Opinion ID: 2327093
Heading Depth: 1
Heading Rank: 3

Heading: Initiation of the Instant Action and Motions for Summary Judgment

Text: On November 22, 2006, shortly after receiving the assignment of claims from Virginia Transportation and Mr. Doire, Mr. DeMarco commenced the instant civil action in the Superior Court for Providence County naming as defendants Travelers and the retained attorney and his law firm. The complaint contained the following six counts: count one, demanding a declaratory judgment pursuant to Asermely ordering Travelers to pay the entire verdict/judgment amount from the personal injury litigation above and beyond the $1 million policy limits, plus all accrued interest, and reasonable attorneys' fees and costs; count two, demanding a declaratory judgment pursuant to G.L.1956 § 27-7-2.2 requiring Travelers to pay interest on the entire amount; [27] count three, alleging breach of contract; count four, alleging bad faith and breach of fiduciary duty pursuant to G.L.1956 § 9-1-33; count five, alleging that Travelers is liable to Mr. DeMarco separate and apart from [his] legal status as an assignee of Virginia Transportation; and count six, alleging legal malpractice by the attorney and firm retained by Travelers to represent Virginia Transportation in the personal injury litigation. [28] On January 3, 2007, the trial justice who had presided over the personal injury litigation brought by Mr. DeMarco against Virginia Transportation and Mr. Doire entered an order stating that the judgment entered in that litigation was satisfied in full. [29] On August 2, 2007, plaintiff filed in the Superior Court a motion for summary judgment with respect to counts one and two of his six-count complaint, specifically requesting entry of final judgment pursuant to Rule 54(b) of the Superior Court Rules of Civil Procedure as to those two counts. Travelers objected to plaintiff's motion for summary judgment, and it filed a cross-motion for summary judgment with respect to all counts. In the memorandum submitted to the Superior Court in support of his motion for partial summary judgment, plaintiff, relying on the assignment of rights which he had received from Travelers' insureds, argued that, pursuant to the rule established in Asermely, Travelers was obliged as a matter of law to pay him the entire amount of the judgment entered against its insureds as a result of the personal injury trial. The plaintiff contended that Travelers had such an obligation because it had declined to settle the DeMarco claim within the [p]olicy [l]imit prior to or during trial, and therefore had, in the words of the Asermely opinion, assume[d] the risk of miscalculation if the ultimate judgment should exceed the policy limits. The plaintiff further contended that the Asermely rule applied in cases such as his, in which there were multiple claimants for policy proceeds, notwithstanding the fact that the actual Asermely case involved a single claimant. He also contended that his claims against Travelers pursuant to Asermely had not been extinguished when he executed a release of the insureds from liability. Finally, plaintiff argued that, pursuant to § 27-7-2.2 (the rejected settlement offer statute), Travelers was required to pay all interest due on the judgment in the personal injury actionboth prejudgment and postjudgment interest. [30] In its opposition to plaintiff's motion for summary judgment, defendant Travelers argued that neither the Asermely rule nor § 27-7-2.2 applies in cases in which there are multiple claimants for the policy proceeds. The insurance company also argued that plaintiff could not establish a required element of his claim viz., that Travelers had breached its duty under Asermely to its insureds; it contended that, because Mr. DeMarco and Mr. Woscyna had released the insureds from all liability, the insureds had suffered no harm that could be the basis for an assignment of rights against Travelers to Mr. DeMarco. A hearing on the respective motions was held on October 16, 2007; and, on September 23, 2008, the hearing justice issued a twenty-three page written decision granting plaintiff's motion for summary judgment on counts one and two and denying defendant's cross-motion in its entirety. [31] With respect to count one, the hearing justice agreed with plaintiff that, although the Asermely case involved only a single claimant for the policy proceeds, the principle elaborated upon by this Court in that case was also applicable in multiple claimant cases. Citing with approval the opinion of the United States Court of Appeals for the First Circuit in the case of Peckham v. Continental Casualty Insurance Co., 895 F.2d 830, 835 (1st Cir.1990) (Selya, J.), [32] the hearing justice in the instant case stated that an insurer faced with a multiple claimant situation (1) should take affirmative steps to relieve its insured of so much of his or her potential liability as is reasonably possible in light of the surrounding circumstances and (2), in accordance with Asermely, must seriously consider the claimants' reasonable offers to settle within the policy limits or assume the consequences of its failure to do so. In addressing the settlement issue with respect to particular claims, the hearing justice further stated that an insurer would be called upon to consider which of the claims presented the greatest threat or threats to its insureds. She also stated that an insurer's ultimate liability under Asermely would depend on the quality of the insurer's exercise of its professional skills in making such a judgment call with respect to the settlement of claims. She recognized that there could be instances where the insurer determines [that] its insured's interests are best served by expending the policy limits on a single claim. [33] However, with respect to the instant case, the hearing justice determined that legal analysis and fact questions relevant to an insurer's obligations in multi-claimant cases [were] beside the point. She explained that determination as follows: It is undisputed that Travelers did not attempt to negotiate any of the claims until days before the DeMarco trial was locked on to begin and, instead, refused to consider all of the three claimants' settlement offers, relying on the claimants to negotiate their claims vis-à-vis each other and reach a global settlement within the policy limits. Furthermore, Travelers refused to make any unconditional individual settlements until after the DeMarco claim had been reduced to a judgment, and the insureds' liability on it and the accumulated interest had attached. It was only then that Travelers settled one of the claims and, therefore, questions concerning its use of professional skill and good faith in selecting which of the multiple claims should be settled in order to `relieve its insured of so much of his [or her] potential liability as is reasonably possible' are extraneous in the context of the narrow circumstances of this case. (Emphasis in original.) [34] The hearing justice also rejected Travelers' contention that it was not liable to Mr. DeMarco due to the fact that Mr. DeMarco had released its insureds from liability; in so ruling, the hearing justice pointed to the fact that the language of the release executed by Mr. DeMarco specifically excluded Travelers from its reach. ( See text accompanying footnote 23, supra. ) The hearing justice accordingly concluded that granting summary judgment in plaintiff's favor with respect to count one would be appropriate under Asermely because Travelers had not submitted admissible evidence showing any of the following: (a) that plaintiffs offer to settle for $1 million was not reasonable; (b) that Travelers had not had adequate time to investigate, consider, and respond to the offer; (c) that plaintiffs August 30, 2006 deadline for accepting his final offer was unreasonable; (d) that Travelers ever offered to settle with plaintiff for the policy limits; or (e) that Travelers could not accept the offer because the policy limits were depleted or exhausted. With respect to count two, the hearing justice also granted summary judgment in plaintiffs favor, stating that the terms of § 27-7-2.2 (the rejected settlement offer statute; see footnote 46, infra ) were clear and unambiguous in providing that an insurer is liable for all interest due on a judgment where it has rejected a plaintiffs written offer to settle within or at the policy limits. Accordingly, the hearing justice held that Travelers would be liable under § 27-7-2.2 for both prejudgment and postjudgment interest on the judgment in the personal injury case. The hearing justice then went on to deny Travelers' cross-motion for summary judgment on the remaining counts. She stated that, [a]lthough Travelers' failure to settle any of the claims until after the DeMarco jury returned its verdict is undisputed, there exist genuine issues of material fact about the nature and extent of the harm that Doire and Virginia suffered as a result of the excess judgment. Subsequently, on October 20, 2008, the hearing justice, citing Rule 54(b), ordered that final judgment should enter in plaintiffs favor with respect to counts one and two. Travelers filed a timely notice of appeal. On appeal, defendant Travelers contends that the hearing justice committed reversible error in granting summary judgment in plaintiffs favor on counts one and two because, in Travelers' view, plaintiffs release of Virginia Transportation and Mr. Doire, as well as the trial court's eventual judgment satisfied order, [35] extinguished any claim against Travelers that might otherwise have been assigned to plaintiff by the insureds. Further, Travelers argues that the rule in Asermely does not apply in multiple claimant cases; it also contends that the record contains facts on the basis of which a finder of fact could conclude that the insurer acted reasonably and in its insureds' best interests in handling plaintiff's claim. Finally, Travelers argues that affirming the decision below would have a negative impact in terms of public policy by, in effect, compelling insurers to subordinate the interests of policyholders to those of third-party claimants.