Title: Boyle v. Zurich Am. Ins. Co.
Citation: N/A
Docket Number: assigned
State: Massachusetts
Issuer: Massachusetts Supreme Court
Date: September 14, 2015

NOTICE:  All slip opinions and orders are subject to formal 
revision and are superseded by the advance sheets and bound 
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error or other formal error, please notify the Reporter of 
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SJC-11791 
 
JOSEPH P. BOYLE & another1  vs.  ZURICH AMERICAN INSURANCE 
COMPANY. 
 
 
 
Middlesex.     April 6, 2015. - September 14, 2015. 
 
Present:  Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, & 
Hines, JJ. 
 
 
Insurance, Insurer's obligation to defend, Notice, Settlement of 
claim.  Notice, Insurance claim.  Consumer Protection Act, 
Insurance, Unfair or deceptive act.  Practice, Civil, 
Damages. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
June 27, 2011. 
 
 
The case was heard by Kenneth W. Salinger, J. 
 
 
The Supreme Judicial Court granted an application for 
direct appellate review. 
 
 
 
John T. Harding (Rachel M. Davison with him) for the 
defendant. 
 
Michael K. Gillis (David R. Bikofsky & Joseph I. Rogers 
with him) for the plaintiff. 
 
The following submitted briefs for amici curiae: 
 
Laura Foggan, of the District of Columbia, & Rosanna 
Sattler for Complex Insurance Claims Litigation Association. 
                     
 
1 Janice M. Boyle. 
2 
 
 
Anthony R. Zelle & Robert J. Maselek, Jr., for 
Massachusetts Defense Lawyers Association. 
 
Charlotte E. Glinka, Thomas R. Murphy, & J. Michael Conley 
for Massachusetts Academy of Trial Attorneys. 
 
 
 
LENK, J.  Joseph P. Boyle was injured by an exploding tire 
in an automobile repair shop operated by C&N Corporation (C&N).  
Joseph2 and his wife, Janice M. Boyle, filed a complaint against 
C&N, asserting claims for bodily injury and loss of consortium.  
C&N held an insurance policy issued by Zurich American Insurance 
Company (Zurich).  The policy required that C&N provide notice 
to Zurich of any suit brought against it.  C&N informed Zurich 
about Joseph's injury.  It did not notify Zurich about the 
lawsuit, but the Boyles' counsel eventually did.  Zurich did not 
defend against the suit.  C&N defaulted, and judgment by default 
was entered for the Boyles. 
 
Subsequently, the Boyles brought suit against Zurich, 
asserting both their individual claims and the claims of C&N, 
which, in the interim, C&N had assigned to the Boyles.  In 
return for a negotiated sum of money, the Boyles released the 
claims that they had asserted on their own behalf; these 
individual claims arose from Zurich's asserted failure to settle 
the Boyles' personal injury action when liability had become 
reasonably clear.  After a jury-waived trial on C&N's claims 
                     
 
2 Because they share a last name, we refer to Joseph P. 
Boyle and Janice M. Boyle by their first names. 
3 
 
against Zurich, a Superior Court judge determined that Zurich 
had committed a breach of its contractual duty to defend C&N.  
The judge declined to award the Boyles (as C&N's assignees) 
multiple damages, costs, and attorney's fees pursuant to G. L. 
c. 93A.  The judge also subtracted from the Boyles' damages (as 
assignees) the amount that Zurich had agreed to pay to settle 
the Boyles' individual claims.  The parties filed cross appeals, 
and we granted Zurich's petition for direct appellate review. 
 
We conclude that the judge did not err in his determination 
that Zurich committed a breach of its duty to defend C&N.  In 
essence, as we have held in the line of cases proceeding from 
Johnson Controls, Inc. v. Bowes, 381 Mass. 278 (1980) (Johnson 
Controls), an insured's failure to comply with a notice 
obligation in an insurance policy does not relieve the insurer 
of its duties under that policy unless the insurer demonstrates 
that it suffered prejudice as a result of the breach.  Zurich 
has not shown such prejudice. 
 
We do not disturb the judge's conclusion that Zurich did 
not violate G. L. c. 93A.  We do, however, conclude that the sum 
agreed upon to settle the Boyles' individual claims should not 
4 
 
have been subtracted from the damages awarded to the Boyles as 
C&N's assignees.3 
 
1.  Background.  We recite the essential facts found by the 
judge, which we accept "unless they are clearly erroneous," 
Weiler v. PortfolioScope, Inc., 469 Mass. 75, 81 (2014), quoting 
Makrigiannis v. Nintendo of Am., Inc., 442 Mass. 675, 677 
(2004), and which the parties do not challenge, supplemented by 
other undisputed information from the record. 
 
a.  Underlying facts.  C&N operated an automobile repair 
shop.  In March, 2006, Nicholas Rago, one of C&N's co-owners, 
raised a customer's truck on a lift at C&N's shop.  At Rago's 
request, Joseph stepped into the garage to listen to the truck's 
transmission.  As Rago revved the engine, one of the truck's 
tires exploded, severely lacerating and fracturing Joseph's left 
forearm and hand. 
 
Joseph underwent several surgical procedures, incurring 
approximately $106,000 in medical expenses.  He suffered 
permanent scarring and partial loss of function in his left arm 
and hand.  For approximately one year, Joseph was unable to 
work.  Subsequently, he was compelled to seek less-skilled, 
lower-paying employment than he previously had held. 
                     
 
3 We acknowledge the amicus briefs submitted by the Complex 
Insurance Claims Litigation Association, the Massachusetts 
Defense Lawyers Association, and the Massachusetts Academy of 
Trial Attorneys. 
5 
 
 
C&N carried a "business auto" insurance policy issued by 
Zurich, which included liability coverage.  The coverage limit 
of that policy was $50,000.  Rago reported Joseph's accident to 
his insurance agent, Tarpey Insurance Group (Tarpey), twelve 
days after the accident.  Tarpey relayed written notice to 
Zurich, which opened a claim file and began an investigation. 
 
In June, 2006, an investigator for Zurich interviewed Rago, 
who described the accident and reported that Joseph was 
undergoing surgeries.  That same month, an attorney retained by 
the Boyles informed C&N by letter that the Boyles intended to 
assert a claim for bodily injury.  This letter was forwarded by 
C&N to Tarpey, and by Tarpey to Zurich.  In October, 2006, the 
Boyles' attorney wrote to Zurich directly, informing it of the 
Boyles' intention to pursue a bodily injury claim and asking for 
information about the coverage limits of C&N's policy.  Another, 
similar letter, marked "2nd request," was delivered to Zurich in 
December, 2006.  Although Zurich was required to provide the 
information sought by the Boyles, see G. L. c. 175, § 112C, it 
did not respond. 
 
By October, 2007, Zurich had determined that C&N would be 
held liable for Joseph's injuries.  By early 2008, it had 
concluded that Joseph's injuries were covered by C&N's policy.  
Zurich did not relay these determinations to C&N.  It also did 
not attempt to estimate the liability that C&N might face, or to 
6 
 
settle the Boyles' claims.  Instead, in February, 2008, Zurich 
closed its file for the Boyles' claim. 
 
b.  Suit against C&N.  In August, 2008, the Boyles brought 
an action in the Superior Court against C&N,4 seeking damages for 
Joseph's injuries and for Janice's loss of consortium.  By that 
time, C&N no longer was operating as a business; it had been 
administratively dissolved for approximately fourteen months.  
C&N did not inform Tarpey or Zurich that the suit had been 
filed, and did not forward to Zurich the complaint or other 
documents filed in the proceedings.  C&N did not answer the 
complaint, and in January, 2009, C&N's default was entered. 
 
The Boyles then moved for a judgment by default.  In 
September, 2009, the Boyles' attorney sent Zurich a letter 
stating that a hearing had been scheduled in the Superior Court 
to determine the amount of the Boyles' damages.  The letter 
specified the docket number assigned to the Boyles' complaint.  
Another letter, sent by the attorney later the same month, 
informed Zurich that the damages hearing had been postponed 
until October, 2009.  That letter also stated the amount of 
Joseph's medical expenses, and enclosed copies of his medical 
bills.  Upon receipt of these letters, a Zurich clerk scanned 
them and added them to the closed file for the Boyles' 
                     
 
4 Nicholas Rago also was named as a defendant in that suit. 
7 
 
complaint.  The clerk did not realize that any other action was 
necessary.  Zurich therefore did not move to have C&N's default 
set aside; did not contact C&N to discuss the suit; and did not 
attempt to settle the suit with the Boyles, or otherwise to 
contact them or their attorney. 
 
The October, 2009, hearing on the Boyles' damages was not 
attended by C&N or by Zurich.  After the hearing, the judge 
awarded damages of $1.5 million to Joseph and $750,000 to 
Janice.  The Boyles also were awarded pre- and postjudgment 
interest.  Final judgment was entered against C&N in January, 
2010.5 
 
c.  Suit against Zurich.  In June, 2011, the Boyles 
commenced their current suit, also in the Superior Court, naming 
Zurich as the defendant.  Among other things, the Boyles 
asserted that they were third-party beneficiaries of C&N's 
policy, and that Zurich had violated G. L. c. 93A by failing to 
settle the Boyles' suit against C&N.  In September, 2013, C&N 
was revived by the Secretary of the Commonwealth for a period 
not to exceed one year.  Upon being revived, C&N assigned to the 
Boyles all of its rights and claims against Zurich, including a 
claim that Zurich had committed a breach of its contractual duty 
                     
 
5 The judgment was entered jointly and severally against C&N 
and Rago, who also had defaulted. 
 
8 
 
to defend C&N.6  C&N's claims against Zurich, assigned to the 
Boyles, subsequently were consolidated with the Boyles' claims 
on their own behalf. 
 
Several days before the case was scheduled to be tried, the 
Boyles and Zurich reached an agreement to settle the Boyles' 
individual claims.  The Boyles signed a release relinquishing 
any claims they had "in their individual capacities."  In 
return, they were to receive $1,324,357, a sum equal to the 
amount that had accrued in postjudgment interest on the default 
judgment that the Boyles had obtained against C&N.  A release 
executed by the Boyles as part of the settlement stated that it 
"specifically excludes . . . the rights of the Boyles as 
assignees of [C&N] to pursue the full amount of the judgment 
entered in [the Boyles' suit against C&N], with interest." 
 
A jury-waived trial was conducted on the remaining claims, 
namely, those that C&N had assigned to the Boyles.  In detailed 
written findings, the Superior Court judge concluded that Zurich 
had committed a breach of its contractual duty to defend C&N.  
The judge determined that Zurich's duty to defend was triggered 
by the notice it had received of Joseph's injury (from C&N), 
                     
 
6 It is permissible and not uncommon for an insured to 
assign his or her rights against an insurer to the injured 
party.  See Ratner v. Canadian Universal Ins. Co., 359 Mass. 
375, 379 (1971); Gore v. Arbella Mut. Ins. Co., 77 Mass. App. 
Ct. 518, 526 (2010). 
9 
 
coupled with its notice of the impending damages hearing 
(received from the Boyles' attorney).  Based primarily on the 
testimony of a Zurich employee, the judge found that any 
reasonable insurer would have attempted, by the time of the 
damages hearing, to settle the Boyles' claim for the policy 
limit of $50,000.  The judge credited the testimony of the 
Boyles and their attorney that if, at that time, Zurich had 
offered to settle for the policy limit, such an offer would have 
been accepted, and no default judgment against C&N would have 
been pursued. 
 
Accordingly, the judge concluded that Zurich's failure to 
defend C&N caused C&N damages in the full amount of the judgment 
rendered against it, namely, $2,250,000, plus interest.  The 
judge did not, however, award the Boyles (as assignees) multiple 
damages, finding no violation of G. L. c. 93A.  At the end of 
his order, the judge wrote that "the $1,324,357 in post-judgment 
interest that [Zurich] has already agreed to pay to the Boyles 
in order to settle their direct claims" would be subtracted from 
the award of damages.  Both parties appealed. 
 
2.  Discussion.  Before us, Zurich contends that its duty 
to defend C&N was not triggered at any time, given that C&N 
itself never informed Zurich of the Boyles' lawsuit, never 
forwarded the complaint and related documents to Zurich, and 
never requested that Zurich provide a defense.  The Boyles, for 
10 
 
their part, challenge the judge's determinations that Zurich 
committed no violation of G. L. c. 93A, and that the Boyles' 
damages should be reduced by the amount that Zurich had agreed 
to pay in order to settle the Boyles' individual claims.  
Examining these arguments "without deference [to] the legal 
standard which the judge applied," Makrigiannis v. Nintendo of 
Am., Inc., 442 Mass. 675, 678 (2004), quoting Kendall v. 
Selvaggio, 413 Mass. 619, 621 (1992), we conclude that only the 
Boyles' challenge to the subtraction of the settlement payment 
from their damages award is meritorious. 
 
a.  Duty to defend.  "It is well settled in this 
jurisdiction that a liability insurer owes a broad duty to 
defend its insured against any claims that create a potential 
for indemnity."  Doe v. Liberty Mut. Ins. Co., 423 Mass. 366, 
368 (1996), citing Liberty Mut. Ins. Co. v. SCA Servs., Inc., 
412 Mass. 330, 332 (1992).  A breach of the duty to defend can 
support claims in contract, in tort, and under G. L. c. 93A.  
See Hartford Cas. Ins. Co. v. New Hampshire Ins. Co., 417 Mass. 
115, 118, 120 (1994).  Closely tied to the duty to defend is an 
insurer's obligation "to effectuate prompt, fair and equitable 
settlements of claims in which liability has become reasonably 
clear."  Id. at 120, quoting G. L. c. 176D, § 3 (9) (f). 
 
The duty to defend also was incorporated explicitly into 
the policy that Zurich issued to C&N, by way of a mandatory 
11 
 
indorsement approved by the Commonwealth's Division of 
Insurance.  Zurich argues, however, that it was not subject to 
any duty to defend C&N because of other terms in C&N's policy.  
That policy, which (according to the parties) is in widespread 
use in Massachusetts, stated that Zurich would "ha[ve] no duty 
to provide coverage . . . unless there has been full compliance" 
with specified obligations, including the obligation to 
"[i]mmediately send [Zurich] copies of any request, demand, 
order, notice, summons[,] or legal paper received concerning [a] 
claim or 'suit.'"  In Zurich's view, C&N's failure to forward 
the Boyles' complaint and related documents to Zurich relieved 
Zurich of its duty to defend. 
 
The approach advocated by Zurich long has been rejected in 
Massachusetts, both by way of legislation and in our 
jurisprudence.  The Legislature, in 1977, amended G. L. c. 175, 
§ 112, to provide that "[a]n insurance company shall not deny 
insurance coverage to an insured because of failure of an 
insured to seasonably notify an insurance company of an 
occurrence, incident, claim or of a suit . . . unless the 
insurance company has been prejudiced thereby."  See St. 1977, 
c. 437.7  This provision applies to motor vehicle insurance 
                     
 
7 Zurich argues that it never "den[ied] insurance coverage" 
to C&N Corporation (C&N).  We reject the suggestion, implicit in 
this argument, that an insurer may avoid the consequences of an 
 
12 
 
policies, like the one issued to C&N, and to other policies 
insuring against liability due to bodily injury, death, or 
property damage. 
 
Our decision in Johnson Controls, supra, extended the same 
treatment to other liability insurance policies.8  The insured in 
that case, an attorney, failed to provide his malpractice 
insurance carrier with written notification of a claim against 
him, and failed also "to forward suit papers" to the insurer, 
all "in violation of the provisions of his insurance contract."  
381 Mass. at 279.9  We held that, in subsequent cases, an 
insurance company seeking to be "relieved of its obligations 
under a liability insurance policy . . . on the ground of 
untimely notice . . . will be required to prove both that the 
                                                                  
otherwise wrongful denial of coverage by ignoring a claim 
altogether. 
 
8 The approach to notice obligations prescribed by Johnson 
Controls, Inc. v. Bowes, 381 Mass. 278, 279 n.2 (1980) (Johnson 
Controls), and its progeny concerns "occurrence"-based liability 
insurance policies like the one at issue in this case.  
Different considerations apply to "claims-made" policies.  See 
Chas. T. Main, Inc. v. Fireman's Fund Ins. Co., 406 Mass. 862, 
863-864 (1990). 
 
 
9 Because the insured in Johnson Controls never provided 
notice of the claim against him, Zurich is incorrect in 
suggesting that the analysis adopted in that case is restricted 
to instances in which the insured did eventually, if belatedly, 
provide notice of the suit against it.  See Darcy v. Hartford 
Ins. Co., 407 Mass. 481, 482-483 (1990).  See also Couch on 
Insurance § 200:33, at 200-48 (3d ed. 2005) (prejudice 
requirement applies to "failure of the insured to give notice"). 
13 
 
notice provision was in fact breached and that the breach 
resulted in prejudice to its position."  Id. at 282. 
 
Our reasoning in Johnson Controls, as we later paraphrased 
it, was that "[a] violation of a policy provision should bar 
coverage only where the breach frustrates the purpose underlying 
that provision."  Augat, Inc. v. Liberty Mut. Ins. Co., 410 
Mass. 117, 123 (1991).  Notice requirements are intended to 
permit the insurer to undertake a "seasonable investigation of 
the facts relating to liability," see Johnson Controls, 381 
Mass. at 281, quoting Bayer & Mingolla Constr. Co. v. Deschenes, 
348 Mass. 594, 600 (1965), so that it may preserve "an 
opportunity to defend effectively."  See Johnson Controls, 
supra, quoting Brakeman v. Potomac Ins. Co., 472 Pa. 66, 75 
(1977).  These purposes are undermined by an insured's breach 
only if the insurer is prejudiced thereby.  See Johnson 
Controls, supra at 281.  The contrary approach, which treats a 
notice provision as a condition precedent to the insurer's 
obligations, results in "a forfeiture, for the carrier 
seeks . . . to deny the insured the very thing paid for."  Id. 
at 281, quoting Cooper v. Government Employees Ins. Co., 51 N.J. 
86, 93-94 (1968).  We noted also in Johnson Controls, supra at 
281, quoting Brakeman, supra at 72, that the traditional notion 
that courts should not "redraft" policy provisions "fails to 
recognize the true nature of the relationship between insurance 
14 
 
companies and their insureds," insofar as "[a]n insurance 
contract is not a negotiated agreement; rather its conditions 
are by and large dictated by the insurance company to the 
insured."10 
 
We reaffirmed and fortified the rule of Johnson Controls in 
Darcy v. Hartford Ins. Co., 407 Mass. 481 (1990) (Darcy).  
There, too, the insured, a corporation, did not notify the 
insurer about the lawsuit brought against it.  The insurer 
learned of the suit when it was impleaded as a third party into 
another action arising from the same underlying accident.  See 
id. at 482-483.  The insurer refused to defend its insured 
because, among other things, the insured had not provided it 
with notice of the suit.  Id. at 484.  The injured parties later 
obtained a judgment against the insurer.  Id.  On appeal, we 
declined to adopt "a rebuttable presumption of prejudice in 
cases where the delay in notifying an insurer of a claim or 
possible claim is 'extreme.'"  Id. at 485.  We explained that an 
insurer should not be permitted "to avoid liability on the basis 
of the possibility, rather than on proof of actual prejudice."  
                     
 
10 This is thus a context in which both we and the 
Legislature have declined to embrace the customary canon -- on 
which Zurich leans heavily in its brief -- that "[a] policy of 
insurance whose provisions are plainly and definitely 
expressed . . . must be enforced in accordance with its terms."  
Cody v. Connecticut Gen. Life Ins. Co., 387 Mass. 142, 146 
(1982), quoting Hyfer v. Metropolitan Life Ins. Co., 318 Mass. 
175, 179 (1945). 
15 
 
Id. at 486.  Rather, the insurer must bear "the burden of 
identifying the precise manner in which its interests have 
suffered," id. at 487, for instance by showing that the 
insured's breach of a notice requirement resulted in "the loss 
of critical evidence[] or testimony from material witnesses[,] 
despite diligent good faith efforts on the part of the insurer 
to locate them."  Id. at 486. 
 
Both Johnson Controls, 381 Mass. at 278, and Darcy, 407 
Mass. at 483, arose from complaints brought by injured parties 
on their own behalf, seeking to reach and apply the proceeds of 
the insureds' policies.  In Sarnafil, Inc. v. Peerless Ins. Co., 
418 Mass. 295 (1994) (Sarnafil), we applied the same approach to 
an insured's complaint for breach of the duty to defend.  The 
insured in Sarnafil, like C&N, informed the insurer about the 
potential for a claim, but -- in violation of the terms of the 
policy -- provided no notice about the initiation of legal 
proceedings.  See id. at 298-301.  This court concluded that the 
insured's violation of the notice provision would bar coverage 
only if the breach frustrated the provision's purpose.  See id. 
at 302, 305-306, citing Augat, Inc. v. Liberty Mut. Ins. Co., 
410 Mass. at 122-123, and Darcy, 407 Mass. at 491.  The court 
rejected the view, advocated by a dissent, that the purpose of 
the notice requirement was frustrated "as a matter of law" by 
the insured's failure to "tender[] its defense to [the 
16 
 
insurer]," id. at 313 (O'Connor, J., dissenting in part), and 
that "[b]ecause there was no notice, there was no duty [to 
defend]."  Id. at 315 (O'Connor, J., dissenting in part).  
Instead, the court held that the insurer would not be excused of 
its obligations without a showing of prejudice.  See Sarnafil, 
supra at 305-306.11 
 
We have not seen cause to revise our holdings in Johnson 
Control and its progeny.  See, e.g., Mello v. Hingham Mut. Fire 
Ins. Co., 421 Mass. 333, 336-337 (1995); Goodman v. American 
Cas. Co., 419 Mass. 138, 141 (1994).  See also Pilgrim Ins. Co. 
v. Molard, 73 Mass. App. Ct. 326, 336-337 (2008).  The reasoning 
of those decisions, described earlier, remains compelling 
today.12  Indeed, similar rules have been adopted by a large 
majority of other States.  See, e.g., Prince George's County v. 
Local Gov't Ins. Trust, 388 Md. 162, 182-188 (2005), and cases 
                     
 
11 Under this analytical framework, the court concluded that 
a genuine dispute remained as to whether the insurer had 
suffered prejudice, precluding summary judgment.  See Sarnafil, 
Inc. v. Peerless Ins. Co., 418 Mass. 295, 302, 305-306 (1994). 
 
 
12 Two of the amici suggest that a rule permitting an 
insured to obtain coverage after failing to comply with a notice 
provision opens the door to manipulations by insureds, who may 
seek to "undermine the defense" and to "thwart the insurer's 
ability to mount an effective, timely defense."  But 
circumstances in which the defense would be injured in these 
ways are precisely those in which the prejudice requirement of 
Johnson Controls, 381 Mass. at 282, would be satisfied. 
 
17 
 
cited; Couch on Insurance § 199:135, at 199-187 to 199-189 (3d 
ed. 2005).13 
 
Accordingly, C&N's failure to notify Zurich of the 
complaint brought by the Boyles did not, standing alone, excuse 
Zurich of its duty to defend C&N.  Instead, upon learning from 
the Boyles' attorney that a lawsuit was pending against C&N for 
an occurrence covered by the policy, Zurich was required to 
defend against that suit unless C&N's breach of its notice 
obligation prejudiced Zurich, by depriving it of an opportunity 
to mount an effective defense. 
 
The judge determined that Zurich did not establish that it 
had been prejudiced in this way.  Although Zurich made no 
argument to the contrary in the Superior Court, it challenges 
this determination in a footnote to its appellate brief.  Even 
                     
 
13 Zurich American Insurance Company (Zurich) cites 
decisions from several other jurisdictions for the proposition 
that the duty to defend is not triggered unless the insured 
affirmatively requests that a defense be provided.  See, e.g., 
Purvis v. Hartford Acc. & Indem. Co., 179 Ariz. 254, 258 (Ct. 
App. 1994); First Bank of Turley v. Fidelity & Deposit Ins. Co. 
of Maryland, 928 P.2d 298, 304 (Okla. 1996).  Other courts do 
not impose this condition.  See, e.g., Cincinnati Cos. v. West 
Am. Ins. Co., 183 Ill. 2d 317, 326 (1998); Garcia v. 
Underwriters at Lloyd's, London, 143 N.M. 732, 738 (2008).  See 
generally Couch on Insurance § 200:32, at 200-47 to 200-48.  As 
we have indicated in Johnson Controls, supra at 282, and Darcy 
v. Hartford Ins. Co., 407 Mass. 481, 482-483 (1990), we 
subscribe to the latter school of thought.  See note 9, supra. 
18 
 
if the issue had been properly preserved and presented,14 
Zurich's position would be belied by the judge's unchallenged 
findings of fact.  When Zurich learned of the Boyles' lawsuit, 
the hearing to assess the Boyles' damages had not yet taken 
place.  At that juncture, Zurich could have contacted C&N and 
arranged to enter an appearance on its behalf.  Zurich could 
have requested a postponement of the damages hearing.  It could 
have moved to have C&N's default set aside, pursuant to Mass. R. 
Civ. P. 55 (c), 365 Mass. 822 (1974).  Even after a judgment had 
entered, Zurich could have moved to set the judgment aside, 
pursuant to rule 55 (c) and Mass. R. Civ. P. 60 (b), 365 Mass. 
828 (1974).  Most importantly, Zurich still could have resolved 
the Boyles' claim by offering to pay the policy limit of 
$50,000, an offer that, the judge found, the Boyles would have 
accepted.  On these facts, the judge's conclusion that Zurich 
failed to present "proof of actual prejudice," Darcy, 407 Mass. 
at 486, was well-founded. 
 
b.  Consequences of the duty to defend.  Zurich presents no 
other challenge to the judge's analysis.  In conjunction with 
its duty to defend, Zurich was obliged to make reasonable, 
                     
 
14 See Canton v. Commissioner of Mass. Highway Dep't, 455 
Mass. 783, 795 n.18 (2010) (argument waived where it was not 
made in trial court); Mole v. University of Mass., 442 Mass. 
582, 603 n.18 (2004) (sentence in footnote did not amount to 
argument). 
19 
 
prudent efforts to settle the Boyles' suit.  See Medical 
Malpractice Joint Underwriting Ass'n of Mass. v. Goldberg, 425 
Mass. 46, 60 n.33 (1997); Hartford Cas. Ins. Co. v. New 
Hampshire Ins. Co., 417 Mass. 115, 119-120 (1994).  Zurich 
committed a breach of that duty by failing to settle the suit 
for the policy limit, an endeavor that, the judge found, any 
reasonable insurer would have undertaken. 
 
The judge calculated the Boyles' total amount of damages by 
using the method we endorsed in DiMarzo v. American Mut. Ins. 
Co., 389 Mass. 85 (1983) (DiMarzo).  In that case, too, an 
insurer failed to settle an injured plaintiff's tort claim 
against an insured for the policy limit, there $20,000.15  See 
                     
 
15 Whereas Zurich failed to make any effort to settle the 
Boyles' suit, the insurer in DiMarzo v. American Mut. Ins. Co., 
389 Mass. 85, 89 (1983), offered the injured plaintiff less than 
the policy limit.  This distinction does not affect the manner 
in which an insured's damages are calculated.  See note 7, 
supra.  Nor is the judge's method of calculating damages 
rendered incorrect by the fact that DiMarzo v. American Mut. 
Ins. Co., supra at 87, concerned a claim under G. L. c. 93A, 
whereas the judge found Zurich liable on a breach of contract 
theory.  Breach of the contractual duty to defend entitles the 
insured "to contract damages caused by the breach."  
Metropolitan Prop. & Cas. Ins. Co. v. Morrison, 460 Mass. 352, 
359 (2011), citing Polaroid Corp. v. Travelers Indem. Co., 414 
Mass. 747, 763 (1993).  "Contract damages are 'those that cannot 
be reasonably prevented and arise naturally from the breach, or 
which are reasonably contemplated by the parties.'"  Polaroid 
Corp. v. Travelers Indem. Co., supra at 762, quoting Delano 
Growers' Coop. Winery v. Supreme Wine Co., 393 Mass. 666, 680 
(1985).  Where breach of the duty to defend results in a 
judgment against the insured that otherwise would not have 
occurred, the amount of that judgment may be deemed damages 
 
20 
 
id. at 89, 100-101.  The plaintiff's tort case went to trial, 
and resulted in a judgment against the insured for approximately 
$149,068.  See id. at 89.  There, as here, the plaintiff 
obtained an assignment of the insured's rights against the 
insurer.  See id. at 93-94.  We upheld a subsequent award of 
damages against the insurer for the full amount of the tort 
judgment, explaining that "[i]f [the insurer] had offered 
$20,000, [the insured] would have been released from the 
judgment against him."  Id. at 101.  See also Metropolitan Prop. 
& Cas. Ins. Co. v. Morrison, 460 Mass. 352, 360 (2011) (insurer 
committing breach of duty to defend may incur "obligation to pay 
the default judgment"); Polaroid Corp. v. Travelers Indem. Co., 
414 Mass. 747, 764 (1993) (Polaroid) ("an insured's losses in 
the underlying claim could well be the result of a breach of the 
duty to defend").  The amount of damages was not affected, we 
explained, by the question whether the insured was (like C&N) 
insolvent; as we had reasoned in an earlier case, "if solvency 
is required in order to sue for damages, an insurer is likely to 
be less responsive to its duty to act in good faith toward an 
insured who cannot pay the judgment."  Jenkins v. General Acc. 
Fire & Life Assur. Corp., 349 Mass. 699, 702 (1965).  See 
                                                                  
arising naturally from the breach.  See Metropolitan Prop. & 
Cas. Ins. Co. v. Morrison, supra at 359-360; Polaroid Corp. v. 
Travelers Indem. Co., supra at 762, 764. 
21 
 
DiMarzo, supra at 95 n.9.  See also D.J. Wall, Litigation and 
Prevention of Insurer Bad Faith § 5:19, at 231 (2d ed. 1994) 
("rule . . . almost unanimously followed . . . holds that the 
contents of the insured's wallet are irrelevant to accrual of 
the insured's cause of action"). 
 
We are not asked to revisit our DiMarzo decision, and we do 
not now see cause to do so.  Applied here, the analysis of that 
decision yields the result reached by the judge, namely, that 
Zurich is liable to C&N for the amount of the judgment by 
default entered in the suit that Zurich failed to defend. 
 
c.  General Laws c. 93A.  In their cross appeal, the Boyles 
challenge the judge's decision that Zurich did not violate G. L. 
c. 93A and that the Boyles are not entitled to multiple damages.  
We discern no reversible error. 
 
The judge determined that Zurich committed a breach of both 
its contractual duty to defend C&N and the statutory obligation 
"to effectuate prompt, fair and equitable settlements of claims 
in which liability has become reasonably clear."  G. L. c. 176D, 
§ 3 (9) (f).  A violation of G. L. c. 176D, § 3 (9), itself 
establishes a violation of G. L. c. 93A unless the injured party 
is "engage[d] in the conduct of any trade or commerce."  See 
G. L. c. 93A, §§ 9 (1), 11.  The judge found, in accordance with 
the parties' agreed statement of facts, that C&N was indeed 
engaged in trade or commerce.  Consequently, the Boyles (as 
22 
 
C&N's assignees) are entitled to relief under G. L. c. 93A only 
upon a showing that Zurich engaged in "[u]nfair or deceptive 
acts or practices."  See G. L. c. 93A, § 2.  An award of "up to 
three, but not less than two, times" C&N's actual damages is 
warranted if such unfair or deceptive acts or practices were 
"willful or knowing."  G. L. c. 93A, § 11.  See Auto Flat Car 
Crushers, Inc. v. Hanover Ins. Co., 469 Mass. 813, 830 (2014); 
Polaroid, supra at 754. 
 
The Boyles contend that Zurich engaged in unfair or 
deceptive acts by failing to defend C&N against the Boyles' 
suit; and, much later, by failing to settle the suit brought by 
the Boyles as C&N's assignees.  The judge found that neither 
episode amounted to an unfair or deceptive act.  "[W]hether a 
particular set of acts, in their factual setting, is unfair or 
deceptive is a question of fact," which we review for clear 
error.  See Klairmont v. Gainsboro Restaurant, Inc., 465 Mass. 
165, 171 (2013), quoting Casavant v. Norwegian Cruise Line Ltd., 
460 Mass. 500, 503 (2011). 
 
Zurich's failure to defend C&N against the Boyles' suit 
was, the judge found, "inadvertent" and "negligent."  It stemmed 
largely from the unfortunate decision of a Zurich clerk to take 
no action upon receiving the letters informing Zurich of the 
Boyles' damages hearing.  Mere negligence ordinarily does not 
23 
 
represent an unfair or deceptive act.  See Darviris v. Petros, 
442 Mass. 274, 278, 279 n.2 (2004), and cases cited. 
 
Zurich made an error of a different nature in failing, more 
recently, to settle the Boyles' lawsuit as C&N's assignees.  By 
the eve of the trial against it, Zurich apparently was not 
averse to settlement, having agreed to resolve the Boyles' 
individual claims for a sum of $1,324,357.  The final offer made 
by Zurich to settle the Boyles' claims as C&N's assignees was 
the policy limit of $50,000, plus interest.  The judge found 
that "Zurich did not make this offer in bad faith or based on 
any ulterior motive," but rather, "did so based on its reading 
of its insurance policy."  The judge stated also, quoting Boston 
Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 406 Mass. 
7, 15 (1989), that the position taken by Zurich was "a 
plausible, although ultimately incorrect, interpretation of 
[the] policy." 
 
In view of our long-standing jurisprudence, described 
supra, we do not share the view that Zurich's position was 
"plausible."  Even so, the judge's finding that Zurich's conduct 
was neither "unfair" nor "deceptive" was not clearly erroneous.  
"While G. L. c. 93A is a statute of 'broad impact,' the limits 
of which are not precisely defined, a violation of G. L. c. 93A 
requires, at the very least, more than a finding of mere 
negligence."  Darviris v. Petros, 442 Mass. at 278, quoting 
24 
 
Greenfield Country Estates Tenants Ass'n v. Deep, 423 Mass. 81, 
88 (1996), and citing Mechanics Nat'l Bank v. Killeen, 377 Mass. 
100, 109 (1979).  The judge found, in essence, that although 
Zurich blundered badly in its reading of the legal landscape, 
its unsuccessful efforts to settle the Boyles' claims as C&N's 
assignees represented a negligent miscalculation, rather than 
"conduct involving dishonesty, fraud, deceit or 
misrepresentation."  Darviris v. Petros, supra, quoting Poly v. 
Moylan, 423 Mass. 141, 151 (1996), cert. denied, 519 U.S. 1114 
(1997).  Similarly, the judge's finding that Zurich's settlement 
efforts, while misguided, were made in good faith, entails the 
conclusion that Zurich's conduct was not "willful or knowing" in 
the sense necessary to warrant an award of multiple damages.  
See Cruz Mgt. Co. v. Thomas, 417 Mass. 782, 791 (1994); VMark 
Software, Inc. v. EMC Corp., 37 Mass. App. Ct. 610, 623 (1994).  
Nothing in the record compels conclusions to the contrary. 
 
d.  Deduction of settlement payment.  As noted, the judge 
reduced the damages awarded to the Boyles as C&N's assignees by 
$1,324,357, the amount for which the Boyles had settled their 
individual claims against Zurich.  We agree with the Boyles that 
this was error. 
 
The judge's concern was evidently that the Boyles not 
recover twice for the same injury.  See Selmark Assocs., Inc. v. 
Ehrlich, 467 Mass. 525, 544 (2014), citing Blake v. Commissioner 
25 
 
of Correction, 403 Mass. 764, 767 (1989) ("double recovery for 
same injury or loss is impermissible").  This concern appeared 
to the judge warranted since, at Zurich's urging, the judge 
characterized the payment of $1,324,357 as "post-judgment 
interest that [Zurich] has already agreed to pay."16  But the 
parties' own agreement concerning their settlement, in the form 
of the written release signed by the Boyles (the validity of 
which is not contested), dispels the notion that the payment 
agreed upon overlaps with any subsequent award granted to the 
Boyles as C&N's assignees. 
 
According to that release, the settlement payment was 
granted to the Boyles specifically in conjunction with the 
"claims, demands, causes of action . . . which the Boyles have 
or could have brought directly and in their individual 
capacities."  The crux of the Boyles' individual claims was that 
Zurich had wronged them as third-party beneficiaries of C&N's 
policy, by failing to settle the Boyles' suit when liability had 
become reasonably clear.  This wrong, which had the potential to 
result in multiple damages, attorney's fees, and costs (even if 
C&N's claim under G. L. c. 93A proved unsuccessful), is 
                     
 
16 The suggestion that the payment should be so 
characterized was based on the fact that, according to the 
parties' joint statement of facts, the amount of postjudgment 
interest that had accrued as of May, 2014, on the judgment by 
default against C&N also was $1,324,357. 
26 
 
analytically independent of the wrong that supported C&N's claim 
against Zurich (assigned to the Boyles) -- i.e., that Zurich did 
not provide C&N with a defense.  The release made in connection 
with the settlement of the Boyles' individual claims against 
Zurich acknowledged as much, stating that it "specifically 
excludes . . . the rights of the Boyles as assignees of [C&N] to 
pursue the full amount of the judgment entered in [the Boyles' 
suit against C&N], with interest" (second emphasis added). 
 
In short, the parties made clear that the payment settling 
the Boyles' individual claims against Zurich would not come at 
the expense of any portion of Zurich's liability toward C&N, 
including (as stated explicitly) interest.  The judgment should 
not have been reduced, therefore, by the amount of the 
settlement payment. 
 
3.  Conclusion.  The result of our analysis is that 
Zurich's failure to defend on a $50,000 policy will culminate in 
an award of damages that is, "in the circumstances, 
extraordinarily large."  See DiMarzo, 389 Mass. at 108 
(Hennessey, C.J., concurring).  This result flows from findings 
of fact "warranted on the evidence," with "[t]he law, step by 
step, . . . correctly applied."  Id.  "The crucial principles 
are . . . established . . . by construction of . . . statute[s], 
or by common law, in prior cases."  Id.  Those "crucial 
principles" are intended, in part, to ensure that an insurer 
27 
 
remains "responsive to its duty to act in good faith toward an 
insured."  Jenkins v. General Acc. Fire & Life Assur. Corp., 349 
Mass. 699, 702 (1965).  We are presented with no reason to 
abandon those principles. 
 
The judgment is vacated and set aside, and the matter is 
remanded to the Superior Court for entry of a modified judgment 
consistent with this opinion. 
 
 
 
 
 
 
 
So ordered.