Massachusetts Court Affirms Summary Judgment to Insurance Company in Bankruptcy Trustee’s Breach of Contract Lawsuit

Naturally, some Cape Cod automobile accident cases are more complex than others. Still, a case reviewed early this month by the Massachusetts Court of Appeals stands out as unusually protracted. Although the facts of how the accident happened were straightforward enough (a pedestrian was struck by a car while crossing the street), a total of three lawsuits were ultimately filed.

Two complicating factors were that, in one action, the plaintiff was awarded more than four times the defendant’s liability insurance limits in damages and that, thereafter, the defendant filed for bankruptcy protection.

Facts of the Case

In a recent appellate court case, the plaintiff in an earlier action was a pedestrian who was injured when she was struck by a certain motorist (named as the defendant in that action). The case proceeded to a jury trial and resulted in a determination that the defendant was 65% at fault. The plaintiff was awarded $414,500 in damages after deduction of personal injury protection benefits previously received. The defendant’s insurance company paid policy limits of $100,000.

In a second suit between the pedestrian and the defendant’s insurance company, the pedestrian sought payment of the full amount of damages awarded to her in the first suit, due to the insurance company’s alleged unfair settlement practices. The insurance company ultimately prevailed in the second suit, but, while an appeal was pending, the pedestrian filed an action for supplementary process against the motorist. The motorist then filed bankruptcy.

The bankruptcy trustee filed a third action, naming the insurance company as a defendant and alleging a breach of contract by reason of the insurance company’s failure to offer to settle the first case for policy limits. The defendant insurance company filed a motion for summary judgment. The trial court granted the motion, and the trustee appealed.

Outcome of the Proceeding

After describing the issues as 1) whether, under the theory of “virtual representation,” the trustee for a bankrupt tortfeasor stood in privity with an accident victim who had pursued, and lost, an unfair settlement practices claim against the tortfeasor’s insurer and 2) whether the relevant equities were such that the prior adjudication had preclusive effect against the trustee’s claim that the same unfair settlement practices constituted a breach of the insurer’s contractual obligations under its insurance policy with the tortfeasor, the court affirmed the lower court’s decision.

Because the trustee was in privity with the accident victim under the particular circumstances at hand, the court held that the outcome of the second suit had a preclusive effect on the trustee in the third action. The court noted that the balance of equities also favored preclusion.

Talk to a Lawyer About a Personal Injury Lawsuit

If you have been hurt in a Cape Cod pedestrian accident, the Law Offices of John C. Manoog, III, can help you fight for the compensation you are due. We offer assertive legal representation in both personal injury and wrongful death cases in Hyannis, Plymouth, and other areas of Cape Cod. Call us at 888-262-6664 for a free consultation.

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