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

Heading: Personal Injury Trial and Subsequent Events

Text: The jury trial in the DeMarco personal injury action against Virginia Transportation and Mr. Doire began on September 18, 2006. On the first morning of trial, Travelers again offered to pay Mr. DeMarco $550,000, and it indicated that Mr. Doire would be willing to contribute an additional $150,000 from his personal fundsthereby causing the total settlement offer to plaintiff to be in the amount of $700,000. Mr. DeMarco rejected that offer, and the trial commenced. [19] At trial, Travelers stipulated as to liability, and it did not present any witnesses with respect to damages. On September 22, 2006, the jury returned a verdict in favor of Mr. DeMarco in the amount of $2,053,795; when interest was computed, the total judgment was in the amount of $2,801,939.07. The trial justice also taxed costs in plaintiffs favor in the amount of $5,879.32. On the same day, September 22, 2006, an attorney retained independently by Mr. Doire wrote to Travelers' claim services director stating that it was Mr. Doire's position that Travelers was responsible for the judgment entered against him. The attorney stated that it was undisputed that Mr. DeMarco had made demands to settle within the policy limits on February 2 and February 25, 2004, on February 7, 2005, and on August 23, 2006, and that no offer or meaningful response from Travelers occurred within a reasonable time   . In his September 22 letter, the attorney retained by Mr. Doire further stated: It is important to emphasize that no monetary offer to Plaintiffs DeMarco ever occurred until September 14, 2006. At every stage of these proceedings, Mr. Doire has expressed the desire that Travelers settle this caseyet no offer was made. (Emphasis in original.) Mr. Doire's attorney then asserted that Travelers was responsible for payment of the judgment pursuant to Asermely  because Travelers had declined to settle within the policy limits; he added that Travelers also should bear the legal expense that Mr. Doire incurred in having to retain independent counsel due to the threat of an excess judgment. The attorney asserted that Travelers' failure to make any offer to settle has cost Mr. Doire thousands of dollars already, and he concluded by stating that his client would explore all legal options to protect his rights and interests. Soon thereafter, on September 29, 2006, Mr. DeMarco's attorney also wrote a letter to Travelers' claim services director, in which he stated: Many times prior to trial we advised both you and your counsel that this case had a very real potential for a verdict above and beyond your policy limits and we repeatedly, throughout the years since the accident, demanded the policy limits to settle Mr. DeMarco's claim. Prior to this verdict, we advised you on no less than 4 occasions that Mr. DeMarco would be willing to settle this matter for the $1,000,000 policy limit. This was presented to you in writing on February 2, 2004; February 25, 2004; July 22, 2005 and finally on August 23, 2006. The only response we ever received was on February 27, 2004 when [the claim services director] asserted that Travelers could make no offer to our client because there were multiple claimants.    The only settlement offer ever made in this matter came the Friday before trial.    Incredibly, on the day of trial, a second offer to settle the case was extended in the amount of $700,000, with the clear understanding that your insured was contributing some of his own personal money. To date, no other offer has been made. In the middle of the trial, your own insured demanded that the matter be settled within the policy limits and even then you ignored his wishes. The consistent position of Travelers has been that it is not capable of settling this case, or even attempting to settle, because another claim exists. Mr. DeMarco's attorney then stated that it was now clear that Travelers had not entertained the settlement demands because the company appears to have a company policy of delaying potential settlements based on the premise that there are multiple claimants. He asserted that there was no reasonable basis for Travelers to act as it had regarding Mr. DeMarco's demands, and he stated that Travelers did so to comply with a company policy that clearly infringes on the fiduciary duty [that] it owes to its insureds. The attorney further noted in his letter that Virginia Transportation was on the brink of financial ruin as a direct result of the significant judgment against it and because of Travelers' steadfast refusal to make an offer to only one claimant; he added that it was his understanding that all lines of credit, bank accounts and future financing for the company had been halted. The attorney concluded by stating that he believed that the facts he had outlined could likely result in one of the largest bad faith claims in the United States in years; but he also stated that Mr. DeMarco was nonetheless willing to accept the amount of the judgment in full and final satisfaction of his claim, and he added that this offer would remain open only until October 18, 2006. Approximately one month later, on October 30, 2006, a new and different attorney [20] wrote to Mr. DeMarco's attorney stating that he had been retained by Travelers to respond to the attorney's September 29, 2006 letter to Travelers' claim services director. He stated that the contention that Travelers' conduct infringed on the fiduciary duty it owed to its insureds was legally and factually unfounded. Citing this Court's opinion in Asermely, he acknowledged that Travelers had a duty to act in the best interests of its insureds to protect them from excess liability, and he asserted that, [m]indful of this duty, from the time it was first notified of the potential claims against its insureds, Travelers sought to settle the claims in a manner that would protect its insured[s] from excess liability. He stated that the February 7, 2005 letter from plaintiffs attorney to the retained attorney requesting that Mr. Woscyna's claim not be settled until Mr. DeMarco's medical treatment had ended and his claim was ready to be resolved was an explicit recognition that Travelers could not independently settle with one of the claimants without exposing [its insureds] to excess liability and was an acknowledgement that it would have been premature for Travelers to have consider[ed] any settlement at that time. Addressing the contention of plaintiff's attorney that Travelers had a company policy of delaying settlement in multiple claimant situations, the second retained attorney stated that there was no factual basis for such an assertion, and he added that plaintiff's attorney's own letter of February 7, 2005 suggested that Travelers should wait to settle the claims against its insureds at one and the same time. The second retained attorney indicated that the reason that Travelers had refused to pay the policy limits to Mr. DeMarco, even though doing so would (in the attorney's view) have advanced Travelers' own financial interests, was because it would have left its insureds unprotected against Mr. Woscyna's claim. He stated that Travelers had refused any demand where it could even remotely be construed that Travelers was putting its own interests ahead of those of its insureds, stating that  Asermely is the guiding law by which Travelers has made its decisions, and by which it will continue to make its decisions. The attorney concluded the letter by requesting that plaintiffs attorney agree to stay the entry of final judgment in the personal injury action so that the parties could again attempt to resolve the matter through mediation, noting that this would be in Mr. DeMarco's interest since any potential for Virginia Transportation and Mr. Doire to contribute to a settlement pool would likely be extinguished if they were forced into bankruptcy. [21] Then, on November 7, 2006, corporate counsel for Virginia Transportation wrote a letter addressed to both of the attorneys retained by Travelers. He stated that the verdict in the personal injury case had already caused great harm to the insureds whom he represented. He further stated that the insureds were willing to attend mediation if it could be expected to be productive, but he added that any discussion had to take place within the next ten days because, after such time, the insureds would face substantial and irreparable harm and would be forced to file for relief under Chapter 11 of the United States Bankruptcy Code. Virginia Transportation's corporate counsel then noted that Virginia Transportation's lenders had already significantly reduced the company's operating line of credit and had given notice that the judgment in the personal injury case was a material event of default. He emphasized (1) that the lenders were demanding an immediate resolution of all claims against Virginia Transportation and (2) that, if the lenders withdrew their financial support, the company would be forced to immediately cease operation and face the loss of several million dollars in annual revenue. Virginia Transportation's corporate counsel asserted that Travelers had had several opportunities to settle with Mr. DeMarco and Mr. Woscyna within policy limits but had failed or refused to do so without regard to the consequences for its insureds; he also asserted that Travelers had ignored the clear and unequivocal instruction of your insured at trial to offer the policy limit to the DeMarco claimants. He further wrote that the insureds were presently faced with substantial excess liability due to the result of the DeMarco personal injury trial as well as with a possible adverse verdict in the yet-to-be-held trial of the Woscyna claim. Virginia Transportation's corporate counsel next stated that, although the insureds' preference would be to defend against the Woscyna claim, they could not take that risk because of the damage that they had already sustained as a result of the verdict in the DeMarco action. He stated that counsel for Mr. Woscyna had offered to settle his client's claims against the insureds for $500,000, and he directed Travelers to immediately pay that amount to Mr. Woscyna under the existing policy. He also urged Travelers to accept responsibility for the entire DeMarco judgment, including the amounts in excess of the policy limits and interest, because of what he characterized as the insurer's mishandling of the claim. He informed the attorneys for Travelers that the DeMarco claimants appear willing to release your insured from the judgment in consideration of an assignment of the claims of your insured against Travelers; and he stated that, unless Travelers was willing to accept responsibility for the entire judgment, the insureds may have no    means of avoiding the need for chapter 11 protection [other than by] the assignment of those claims. He concluded by stating that the insureds would have no choice but to resume discussions with Mr. DeMarco about the assignment of their claims against Travelers if they did not receive a response by November 10, 2006. Also on November 7, 2006, Travelers brought a declaratory judgment action in the United States District Court for the District of Rhode Island, naming Virginia Transportation, Mr. Doire, Mr. DeMarco, Mr. Woscyna, and National Grid as defendants. Travelers requested a judgment declaring: (1) that Travelers' duty to defend or settle claims against its insureds would end when it exhausted the $1 million policy limits; (2) that Travelers was entitled to exhaust the policy limits by paying $1 million to Mr. DeMarco in partial payment of the judgment against Travelers' insureds; (3) that Travelers had not been required to pay the policy limits to Mr. DeMarco prior to entry of the judgment in the personal injury case; (4) that Travelers was not required to make any payment to Mr. Woscyna or National Grid (absent a judgment favorable to them) where such payment would reduce sums available to pay Mr. DeMarco's judgment; (5) that Travelers was not required to pay any interest that had accrued after the entry of the judgment in the personal injury case; (6) that Travelers was not required to make any payment to Mr. DeMarco, Mr. Woscyna, or National Grid in excess of the policy limits; and (7) that Travelers was not required to indemnify or pay its insureds for any amount in excess of the policy limits. Shortly thereafter, on November 17, 2006, Travelers arranged for a mediation to be conducted involving counsel for Virginia Transportation, Mr. Doire, Mr. DeMarco, and Mr. Woscyna respectively. In the wake of that mediation, Travelers offered to pay the sum of $450,000 to Mr. Woscyna; he accepted that offer and proceeded to release Virginia Transportation, Mr. Doire, and Travelers from liability that same day. The Woscyna release document was entitled  RELEASE AND SETTLEMENT OF CLAIM;  it provides in pertinent part as follows:  For the Sole Consideration of Four Hundred Fifty Thousand and 00/100 ($450,000.00) Dollars, in hand paid,    the receipt of which is hereby acknowledged, we PAUL D. WOSCYNA, DOROTHY M. WOSCYNA   , and KRISTEN R. WOSCYNA, a minor (collectively, the Releasors), do hereby release and forever discharge LEO H. DOIRE, VIRGINIA TRANSPORTATION CORP., a Rhode Island corporation, and TRAVELERS INDEMNITY COMPANY OF AMERICA (collectively, the Releasees), and all other persons, firms or corporations from any and all claims    resulting or to result from an accident that occurred on or about September 10, 2003, in Cranston, Rhode Island and as claimed in a civil action entitled Paul D. Woscyna, et al v. Leo H. Doire, Jr. and Virginia Transportation Corporation   . It is expressly understood and agreed that the acceptance of the said above amount is in full accord and satisfaction of a disputed claim   . (Emphasis in original.) Further in the wake of the November 17, 2006 mediation, Travelers also agreed to pay $550,000 to plaintiff DeMarco. Mr. DeMarco accepted that amount and proceeded to release Virginia Transportation and Mr. Doire from liability. However, taking a significantly different tack from the one taken by Mr. Woscyna, Mr. DeMarco explicitly declined to release Travelers in the release document that he signed. That document states in pellucid language that Mr. DeMarco specifically reserved any and all claims against Travelers. [22] The release document was entitled  GENERAL RELEASE;  it provides in pertinent part as follows: KNOW ALL MEN, THAT WE, WAYNE DEMARCO, LEESA DEMARCO, BRAEDYN DEMARCO and CHAYCE DEMARCO (collectively, the Releasors), in consideration of the sum of $550,000.00 (Five Hundred Fifty Thousand 00/100) Dollars to be paid by Travelers Insurance Company of America, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, do hereby remise, release, and forever quit-claim unto said LEO H. DOIRE and VIRGINIA TRANSPORTATION CORP., a Rhode Island corporation, their successors and assigns (collectively, the Releasees), any and all manners of action    which against said Releasees said Releasors ever had, now have, or in the future may have    including, without limitation, any and all loss, damage or claim arising out of the subject matter of the litigation brought by the Releasors against Releasees in the Providence County Superior Court being Civil Action No. 04-1171 (the Litigation), and any verdict or judgment entered in the Litigation. This General Release shall not in any way be construed, nor is it intended, to release Travelers Insurance Company of America    from any and all claims that Releasors may have against Travelers in any way arising from the Litigation or any aspect thereof. The same are specifically reserved by Releasors. (Emphasis in original.) [23] On the same day as the two just-referenced release documents were executed (November 17, 2006), Mr. DeMarco also entered into an agreement with Virginia Transportation and Mr. Doire, [24] in which they assigned to him any and all claims and causes of action that [they] may have against Travelers. [25] The assignment document explicitly recites that the assignment of claims was effected  in consideration of the General Release executed contemporaneously herewith   . [26] (Emphasis added.) The claims that were assigned to plaintiff include claims (1) that in any way related to the conduct of Travelers in the handling of the claims of the Assignees subsequent to the motor vehicle collision and resulting in the personal injury litigation or (2) that related to the manner in which Travelers and appointed counsel discharged their respective obligations to Doire and Virginia, including but not limited to all claims for fraud, breach of contract, breach of all duties of good faith and fair dealing, bad faith, further including but not limited to any and all Asermely claims   . The assignment document also provided that Virginia Transportation and Mr. Doire agreed to cooperate fully in good faith as a material part of this Assignment with Mr. DeMarco and his attorney in their exercise of the assigned rights and any rights against parties not released. Subsequent to the payment of the $450,000 and $550,000 amounts and the signing of the releases by Mr. DeMarco and Mr. Woscyna, Travelers filed an amended complaint in the then-pending federal district court declaratory judgment action, attaching copies of both the DeMarco and Woscyna releases and also attaching a stipulation signed by counsel for National Grid and by corporate counsel for Virginia Transportation, which stipulation indicates that National Grid's claims against Virginia Transportation and Mr. Doire have been dismissed. Travelers alleged in the amended federal court complaint that it had exhausted the policy limits in paying $1 million to settle the claims of Mr. DeMarco and Mr. Woscyna, and it requested that the federal court enter the following judicial declarations: (1) that Travelers had satisfied its contractual duties to its insureds; (2) that Travelers had not been required to pay the entire policy limits to Mr. DeMarco where doing so would have left Virginia Transportation and Mr. Doire uninsured against other claims; (3) that Travelers was not required to pay any sums in excess of the policy limits; and (4) that Travelers was not required to indemnify or pay its insureds any sums that they might have agreed to pay Mr. DeMarco in connection with an assignment. C