. c. 176D requires the application 
of law to the facts.  We conclude, however, that there is no 
genuine issue of material fact in the instant case because the 
insurer's complained-of conduct did not cause the plaintiffs' 
injury.  The injury here was undisputedly caused by the 
obstinacy of the insured, not the particular acts or omissions 
of the insurer that the plaintiffs have identified. 
 
b.  Relevant statutory provisions.  General Laws c. 176D, 
§ 3 (9), regulates the insurance business and identifies "unfair 
claim settlement practices."    The failure to "effectuate 
prompt, fair and equitable settlements of claims in which 
liability has become reasonably clear" is an unfair claim 
settlement practice.  G. L. c. 176D, § 3 (9) (f).  Similarly, an 
insurer's refusal to pay claims "without conducting a reasonable 
investigation based on all available information" constitutes an 
unfair claim settlement practice.  G. L. c. 176D, § 3 (9) (d).  
These provisions "were enacted to encourage settlement of 
insurance claims . . . and discourage insurers from forcing 
claimants into unnecessary litigation to obtain relief."  
Morrison v. Toys "R" Us, Inc., Mass., 441 Mass. 451, 454 (2004), 
quoting Hopkins v. Liberty Mut. Ins. Co., 434 Mass 556, 567-568 
(2001).  A violation of G. L. c. 176D amounts to an unfair or 
deceptive act or practice for purposes of claims made under 
17 
 
 
G. L. c. 93A.  Morrison, supra.  See Hopkins, supra at 562 
("G. L. c. 176D . . . , which is consumer oriented, was designed 
to remedy a host of possible violations in the insurance 
industry and to subject insurers committing violations to the 
remedies available to an injured party under G. L. c. 93A"). 
 
c.  Legality of consent-to-settle clauses.  The issue 
presented is whether consent-to-settle clauses in professional 
liability policies violate an insurer's obligations under G. L. 
cc. 93A and 176D because the insurer has entered into a contract 
with its insured that provides the insured with a right to 
consent to, or reject, any settlement offer.  More precisely, 
the issue is whether such a contract conflicts with an insurer's 
statutory obligation to effectuate a prompt settlement under 
G. L. c. 176D, § 3 (9) (f), once liability has been clearly 
established. 
 
For the reasons explained in detail infra, we discern no 
legislative intent to preclude consent-to-settle clauses in 
professional liability policies.  This is an area of insurance 
that is voluntary, not mandatory, and thus subject to freedom of 
contract principles absent legislative direction to the 
contrary.  Consent-to-settle clauses in professional liability 
policies predate the passage of G. L. cc.93A and  176D, § 3 (9), 
and more particularly the 1979 amendment to G. L. c. 93A that 
allowed third parties adversely affected by insurers' failures 
18 
 
 
to comply with G. L. c. 176D to bring suit against those 
insurers; yet, there has been no legislative action to prohibit 
consent-to-settle clauses.  Consent-to-settle clauses also serve 
valuable purposes in the professional liability context, 
including the important protection of a professional's 
reputation and good will.  Moreover, consent-to-settle clauses 
encourage professionals to purchase this voluntary line of 
insurance, thereby providing more secure funding for the payment 
of third-party claims.  In these circumstances, we will not 
infer legislative intent to prohibit consent-to-settle policies 
because there may exist tension between consent-to-settle 
clauses and an insurer's obligation pursuant to § 3 (9) (f) to 
effectuate a reasonable settlement once liability has been 
clearly established. 
 
i. Voluntariness of professional liability insurance.  
Professional liability insurance is not one of the lines of 
insurance products mandated by law or with legislatively 
dictated and defined provisions.  Contrast G. L. c. 90, § 1A 
(requiring motor vehicle liability insurance); G. L. c. 90, 
§ 34M (requiring personal injury protection benefits in motor 
vehicle liability policies); 211 Code Mass. Regs. § 95.08 (2006) 
(mandatory provisions in life insurance policies); 266 Code 
Mass. Regs. § 3.04 (2017) (mandatory insurance for home 
inspectors); 956 Code Mass. Regs. § 8.03 (2019) (mandatory 
19 
 
 
health insurance for students).3  Instead, professional liability 
insurance is optional. 
 
ii.  Purposes of consent-to-settle clauses.  Consent-to-
settle clauses serve important purposes in this optional line of 
insurance.  Most importantly, they encourage professionals to 
purchase such insurance, thereby providing coverage for the 
insured and deeper pockets to compensate those injured by the 
insured.  Including a consent-to-settle clause differentiates 
these policies from other types of liability policies, such as 
homeowners and commercial general liability policies, which 
commonly provide that the insurer will have the "right and duty 
to defend any suit against the insured . . . and may make such 
investigation and settlement of any claim or suit as it deems 
expedient."  Western Polymer Tech., Inc. v. Reliance Ins. Co., 
32 Cal. App. 4th 14, 18 (1995).  See Murach v. Massachusetts 
Bonding & Ins. Co., 339 Mass. 184, 186 (1959). 
 
Control over settlement is particularly important to 
professionals, as settlement of malpractice claims directly 
implicates their reputational interests.  "Insured professionals 
are often more likely than other insured entities to resist 
settlement of underlying claims [because] settlement of an 
                                                          
 
 
3 Medical malpractice insurance, however, is mandated 
professionally liability insurance under Massachusetts law.  See 
G. L. c. 112, § 2; 243 Code Mass. Regs. § 2.07(16) (2019). 
20 
 
 
underlying claim may adversely affect the professional's 
reputation or might actually encourage future lawsuits against 
the professional."  Massachusetts Liability Insurance Manual, 
supra at § 5.6.2.  See also 14 Couch on Insurance § 203:10 (3d 
ed. 2005) ("Policies such as medical malpractice or other 
professional liability coverage may contain provisions requiring 
the insured's consent to settlement, because of the potential 
effect that a professional negligence or misconduct claim may 
have on a professional's reputation and future ability to 
practice his or her profession").  Insurers and professionals 
may also have very different perspectives regarding malpractice 
settlements.  For insurers, the benefits of smaller dollar 
settlements may greatly outweigh the costs of reputational 
damage to the professional caused by settling a malpractice 
claim; for professionals, the opposite may be true.  Syverud, 
The Duty to Settle, 76 Va. L. Rev. 1113, 1174 (1990) 
("[Reputational] stakes in any settlement or judgment may lead 
the professional to actively oppose settlement in many cases, 
even where the potential liability and the proposed settlement 
are well within policy limits"). See also 14 Couch on Insurance 
§ 203:10; Massachusetts Liability Insurance Manual, supra at 
§ 5.6; J. Cowin and L. Goldberg, Insurance Coverage for 
Municipalities, in Massachusetts Municipal Law § 17.4.9 (Mass. 
Cont. Legal Educ. 2d ed. 2015).  Thus, consent-to-settle 
21 
 
 
provisions are both significant safeguards for insureds to 
defend their professional reputations and important incentives 
for the purchase of such insurance. 
 
iii.  Freedom of contract and legislative oversight.  "The 
general rule of our law is freedom of contract, [and] it is in 
the public interest to accord individuals broad powers to order 
their affairs through legally enforceable agreements" 
(quotations and citations omitted).  Beacon Hill Civic Ass'n v. 
Ristorante Toscano, Inc., 422 Mass. 318, 320 (1996).  This 
principle certainly applies to voluntary lines of insurance.  
Absent legislative intervention, "an insurance policy is a 
bargained-for contract, . . . and . . . the parties should have 
the benefit of their stated bargain" (citation omitted).  Great 
Divide Ins. Co. v. Lexington Ins. Co., 478 Mass. 264, 268 
(2017).  Although the freedom to contract is not absolute and is 
sometimes outweighed by public policy, "[c]ourts do not go out 
of their way to discover some illegal element in a contract or 
to impose hardship upon the parties beyond that which is 
necessary to uphold the policy of the law" (quotation omitted).  
Beacon Hill Civic Ass'n, supra. 
In reviewing whether a contract is void as a matter of 
public policy, "[t]he test is . . . whether the underlying 
tendency of the contract under the conditions described was 
manifestly injurious to the public interest and welfare."  
22 
 
 
Beacon Hill Civic Ass'n, 422 Mass. at 321, quoting Adams v. East 
Boston Co., 236 Mass. 121, 128 (1920).  "'Public policy' in this 
context refers to a court's conviction, grounded in legislation 
and precedent, that denying enforcement of a contractual term is 
necessary to protect some aspect of the public welfare."  Beacon 
Hill Civic Ass'n, supra. 
iv.  Consent-to-settle clauses and G. L. c. 176D.  With 
these principles in mind, we consider both the statutory 
language at issue and the public interests implicated by 
consent-to-settle clauses. We begin with the recognition that 
consent-to-settle clauses are not directly addressed in G. L. 
c. 176D. Indeed, they are not in any way referenced in G. L. 
c. 176D, nor are they discussed in the legislative history. 
 
We consider the absence of any express or implied 
prohibition, or even any reference to consent-to-settle clauses 
in the legislative history, to be significant.  Consent-to-
settle clauses have been common, long-standing features of 
professional liability policies.  See A. David & T. Pomorole, 
Legal and Accounting Malpractice, in Business Torts in 
Massachusetts § 14.6.3(c) (Mass. Cont. Legal Educ. 2d ed. 2016) 
("Most professional liability policies give the insured 
professional the right to consent to any settlement"); Syverud, 
76 Va. L. Rev. at 1176 ("Today, [professionals] can all choose 
policies giving them the right to veto any settlement"); J.D. 
23 
 
 
Long & D.W. Gregg, Property and Liability Insurance Handbook 482 
(1965) ("unlike most general liability policies, written consent 
of the insured is required in the settlement of any claim or 
suit [in medical professional liability policies]").  Consent-
to-settle clauses certainly predate the passage of G. L. 
c. 176D, § 3 (9) and the amendments to G. L. c. 93A in the 
1970s, which are discussed in more detail infra.  Yet, the 
legislature did not express any intention to prohibit or 
otherwise limit consent-to-settle provisions when enacting these 
statutory provisions. 
 
The basis of the plaintiffs' contention that consent-to-
settle provisions are prohibited in professional liability 
policies is the language in G. L. c. 176D, § 3 (9) (f), which 
provides that the failure "to effectuate prompt, fair and 
equitable settlements of claims in which liability has become 
reasonably clear" is an unfair claims settlement practice.  More 
particularly, they claim that an insurer's obligation to make a 
settlement offer once liability has become reasonably clear is 
inconsistent with consent-to-settle clauses that eliminate an 
insurer's unilateral ability to settle a claim once it has made 
such a determination. 
An understanding of the history of § 3 (9) (f), and the 
evolution of its enforcement pursuant to G. L. c. 93A, is 
necessary to understand its application to consent-to-settle 
24 
 
 
clauses.  This provision was originally designed to address the 
obligations of insurers towards insureds, particularly in the 
context of insurance policies in which insurers retained control 
over settlement.  As this court explained, "[o]ne obvious 
legislative concern was that entities that profit from selling 
insurance policies not abuse exclusive rights and duties to 
control litigation vested through those same policies."  
Morrison, 441 Mass. at 454-455.  This was of particular concern 
in cases involving verdicts in excess of policy limits.  See 
e.g. Murach, 339 Mass. at 186-187 (defining, in seminal 
decision, common-law duty in excess liability cases as follows:  
"Although [policy] language leaves the matter of settlement 
entirely to the insurer's discretion, its privilege in this 
respect imports a reciprocal obligation . . . to act in good 
faith").  Thus, at the time of their enactment, the provisions 
of G. L. c. 176D, § 3, were focused on the imbalance of the 
relationship between insurer and insured.  See St. 1972, c. 543, 
§ 1.4  If anything, consent-to-settle clauses helped to correct 
that imbalance by giving the insured control over the settlement 
process.  At the time § 3(9) passed in the Legislature, third 
parties did not even have standing to bring suits under G. L. 
                                                          
 
 
4 In 1972, the Legislature replaced the entire text of G. L. 
c. 176D, inserted by St. 1947, c. 659.  See St. 1972, c. 543, 
§ 1. 
25 
 
 
c. 93A, and were thus not a focal point for the Legislature when 
defining insurers' duties under G. L. c. 176D. 
 
The plaintiffs nonetheless emphasize that, in the original 
draft of the bill introducing § 3 (9) (f), the Legislature 
replaced the suggested language "[n]ot attempting in good faith 
to effectuate"  with "[f]ailing to effectuate," thus forgoing 
the opportunity to narrow an insurer's obligations under the 
statute to good faith attempts.  Compare 1972 House Doc. No. 
5239 at 10, line 172, with G. L. c. 176D, § 3 (9) (f), as 
appearing in St. 1972, c.543, § 1.5  We do not consider this 
subtle language change to be particularly informative with 
regard to the legality of consent-to-settle provisions.6  If the 
Legislature had intended for such a change to be designed to 
prohibit consent-to-settle provisions because insurers no longer 
                                                          
 
5 In reviewing the change in the language of G. L. c. 176D, 
§ 3 (9) (f) from 1972 House Doc. No. 5239 at 10, line 172, it 
appears that subsection (f) was changed to create more 
consistent language throughout § 3 (9).  For example, other 
subsections of § 3 (9) use the words "failing to acknowledge," 
§ 3 (9) (b), "failing to adopt," § 3 (9) (c), and "failing to 
affirm," § 3 (9) (e), instead of "not acknowledging," "not 
adopting," and "not affirming."  The change in the original 
draft of § 3 (9) (f) is thus even less instructive in our 
analysis. 
 
6 In their reply brief, the plaintiffs also distinguish 
G. L. c. 176D from Cal. Ins. Code § 790.03 (h) (5) (West 2013), 
which requires that an insurer "attempt[] in good faith to 
effectuate prompt, fair and equitable settlement."  The 
plaintiffs contend that the lack of the word "attempt" in § 3 
(9) (f) imposes a broader affirmative obligation on Continental 
in this case.  We consider this argument unpersuasive as well. 
26 
 
 
had the unilateral right to effectuate a settlement, we conclude 
that it would have said so more expressly.  See, e.g., Lazaris 
v. Metropolitan Prop. & Cas. Ins. Co., 428 Mass. 502, 506 (1998) 
(G. L. c. 176D, § 3 [9] [f], was not so specific as to deny 
insurer right to insist on release by claimant before paying its 
insured's policy limits, where "[i]f the Legislature wants to 
require an insurance company [to do otherwise], it may amend the 
statute"). 
 
Moreover, the statute has not been interpreted to require 
the effectuation of settlements as opposed to good faith efforts 
to effectuate settlement; the language change relied on by the 
plaintiffs therefore appears to be a distinction without a 
difference.  See, e.g., Hartford Cas. Ins. Co. v. New Hampshire 
Ins. Co., 417 Mass. 115, 118 (1994) ("the liability of an 
insurer with respect to its refusal or failure to settle a claim 
against its insured has traditionally been decided on the 
standard of whether the insurer exercised good faith judgment on 
the subject"); Silva v. Norfolk & Dedham Mut. Fire Ins. Co., 91 
Mass. App. Ct. 413, 418 (2017) ("settlement offers must be made 
in good faith given the insurer's knowledge at the time of the 
relevant facts and law concerning [the] claim" [quotations and 
citation omitted]). 
 
We also do not interpret the 1979 amendment to G. L. 
c. 93A, § 9, to prohibit consent-to-settle clauses in 
27 
 
 
professional liability insurance policies.  See St. 1979, c. 
406, § 1.  The 1979 amendment changed the requirement for 
standing to bring a suit under G. L. c. 93A, § 9, from "[a]ny 
person who purchases or leases goods, [or] services . . . and 
thereby suffers any loss of money or property . . . as a result 
of the use or employment by another person of an unfair or 
deceptive act or practice declared unlawful," G. L. c. 93A, § 9, 
as amended through St. 1971, c. 241, to "[a]ny person . . . who 
has been injured by another person's use or employment of any 
method, act or practice declared to be unlawful . . . ."  G. L. 
c. 93A, § 9, as amended through St. 1979, c. 406, § 1.  The 
amendment followed this court's decision in Dodd v. Commercial 
Union Ins. Co., 373 Mass. 72, 79-81 (1977), which held that 
policy holders -- but not third party claimants -- could "bring 
the potent remedies of chapter 93A to bear on claim settlement 
practices."  Billings, The Massachusetts Law of Unfair Insurance 
Claim Settlement Practices, 76 Mass. L. Rev. 55, 59 (1991).  See 
Van Dyke v. St. Paul Fire & Marine Ins. Co., 388 Mass 671, 675 
(1983).  The 1979 amendment allowed for "third-party 
claimants . . . to bring actions against liability insurers who 
violate G. L. c. 93A."  Clegg v. Butler, 424 Mass. 413, 418 
(1997).  Thus, "the specific duty contained in subsection (f) 
[failure to effectuate prompt, fair, and equitable settlements 
of claims] [was no longer] limited to those situations where the 
28 
 
 
plaintiff enjoys contractual privity with the insurer."  Id. at 
419.  Rather, "[t]he text of G. L. c. 93A, § 9 (1), and our 
interpretation in Van Dyke [supra, an insurance case involving a 
consent-to-settle clause,] are both clear affirmations of third-
party rights, and we cannot accept [the] argument that only 
insureds are owed a duty of fair dealing when it comes to an 
insurer's settlement practices."  Id. at 418. 
As discussed supra, at the time of the 1979 amendment to 
G. L. c. 93A, there was no doubt that consent-to-settle clauses 
were in existence. See Van Dyke, 388 Mass. at 676 n.6 ("the 
[consent-to-settle] policy was, of course, issued long before 
the 1979 amendment of G. L. c. 93A, § 9").  Yet there was 
neither an express prohibition of, nor a limitation on, such 
clauses nor even any discussion of them in the legislative 
history when expanding standing to third-party claimants under 
G. L. c. 93A. 
Recognizing that insurers owe a duty to third-party 
claimants, and that such third-party claimants have standing to 
sue insurers, is also different from defining the types of 
contracts into which insurers may enter with their insureds or 
requiring insurers to subordinate to third parties their duties 
to their insureds when conflicting duties arise.  Indeed, we 
have recognized the possibility of G. L. c. 176D imposing 
conflicting obligations on insurers, but have held that an 
29 
 
 
insurer must respect its obligations to its insured absent 
legislative guidance to the contrary.  For example, in Lazaris, 
428 Mass. at 506, we held that an insurer may insist on a 
release by a claimant before paying its insured's policy limits 
for damages that exceed those limits, and that such insistence 
on the insurer's part did not violate its statutory duty to 
effectuate a prompt, fair, and equitable settlement under G. L. 
c. 176D.  We held: 
"The insurer has a duty to its insured. If it does not 
fulfil that duty, it may violate G. L. c. 176D, § 3 (9), 
and be liable to its insured.  See Hartford Cas. Ins. Co.[, 
417 Mass. at 120].  If we read § 3 (9) (f) as requiring 
payment of the policy limit without a settlement of claims 
against the insured, then an insurance company would be 
forced to watch both flanks.  On one side, the company may 
be sued for unfair settlement practices by a claimant 
disgruntled by the company's failure to pay, and, on the 
other side, the company may be sued by an insured 
disgruntled by the company's payment of the policy limit 
without obtaining a release.  We do not construe G. L. 
c. 176D, § 3 (9) (f), to place insurers in such a 
position. . . .  If the Legislature wants to require an 
insurance company, without obtaining a settlement, to pay 
the policy limits in a case like the one before us, it may 
amend the statute." 
 
Id.  Thus, to the extent the insurer has a duty to a third-party 
claimant to effectuate settlement under G. L. c. 176D, § 3 (9) 
(f), that duty is still subject to the insurer's contractual and 
statutory duty to its insured under the terms of its insurance 
policy and G. L. c. 176D absent legislative direction or 
instruction to the contrary. 
30 
 
 
 
We recognize that, in certain circumstances, an insurer 
would be obligated to make a settlement offer had its insured 
not refused consent.  Some insureds, like the insured in the 
instant case, will not settle even where such a refusal is 
unreasonable and against the advice of the insurer itself.  In 
such circumstances, the claimant will have to proceed to trial, 
even where the insurer would have otherwise been required to 
make a settlement offer.  Despite this tension, we cannot 
conclude that the Legislature intended to ban all consent-to-
settle professional liability policies because some insureds 
will act unreasonably.  Those unreasonable insureds can and 
should be held to account at trial and suffer the possibility of 
large, multiple damages awards.  The claimant also is in no 
worse a position than he or she would have been if the 
professional had not purchased insurance.  Such insureds, 
arguably, are the type who would not buy insurance in the first 
place if they could not control the decision to settle. 
 
For all of these reasons, we do not consider it appropriate 
to impute the insured's refusal to settle here to Continental 
for purposes of a G. L. c. 93A violation when Continental's 
ability to settle the claim was contingent on the insured's 
consent.  See Clauson v. New England Ins. Co., 254 F.3d 331, 
340-341 (1st Cir. 2001) (declining to treat insured's rejection 
of settlement offer as insurer's rejection of same for purposes 
31 
 
 
of Rhode Island's rejected settlement statute, R.I. Gen. Laws, 
§ 27-7-2.2, and emphasizing that insurer "had no ability to 
control or direct [the insured], who acted in direct 
contradiction of [the insurer's] recommendations" during 
settlement process). 
In sum, consent-to-settle clauses are neither prohibited by 
G. L. c. 176D, § 3 (9) (f), nor "manifestly injurious to the 
public interest and welfare" (citation omitted), and therefore, 
nothing renders them unenforceable as a matter of public policy.  
See Beacon Hill Civic Ass'n, 422 Mass. at 321.  We therefore 
hold that consent-to-settle provisions are valid under 
Massachusetts law, and that an insurer's duty to effectuate a 
prompt, fair, and equitable settlement under § 3 (9) (f) does 
not require the insurer to violate a consent-to-settle 
provision, even when liability has been clearly established.7 
                                                          
 
 
7 For the same reasons that we conclude that consent-to-
settle clauses are not prohibited by G. L. c. 176D, § 3 (9) (f), 
or otherwise in violation of public policy, we also reject the 
argument that only consent-to-settle clauses paired with hammer 
clauses are permissible.  The statute and its legislative 
history likewise neglect to require, or even mention, hammer 
clauses.  Such a specific redrafting of voluntary insurance 
policies requires specific legislative direction, as it intrudes 
even further on freedom of contract principles.  The hammer 
clause also will diminish the incentive professionals have to 
purchase this voluntary insurance, which, as explained supra, 
serves a valuable purpose:  it benefits third parties by 
providing deeper pockets for recovery. 
32 
 
 
 
d.  Third-party claimants and an insurer's duty to act in 
good faith.  Our conclusion that consent-to-settle clauses are 
not in violation of public policy does not mean that an insurer 
who honors a consent-to-settle clause is otherwise exonerated 
from the duties imposed by G. L. c. 176D.  The existence of such 
a clause is not conclusive.  See Van Dyke, 388 Mass. at 676 n.6.  
See also Insurance Co. of N. Am. v. Medical Protective Co., 768 
F.2d 315, 319 (10th Cir. 1985) ("It is common practice for an 
insurer to conduct settlement negotiations in advance of 
obtaining the insured's final consent to the agreement.  These 
negotiations must be conducted in good faith and without 
negligence, . . . regardless of whether or not the insured 
eventually will consent" [citation omitted]). 
 
The determination whether an insurer has complied with its 
dual obligations, despite the existence of a consent-to-settle 
clause, is a factual one to be measured in terms of the 
insurer's good faith efforts and transparency toward both its 
insured and a third-party claimant.  These efforts would include 
a thorough investigation of the facts, a careful attempt to 
determine the value of a claim, good faith efforts to convince 
the insured to settle for such an amount, and the absence of 
misleading, improper, or "extortionate" conduct towards the 
third-party claimant.  See Darcy v. Hartford Ins. Co., 407 Mass. 
481, 491 (1990) ("an insurer may not disclaim liability due to 
33 
 
 
lack of cooperation [of an insured] unless it has exercised 
'diligence and good faith' in obtaining that cooperation," which 
is factual question requiring examination of efforts "to 
investigate the circumstances attending the [incident]"); Clegg, 
424 Mass. at 416, 419 ("Whether a settlement is eventually 
reached or not," insurer violated G. L. c. 176D when it 
determined probable value of case during investigation of 
traffic accident caused by its insured after analyzing medical 
records, but failed to make settlement offer after it "knew or 
should have known that [plaintiff] was permanently and totally 
disabled"); Caira v. Zurich Am. Ins. Co., 91 Mass. App. Ct. 374, 
381 (2017), quoting Guity v. Commerce Ins. Co., 36 Mass. App. 
Ct. 339, 344 (1994) ("Liability under G. L. c. 176D and c. 93A 
based on unfair claim settlement practices is generally 
characterized by '[a]n absence of good faith and the presence of 
extortionate tactics'" [emphasis added]); McLaughlin v. American 
States Ins. Co., 90 Mass. App. Ct. 22, 32 (2016) (reasonable 
investigation requires taking "basic steps toward obtaining an 
independent or neutral assessment of . . . potential fault"). 
 
The plaintiffs contend that Continental did not do enough 
to effectuate a settlement or properly investigate the 
plaintiffs' claims, even if the consent-to-settle provision 
itself was permissible.  We conclude that Continental did make 
good faith efforts to investigate the claims and effectuate a 
34 
 
 
settlement consistent with its duty to its client (Lala) and the 
third-party claimants (the plaintiffs).  Continental agreed to 
defend and indemnify Lala.  Through its adjusters or attorneys, 
it thoroughly investigated the underlying facts, and informed 
Lala of the results of its investigation.  It encouraged 
mediation to both Lala and the plaintiffs.  It explained the 
vulnerabilities of the case to Lala, encouraging him to settle.  
Finally, it helped convince the reluctant Lala to offer 
$100,000.  Although its conduct towards the plaintiffs was more 
problematic, for the reasons discussed infra, we conclude they 
caused the plaintiffs no harm. 
 
When Lala refused to offer more than $100,000 -- even when 
his attorneys warned him of a potential seven-figure judgment -- 
and when Continental made clear that Lala would be responsible 
for paying any judgment in excess of his policy limits, it was 
clear that further investigation and additional efforts to 
effectuate settlement would be pointless.8  In these 
circumstances, with such obstinacy on the part of Lala, we 
                                                          
 
 
8 In Murach v. Massachusetts Bonding & Ins. Co., 339 Mass. 
184, 189 (1959), we stated that, "[w]here a claim is made for an 
amount greater than the limits of the policy . . . [i]t is the 
duty of the insurer to disclose to its insured its adverse 
interest with respect to the extent of its liability under the 
policy."  In that case, we held that "the insurer fulfilled its 
duty in this respect by its communication to the insured 
advising them of the possibility of a verdict in excess of the 
policy limit."  Id.  We conclude Continental similarly fulfilled 
its duty in this case. 
35 
 
 
cannot conclude that Continental did not make good faith efforts 
to investigate the claims or effectuate a settlement consistent 
with its own obligations to its insured. 
 
e.  Causation:  Continental's conduct and the plaintiffs' 
loss.  The plaintiffs also allege that Continental's "persistent 
effort" to hide the Heger report and the misrepresentations of 
Lala's insurance coverage violated G. L. cc. 93A and 176D, § 3 
(9) (a) ("[m]isrepresenting pertinent facts or insurance policy 
provisions relating to coverages at issue").  We recognize that 
these actions, when viewed in the light most favorable to the 
plaintiffs, remain questionable and might rise to the level of a 
G. L. c. 176D claim in other circumstances where, for example, 
the parties were not far apart in settlement discussions, and 
such conduct may have affected the possibility of settlement.  
An insurer has a duty to a third-party claimant not to engage in 
misleading, improper, or extortionate conduct or otherwise act 
in bad faith.  We emphasize that the conduct at issue here, 
viewed in the light most favorable to the plaintiffs, is 
problematic to Continental's duty as an insurer to act in good 
faith, and we do not condone it.9 
                                                          
 
 
9 Because of our decision here, we need not reach the thorny 
issue whether the handling of Heger and his report amounted to 
unfair or deceptive practices under G. L. c. 93A or was within 
the parameters of zealous advocacy in defense of the insured.  
We have held that a party's conduct during litigation can 
constitute a violation of G. L. c. 93A under certain 
36 
 
 
 
Nevertheless, "[e]ven when an insurer's conduct is unfair 
or deceptive in violation of G. L. c. 93A, the [plaintiffs] must 
prove that the insurer's conduct was the cause of any loss 
[they] sustained."  Polaroid Corp. v. Travelers Indem. Co., 414 
Mass. 747, 763 (1993).  See Tyler v. Michaels Stores, Inc., 464 
Mass. 492, 503 (2013) ("[the] distinct injury or harm [must] 
arise[] from the claimed unfair or deceptive act itself"); 
Hartford Cas. Ins. Co., 417 Mass. at 125 ("The absence of proof 
of causation [was] fatal to [the excess insurer's] G. L. c. 93A 
and G. L. c. 176D claims"); Van Dyke, 388 Mass. at 678 ("any 
omission by [the insurer] to comply with G. L. c. 176D, § 3 (9), 
did not cause any injury to or adversely affect the [third-
party] plaintiffs"); DiMarzo v. American Mut. Ins. Co., 389 
Mass. 85, 100-101 (1983) (insurer's refusal to settle exposed 
                                                          
 
circumstances.  See Schubach v. Household Fin. Corp., 375 Mass. 
133, 137-138 (1978) (defendants' filing of collection action 
against the plaintiffs in inconvenient location was "unfair" for 
purposes of G. L. c. 93A).  See also Commercial Union Ins. Co. 
v. Seven Provinces Ins. Co., 217 F.3d 33, 43 (1st Cir. 2000), 
cert. denied, 531 U.S. 1146 (2001) (insurer's conduct -- 
"raising multiple, shifting defenses [many of them 
insubstantial] in a lengthy pattern of foot-dragging and 
stringing [plaintiff] along, with the intent . . . of pressuring 
[plaintiff] to compromise its claim -- had the extortionate 
quality that marks a [G. L. c.] 93A violation"); Trenwick 
America Reins. Corp. v. IRC, Inc., 764 F. Supp. 2d 274, 305 (D. 
Mass. 2011) ("while there is considerable debate about whether 
litigation tactics alone can rise to the level of a Chapter 93A 
violation, there is little doubt that a course of conduct 
beginning before litigation and continuing unabated, thereafter 
may do so"). 
37 
 
 
insured to liability).  Here, the decision to claim that Heger 
was acting as a mediator and to withhold the Heger report until 
ordered by the trial court to produce it did not cause the 
plaintiffs' harm.  Lala's intractable position on settling the 
case became even more apparent after the plaintiffs reviewed the 
Heger report.  The delay in issuing the report made no 
difference.  Van Dyke, supra. 
 
Likewise, the misrepresentation of Lala's policy limits -- 
whether intentional or accidental -- did not proximately cause 
the plaintiffs' harm.  In fact, Lala did not waver in his 
refusal to settle once he learned that the policy limits were 
twice the amount Continental originally represented.  Moreover, 
Continental tendered the remaining policy limits to the 
plaintiffs in partial satisfaction of the judgment against Lala, 
and the excess verdict was paid in full by Lala following the 
trial.  The plaintiffs were not harmed by Continental's 
incorrect representations regarding Lala's policy limits.  Our 
reasoning does not change when taking the cumulative impact of 
Continental's alleged misconduct into account, as the plaintiffs 
urge us to do:  any chance of reaching a settlement was thwarted 
by Lala's refusal to consent, which was the proximate cause of 
the plaintiffs' harm.  For these reasons, summary judgment is 
appropriate on the remainder of the plaintiffs' claims. 
38 
 
 
 
3.  Conclusion.  A consent-to-settle provision in an 
insurance policy does not violate an insurer's duty to 
effectuate a prompt, fair, and equitable settlement under G. L. 
c. 176D,  § 3 (9) (f).  However, a consent-to-settle provision 
is not a carte blanche for an insurer to engage in unfair or 
deceptive conduct with a third-party claimant merely because the 
insured declines to reach a settlement.  An insurer still owes a 
duty to conduct a reasonable investigation and engage in good 
faith settlement attempts consistent with its duty to both its 
insured and the claimant.  In the instant case, Continental did 
make good faith efforts to investigate the claim and effectuate 
settlement, particularly in light of its insured's stubborn 
refusal to settle.  Although certain actions Continental took in 
the course of its settlement discussions were questionable, 
these actions did not cause the plaintiffs' harm in this case.  
The proximate cause of the plaintiffs' harm was the insured's 
refusal to settle, and not any conduct attributable to 
Continental.  The judgment of the Superior Court is therefore 
affirmed. 
 
 
 
 
 
 
 
So ordered.