A Superior Court judge denies insurers’ request to throw out unfair claim practice claim. The court says public agencies can sue as “persons” to recover multiple damages and attorney fees under the state’s consumer protection law, even when the law protects the agency from similar lawsuits.
A major legal battle over a $213 million public construction project tests the limits of Massachusetts’ powerful consumer protection law, G.L. c. 93A. A Suffolk Superior Court judge ruled that the Massachusetts Bay Transportation Authority (MBTA) can move forward with a bad faith claim against a group of insurance companies. This opens the door to potential double or treble damages.
In a recently published decision, Justice Debra A. Squires-Lee denied a request by the insurers, including Zurich American Insurance Company and Liberty Mutual, to throw out the MBTA’s Chapter 93A claim. The fight centers on a $213.8 million performance bond for the troubled Cabot Yard project. By filing a claim under G.L. c. 93A, § 9, which incorporates G.L. c. 176D’s bar against unfair claim practices, the MBTA could win double or triple damages plus attorneys’ fees.
In a letter to the insurers, the MBTA said this could cost them “almost $1,000,000,000.00” [One billion].
The insurers asked the court to decide one legal question: Can the MBTA, a government agency of the Commonwealth of Massachusetts, legally be considered a “person” that can sue under the consumer-focused §9 of the law?
The insurers said no. The court said yes.
The Project, The Default, and The Denial
The dispute started with an August 2018 contract between the MBTA and LMH-Lane Cabot Yard Joint Venture. The contractor agreed to rebuild and improve the Cabot Yard Maintenance Facility in Boston for $213,817,000. The insurance companies issued a performance bond for the full contract amount to guarantee the work.
In February 2022, the MBTA declared the contractor had broken the contract. The MBTA said the contractor abandoned the project. It formally demanded the insurance companies complete the work as the bond required.
After investigating for three months, the insurance companies denied the MBTA’s bond claim in a letter dated June 10, 2022.
- Insurers’ Reason: The insurance companies said they didn’t have to pay because the MBTA “failed to perform its obligations under the Contract.” They said this failure was a requirement that had to happen before they had to pay on the bond.
- MBTA’s Claim: The MBTA says this denial was just an excuse. It claims the insurers ran a “bad faith campaign to prove the MBTA breached the contract first.” The MBTA’s complaint says the insurers “simply adopted LMH-Lane’s self-serving excuses for abandoning the Project” to wrongfully deny the claim.
The Insurers’ Argument: “MBTA Is Not a Person”
The insurance companies built their request for summary judgment on one specific legal argument: the MBTA cannot be a “person” under c. 93A, § 9.
First, they argued that courts must give a word the same meaning throughout a law.
Second, they pointed to the MBTA’s own arguments in earlier lawsuits. In a 2017 case, Massachusetts Bay Transportation Authority v. Boston & Maine Corp., the MBTA successfully argued it could not face a c. 93A lawsuit because it was not a “person.” In that case, the MBTA’s lawyers said:
“That MBTA is a ‘political subdivision’ of the Commonwealth ‘ordinarily’ means that MBTA is not a suable ‘person.’ … MBTA is not aware of a single case in which a 93A claim was ever successfully asserted against a ‘political subdivision’ … when carrying out its core functions…”
Third, the insurers said the law’s structure trapped the MBTA:
- It Cannot Sue Under § 11: The MBTA admitted it was not acting in “trade or commerce.” Instead, it performed a “governmental function” to fulfill its “legislative mandate.” This admission, the insurers argued, blocks the MBTA from suing under § 11, which only covers entities in “trade or commerce.”
- It Cannot Sue Under § 9: The insurers argued § 9 protects “individual consumers” in transactions for “purely personal reasons,” not a “sophisticated party to a business dispute” over a $213 million public works contract.
Finally, the insurance companies argued the law was unfair because it let the MBTA sue them under c. 93A when they “cannot bring a 93A claim against MBTA.”
The MBTA’s Response: The “Sword and Shield” Theory
The MBTA’s response brief argued this apparent contradiction is exactly what the law intends.
It framed the issue as whether a public agency can use the law as both a “shield and a sword.”
- The “Shield”: The MBTA argued that sovereign immunity and the “trade or commerce” requirement protect public agencies from c. 93A lawsuits when they perform government functions.
- The “Sword”: But it argued that this protection doesn’t stop the MBTA from using the law as a weapon to sue private companies.
- “Any Other Legal Entity”: The MBTA said the c. 93A definition of “person”—which includes “natural persons, corporations, trusts, partnerships… and any other legal entity”—uses broad language on purpose. The legislature wanted it broader than other laws.
- Public Policy: The MBTA concluded that “Doing business with the government should not give companies carte blanche to engage in unfair and deceptive practices.”
The Court’s Decision: A “Person” for Suing, Not for Being Sued
Justice Squires-Lee’s decision adopted the MBTA’s “sword and shield” reasoning. She found this “reality is inherent in the structure of the statute.”
The court found the MBTA is a “person” that can sue under G.L. c. 93A, § 9 for two main reasons:
- Reading the Law: The court held that lawmakers “expressly adopted a broader definition of ‘person’” in c. 93A than in other laws. The phrase “any other legal entity” is “plain, unambiguous, and exceedingly broad.” Since the MBTA is a “legal entity” with the power to “sue and be sued in law and equity,” it fits the definition.
- Fixing the “Inconsistency”: The court directly addressed the insurers’ fairness argument. It found that the law is one-sided by design. Citing the state’s highest court, Justice Squires-Lee wrote: “‘One who deals with a public entity, as for instance in providing it with goods or services, may very well be engaged in trade or commerce without the entity being so engaged as well.’”
The court accepted the MBTA’s logic: Because the MBTA was not acting in “trade or commerce,” it (1) cannot sue under § 11, and (2) cannot face lawsuits as a defendant. Therefore, § 9, which allows suits by “[a]ny person, other than a person entitled to bring action under section eleven,” is the correct and only path for its claim.
The decision ended with a strong policy statement:
“Parties doing business with the government should not have a free pass and carte blanche to engage in unfair and deceptive acts and practices when their victims are public entities and the public till.”
What This Means for Massachusetts Insurers
The court’s decision doesn’t address whether the MBTA’s bad-faith claim is valid. The insurance companies can still argue they had good reasons to deny the claim. The MBTA must still prove the insurers broke G.L. c. 176D.
However, the ruling confirms the “sword and shield” approach for public agencies in Massachusetts. It confirms that the state and its agencies, while protected from c. 93A liability when doing government work, can use the full power of G.L. c. 93A, § 9 which allows for the award of up to treble damages for insurers found liable for unfair claim practices as defined in G.L. c. 176D..
For insurance companies, the risk of working on public performance bonds in Massachusetts is now clear. When insurers deny a claim on a public project’s performance bond, they now face the court-approved risk of a multiple damage c. 93A lawsuit, even though the insurer cannot file a similar c. 93A counterclaim.
The MBTA’s suit now moves to discovery to examine the facts of how the insurers investigated and denied the claim.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Throughout my legal career, I have argued numerous cases in the Massachusetts Supreme Judicial Court and assisted agents, insurance companies, and lawmakers with the complexities and nuances of insurance law in the Commonwealth.
Interested in contacting me? Call me directly at 617-598-3801.
