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

Heading: Events Leading to the Trial of the Personal Injury Action Against Travelers' Insureds

Text: On February 2, 2004 (less than six months after the collision), Mr. DeMarco's attorney submitted to Travelers' claim services director a demand letter seeking the payment of $1 million (the policy limits) to plaintiff. The letter stated that the attorney was still in the process of obtaining Mr. DeMarco's voluminous medical records and bills, but the letter also indicated that hospital bills totaling $190,932.56 had already been sent to Travelers. In that February 2 letter, plaintiffs attorney also stated that she was enclosing a courtesy copy of the lawsuit that [she intended] to file within 14 days of the date of [the] letter, and she requested that Travelers review and advise. On February 25, 2004, plaintiff's attorney sent another letter to Travelers' claim services director, stating that we believe that our client's claim for personal injuries far exceeds your insured's [ sic ] liability coverage policy limit; the attorney demanded that her client's claim be settled in the amount of the policy limits. The attorney went on to state that, if Travelers did not agree to settle in accordance with plaintiffs demand, the insurance company might be exposed to liability for damages in excess of the policy limits and for interest. In support of that assertion, plaintiffs attorney explicitly cited this Court's opinion in the case of Asermely v. Allstate Insurance Co., 728 A.2d 461 (R.I.1999); the attorney stated in her letter that the Asermely opinion set forth principles relative to an insurance company's potential responsibility for such excess damages and for interest. The letter then quoted from the Asermely opinion, including the language stating that an insurance company's fiduciary obligation extends not only to its insureds but also to a party to whom the insureds have assigned their rights. The letter from plaintiffs attorney also quoted the language in the Asermely opinion which states that an insurance company must seriously consider a plaintiffs reasonable written offer to settle within policy limits and which also states that, if the insurer declines to settle, it will be liable for an eventual judgment against its insureds in excess of the policy limits (unless it can show that the insureds were unwilling to accept the offer of settlement). [8] On February 27, 2004, Travelers' claim services director sent a letter to plaintiff's attorney acknowledging receipt of plaintiff's February 2 demand letter. The claim services director stated that Travelers was not in a position to make an offer to Mr. Demarco [ sic ] at this time, noting that the insurer had not yet received medical records describing Mr. DeMarco's injuries. The letter from Travelers went on to express the insurer's understanding that there were multiple persons [9] who were seriously injured as a result of the collision and that medical bills unrelated to Mr. DeMarco could equal or exceed his own. The letter from Travelers further stated that, under such circumstances, Travelers [could not] exhaust its policy limit of $1 million by paying it to Mr. Demarco [ sic ]. Nothing in the record indicates that Travelers responded to the February 25 demand letter from plaintiff's attorney, which had made explicit reference to the insurer's potential liability under Asermely. [10] However, on March 1, 2004, an attorney retained by Travelers ( see footnote 12, infra ) wrote to Travelers' claim services director to provide his legal opinion regarding Mr. DeMarco's demand for the policy limits. He stated that the claim services director should respond to Mr. DeMarco's demand letter, but he also expressed his view that the insurer was not at that time required to make a counter-offer. The attorney stated: Generally, Asermely holds that an insurance carrier can be held liable in excess of its policy limits if it fails or refuses to settle a claim within its policy limits and a judgment is rendered that exceeds the policy limits. Nevertheless, in the same letter the attorney opined that, under the circumstances of this case, Travelers will not be held liable for damages in excess of the policy limits. He acknowledged that Travelers had a duty under Asermely to settle within the policy limits; but he then stated that, since there was at least one other seriously injured party in addition to Mr. DeMarco, if Travelers were to pay the entire limits to Mr. DeMarco, such an action by Travelers could expose the insureds to personal liability stemming from non-DeMarco-related claims. The attorney noted that the Asermely opinion stated that an insurer had a fiduciary obligation to act in the best interests of its insured and to strive to protect the insured from excess liability, and the attorney expressed his view that the payment of policy limits to one claimant may be a violation of Asermely that will expose Travelers to extra-contractual liability. Shortly thereafter, on March 4, 2004, Mr. DeMarco commenced a personal injury action in the Superior Court for Providence County against Travelers' insureds viz., Virginia Transportation and Mr. Doire. [11] Almost a year later, on February 7, 2005, plaintiffs attorney wrote to the attorney who had been retained by Travelers to represent its insureds in the personal injury litigation which plaintiff had commenced in March of 2004. [12] The plaintiffs attorney indicated that she was aware that Mr. Woscyna's attorney had submitted a settlement demand totaling $829,747 to Travelers, and she asked that the retained attorney advise Travelers' claim services director that Mr. DeMarco is not yet done treating and that Mr. DeMarco's medical bills are five (5) times the amount of Mr. Woscyna's medical bills   . The plaintiffs attorney then observed: That being said, I suspect that Mr. Woscyna's claim will not be resolved until Mr. DeMarco's claim is ready to be resolved. She concluded by asking the retained attorney to respond with his thoughts. The retained attorney responded in a letter dated February 23, 2005, in which he stated that he would like to take the deposition of Mr. DeMarco so that we can be in the best position to assess the claim of each injured person; a notice of deposition was enclosed. On April 19, 2005, plaintiffs attorney sent a letter and copies of her client's medical records and bills to Travelers' retained attorney; the letter indicated that Mr. DeMarco had been discharged from his doctor's care on February 28, 2005. The plaintiffs attorney further asked the retained attorney to contact her so that they could discuss moving toward a resolution of the matter. On June 7, 2005, plaintiffs attorney sent Travelers' retained attorney another letter, enclosing copies of Mr. DeMarco's tax returns and requesting that he please advise if we can proceed towards arbitration or mediation. On June 29, 2005, plaintiff's attorney once again wrote to Travelers' retained attorney and asked him to advise if we are in a position to proceed with arbitration or mediation with the other claimant in this matter. On July 22, 2005, plaintiff's attorney sent another letter to Travelers' retained attorney, offering to settle with the insurance company for $1 million (the policy limits). This letter included a detailed description of Mr. DeMarco's injuries, his course of treatment, his medical expenses, and his lost wages. Neither Travelers nor the retained attorney responded to the several letters from plaintiff's attorney that we have just described. However, almost nine months later, on April 13, 2006, the retained attorney, having reviewed Mr. DeMarco's most recent production of documents in the personal injury litigation, wrote to Travelers' claim services director in order to provide her with his evaluation of Mr. DeMarco's claim as compared with that of Mr. Woscyna. The retained attorney estimated that Mr. DeMarco's claim had a value of approximately $885,000, including prejudgment interest   . He stated that he had also reviewed the records and the demand provided to Travelers by Mr. Woscyna's attorney, and he estimated that the value of that claim would be at least as high as that of the DeMarco claim. The retained attorney recommended to the claim services director that, after any still-outstanding information regarding claims for property damage and personal injury was collected, Travelers should notify potential claimants that the combined value of all claims would greatly exceed the policy limits. The retained attorney opined that [s]o long as we offer the policy for all claimants to share on a pro rata basis, there will be no `Asermely' problem; he premised that opinion on the fact that the combined demands of Mr. DeMarco and Mr. Woscyna greatly exceeded the policy limit, which fact led him to conclude that the case did not present an `Asermely' situation. [13] Approximately three months thereafter, on July 11, 2006, Travelers' retained attorney wrote to the attorneys representing Mr. DeMarco, Mr. Woscyna, and National Grid in order to officially confirm that Travelers Insurance Company is offering its remaining policy limit of $995,000.00    to be shared by your respective clients. [14] The letter from Travelers' retained attorney took no position as to how that sum of money should be divided; but it stated that, if the above-named claimants could not decide amongst [them-]selves how it should be divided, Travelers would file an interpleader action and seek to deposit the $995,000 amount into the registry of the court. On July 13, 2006, Mr. DeMarco's attorney responded to the July 11 letter from the retained attorney. [15] He pointed to the fact that Travelers had been aware of the severity of the collision since September of 2003. He then noted that, until it sent the letter of July 11, 2006, Travelers had not made any offers to settle during that almost three-year time span, despite the repeated attempts to settle that had been made on behalf of Mr. DeMarco. The attorney also noted that Travelers was aware that the personal injury trial was scheduled to begin on a date certain ( viz., September 18, 2006), and he stated that [t]he failure of [Travelers] to make a good faith effort to settle this claim within a reasonable period of time cannot now be cured by this eleventh hour attempt. The plaintiffs attorney further stated that he did not believe that Travelers' eleventh hour offer of the policy limits and its suggestion that the claimants decide amongst [them]selves how to divide it would discharge Travelers' obligation under [ Asermely ], or otherwise relieve it from its responsibility to pay damages and interest well above the policy limit. [16] On July 31, 2006, Travelers' retained attorney responded to the July 13 letter from plaintiff's attorney. He emphasized that plaintiff's attorney had limited himself to demanding the entire policy limits of $1 million, despite being aware of the fact that Travelers' policy limits were only $1 million and the fact that Mr. Woscyna had also been seriously injured and was making a claim under the policy. Travelers' retained attorney wrote that, as a result, Travelers and its insureds had been placed in an impossible situation because, in Travelers' view, Mr. DeMarco had never made any reasonable offer to settle in such a way that Travelers would be able to pay out the policy limits and not expose the assets of its insureds to other claims. The retained attorney further stated that he disagreed with the analysis of Mr. DeMarco's attorney as to whether or not Travelers [had] failed to make a good faith effort to settle this case; and he further expressed disagreement with Mr. DeMarco's attorney's assessment of the facts of this case as they apply to an analysis under the Asermely case or under R.I.G.L. Section 27-7-2.2. [17] The retained attorney wrote that he did not believe that Travelers was liable in excess of the policy limits; and he stated that, in view of Mr. DeMarco's demands, there would be no resolution other than proceeding to trial. He concluded his letter by stating: Perhaps you should study Asermely a bit more closely. [18] Then, on August 15, 2006, a little over a month before plaintiffs personal injury trial was to begin, Travelers commenced an interpleader action in the Superior Court for Providence County; Travelers simultaneously filed a motion requesting that it be allowed to deposit the policy limits into the registry of the court. On August 23, 2006, plaintiff's attorney responded to the July 31 letter from Travelers' retained attorney and offered one final time to settle with Travelers for the policy limits. He again noted that the DeMarco personal injury trial was scheduled to begin on September 18, 2006, and he stated that there is a very real possibility of this case exceeding [the policy] limit. He continued as follows: If the verdict does exceed that limit, we will do everything in our power to secure that judgment, including securing the judgment through the assets of Virginia Transportation. He stated that it was his position that Asermely would be applicable to the instant case, thereby strongly suggesting that Travelers could be liable to an extent beyond the policy limits. He further stated that Travelers had never offered the policy limits to Mr. DeMarco. The letter from plaintiff's attorney concluded as follows: [I]t would appear to be in your insured's [ sic ] best interest for you to reconsider your position as it relates to our past demands of February 2, 2004; February 25, 2004[;] and February 7, 2005. To that end, we, once again, consistent with Asermely, are demanding the One Million Dollars policy limit from Travelers Indemnity Company to fully resolve this matter as it relates to both your clients. The plaintiff's attorney stated that, in view of the fact that trial was scheduled to begin in less than a month, Travelers would have until August 30 to respond to his August 23 letter; he stated that, if there was no response, he would consider the demand rejected. He added that his clients would not discuss settlement after that August 30 date. On August 30, 2006, Travelers' claim services director wrote to plaintiff's attorney, noting that she was responding to the attorney's August 23 letter to Travelers' retained attorney. The claim services director stated: As we have previously informed you, as a result of the duty owed to our insureds, we cannot pay the entire policy limit to your clients. She noted that, if Travelers were to pay the policy limits to Mr. DeMarco, it would thereby expose its insureds to personal liability to satisfy the claims of Mr. Woscyna and National Grid. The claim services director further disagreed with the contention of plaintiff's attorney that Travelers had not offered its policy limits to Mr. DeMarco. She rather tersely stated: We have. Those funds are available to all claimants. Unfortunately, the claimants' claims greatly exceed the available limits, thereby precluding our ability to pay full policy limits to any single claimant. The claim services director also asserted that Travelers had responded to the past demands of Mr. DeMarco's counsel dated February 2 and February 25, 2004, and she stated that those responses were the only responses we could have provided under the circumstances. She further expressed her view that the letter of February 7, 2005 [did] not constitute a demand because it indicated that Mr. DeMarco had not completed treatment for his injuries. She informed plaintiff's attorney that, in order to resolve this dilemma, Travelers (1) had filed an interpleader action and [a] motion to deposit the entire policy proceeds of $1 million into the registry of the Superior Court and (2) had proposed mediation in order to arrive at a satisfactory division of the proceeds among all claimants. The plaintiff's attorney objected to Travelers' motion seeking leave to deposit the policy proceeds into the registry of the Superior Court, and a hearing on the motion was held on September 5, 2006. At that hearing, Travelers proposed that the court issue an order indicating that no party would be allowed to withdraw policy funds until a hearing or trial took place to determine the proper division of the fundsor until the parties themselves reached an agreement as to the division of the funds and released Travelers and its insureds from liability. Mr. DeMarco's attorney argued that the motion should be denied due to the fact that the personal injury trial against Travelers' insureds was scheduled to begin in less than two weeks. Mr. DeMarco's attorney explicitly indicated that he wanted to be able to pursue an Asermely claim if the trial resulted in a judgment in excess of the policy limits. The hearing justice ruled that interpleader was not warranted at that time because Travelers had a considerable interest in the outcome of the underlying personal injury litigation; and he denied Travelers' motion seeking leave to deposit the policy proceeds into the registry of the court. On the same day (September 5, 2006), Travelers' claim services director wrote to the attorneys representing Mr. DeMarco, Mr. Woscyna, and National Grid, confirming that they had agreed to participate in a mediation on September 7, 2006 in an effort to obtain a full release of all claims within the available limits. She stated that, if Travelers were not able to resolve all claims within the policy limits, it would proceed to settle claims individually and maximize the release of the insured[s] from as much potential liability as possible. The parties engaged in mediation on September 7, 2006, but it was unsuccessful. Then, on September 14, 2006, four days before the trial in plaintiffs case against Travelers' insureds was set to begin, Travelers' claim services director wrote to the parties offering to pay $550,000 to Mr. DeMarco and $450,000 to Mr. Woscyna, in exchange for a complete release from both claimants in favor of Virginia Transportation and Mr. Doire. She stated that the offer was contingent upon acceptance by both [Mr.] DeMarco and [Mr.] Woscyna. The claim services director concluded her letter by stating that, if both parties were not prepared to accept the proposal and release all claims, Travelers would continue with the pending Interpleader Action to let the [c]ourt determine how the liability insurance proceeds are to be distributed; she added that Travelers would be open to an alternative proposal from the claimants that might resolve all claims within the policy limits. Although Mr. Woscyna was prepared to accept the September 14 offer, Mr. DeMarco was not inclined to do so. In a letter dated September 15, 2006, Mr. DeMarco's attorney wrote to Travelers' claim services director to inform her that he and his client would not be accepting the settlement offer. He stated that the September 14, 2006 letter from Travelers was the first time in 3 years that Travelers has made a formal offer to achieve a settlement, and he added that we view this as another eleventh hour attempt by Travelers to avoid responsibility above and beyond your policy limits. The letter from Mr. DeMarco's attorney concluded as follows: Because no formal offer was ever made prior to September 14, 2006, we have and continue to invest considerable time, money and legal resources in preparing for the upcoming trial beginning Monday, September 18th. We are not now in a position to accept $550,000 to settle this case and focus all of our effort on the upcoming trial. B