Opinion ID: 2327093
Heading Depth: 1
Heading Rank: 2

Heading: What Was Assigned?

Text: In the event that a claim is made against an insured, the carrier must defend and indemnify the insured for any judgment entered against the insured to the extent of its policy limit. See 3 Jeffrey E. Thomas, New Appleman on Insurance Law Library Edition, § 16.06[1] at 16-145 (Lexis-Nexis 2010) (Liability insurers are often said to have two principal contractual duties: the duty to defend and the duty to indemnify.    The duty to defend refers to the insurer's obligation to pay the expense of defending its policyholder in a lawsuit.    The duty to indemnify, by contrast, refers to the insurer's obligation to pay damages awarded against its insured.). The duties of the insurer are contractual in nature; however, this Court has held, and the majority correctly affirms in this case, that the insurer also is burdened with a fiduciary duty to refrain from placing its own interest ahead of that of the insured, and to endeavor in good faith to resolve claims against its insured within the limits of the policy coverage, thereby avoiding uncovered risk to the insured. Asermely v. Allstate Insurance Co., 728 A.2d 461, 464 (R.I.1999); Medical Malpractice Joint Underwriting Association of Rhode Island v. Rhode Island Insurers' Insolvency Fund, 703 A.2d 1097, 1102 (R.I.1997). As the majority has adroitly reasoned, that burden becomes exponentially more difficult when, as was the situation here, there are multiple substantial claims that threaten to exhaust policy resources. See Peckham v. Continental Casualty Insurance Co., 895 F.2d 830 (1st Cir.1990); Asermely, 728 A.2d at 464. What occasions my departure from the majority's reasoning here, however, is the fact that both claimants, DeMarco and Mr. Woscyna, released the insured, Doire, from any and all claims. Thus, Travelers fulfilled its two duties under its contract of insurance. It is beyond dispute that Travelers owed no duty to DeMarco, a stranger to the insurance contract; and in making any claim against the carrier, DeMarco must stand in the shoes of Doire. There is no question that, in some circumstances, an insured properly may assign claims that it may have against its carrier to another. In Mello v. General Insurance Co. of America, 525 A.2d 1304, 1306 (R.I.1987), this Court held that an insured's bad-faith claim against her insurer could be assigned to a claimant. But, it is significant to note that in Mello, a case that was decided before this Court's adoption of the new rule set forth in Asermely, there had been no release of the insured's liability. See Mello, 525 A.2d at 1305. In Mello, the insurer had refused to settle a claim brought by a single claimant for a sum that was within the policy limit. Id. When a jury returned a verdict against the insured that exceeded the insured's coverage, the carrier simply satisfied the verdict to the extent of its coverage and walked away, leaving the insured personally exposed to the remainder of the judgment. Id. The insured then assigned its rights against its own carrier to the judgment creditor, who promptly brought suit against the carrier. Id. A hearing justice of the Superior Court granted summary judgment to the insurer, reasoning that the bad-faith claim was a personal injury that could not be assigned. Id. On appeal, this Court reversed and vacated the judgment. Mello, 525 A.2d at 1306. We held that in certain limited circumstances the insured's right may be assigned. The facts of the case at bar constitute such limited circumstance. Id. In deciding in favor of the assignee, the Court further said: We believe that within the facts of this case this assignment was justified. We therefore hold that an insured may assign its bad-faith claim against its insurer to the insured claimant for the limited purpose of recovering the difference between the judgment received against the insured and the insurance-policy limits. Id. The situation confronting the Court in Mello was dramatically different from the situation present in this matter because in that case the claimant had not signed a release, and, therefore, the insured still was exposed to the claimant for a substantial excess judgment. [62] Those facts are simply not present here. DeMarco has released Doire from any and all liability, fully and unconditionally, leaving Doire altogether off the hook. [63] I agree with the many courts that have drawn a distinction between the permissible assignment of those cases resolved by a covenant not to execute on a judgment, as was the case in Mello, and a general release, as is the case here. See, e.g., Red Giant Oil Co. v. Lawlor, 528 N.W.2d 524, 529 (Iowa 1995) ([A] covenant not to execute    is merely a contract, and not a release, such that the underlying tort liability remains and a breach of contract action lies if the injured party seeks to collect its judgment. Thus, the tortfeasor is still `legally obligated' to the injured party, and the insurer still must make good on its contractual promise to pay.) (emphasis added); Stateline Steel Erectors, Inc. v. Shields, 150 N.H. 332, 837 A.2d 285, 290-91 (2003) (holding that summary judgment in favor of the insurer was improper because insured and third party executed an assignment accompanied by a covenant not to sue, rather than a release, and noting that [u]nlike a release, a covenant not to sue does not relinquish a right or claim, or extinguish a cause of action) (internal quotation marks omitted); Kobbeman v. Oleson, 574 N.W.2d 633, 636 (S.D. 1998) (considering whether to give effect to a covenant not to execute accompanied by an assignment and concluding that [t]he most pragmatic approach looks to the language of the covenant to find whether a tortfeasor remains legally obligated on a judgment) (citing Lancaster v. Royal Insurance Co. of America, 302 Or. 62, 726 P.2d 371, 372 (1986)). [64] When, as here, a general release has been executed in favor of the insured, there simply is nothing left to be assigned.