Court Opinion

ID: 9754145
Source: CourtListenerOpinion
Date Created: 2023-08-28 19:45:53.97307+00
Date Added: 2024-06-11T07:27:49.750798
License: Public Domain

Justice FLAHERTY,
dissenting.
I most respectfully dissent from the holding in this case for three reasons. First, the document signed by Mr. DeMar-co was a general release, and no amount of legerdemain or word craft by the majority can transform it into something it is not. Second, the execution of a release by De-Marco, absolving Mr. Doire and Virginia Transportation57 from any and all liability, effectively ended the case, leaving no claim of Doire against Travelers to be assigned. Third, the Court’s holding in this case is contrary to well-defined principles of public policy.
Is this a General Release?
A necessary underpinning to the majority’s reasoning is its conclusion that the general release signed by DeMarco should not be considered to be a general release at all, but a document from which the understanding of further litigation flows. In my opinion, this holding turns our well-settled jurisprudence on the interpretation of contracts in general, and releases in particular, on its head. It is also my opinion that this decision subjects insurance carriers to ambush by subterfuge, invites collusion, and clouds the settlement of serious cases in the future.58
*630It is striking to me that the majority apparently considers that there are only two parties whose interests were impacted here; DeMarco’s and Doire’s. This rather shortsighted view overlooks two important factors. First, the initial problem was caused by the fact that Doire had insufficient coverage to protect him from serious liability claims, and, second, Travelers paid approximately $550,000 and received a release of Doire’s liability to DeMarco. De-Marco’s assertion that this was a “gratuitous” payment, or that he would have signed the documents without being paid over one-half million dollars, rings hollow.
The majority purports to read the release and the assignment documents together to discern the intent and reach the perceived overall objective of DeMarco and Doire. To reach its conclusion, however, the majority must read each document separately, overlook the fact that the release absolved Doire of all liability, and give the assignment full effect as if the release did not exist. Moreover, there is no evidence in the record that Travelers ever saw the assignment document.
I also respectfully disagree with the majority’s reliance on Campione v. Wilson, 422 Mass. 185, 661 N.E.2d 658 (1996), as authority for the proposition that even a general release, as opposed to an agreement not to execute on a judgment, can be combined effectively with an assignment of a bad-faith claim against an insurer.
An examination of that case reveals stark factual differences from the case before us. In Campione, the plaintiff-decedent was killed by the defendant’s truck after his own vehicle had broken down in the breakdown lane of a highway. Campione, 661 N.E.2d at 659-60. Campione’s estate brought a wrongful death suit against O’Donnell Sand and Gravel, Inc., and a judgment, substantially in excess of O’Donnell’s insurance coverage, was entered. Id. at 660. In a series of documents, including an agreement for judgment, conditional releases, assignments, and settlement agreements, O’Donnell assigned to Campione’s estate all its rights to bring an action for negligence against two insurance agents because they had not obtained adequate insurance coverage for the trucking company. Id. at 660-61.
A trial court dismissed the actions against the agents, but the Supreme Judicial Court reversed.59 Campione, 661 N.E.2d at 659. In doing so, the court recognized that this was not a case in which an insurer was accused of bad faith after the settlement of a case, as is the case here. Id. at 660-61. In fact, the *631carrier, which had paid out its entire policy in the underlying wrongful death case, was not even a defendant in the action precipitated by the assignment to Campione. Id. at 661. Rather, it was the independent agents who were alleged to be negligent because they had secured a policy with inadequate coverage for O’Donnell. Id. at 660, 661-62. For these reasons, Cam-pione is not particularly relevant to the case before us.
The majority also relies heavily on Pinto v. Allstate Insurance Co., 221 F.3d 394 (2nd Cir.2000). In that case, an excess verdict was returned against an insured after the carrier stubbornly refused to settle a personal-injury claim brought by a single claimant within the insured’s policy limit. Id. at 396-98. The injured party and the insured exchanged a general release and assignment of the insured’s bad-faith claim against his carrier. Id. at 398.
In deciding against the carrier, the Second Circuit noted that the normal way to preserve such a claim was by a covenant not to execute, and not by a general release. Pinto, 221 F.3d at 403. However, observing that New York’s highest court had not addressed the issue, the Second Circuit then predicted that the Court of Appeals for the State of New York probably would hold that it was appropriate to give force and effect to the intent of the parties, even if their intentions were diametrically opposed to what they said in the settlement documents.60 Id. at 403-04. The Pinto case is clearly in the minority, and I cannot accept its reasoning.
Our well-settled rules of contractual interpretation require that the intent of the parties is best determined by the wording of the documents that they drafted, agreed upon, and executed. See Westinghouse Broadcasting Co. v. Dial Media, Inc., 122 R.I. 571, 581 n. 10, 410 A.2d 986, 991 n. 10 (1980) (“[T]he intent [the Court] seek[s] is not some undisclosed intent that may have existed in the minds of the contracting parties but is instead the intent that is expressed in the language of the contract.”) (citing Theroux v. Bay Associates, Inc., 114 R.I. 746, 339 A.2d 266 (1975); Flanagan v. Kelly’s System of New England, Inc., 109 R.I. 388, 286 A.2d 249 (1972)). Only when the document is absurd on its face (and no one has raised that argument here) or ambiguous do we rely on extrinsic factors to give context to the parties’ intent.61 See Gorman v. Gorman, 883 A.2d 732, 739 n. 11 (R.I.2005) (“Under established contract law principles, when there is an unambiguous contract * * *, the terms of the contract are to be applied as written.”); Mallane v. Holyoke Mutual Insurance Co. in Salem, 658 A.2d 18, 20 (R.I.1995); Aetna Casualty & Surety Co. v. Sullivan, 633 A.2d 684, 686 (R.I.1993).
Those rules apply in particular to releases; this Court consistently has applied the same rules of construction to release documents as it has to other forms of contractual agreements. See Young v. Warwick *632Rollermagic Skating Center, Inc., 973 A.2d 553, 558 (R.I.2009) (“A release is a contractual agreement, and the various principles of the law of contracts govern the judicial approach to a controversy concerning the meaning of a particular release.”).
In attempting to divine the possible motives of DeMarco and Doire and further in construing the language of the DeMarco release and assignment together, the majority reaches a conclusion that is hostile to our well-settled precedent. I respectfully disagree with the majority’s conclusion that this is a case of form over substance; the essence of the substance is the release, which in clear language absolved Doire from any and all liability. DeMarco does not dispute that he intended to completely release Doire from liability from the excess judgment, nor does either party disagree that Doire assigned any claims he might have against his insurer to DeMar-co. Instead, the vexing problem that remains is that DeMarco, an assignee who merely stands in the shoes of Doire, has no remaining claim to pursue against Travelers because the general release vitiated that claim. Although I am sympathetic to DeMarco’s plight, the future implications of construing a general release as something other than a general release are too significant to ignore.
What Was Assigned?
In the event that a claim is made against an insured, the carrier must defend and indemnify the insured for any judgment entered against the insured to the extent of its policy limit. See 3 Jeffrey E. Thomas, New Appleman on Insurance Law Library Edition, § 16.06[1] at 16-145 (Lexis-Nexis 2010) (“Liability insurers are often said to have two principal contractual duties: the duty to defend and the duty to indemnify. * * * The duty to defend refers to the insurer’s obligation to pay the expense of defending its policyholder in a lawsuit. * * * The duty to indemnify, by contrast, refers to the insurer’s obligation to pay damages awarded against its insured.”). The duties of the insurer are contractual in nature; however, this Court has held, and the majority correctly affirms in this case, that the insurer also is burdened with a fiduciary duty to refrain from placing its own interest ahead of that of the insured, and to endeavor in good faith to resolve claims against its insured within the limits of the policy coverage, thereby avoiding uncovered risk to the insured. Asermely v. Allstate Insurance Co., 728 A.2d 461, 464 (R.I.1999); Medical Malpractice Joint Underwriting Association of Rhode Island v. Rhode Island Insurers’ Insolvency Fund, 703 A.2d 1097, 1102 (R.I.1997). As the majority has adroitly reasoned, that burden becomes exponentially more difficult when, as was the situation here, there are multiple substantial claims that threaten to exhaust policy resources. See Peckham v. Continental Casualty Insurance Co., 895 F.2d 830 (1st Cir.1990); Asermely, 728 A.2d at 464.
What occasions my departure from the majority’s reasoning here, however, is the fact that both claimants, DeMarco and Mr. Woscyna, released the insured, Doire, from any and all claims. Thus, Travelers fulfilled its two duties under its contract of insurance. It is beyond dispute that Travelers owed no duty to DeMarco, a stranger to the insurance contract; and in making any claim against the carrier, DeMarco must stand in the shoes of Doire.
There is no question that, in some circumstances, an insured properly may assign claims that it may have against its carrier to another. In Mello v. General Insurance Co. of America, 525 A.2d 1304, 1306 (R.I.1987), this Court held that an insured’s bad-faith claim against her insurer could be assigned to a claimant. But, it *633is significant to note that in Mello, a case that was decided before this Court’s adoption of the new rule set forth in Asermely, there had been no release of the insured’s liability. See Mello, 525 A.2d at 1305. In Mello, the insurer had refused to settle a claim brought by a single claimant for a sum that was within the policy limit. Id. When a jury returned a verdict against the insured that exceeded the insured’s coverage, the carrier simply satisfied the verdict to the extent of its coverage and walked away, leaving the insured personally exposed to the remainder of the judgment. Id. The insured then assigned its rights against its own carrier to the judgment creditor, who promptly brought suit against the carrier. Id. A hearing justice of the Superior Court granted summary judgment to the insurer, reasoning that the bad-faith claim was a personal injury that could not be assigned. Id.
On appeal, this Court reversed and vacated the judgment. Mello, 525 A.2d at 1306. We held that “in certain limited circumstances the insured’s right may be assigned. The facts of the case at bar constitute such limited circumstance.” Id. In deciding in favor of the assignee, the Court further said:
“We believe that within the facts of this case this assignment was justified. We therefore hold that an insured may assign its bad-faith claim against its insurer to the insured claimant for the limited purpose of recovering the difference between the judgment received against the insured and the insurance-policy limits.” Id.
The situation confronting the Court in Mello was dramatically different from the situation present in this matter because in that case the claimant had not signed a release, and, therefore, the insured still was exposed to the claimant for a substantial excess judgment.62 Those facts are simply not present here. DeMarco has released Doire from any and all liability, fully and unconditionally, leaving Doire altogether “off the hook.”63
I agree with the many courts that have drawn a distinction between the permissible assignment of those cases resolved by a covenant not to execute on a judgment, as was the case in Mello, and a general release, as is the case here. See, e.g., Red Giant Oil Co. v. Lawlor, 528 N.W.2d 524, 529 (Iowa 1995) (“[A] covenant not to execute * * * is merely a contract, and not a release, such that the underlying tort liability remains and a breach of contract action lies if the injured party seeks to collect its judgment. Thus, the tortfeasor is still ‘legally obligated’ to the injured party, and the insurer still must make good on its contractual promise to pay.”) (emphasis added); Stateline Steel Erectors, Inc. v. Shields, 150 N.H. 332, 837 A.2d 285, 290-91 (2003) (holding that summary judgment in favor of the insurer was improper because insured and third party executed an assignment accompanied by a covenant not to sue, rather than a release, and noting that “[ujnlike a release, a cove*634nant not to sue does not relinquish a right or claim, or extinguish a cause of action”) (internal quotation marks omitted); Kobbeman v. Oleson, 574 N.W.2d 633, 636 (S.D.1998) (considering whether to give effect to a covenant not to execute accompanied by an assignment and concluding that “[t]he most pragmatic approach looks to the language of the covenant to find whether a tortfeasor remains legally obligated on a judgment”) (citing Lancaster v. Royal Insurance Co. of America, 302 Or. 62, 726 P.2d 371, 372 (1986)).64 When, as here, a general release has been executed in favor of the insured, there simply is nothing left to be assigned.
Public Policy Considerations
In its decision in this case, the majority places itself squarely within the minority of jurisdictions that have addressed this issue. The majority of jurisdictions addressing the issue have decided explicitly or implicitly that a general release extinguishes all liability and thereby obviates any assignment of claims by the insured to another party. See, e.g., Red Giant Oil Co., 528 N.W.2d at 529; Stateline Steel Erectors, Inc., 837 A.2d at 290-91; Lancaster, 726 P.2d at 372; Kobbeman, 574 N.W.2d at 636. In arriving at their decisions, most of those jurisdictions have weighed serious public policy considerations regarding the potential for collusion.65 See, e.g., Red Giant Oil Co., 528 N.W.2d at 530 (determining that a covenant not to execute on a judgment entered against tortfeasor in exchange for an assignment of the tortfeasor’s claims against an insurance agent was not inherently collusive because it could be set aside if the agent raised and proved collusion as a defense); Stateline Steel Erectors, Inc., 837 A.2d at 288-89 (upholding an assignment of rights accompanied by a covenant not to sue in part because the risk of collusion was low); Kobbeman, 574 N.W.2d at 636-37 (holding that a settlement between the injured party and the insured that included a covenant not to execute and assignment of insured’s cause of action against insurance agents was not “intrinsically collusive”).
Those public policy considerations are particularly illuminated by the facts present in this case. Here, DeMarco had obtained a $2.8 million judgment against Doire. There is no question that Travelers was faced with the contractual obligation to pay the remainder of its policy, $550,000, to DeMarco in partial satisfaction of the judgment. It is further indisputable that had that been done, and in the absence of a release, DeMarco was free to obtain an assignment of whatever viable claim Doire may have had against Travelers.
It is very clear from the record that Doire and DeMarco had an amicable relationship both before and after the accident, and that DeMarco executed a general release of liability as an accommodation to Doire so that Doire could avoid bankruptcy. Indeed, DeMarco’s memorandum of law accompanying his motion for summary judgment noted the following:
*635“DeMarco negotiated a resolution with [Doire] and its corporate counsel that in exchange for an assignment of all [Doire’s] rights against Travelers * * * and others, DeMarco would execute a release in favor of [Doire] so that [Doire] could avoid having to file bankruptcy. Travelers was not involved in the negotiations between [Doire] and DeMarco, nor was it ever released.” (Emphases added.)
In my opinion, this is the very type of collusion that forms the basis for distinguishing between covenants not to execute and general releases of liability. In disregard of the sound public policy forbidding assignments accompanied by the execution of a general release, this Court’s decision in this case invites linguistic gamesmanship between nominally adverse but nonetheless cooperating parties to a lawsuit. Inevitably, it will make the settlement of serious cases in which adequate insurance coverage is an issue much more difficult.
Conclusion
For the reasons set forth above, I would have vacated the judgment in favor of DeMarco and ordered the entry of judgment in favor of Travelers.
APPENDIX
*636GENERAL RELEASE
KNOW ALL MEN, THAT WE, WAYNE DEMARCO, LEESA DEMARCO, BRAEDYN DEMARCO and CHAYCE DEMARCO (collectively, the “Releasors"), m 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 COS?., a Rhode Island corporation, their successors and assigns (collectively, the “Releasees"), any and all manners of action, causes of action, debts, dues, claims and demands, both in law and equity which against said Releasees said Releasors ever had, now have, or in the future may have for or by reason or means of any matter or thing from the beginning of the world to the day of the date of these presents 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, Travelers Indemnity Company, Travelers St. Paul, Travelers Insurance Company, or any of its affiliates (collectively, “Travelers”) ftwn 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.
APPENDIX A
*637THIS GENERAL RELEASE shall be deemed to be made under and shall be governed by and construed and enforced in accordance with the laws of fhc State of Rhode Island, without reference to conflict of law rules.
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STATE OF RHODB ISLAND COUNTY OF PROVIDENCE
In Providence, on the 17* day of November, 2006, before me personally appeared Wayne DeMarco, to me known and known by me to be the person executing the foregoing Instrument, and he acknowledged said idstr^mj^t by him'pxecuted.to be his See act and deed.
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WITNESS:
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STATE OF RHODE ISLAND COUNTY OF PROVIDENCE
In Providence, on the 17"' day of November, 2006, before me personally appeared Leesa DeMarco, to me known and known by me to bathe person executing the foregoing instrument, and she acknowledged said instrument Ij^hbr ok^uted to bp her free act and deed.
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*638Assignment
For good and valuable, consideration, and in consideration of the General Release executed contemporaneously herewith, the receipt and adequacy of which are hereby acknowledged, the undersigned, Leo Doire, individually, and Virginia Transportation Corp., a Rhode Island corporation, and each of them (collectively, the “Assignors”), do hereby assign to Wayne DeMarco, Leesa DeMarco, Chayce DeMarco and Braedyn DeMarco, and each of them (collectively, the “Assignees”) all of the rights, title and interests of Doire and Virginia and each of them in and to any and all claims and causes of action that either or both of them may have, including any and all rights to indemnity, contractual or equitable, which they now have, or ever had, against each of Travelers and counsel provided to Doire and Virginia by Travelers, being Michael DeLuca and the firm of Gidley, Sarli & Marusak, LLP (“appointed counsel”) in any way related to the conduct of Travelers in the handling of the claims of the Assignees, at all times subsequent to die motor vehicle accident that resulted in the litigation brought in the Providence County Superior Court entitled Wavne DeMarco et al vs. Leo R Doire and Virginia Transportation Coro.. Civil Action No. 04-1171(the “litigation”) and the manner in which Travelers and appointed counsel discharged their respective obligations to Doire and Virginia, including but not limited to ail claims for fraud, breach of contract, breach of all duties of good frith and fair dealing, bad faith, further including but not limited to any and all Asermelv claims, so called, malpractice and negligence. This Assignment shall also operate to assign to the Assignees any and all claims that the Doire and Virginia may have against any insurance agents or insurance professionals.
Assignors agree to cooperate fully in good frith as a material part of this Assignment with the Assignees and their counsel in efforts to exercise these assigned rights as well as any rights against parties not released.
This Assignment shall be deemed to be made pursuant to and governed by and construed and enforced inaccordance with the laws of the State of Rhode Island, without reference to conflict of law rules.
IN WITNESS WHEREOF, each of the Assignors has caused this Assignment to be duly executed as of the 17th day of November, 2006.
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APPENDIX B
*639STATE OF RHODE ISLAND COUNTY OF PROVIDENCE
In providence in said county on the J7th da; personally appeared Leo H.C. Doire, to me executing the foregoing instrument and he a< executed to be his free act and deed. pvember, 2006, before me own by me to be the party ¡fed said in itrument by him
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WITNESS:'
Virginia Transportation Corp.
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STATE OF RHODE ISLAND COUNTY OF PROVIDENCE
In Providence in said county on the 17th day of November, 2006, before me personally appeared Leo H.C. Doire, President of Virginia Transportation Corp., to me known and known by me to be the party executjjjg-the foregoing instrument for and on behalf ofVirginia Transportation Corp., and he acknWáé&gedsaid instrument by him executed to be his tree act and deed in said capacity aiípthe frebáct and deed of Virginia Transportation Corp..
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. While Doire and his company, Virginia Transportation, both were insureds in this case, for the ease of the reader, I refer to those parties collectively as Doire.

. It is axiomatic that a central principle of our legal system is facilitating predictability. In its opinion today, the majority weakens that predictability by holding that a general release (which the parties did intend to serve as a total release of liability by one party of *630the other), may not be that which it purports to be. In his article on Sir Edward Coke and the origins of judicial review, Allen Dillard Boyer noted:
" 'Certainty is the mother of quietness and repose,’ [Coke] wrote. On another occasion he noted that '[i]t is a miserable bondage and slavery when the law is wandering or uncertain.' * * *
"The certainty to which Coke aspires is not the specious certitude of the legal meta-physician. Rather, it looks toward the economist’s observation that the definition of rights is necessary for orderly commerce, because only what is clearly defined can be accurately valued or meaningfully exchanged. From the legal perspective, this ordering is reflected in the ability of attorneys and clients to predict the resolution of foreseeable disputes." Allen Dillard Boyer, "Understanding, Authority, and Will Sir Edward Coke and the Elizabethan Origins of Judicial Review, 39 B.C. L.Rev. 43, 59 (1997) (emphasis added) (quoting Sir Edward Coke, Preface to 6 Reports (1607)).

. In so doing, the court recognized that most courts balance policy considerations when deciding suits premised on this type of maneuvering, especially in light of the risk of collusion. Public policy rationales in cases involving assignments and releases or covenants not to execute are discussed infra.

. The dissenting justice in that case said that he was not surprised that there was no New York law on what appeared to him to be such an obvious question, and that the majority's conclusion served to create value in the assignment. Pinto v. Allstate Insurance Co., 221 F.3d 394, 409 (2nd Cir.2000) (Jacobs, J„ dissenting). Characterizing the majority’s holding as “alchemy,” the dissent noted that the Court cited "no authority from any jurisdiction to support its view that the excess judgment survives the release for any purpose.” Id.

. In working its way to its conclusion, the majority has extracted from the record several correspondences (only some of which are contemporaneous to the assignment and release), and, in my opinion, inappropriately used them to deduce the intent of the parties when they executed the assignment and release.

. The claimant in Mello v. General Insurance Co. of America, 525 A.2d 1304, 1306 (R.I.1987), agreed not to levy execution on the judgment against the insured in exchange for the insured’s assignment of his claim against the insurer. A covenant not to execute is notably distinct from a general release because the executing party does not relinquish his right to execute on the judgment but merely refrains from enforcing it. On the other hand, a releasor explicitly gives up both present and any future rights against the released parties.

. The Mello Court and the majority in this case both rely on Etheridge v. Atlantic Mutual Insurance Co., 480 A.2d 1341 (R.I.1984); but in that case, there also was no release absolving the insured from further liability of any kind.

. The majority observes that these cases involve instances in which the assignment and release (or covenant) was executed prior to the entry of judgment in the underlying case. While this is an accurate observation, I do not think that the risk of collusion evaporates simply because judgment has been entered, as occurred here. It is, therefore, a distinction without any rational difference.

. Indeed, when it approved of the assignment in Campione, the Supreme Judicial Court acknowledged that most courts balance policy considerations when deciding similar suits and specifically cited the low risk of collusion given the facts in that case. Campione v. Wilson, 422 Mass. 185, 661 N.E.2d 658, 661 n. 10 (1996).