Court Opinion

ID: 9791913
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:20:24.206246+00
Date Added: 2024-06-11T07:37:39.340076
License: Public Domain

MONTGOMERY, Justice (specially concurring). I concur in the result. I agree that the trial court did not err by refusing to give the jury a modified UJI 1825 instruction. Exum v. Ferguson holds that UJI 1825 is not applicable where joint tortfeasors are not involved, 97 N.M. at 125, 637 P.2d at 556. This does not answer the question whether the jury should be instructed as to a settlement by a previous defendant when the case proceeds to determine the remaining defendant’s breach of contract, but I would hold that the remaining defendant’s entitlement to a credit for the other defendant’s settlement is a question of law. The credit, if any, should be applied by the court, not the jury. Is the remaining defendant entitled to a credit for the settlement previously made with another defendant? I do not believe that this question can be answered, as this Court answered it in Exum, by simply classifying the claim against the remaining defendant as a contract claim rather than a tort claim and the defendants as severally liable rather than liable as joint tortfeasors. The question should instead be answered by identifying and evaluating the relevant policies in favor of and opposed to each answer and deciding which policy or policies should be given primacy in this case. The first policy is that against awarding a claimant compensation that exceeds his losses — the policy against duplicate recovery. This is a venerable policy in American law. See, e.g., Hale v. Basin Motor Co., 110 N.M. 314, 795 P.2d 1006 (1990) (citing Hood v. Fulkerson, 102 N.M. 677, 680, 699 P.2d 608, 611 (1985)); W. Keeton, D. Dobbs, R. Keeton & D. Owens, Prosser and Keeton on the Law of Torts § 48, at 330 (5th ed.1984) [hereinafter Prosser & Keeton]. It clearly is being denied effect in this case. The plurality speculates that, had the claim against Aviation gone to the jury it might well have awarded McConal additional damages. However, there is no indication that the jury would have done so. McConal sued Commercial for the costs of repairing its airplane, transportation and storage charges, and interest on a loan. The jury’s verdict awarded McConal only slightly more than the requested damages. Although McConal refers in its brief to other amounts which it might have claimed from Aviation, we are pointed to nothing in the record indicating that McConal’s loss was other than the single, indivisible, unitary loss which Commercial alleges it was. Had the case gone to the jury against both defendants, the jury would have returned a verdict against one and exonerated the other. McConal concedes that the claims asserted against Commercial and Aviation — a claim for breach of a contract of insurance and a claim for negligent failure to procure insurance, respectively— were mutually exclusive. Since the case proceeded against only one defendant, what is the justification for allowing the plaintiff to retain more than the amount of its damages? The policy against duplicate recovery, while no doubt strong and longstanding, does admit of exceptions. One of those exceptions — perhaps the most pervasive— is provided by the collateral source rule.1 (I shall return below to consideration of the policy underlying that rule.) Since the policy has exceptions, one might wonder what the reason is for the policy itself. Is the law so niggardly in its conferral of benefits and recognition of rights that it simply cannot stand to see a claimant receive more than his or her out-of-pocket losses, no matter what the circumstances? Again, the collateral source rule stands as an obstacle to an across-the-board enforcement of any such penurious policy. It is commonly assumed that the policy against duplicate recovery prevents unjust enrichment, see, e.g., Prosser & Keeton at 330; but this only raises further questions: What is “enrichment,” and when will it be deemed “unjust”? Another relevant policy is the one relied on in the plurality opinion — the policy favoring settlements. The theory is that if the nonsettling defendant knows that its liability will be reduced because of the previous settlement, it will have no incentive to make a settlement itself; it will have every incentive to gamble on a favorable outcome at trial, and the policy favoring settlements will thereby be frustrated. Looked at from the standpoint of the non-settling defendant, this theory probably makes sense. However, from the standpoint of the claimant the opposite is probably true. If the claimant knows that the previous settlement will be credited to any judgment against the nonsettling defendant, the claimant will have every reason to settle for as much as he or she can get; if, on the other hand, the settlement is not credited, the claimant will have every reason to “go for broke” and press the case to trial against at least one defendant. A victory at trial will mean no reduction, whereas a loss will leave the claimant at least partially compensated through the settlement(s) with the previous ■ defendants). I hesitate to endorse a result in this case that fuels the fire in lawsuits of this sort and encourages claimants to bring as many claims2 as they can devise against as many defendants as they can find and then proceed to settle with each defendant in turn, making a settlement that, among other things, finances the litigation against the remaining defendants) and enables the claimant to gamble for the big stakes. However, I conclude that the answer to the question whether settlement is encouraged or discouraged by crediting the amount of the first settlement against any later judgment probably is neutral and really depends on the size of the settlement in relation to the nonsettling defendant’s exposure and the claimant’s potential recovery. If the previous settlement is relatively large, as in this case, then crediting it against an ultimate recovery diminishes the remaining defendant’s incentive to settle and correspondingly increases the pressure on the claimant to compromise, rather than risk the cost of going to trial when the marginally greater recovery will be reduced if the claimant is successful. On the other hand, if the amount of the settlement is small in relation to the exposure and potential recovery, then crediting it does not materially lessen the claimant’s risk in going to trial and provides the nonsettling defendant little incentive to reduce his own risk by making a settlement before trial. Still another policy in the mix is that which underlies the collateral source rule: the policy that a wrongdoer should not benefit from a fund provided by a collateral source and that, as between an innocent plaintiff and a culpable defendant, if one party is to benefit from a fund received from another source, it is preferable to allocate the benefit to the innocent party. In this case, it is clear that McConal’s loss will be compensated in full. The only question is whether the $40,000 paid by Aviation will augment McConal’s recovery or will reduce Commercial’s liability. I answer this question by resorting to the policy of expecting (and therefore, in the context of this case, requiring) the insurance company and the agent-broker to get their act together. McConal bought and paid for property damage insurance. The insurance company denied liability, pointing the finger at the agent; the agent claimed that it was not responsible and that, at least by implication, it had not failed in its duty to procure insurance from the insurer. Meanwhile, the insured was not compensated for its loss and had to commence litigation. It had done everything required of it to see that its property was insured; the insurer and the agent between them evaded responsibility and placed the onus of going forward on the insured. The insured had to undergo the delays, inconvenience, uncertainties and expense of litigation; the insurer and the agent between them could keep the insured’s money until they either voluntarily settled or the court told one of them to pay. Under these circumstances it does not seem unreasonable to require the insurer, Commercial, to pay what it contracted to pay and to allow the insured, McConal, to keep what the agent, Aviation, voluntarily contributed in order to settle its alleged liability. If there must be a windfall certainly it is more just that the injured person shall profit therefrom, rather than the wrongdoer shall be relieved of his full responsibility for his wrongdoing. We think we may judicially note that notwithstanding that the law contemplates full compensation, incidental losses and handicaps are suffered in a great number of * * * cases which are not, and cannot be, fully compensated. Grayson v. Williams, 256 F.2d 61, 65 (10th Cir.1958). See also Helfend v. Southern Cal. Rapid Transit Dist., 2 Cal.3d 1, 12, 84 Cal.Rptr. 173, 180, 465 P.2d 61, 68 (1970): [T]he plaintiff rarely actually receives full compensation for his injuries as computed by the jury. The collateral source rule partially serves to compensate for the attorney’s share and does not actually render “double recovery” for the plaintiff. The insurance company in this case, seeking a judicial determination as to the existence of coverage under its policy, might not fit the classical picture of the “wrongdoer” who is denied an offset of the benefit under the collateral source rule. However, Commercial and Aviation between them did force McConal to endure the “losses and handicaps” entailed by the delay in payment and the necessity for litigation. One of these losses — not insignificant in amount, I have no doubt — was the attorney’s fees. Under the policy of the collateral source rule — that the “windfall” is to be allocated to the innocent claimant rather than the arguably culpable defendant who a jury has determined breached its contract — I concur in giving the plaintiff the “duplicate recovery” realized in this case.  . It is widely believed that the collateral source rule has little or no application to contract claims. See, e.g., Restatement (Second) of Contracts § 347, comment e (1979); D. Dobbs, Handbook on the Law of Remedies § 8.10, at 587 (1973). For an exhaustive demonstration that this is not correct, see generally J.G. Fleming, The Collateral Source Rule and Contract Damages, 71 Calif.L.Rev. 56 (1983).   . E.g., a claim against one defendant for negligence, a claim against another for an intentional tort, a claim against another for breach of warranty (contract), and a claim against still another for strict liability.