Opinion ID: 50547
Heading Depth: 4
Heading Rank: 2

Heading: Mutual Agreement to Litigate Post-Payment

Text: The second issue on appeal is Fireman’s Fund’s contention that summary judgment was improperly granted, as —— it asserts —— there exists a genuine fact issue whether a mutual, presettlement agreement to litigate coverage issues post-settlement existed between it and Liberty Mutual. According to Fireman’s Fund, sufficient evidence of such a mutual agreement exists to create a genuine issue of material fact and thus make the district court’s grant of summary judgment erroneous. Specifically, Fireman’s Fund points to (1) Shaw’s deposition testimony, (2) the August 2001 email from Shaw to Moray, (3) Moray’s file notes, and (4) a September 2001 letter from Liberty Mutual to Wausau, as support for its contention that a factual conflict exists whether the parties agreed to litigate the coverage issue subsequently.
Initially, Fireman’s Fund contends that Shaw’s deposition testimony evidences that the two insurers did mutually agree to litigate their respective liabilities subsequently. In his 11 August 17, 2004 deposition, Shaw testified, in part: Q: Anything else you can recall about your conversations with Mr. Moray? A: Yes. Q: What else? A: When we came to settling the case, Liberty Mutual’s contribution was $200,000. I did not believe that that represented Liberty’s exposure, and I told him directly that we were going to sue them for it and that I was going to send him a reservation of rights letter, and he said, “You do what you have to do.” And I told him that I felt Liberty was trying to manipulate this from a position of noncoverage and I was offended that they could take that position and I was further offended, after we had had those discussions, that there could now be raised the element that we might have made a volunteer payment there, which was at no time discussed because the disagreements on coverage were pretty stark. Q: But you and Mr. Moray discussed a voluntary payment issue? A: No, that was never brought up. Q: Never came up? A: Well, I took his contribution to the settlement as a ratification, that it was reasonable and that what was being agreed to —— the settlement was acceptable and not outside the bounds of what should be paid in settlement for such a loss. Q: At no time did you —— did Mr. Moray ever raise with you voluntary payment? A: Not at all. 12 Q: Never used that term with you? A: Not at all. . . . Q: So when you left off with Mr. Moray, it was, “We’re going to get this case settled and then we’re going to sue you”? A: “We will do what we have to to seek recovery.” Q: Well, did you tell him that you were going to sue him or did you tell him that you were going to do what you had to do to seek recovery? A: I mentioned the word “sue.” I mentioned “recovery.” I probably told him ten times what we were going to do. Q: Was there ever a verbal agreement between you and Mr. Moray to the effect that Liberty Mutual would contribute $200,000; Fireman’s Fund would contribute the balance; and that both parties would agree to resolve any coverage issues in a subsequent proceeding? A: Do you mean did I have his permission —— Q: Yes. A: —— to settle the claim or to sue Liberty Mutual? Q: To sue Liberty Mutual. A: I had his acknowledgment that we would do that if we had to. He acknowledged that that would be appropriate. Q: He understood that that’s what you were going to do? A: That was —— yeah, one of the potential —— either arbitration or litigation or even negotiation later outside the realm of an arbitration, but 13 that this would be brought to resolution at some point. Q: I mean, you made that clear to him that you were going to do that? A: Yes. And there was never any disagreement from him on that part. Q: Did he expressly agree that that would be fine? A: Yes. . . . Q: And is that the reservation of rights letter —— the reservation of rights you’re referring to? A: That is, yes. Q: And there’s nothing in this e-mail about Liberty Mutual agreeing to resolve the coverage issues after the fact? A: The discussion had been that we will, and I didn’t see the need to point out that, “You have agreed that we” —— I didn’t believe there was any need to gain Liberty Mutual’s agreement for us to sue them later since they had disclaimed coverage and we felt that they were not stepping up to the plate fully in a defense obligation; that for us to have the onus or the burden of obtaining their agreement would be ludicrous. That —— Q: That just wasn’t necessary in your mind? A: —— wasn’t necessary, no. Q: In your mind, you were doing everything you could to preserve Fireman’s Fund’s right to litigate later or arbitrate later against Liberty Mutual? A: We were reserving our rights. We had told them that we would do so. 14 Q: And you’re telling them again? A: And I’m telling them again, and now we’re sitting here talking about it. As can be seen from this deposition testimony, Shaw was attempting to get Liberty Mutual to raise its settlement contribution and, in this effort, he threatened the possibility of a lawsuit. Moray responded, in essence, that, regardless of a potential lawsuit, Liberty Mutual was not going to raise its contribution and Fireman’s Fund could go do whatever it wanted. Although there was some mutual assent, it was not directed towards a subsequent coverage lawsuit between the two insurers. Instead, both parties acknowledged that Liberty Mutual would not raise its settlement contribution over $200,000.00 and Fireman’s Fund could do whatever it wanted in response. This is not sufficient to constitute mutual assent to subsequent coverage litigation.
In the August 2001 email from Shaw to Moray, Shaw wrote, in part: We are not convinced that Liberty International Underwriters’ Policy RG2-W31-004265-010 does not apply. As such, we are forced to negotiate settlement in this matter with minimal contribution from Liberty International Underwriters. Please be advised that we are doing so under a full reservation of rights under the policies, and that we specifically reserve the right to resolve the coverage issues after the fact. 15 Fireman’s Fund contends that this email constitutes a presettlement, mutual agreement to reserve the right to litigate the parties’ coverage issues subsequently. We disagree. In his email, Shaw purports unilaterally to reserve Fireman’s Fund’s right to litigate. This is not sufficient to preclude application of the voluntary payment doctrine, which requires that all interested parties mutually agree to litigate subsequently.
In his file notes relating to the Doe lawsuit, Moray observed, in part: “Jim Morey —— 6/3/04 —— A review of the file reveals that on 8/11/03, the case settled for $3,000,000.00 with Liberty’s contribution being $200,000. Thereafter, the matter is subject to coverage litigation. This part of the file is being handled by Tony Glenn.” Fireman’s Fund asserts that this notation also supports its position that the parties did reserve their rights to litigate subsequently. Fireman’s Fund’s position is unpersuasive. This file note does not reference Shaw, Fireman’s Fund, or any agreement between Liberty Mutual and Fireman’s Fund with respect to the Doe lawsuit. In addition, this note was written approximately ten months after the Doe lawsuit was settled and several months after Fireman’s Fund filed its intervention complaint with the district 16 court. These notes are simply file documentation from a periodic file review, not evidence of a ten-month-old mutual agreement to litigate.
The last item of evidence offered by Fireman’s Fund is a September 2001 letter from Liberty Mutual to Fireman’s Fund. The letter states, in part: I have enclosed in connection with the reference matter Liberty Mutual Fire Insurance Company Check No. 8018688 in the amount of $200,000 made payable to [Ms. Doe and her attorneys]. Tender of this check by Liberty Mutual Fire Insurance Company is not intended as nor should it be construed as an admission by Liberty Mutual Fire Insurance Company or any related companies of any liability under Policy No. RG2-W31-004265-010 in connection with the matters at issue. Said tender is made subject to Liberty Mutual Fire Insurance Company’s full and complete reservation of rights under the above-reference policy and without prejudice to any of the claims and/or defenses currently asserted or which may be asserted by Liberty Mutual Fire Insurance Company in the lawsuit styled and numbered Liberty Mutual Fire Insurance Company v. Virtu Signature Square Associates, LLC, et al., in the United States District Court for the Southern District of Mississippi, Jackson Division, Civil Action No. 3:01CV860WS. Like the other items, this letter too fails to prove a mutual agreement between Fireman’s Fund and Liberty Mutual. It does not mention Fireman’s Fund or any mutual agreement between Fireman’s Fund and Liberty Mutual. Neither does it purport to reserve any of Liberty Mutual’s rights with respect to Fireman’s 17 Fund. Instead, it unilaterally confirms Liberty Mutual’s reservation of rights under the Liberty Mutual Policy with respect to its insureds and reserves all existing claims and defenses with respect to the pending lawsuit between Liberty Mutual and Virtu and Denham. It is therefore insufficient to constitute evidence of a mutual agreement to litigate subsequently.