There are many things to say about the rulings in the Szafarowicz case. Commerce Ins. Co. v. Szafarowicz, 131 N.E.3d 782 (Mass. October 1, 2019). A special feature of the case was discussed in an article posted here on October 22, 2019, and the background of the case has been discussed with unique insight into Insurance Coverage Law in Massachusetts by Nina Kallen, Esquire in her blog of that name, most recently on October 23, 2019.
I have struggled with ways to organize my own remaining thoughts about the reported decision in this case. Here is how I settled, for now, on organizing some of them.
1. Recovery under a stipulated settlement or "Consent Judgment" in this case was limited to policy limits because that's what the insureds and the claimant agreed.
The insureds and the deceased claimant's estate stipulated to settlement of the estate's Wrongful Death Action against the insureds. Although it appears not to be relevant to the stipulation, the fact that the settlement happened at all has everything to do with a couple of further facts by way of background here. The insureds were being defended by Commerce at the time under a reservation of rights to deny all coverage. Commerce also separately pursued a Declaratory Judgment Action before the underlying settlement was stipulated. (Commerce objected to the settlement.)
As a part of their stipulated settlement, the insureds and the estate in the Wrongful Death Action stipulated that the estate's recovery if any would be limited to the insureds' Commerce policy limits and that they, the defendants-insureds, would not face any other risk of damages other than the Commerce policy limits. Szafarowicz, 131 N.E.3d at 789. Not only did the estate stipulate to limiting recovery to policy limits. "The estate agreed that it would not seek to collect or enforce any judgment against the [insureds] beyond the amount payable under their insurance policy[.]" Szafarowicz, 131 N.E.3d at 789.
That is why the estate's potential recovery against Commerce was limited to the policy limits by the Supreme Judicial Court of Massachusetts: Anything else they could say would be dicta in the face of these facts. The facts of this case determined the outcome.
2. Recovery of policy limits was possible in this case even though there is no insurance coverage.
The Massachusetts Supreme Judicial Court allowed injured claimants, broadly speaking, to recover from defendants' liability insurance carriers so long as certain conditions were met. Those conditions are discussed below.
However, in the Szafarowicz case, by the time the Supreme Judicial Court ruled there had already been a judicial determination that Commerce had no coverage under the "optional" bodily injury liability coverage under its policy. Szafarowicz, 131 N.E.3d at 790-91.
To recover policy limits, which the Szafarowicz Court said it would allow theoretically, means that the injured claimant would recover under the policy. Yet in this case, there was already a determination that there was no coverage under the policy. Still the Massachusetts HIgh Court remanded for a determination in the lower courts under its theoretical framework for recovery of Consent Judgments, as discussed below.
That framework simply does not include proving insurance coverage for the loss. If it did, the Szafarowicz Court would not have remanded for a determination of anything in this case, where to say again there was already a judicial determination of no insurance coverage for the loss.
3. "How many angels can dance on the head of a pin?" Theoretically. The elements of recovery under a Consent Judgment in Massachusetts today.
Well, there was still the matter of whether Commerce would be liable for post-judgment interest on any part of the underlying Consent Judgment. So, the Massachusetts Supreme Judicial Court said that it was fashioning a rule to address that situation. But that is not what they actually did.
In Szafarowicz, the Court fashioned a rule for recovery under Consent Judgments generally:
Balancing these risks and benefits, we conclude that an insurer who defends a claim under a reservation of rights is bound by the amount of a judgment arising from a prejudgment settlement/assignment agreement where (1) the insurer is given notice of the settlement/assignment agreement and an opportunity to be heard by the court before judgment enters; (2) the insurer contests the judgment; and (3) the insured, after hearing, meets his or her burden of showing that the settlement is reasonable in amount.
Szafarowicz, 131 N.E.3d at 797.
The Court said, theoretically, that "the probability of a finding that the plaintiff's injuries were caused by an accident rather than intentional conduct ... may also be considered in determining the amount of a reasonable settlement." Szafarowicz, 131 N.E.3d at 798.
They said this despite the fact that, in this case, they previously said that on remand Commerce will not be bound here "to pay the damages determined at the assessment hearing, because it obtained a declaratory judgment that it was not obligated to pay these damages." Szafarowicz, 131 N.E.3d at 796.
In the final analysis, the Szafarowicz Court was against exposing carriers to recovery beyond policy limits even when Consent Judgments are successfully enforced against the carriers, at least in a case like this where the insureds and the injured claimant stipulated to that result. Except that liability carriers can be exposed to paying Consent Judgments even when they have no coverage under their policies for the loss at issue unless they previously obtained a judicial declaration of no coverage for the loss at issue, as in this unique case.
Whew. Complicated, isn't it? Maybe it became more complicated in Szafarowicz than it had to be. Who am I to judge?
Please Read The Disclaimer. ©2019 Dennis J. Wall. All Rights Reserved.
Comments