Morrison v. Toys “R” Us (Massachusetts Supreme Judicial Court)

While shopping in a Toys “R” Us store in Kingston, Massachusetts, plaintiff-appellant Susan Morrison was struck on the head and face by a falling sign and suffered significant injuries. She sued Toys “R” Us, demanding $250,000 for the settlement of her claim. Toys “R” Us was self-insured for claims of up to $1 million. The company’s risk management and claims facilitation department offered $45,000 prior to trial, but Morrison rejected the offer and held firm at $250,000. At trial, the jury awarded Morrison $1.2 million, which the court reduced to $250,000 plus interest. Morrison then filed suit against Toys “R” Us, alleging unfair claim settlement practices in violation of chapters 93A and 176D, for “[f]ailing to effectuate prompt, fair, and equitable settlements of claims in which liability ha[d] become reasonably clear.” G.L. c. 176D, § 3(9)(f). The trial court held that Toys “R” Us was not subject to the unfair insurance claim settlement prohibitions in G.L. c. 176D because it was a retail toy company and was not engaged in the business of insurance. The court also held that Morrison had no separate and independent right of action under c. 93A for unfair claims practices. The Appeals Court reversed, holding that while Toys “R” Us is not engaged in the business of insurance within the meaning of c. 176D, it can still be liable under c. 93A for unfair settlement practices. Toys “R” Us then applied for further appellate review to the Supreme Judicial Court, and the Court granted the application. In a brief filed in support of Toys “R” Us, NELF argues that defendants not in the insurance business should be free to defend their assets and negotiate disputes without the fear of incurring liability for multiple damages and attorneys’ fees under c. 93A. Chapter 93A provides a right of action for violations of c. 176D, which applies exclusively to entities “in the business of insurance.” The Appeals Court’s decision therefore expands liability for unfair insurance practices in violation of the express language of chapters 93A and 176D. NELF argues that the Legislature has singled out insurers, and insurers alone, for affirmative settlement obligations because liability insurers are in the business of defending third-party insureds for a profit. The legislative impetus behind the regulation of insurance companies arises from the unique contractual relationship between insurer and insured. This impetus is altogether absent when a company defends itself in litigation. Finally, NELF argues that courts from many other jurisdictions applying similar unfair insurance claims practices statutes have uniformly refused to subject corporations not in the insurance business to the statutory settlement obligations of insurance companies. The Supreme Judicial Court agreed with NELF's position and held that companies not in the insurance business cannot be sued under c. 93A for their claim settlement practices. The Court explained that c. 93A was not designed to "expose ordinary defendants (even large corporations such as Toys) to the risk of liability for multiple damages and attorney's fees for choosing to go to court rather than settling a dispute.... As an ordinary defendant, Toys had no affirmative duty to settle the plaintiff's claim."