In a case decided late last year, the First Circuit Court of Appeals determined that a Massachusetts company would be permitted to bring a second lawsuit against its insurance company seeking damages for unfair and deceptive practices, a violation of G.L. c. 93A, Sec. 11. In the case, Andrew Robinson International, Inc. v. Hartford Fire Insurance Company, 547 F.3d 48 (2008), the court determined that the earlier declaratory judgment action in a state court action was not a bar to the second action, which sought monetary damages against the insurance company.
The first case between the parties was a delcaratory judgment action. The plaintiff sought a determination that the insurance company was required to pay for the damages suffered when the business premises were contaminated with lead-laden dust from a remodeling project in a neighboring office. The insurance company argued the claim was barred by a pollution exclusion clause. The state court disagreed, and entered judgment for the plaintiffs. The insurer paid.
The second action sought damages for unfair and deceptive acts in violation of c. 93A, frequently referred to as a bad faith insurance claim. Hartford removed the case to Federal court (diversity jurisdiction) and then moved to dismiss the case, arguing it was improper to allow the plaintiffs to bring a second suit. Hartford argued that the claim was barred under principles of res judicata, and that plaintiffs could not split their claims.
The Appeals Court found no Massachusetts case directly on point, so did its best to determine what Massachusetts would likely do. It found that the action was not barred, carving out a special exception for declaratory judgments. Ordinarily, however, when claims arise from the same transaction and occurrence, a plaintiff is wise to bring all claims in a single action; the exception saved the day for these plaintiffs.