Opinion ID: 2441652
Heading Depth: 1
Heading Rank: 2

Heading: fuller's appeal

Text: Section 537.065 provides in relevant part: Any person having an unliquidated claim for damages against a tort-feasor, on account of bodily injuries or death, may enter into a contract with such tort-feasor or any insured in his behalf or both, whereby, in consideration of the payment of a specified amount, the person asserting the claim agrees that in the event of a judgment against the tortfeasor, neither he nor any person, firm or corporation claiming by or through him will levy execution ... except against the specific assets listed in the contract and except against any insurer which insures the legal liability of the tort-feasor for such damage.... Fuller cites Cologna v. Farmers & Merchants Ins. Co., contending that a section 537.065 settlement need only be free from fraud and collusion to be enforceable. 785 S.W.2d 691, 701 (Mo.App.1990). Fuller asserts that there is no requirement that section 537.065 settlements be reasonable. In Cologna, the Missouri Court of Appeals, Southern District, after stating that the insured is free to make a reasonable settlement, went on to say that it could not fairly be said that the judgment in the wrongful death action was collusive or fraudulent.... Id. In Whitehead v. Lakeside Hosp. Ass'n, the parties settled pursuant to section 537.065, which the western district stated is a method of settlement that is valid if free of collusion or fraud. 844 S.W.2d 475, 480 (Mo.App.1992). Fuller interprets this language as requiring only that a settlement be free from fraud and collusion. Gulf cites Cologna for the proposition that an insurer's unjustified refusal to defend upon the ground that the claim is not covered by the policy relieves the insured from his contractual obligation not to settle and the insured is at liberty to make a reasonable settlement or compromise .... (emphasis added). 785 S.W.2d at 701. See also Whitehead, 844 S.W.2d at 480. Gulf argues that this language imposes a reasonableness standard on courts when enforcing section 537.065 settlements. Gulf also argues that the settlement must be made in good faith. Cologna, 785 S.W.2d at 701. No Missouri appellate court has yet directly addressed the reasonableness requirement for section 537.065 settlements. In Cologna, the court of appeals stated, with little discussion, that an insurer's unjustified refusal to defend upon the ground that the claim is not covered by the policy relieves the insured from his contractual obligation not to settle and the insured is at liberty to make a reasonable settlement.... It is also said that to bind the insurer the settlement must be reasonable.... 785 S.W.2d at 701. Reasonableness of the settlement was not necessary, however, to the holding in Cologna because the court found the claim was barred by the doctrine of res judicata. Id. In Whitehead, the court of appeals cited Cologna's requirement that the settlement be reasonable, 844 S.W.2d at 480, although, as in Cologna, the matter was not at issue. It is necessary now to decide whether reasonableness, along with fraud and collusion, should be a part of the analysis in determining the enforceability of section 537.065 settlement contracts. After considering the arguments of the parties and the authority of other jurisdictions, this Court determines that a reasonableness standard is appropriate in determining the enforceability of section 537.065 settlements. Requiring a settlement  to be reasonable strikes an appropriate balance between the interests of the insured and the interests of the insurer. In cases such as the present case, the insurer has refused to defend, leaving the insured to fend for itself. The insured, however, although not engaging in collusive conduct for fraudulent or deceitful purpose, may act in a self-interested way in an attempt to protect himself from personal liability. In Steil v. Florida Physicians' Ins. Reciprocal, the District Court of Appeals of Florida explained why courts should require settlements to be reasonable: The conduct of the insured can hardly be characterized as fraudulent simply because he stipulates to a large settlement figure in order to obtain his release from liability. He has little or nothing to lose because he will never be obligated to pay. As a consequence, the settlement of liability and damages may have very little relationship to the strength of the plaintiff's claim. Due to this problem, the ordinary standard of collusion or fraud is inappropriate. Thus, we hold ... a settlement may not be enforced against the carrier if it is unreasonable in amount or tainted by bad faith. 448 So.2d 589, 592 (Fla.Dist.Ct.App.1984) (citation omitted). The test of whether the settlement amount is reasonable is what a reasonably prudent person in the position of the defendant would have settled for on the merits of the plaintiff's claim. Miller v. Shugart, 316 N.W.2d 729, 735 (Minn.1982). The determination involves a consideration of the facts bearing on the liability and damage aspects of plaintiff's claim, as well as the risks of going to trial. Id. The burden of proving the reasonableness of the settlement contract is on the insurer, who has elected not to participate in the underlying case. This distributes among the parties the risks attendant to settlement. Applying the analysis to the settlement contract at issue in this case, this Court notes that fraud is not at issue and Gulf has not carried its burden of proving that the settlement was obtained through collusion. Gulf has, however, met its burden of proving that the settlement amount was unreasonable. The evidence was that Fuller's medical bills and lost wages totaled $12,072.79, approximately 1/82 of the amount of the settlement. Fuller testified regarding some permanency of the effects of the injury to her leg and ankle. At the settlement conference, Fuller's attorney made a $295,000 demand. Pacific's attorney offered $50,000 to settle. Fuller also demanded $50,000 in punitive damages. The attorney hired by Pacific to represent Noble estimated a probable verdict range between $50,000 and $65,000. He estimated the top jury verdict would be between $65,000 and $75,000. Upon the evidence adduced, this Court cannot say that the trial court abused its discretion in finding the settlement in this case to be unreasonable. Fuller argues that this Court should not consider unaccepted offers and demands as evidence of the value of a case. Fuller, however, did not object to the evidence of offers and demands during the trial. Failing to make an objection to an issue at trial waives the issue on appeal. Johnson v. Moore, 931 S.W.2d 191, 195 (Mo.App.1996). In fact, Fuller mentioned the offers during her opening statement. She cannot complain for the first time on appeal when she failed to object to the use of the evidence at trial. Finally, this Court must determine an appropriate process for disposition of a case in which the settlement agreement is judged to be unreasonable. There are two possibilities. First, the court, after holding an agreement unenforceable, could release the insurer from any liability. Alternatively, the trial court, acting as the finder of fact, could determine a reasonable settlement amount for which the insurer should be held liable. This Court concludes that the second of the possibilities is the more fair. This requires that the case be remanded. The question of what constitutes a reasonable settlement in this case would have been necessarily addressed, at least in part, by implication in the determination that the settlement amount was unreasonable. The question may, however,  require further argument by the parties. Whether such argument is helpful in this case is left to the sound discretion of the trial court to determine on remand before making a finding of a reasonable settlement amount for which the insurer should be held liable. In summary, the CGL Policy provides coverage for Fuller's injuries because it is ambiguous. The trial court did not abuse its discretion in finding the settlement amount of one million dollars to be unreasonable. The matter requires further proceedings to determine a reasonable settlement amount for which the insured should be held liable. The judgment of the trial court is affirmed in part and reversed and remanded in part for further proceedings consistent with this opinion. HOLSTEIN, C.J., and PRICE and WHITE, JJ., concur. ROBERTSON, J., dissents in separate opinion filed. BENTON and LIMBAUGH, JJ., concur in opinion of ROBERTSON, J. ROBERTSON, Judge, dissenting. I respectfully dissent. The majority opinion says that an ambiguous policy of insurance is construed against the insurer. That is true beyond serious dispute. The majority opinion says that the policy under our review is ambiguous. The policy contains the following exception to its general liability coverage provisions. This insurance does not apply to ... g. Bodily injury or property damage arising out of the ownership, maintenance, use or entrustment to others of any ... `auto' owned or operated by ... any insured. This language is not ambiguous. The majority does not claim otherwise (to the contrary). But the policy contains a special events endorsement. IT IS HEREBY UNDERSTOOD AND AGREED THAT THE FOLLOWING SHALL BE INCLUDED AS THE TERMS AND CONDITIONS OF THIS POLICY: SPECIAL EVENTS SHALL INCLUDE... PARADES ...       Subject otherwise to all the terms, limits and conditions of the Policy. For the majority, the addition of the word otherwise between subject and to creates an ambiguity. This is because, the majority reasons, otherwise can mean in different circumstances. I disagree with the majority's finding that this policy is ambiguous. In this circumstance, otherwise means in other ways. The World Book Dictionary 1472 (1988). When defined in a manner consistent with this common meaning and considering the intent of the policy read as a whole while reading the words in context, it is clear that the phrase subject otherwise to is intended to invoke the exceptions to the policy previously and unambiguously set out. The use of the word otherwise does not void those exceptions or render the meaning of the policy uncertain. It takes diligent searching through a dictionary to find a non-scientific English word carrying a single meaning. The simple word the has nearly two thousand words devoted to its possible meanings, Webster's Third New International Dictionary 2368-9 (1976), and the single letter a has over five hundred words devoted to its possible uses and definitions. Id. at 1. For one intent on finding ambiguity, the dictionary provides an ample basis for rendering every insurance contract meaningless in the face of injury or need. The simple phrase subject otherwise to all terms of the policy could mean the person under the rule of the king [subject] in different circumstances  [otherwise] included [to] only [all] the court's sessions [terms] during [of] the [the] conduct of public affairs [policy]. But we know better, understanding innately Wittgenstein's teaching that the meaning of a word is its use in the language. L. Wittgenstein, Philosophical Investigations, 43. With respect, the phrase subject otherwise to does not render this otherwise (in other respects) unambiguous insurance contract ambiguous. If this Court wishes to read the words of the policy in context and assign the words used in the policy the meaning normally associated with insurance policies, it will discover as did the court of appeals that the policy is not ambiguous. After all, communication in a language as rich in nuance as English is ever dependent on the context in which words are used. Otherwise (or else) we could not communicate at all. I would declare the policy unambiguous as a matter of law and reverse the judgment of the trial court. Under my reading of the law and this insurance contract, I would not reach the Fuller appeal because the conclusion that the policy is clear denies that appeal of necessity.