Opinion ID: 2512475
Heading Depth: 2
Heading Rank: 2

Heading: Whether the District Court Failed to Make a Proper Evaluation of the Settlement

Text: The WTCP Plaintiffs next argue that the district court failed to make a proper evaluation of the settlement and its relative fairness. Under New York law, an insurer has no duty to pay out claims ratably and/or consolidate them, so long as it does not act in bad faith. Allstate Ins. Co., 788 N.Y.S.2d at 402 (citing Duprey v. Sec. Mut. Cas. Co., 22 A.D.2d 544, 256 N.Y.S.2d 987, 989 (N.Y.App.Div.3d Dep't 1965)). An insurer may therefore settle with less than all of the claimants under a particular policy even if such settlement exhausts the policy proceeds. STV Grp., Inc. v. Am. Cont'l Props., Inc., 234 A.D.2d 50, 650 N.Y.S.2d 204, 205 (N.Y.App.Div. 1st Dep't 1996). Such settlements are not voluntary or additional insurance, but rather reduc[e] the liability remaining under the policy. Duprey, 256 N.Y.S.2d at 989. This has long been the rule across several jurisdictions. [2] See 70 A.L.R.2d 416 § 2a (2008); 46A C.J.S. Insurance § 2318 (2010). The WTCP Plaintiffs have presented no evidence of the bad faith necessary to draw into question the settlement in this case. [3] The settling parties' mediator, Judge Martin, attested that the settling parties hotly contested each other's claims both as to legal liability and damages, and that they made detailed presentations on their differing positions. Decl. of John S. Martin, Jr. ¶ 7. He has affirmed that there was no indication during the mediation process that any of the parties softened its position on a proper settlement for interests other than its own. Id. ¶ 8. Judge Martin has also stated that the settlement agreement was reached only after extensive arms-length and good-faith negotiations among the parties and was not intended to prejudice the rights of any other party. Id. ¶ 10. In addition, the $1.2 billion settlement amount was proposed by Judge Martin, represented a 72 percent discount from the Settling Plaintiffs' total claimed damages of $4.4 billion, and was higher than the last settlement offer by the Aviation Defendants. The WTCP Plaintiffs argue that the settlement is improper because it is a lump sum applicable to all of the Settling Plaintiffs' claims, and is not based on a claim-by-claim assessment of potential liability. Judge Martin explained, however, that while the parties did spend a substantial amount of time discussing damages on a claim-by-claim basis, none of these issues could be resolved by the time mediation began. Id. ¶ 12. The settling parties decided that the assessment of damages on an underlying claim-by-claim and defendant-by-defendant basis could not have been done in any reasonable amount of time and without substantial cost. Id. Instead, both parties independently concluded that damages should be allocated approximately 60 percent to Flight 11, and 40 percent to Flight 175. The 60/40 allocation resulted from each settling party deeming Flight 11 responsible for the destruction of Tower Sevenan assessment of responsibility that the WTCP Plaintiffs themselves assert in their complaint. The WTCP Plaintiffs also contend that the settlement is improper because it releases all Aviation Defendants from liability when only four of them are responsible for paying the settlement amount. However, the settling parties articulated their reasons for limiting the settlement contributors to four of the Aviation Defendants. The Aviation Defendants believed that adding other defendants and insurers would increase plaintiffs' settlement demands and further complicate negotiations without reducing payment by the contributing Aviation Defendants' insurers. Further, they believed that the claims against the other Aviation Defendants were weaker than those against the two airlines and their checkpoint security companies. The Aviation Defendants were also concerned about setting an undesirable precedent for future disasters if non-carrier airlines (which might in the future include American and United) contributed to the settlement. In addition, the Aviation Defendants contributing to the settlement did not want to face potential indemnification claims by other Aviation Defendants not released. Finally, the contributing Aviation Defendants' insurers sought to avoid the costs of continued discovery of their four insureds if the other Aviation Defendants were not released. In sum, we agree with the district court that the settling parties entered into their settlement agreement in good faith. We therefore conclude that the district court did not abuse its discretion in approving the settlement agreement.