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In Chaichian v. Sentinel Ins. Co., No. 1:16-cv-1026, 2017 WL 4891534 (W.D. Ark. October 30, 2017) (Hickey, United States District Judge), the pro se plaintiff signed a "confidential release" in settlement, was tendered a check to fund the settlement, and also received a sealed notice of dismissal of her case, with prejudice, prepared by the defendants' lawyers.
To say again, the release which the pro se plaintiff signed is under wraps. It is sealed from public view. That release apparently contains the terms of the settlement agreement. Still, it is sealed.
To say again also, the defendants' attorneys prepared a notice of dismissal with prejudice for the pro se plaintiff to sign. It is also under wraps. It too is sealed.
After all that, the plaintiff balked at these proceedings. She had the apparent temerity (even gall!) to say that the defendants' lawyers promised to pay her more money than what was in the check.
So, she filed a motion to enforce the settlement. Her motion was denied.
The defendants filed a motion to enforce what they said was the settlement, and they filed their motion under seal away from public view. Their motion was granted.
And the defendants also filed a motion to strike the plaintiff's motion to enforce the settlement. It too was secret. It too was granted.
However, the District Judge made it clear that her ruling and the magistrate's report and recommendations were based on evidence only they and the parties (presumably including the pro se plaintiff) had ever seen:
Judge Bryant’s Report and Recommendation concludes that this case should be dismissed with prejudice. Judge Bryant bases this recommendation on a review of the settlement documents, filed with the Court under seal, which do not reference an additional settlement payment.
(Emphasis supplied.) We have their words to take for what was in the settlement documents, I suppose, since they were filed with the Court under seal as the District Judge said.
But in truth we have more than that. The U.S. Constitution requires that when evidence is used by a judge to make a ruling against someone, then that evidence must be open to the public.
There is another reason which does not necessarily come from the Constitution. It comes from reality. In reality, it is the public that pays for the court system with their federal tax dollars; private wealthy litigants do not fund it.
In the meantime, federal magistrates and federal judges make rulings using secret evidence, and not just in this case.
Dennis Wall is currently at work on his fifth book, which will address how concealed evidence and secret settlements take our money, foreclose on our homes, and change our lives.
A liability carrier's decisions to simultaneously defend its policyholder under a reservation of rights, seek declaratory judgment of no coverage, and settle underlying claims against the policyholder, did not bar a bad faith claim nor claims under the Kentucky Unfair Claim Settlement Practices Act and the Kentucky Consumer Protection Act, Kentucky's highest court held in Indiana Ins. Co. v. Demetre, 527 S.W.3d 12 (Ky. 2017).
Last week, I wrote about a decision in California that followed the view that a formal demand to settle is not necessary before a liability carrier can be held liable for bad faith in settlement. See the article posted here on June 27, 2017.
This week, I report that the parties have agreed to vacate the U.S. District Court's conclusions of law and findings of fact in that case, and the District Judge granted their relief. The dates are interesting of when all this happened.
The District Judge granted the relief on April 28, 2017.
Westlaw says that the order was filed on May 1, 2017.
Yet my own Keycite in June 2017 did not turn up this ruling, and it could not have, because this ruling was not posted on Westlaw at that time.
Another "DATE" is appended to the Westlaw report of this decision: "May 18, 2017." I have no idea what this "DATE" means. I can speculate with the best of them, as they say, and I wonder if that is perhaps the date that the Met attorneys identified in the report asked for the order to be published in Westlaw. No other attorneys are identified in the Westlaw report, so perhaps that is why only the Met attorneys are identified in it, namely, because they are the ones that asked for Westlaw to publish this order. See Metropolitan Prop. & Cas. Ins. Co. v. Hedlund, No. 2:16-cv-00352-MCE-DB, 2017 WL 2609602 (E.D. Cal. April 28, 2017?).
It stands to reason that Met might not want the original decision to stand; in it, Met was held responsible for the underlying judgment of $5 million, plus interest, because Met acted in bad faith in negotiating settlement of the underlying case.
The disappearance of that decision might be premature, however. Its disappearance is a tale of two settlements. The only party revealing the tale is Met, based on its pleadings in the District Court file.
The first settlement.
The underlying case was filed by claimant Magnuson against Met's insureds, Hedlund and Sah. Magnuson was injured in an automobile accident when the car he was riding in was hit by a car driven by Hedlund and owned in part by Sah. The underlying case was settled by a "non-collusive stipulated judgment" of $5 million, Met wrote in its District Court complaint. (Metropolitan Prop. & Cas. Ins. Co., Complaint for Declaratory Relief, Doc. 1, ¶ 21 at page 6, filed 02.18.16 [E.D. Cal. No. 2:16-cv-00352].) Download Met Prop & Cas Ins Co v. Hedlund Dkt No. 1 Met Complaint Filed TBD (E.D. Cal. No. 2.16.cv.00352).
After the complaint was filed in the District Court, the District Judge made findings of fact displaying that Met acted unreasonably in the eyes of the District Judge. The Judge also entered conclusions of law that Met's conduct was actionable bad faith and for that reason Met would be required to indemnify its insureds for the $5 million underlying judgment "without regard to its policy limits, ... including interest accruing at the legal rate[.]"
Met appealed. While Met's appeal was pending, the parties reached their second settlement.
The second settlement.
The basis for Met's appeal is unclear from what is publicly available in the electronic court file. However, clearly Met was concerned with the timeframe of the dec action in which it would ultimately be declared that Met had acted in bad faith in the underlying case.
During the pendency of the dec action in the District Court, Met contended that the complaint in the District Court limited the scope of the action to "Met P&C's alleged actions or omissions between October 5, 2012 ... and, at the latest, November 29, 2012[.]" (Id., at p. 1.) Met may have contended that that was what the complaint alleged, but that is not exactly what the complaint alleged. Anyway, there was probably an element of risk for all sides. And there was no counterclaim to put forward another claim based on the key events.
The District Judge certainly went on to consider events after November 29, 2012 in his finding of facts displaying as he said, Met's unreasonable settlement conduct, which were part of the District Judge's reasons for concluding that Met had acted in bad faith under applicable law. The District Judge, it should be noted, found several facts on matters that were alleged in the complaint after November 29, 2012.
So, Met appealed and during this time arranged a second settlement with Magnuson, Hedlund, and Sah. This time, Met would file a motion that the others agreed they would not oppose. Met filed its "UNOPPPOSED MOTION" to vacate the District Judge's findings of fact and conclusions of law. (The title including all caps and underlining is Met's.) The motion was filed on April 10, 2017. (Id., Doc. 67.) Download Met Prop & Cas Ins Co v. Hedlund Dkt No. 67 Met n UNOPPOSED M Vacate Filed 04.10.17 (E.D. Cal. No. 2.16.cv.00352). In it, Met revealed what it truly wanted, arguing that "the parties desire to avoid potential preclusive effect." (Id., at p. 5.)
The next day, the lawyers for Magnuson, Hedlund and Sah filed what they styled a "Notice of Non-Opposition to Plaintiff's Motion." (Id., Doc. 68.) Download Met Prop & Cas Ins Co v. Hedlund Dkt No. 68 'Ds' Statement of Non-Opposition to Met UNOPPOSED M Vacate Filed 04..17 (E.D. Cal. No. 2.16.cv.00352). The text is no longer than the title, really. I have never seen a "Non-Opposition" before, at least I have never seen anything called that, and filed so quickly. I sent an EMail to the two lawyers who signed it, asking if they had been able to read Met's motion before they filed their "Non-Opposition." I have not yet received a reply.
So, there you have everything that can be known from the court file. Perhaps the lawyers for Met, Magnuson, Hedlund and Sah know more, but they do not seem to be telling. Perhaps Met and the others know something, but they do not seem to be telling, either.
Whether or not we know any more about why the District Court's conclusions of law and even his findings of fact are purportedly vacated, we know this much: The District Judge's opinion makes a fine brief or memorandum outlining the law for any case of similar facts.
Whenever there is a future case against an insured, in which an injured claimant reasonably evidences her, his or its interest in settlement, the liability carrier can be found extracontractually liable for bad faith conduct at that time even if the injured claimant did not make a settlement demand at that time.
In Teleflex Med. Inc. v. National U. Fire Ins. Co., No. 14-56366, 2017 WL 1055586 (9th Cir. March 31, 2017), a policyholder sued its excess liability insurer for breach of contract and bad faith. The action was based on allegations that the excess carrier refused either to contribute to a reasonable settlement of the underlying case against the insured, or to take over the insured's defense in the underlying action.
The excess carrier did not have much luck defending the bad faith suit by raising the "no action" clause in its policy forbidding any action against the carrier until the insured's underlying liability was determined by judgment or by a settlement in which the carrier participated, basically.
In the bad faith suit, the U.S. District Court for the Southern District of California denied the carrier's motion for summary judgment, then the case went to verdict against the carrier, and then the District Court entered judgment on the verdict against the carrier.
Things did not get any better for the carrier on appeal to the Ninth Circuit. The appellate court affirmed the judgment against the carrier.
It is of interest that the appellate panel called its decision a "rule," as in a "rule" that where a liability carrier as here refuses either to contribute to a reasonable settlement of the underlying action against the insured, or to defend the underlying action, then the liability carrier (including the excess carrier in this case) cannot rely on its policy's "no action" clause as a defense to a bad faith action.
Be careful not to let judges and opposing counsel invoke this "rule" without saying what the supposed rule stands for, in other words, without saying what they say the law is.
Senior U.S. District Judge Roger Vinson recently wrote a decision which illuminates two parts of Florida's bad faith law.
First, he wrote that the duty to investigate is a part of the insurance company's good faith duty and not an independent duty standing by itself apart from the duty of good faith:
An insurer's “duty to investigate” does not exist in a vacuum; rather; it is part and parcel of the overall duty to settle a claim within policy limits wherever possible, thereby protecting the insured from a potential excess judgment.
Welford v. Liberty Ins. Corp., 190 F. Supp. 3d 1085, 1095 (N.D. Fla. 2016), appeal docketed, No. 16-14054 (11th Cir. June 24, 2016).
Second, he ruled that when a liability carrier has a duty to initiate settlement negotiations even without a settlement demand from the injured claimant, it is when the insured's liability is reasonably clear:
It is true, of course, that Powell [Powell v. Prudential Prop. & Cas. Ins. Co., 544 So. 2d 12 (Fla. 3d DCA 1991), review denied, 598 So. 2d 77 (Fla. 1992)] holds that an insurer does not have to sit back and wait for a formal demand (“the lack of a formal offer to settle does not preclude a finding of bad faith”), and, consequently, bad faith can exist if the insurer does not attempt settlement on its own (“an insurer has an affirmative duty to initiate settlement negotiations”). However, Powell itself cautions that the insurer's affirmative duty to initiate settlement negotiations will exist only “where liability is clear.” 584 So.2d at 14 (emphasis added).
* * *
On its face, Powell does not obligate insurers to initiate settlement negotiations whenever an insured is involved in a crash and has some potential liability. Indeed, if that were the law, insurers would have that obligation in virtually every accident case as it is almost always possible that an insured may be found at least partially liable for an injury. But that is not what the Powell Court said. Rather, at the risk of repetition, Powell speaks specifically about an insurer's responsibility when its insured's liability is clear, which generally means: “Free from doubt; sure. Unambiguous.” See Black's Law Dictionary (10th ed. 2014); (further citation omitted).
Welford v. Liberty Ins. Corp., 190 F. Supp. 3d 1085, 1095-96 (N.D. Fla. 2016), appeal docketed, No. 16-14054 (11th Cir. June 24, 2016).
Legal junkies may remember Judge Vinson's lengthy opinion stimulated by the issue of constitutionality of the Affordable Care Act. (The U.S. Supreme Court ultimately disagreed with his holding that the ACA was unconstitutional.) However, Judge Vinson's decision in Welford v. Liberty Insurance stands on firmer ground and it is supported by other authorities, which are cited in the opinion.
It is not necessarily the fault of any particular liability carrier, including the one whose motion for summary judgment on a claim of alleged bad-faith-in-settlement was denied once again, in Lemoine v. GEICO Indemnity Co., No. 14-80694-CIV-ZLOCH, 2016 WL 4240044 (S.D. Fla. February 18, 2016).
One particular issue involved in the case was the carrier's alleged failure to advise the insured of settlement offers and opportunities. The District Judge called this "the necessity of settlement offer disclosures."
The liability carrier candidly admitted in the bad-faith case that there was no evidence that it had communicated some settlement offers during the underlying case in which its insured was sued. Failure to advise the insured of settlement offers, if true, is however only one fact in the totality of the circumstances approach taken under Florida law to claims that liability carriers acted in bad faith during settlement negotiations of the underlying claim that the insured was facing.
"This is one factor among many, but the cases also indicate that the weighing of factors and evaluation of an insurance company's entire treatment of a claim is not a question of law, but one of fact, normally reserved for the jury." Lemoine v. GEICO Indemnity Co., No. 14-80694-CIV-ZLOCH, 2016 WL 4240044, at *5 (S.D. Fla. February 18, 2016). The Court accordingly denied the carrier's motion for summary judgment on the bad faith claim.
Well, you can't stop a guy from trying they used to say. And it must be hard for people not familiar with Florida law to understand that bad faith is determined under the totality of the circumstances, meaning of course the totality of the facts. Now, they probably say, you can't stop a company from trying, again.
In an alleged third-party-bad-faith-in-settlement case, the defendant liability carrier raised a defense under Florida law that it had no realistic opportunity to settle before the underlying suit was filed against its insured. On the theory that all discussions on settlement were discoverable under the Florida "totality of the circumstances" standard, the carrier sought discovery from the date of the accident through the date of the underlying judgment:
Further, [the liability carrier] claims it made multiple efforts to communicate with Plaintiff's counsel after litigation was initiated and evidence of those communications supports its defense that there was no realistic opportunity to settle.
Soricelli v. GEICO Indemnity Co., No. 8:16–cv–1535–T–30TBM, 2017 WL 275967, at *2 (M.D. Fla. January 20, 2017) (McCoun, USMJ).
The carrier served a subpoena duces tecum on its insured's attorney in the underlying case, in part here pertinent. A U.S. Magistrate Judge granted the lawyer's and the policyholder's objections in part, and denied their objections in part, ruling:
[The lawyer] is ORDERED to produce for copy and inspection all correspondence, emails, records documenting telephone calls, and documents memorializing telephone conversations between [the lawyer] and [the defendant liability insurance carrier] regarding settlement of the underlying accident from October 10, 2009 [which was apparently the date of the accident], through January 17, 2011, the date [the defendant liability insurance company] created its extra-contractual file.3
Soricelli v. GEICO Indemnity Co., No. 8:16–cv–1535–T–30TBM, 2017 WL 275967, at *3 (M.D. Fla. January 20, 2017) (McCoun, USMJ).
Why 'through the date that the defendant opened its bad faith file'? It is not clear, exactly, but the Magistrate Judge wrote his reasoning in a footnote. The footnote reads in its entirety as follows:
Certainly, by this date at least GEICO anticipated a bad faith action and communications up to that date may reasonably relate to the claims and defenses in this suit.
Soricelli v. GEICO Indemnity Co., No. 8:16–cv–1535–T–30TBM, 2017 WL 275967, at *3 n.3 (M.D. Fla. January 20, 2017) (McCoun, USMJ).
If these communications were requested by the policyholderfrom the carrier, it would make sense to cut off discovery of them as of the date that the carrier anticipated litigation and opened its bad faith file. The work product immunity from discovery might apply then.
But, respectfully, it makes no sense to cut off the carrier'sdiscovery of these communications from the policyholder's attorney as of the date that the carrier opened its bad faith file.
It is theoretically possible that the entire range of communications on settlement from the accident through the underlying judgment fits the totality of the circumstances standard of bad faith, extracontractual liability, but it is difficult at best to understand how discovery of communications on settlement must end, not on the date the suit was filed where as here the bad faith claims were apparently based on failure to settle before the underlying suit was filed, but instead must end on the date that the carrier opened a bad faith file. What if the carrier had never opened a bad faith file? Under a ruling that discovery of settlement communications ends when the carrier opened its bad faith file, does that mean that if the carrier never opened its bad faith file, that it could have discovered all settlement communications through the date of the underlying judgment after all?
Time will certainly tell whether and how this ruling stands in this case, and how it may be applied in future cases.
A Federal District Judge followed settled Florida law in ruling that a Florida policyholder's conduct is relevant to her claims of bad-faith-failure-to-settle. And that her lawyer's conduct is relevant too:
Opinions Regarding Anderson's and Her Counsel's Motives
Plaintiffs anticipate that [the defendant liability carrier] will attempt to elicit opinions about [the underlying plaintiff's-policyholder's] and her counsel's motives and beliefs to the extent that they “set up” a bad faith claim. For example, Plaintiffs state that certain witnesses may testify that [the underlying plaintiff and policyholder] secretly hoped [the defendant liability carrier] would not accept her settlement offers so she could pursue a bad faith case. Or that [her] counsel intentionally withheld certain medical reports in an attempt to set up a bad faith claim. This issue has been squarely addressed by other courts in this district; specifically, in prior bad faith cases, the courts have ruled that evidence regarding the motive and conduct of the underlying plaintiff and her attorney is relevant and should not be prohibited as long as it is not purely speculative.
Gonzalez v. GEICO General Ins. Co., No. 8:15-cv-240-T-30TBM, 2017 WL 39113, at *1-*2 (M.D. Fla. January 4, 2017).
In a new decision, one of Florida's district courts of appeal understandably exonerated a liability carrier from causing an excess judgment, where the record displayed that the carrier did not act in bad faith and, even if it had, there was insufficient evidence that the carrier's conduct caused the excess judgment.
Then, exuberance apparently took over reason. The same court exhumed a long-dead doctrine of proximate cause that where the victim contributes to the damage, the defendant is immune from liability regardless of any other evidence:
The record in this case shows that GEICO did not fail to meet any deadlines or other requirements established by the estate, as a requirement for settling the claim and avoiding the filing of a lawsuit against its insured. Also, where the insured'sown actions or inactions result, at least in part, in an excess judgment, the insurer cannot be liable for bad faith.
GEICO General Ins. Co. v. Harvey, No. 4D15–4724, 2017 WL 33659, at *5 (Fla. 4th DCA January 4, 2017) (emphasis by the Court; opinion released with this NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL).
Whether this once again becomes the law of Florida, or anywhere else, remains to be seen.
A Federal District Judge recently wrote that Florida's bad-faith statute, Section 624.155, provides a remedy to an insured who has a first-party bad faith claim:
Count I: Insurance Bad Faith
In Florida, an insured is authorized by statute to bring a first-party bad-faith claim against an insurer, when the insured is damaged by: (1) the insurer's failure to attempt “in good faith to settle claims when, under all the circumstances, it could and should have done so;” or (2) the insurer's violation of enumerated statutory provisions, including Fla. Stat. § 626.9541(1)(i), which prohibits unfair claim settlement practices. See Fla. Stat. § 624.155(1)(a), (b).
Kapral v. GEICO Indemnity Co., No: 8:13-cv-2967-T-36EAJ, 2016 WL 7234147, at *3 (M.D. Fla. January 5, 2016).
There is so much wrong with this that I could spend all the time between now and Christmas writing about it.
A few words will avoid that fate. First, section 624.155 does indeed authorize "an insured" to bring a first-party bad faith claim against an insurer. At common law in Florida before this statute was enacted, an insured did not have a claim for first-party bad faith in Florida. That is the main reason that section 624.155 was enacted.
Second, section 624.155 provides a statutory cause of action to "any person damaged" (emphasis added) by an insurance carrier's alleged bad faith. The statute does not limit its availability to "an insured."
Third, in the above quotation and especially following the above quotation in its opinion, the Court in this case went on to cite and summarize Florida rules governing alleged third-party bad-faith-in-settlement. That is after all what the Kapral case was all about, namely, alleged bad faith by a liability carrier in failing settle an underlying claim within liability policy limits.
But none of that makes "third party" mean "first party," or "first party" mean "third party." As the warden said when the character Luke was shot to death in the movie "Cool Hand Luke":
In a new ruling apparently reversing an emerging rule in Florida, a Federal District Judge has held on the 12th issue raised in an insurance carrier's motion in limine that evidence of the liability insurance company's litigation conduct would be irrelevant in a bad-faith-in-settlement case in Florida:
L. GEICO's Behavior in this Action
GEICO believes that Plaintiffs may attempt to offer evidence that GEICO acted in bad faith in the present action, specifically in the handling of discovery. GEICO argues that the contentious discovery disputes in this case are irrelevant to a determination of whether GEICO acted in bad faith in the handling of Anderson's claim. The Court agrees and grants GEICO's motion on this issue.
Gonzalez v. GEICO General Ins. Co., No. 8:15-cv-240-T-30TBM, 2016 WL 7157551, at *4 (M.D. Fla. December 8, 2016).
Appearances can be deceiving, however. See whether this in-limine ruling fits within decided Florida and national case law analyzed at length in 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 9:6 (3d ed. Thomson Reuters West, with 2016 Supplements).
After a judicial ruling in which Georgia joined the majority of jurisdictions holding that "bad-faith-in-settlement" can result from a liability insurance carrier's failure to accept a time-limit settlement demand within the limited time of the demand, the Georgia Legislature acted. The Legislature amended the Georgia settlement-offer statute apparently to provide additional time to liability carriers to decide whether to accept settlement offers (or what the carriers themselves ordinarily call settlement demands), which again has counterparts in many States and other jurisdictions.
The interplay of "bad faith" ramifications and statutory interpretations came together in Grange Mut. Cas. Co. v. Woodard, 826 F.3d 1289 (11th Cir. 2016). With a wrinkle. That case did not present just questions of offer and acceptance. The claimants in that case added a condition that they receive payment within 10 days. Clearly the carrier in that case did not meet thatcondition within 10 days.
In that case, the Eleventh Circuit Court of Appeals certified the following questions to the Georgia Supreme Court, requesting the State Supreme Court's answers as to what Georgia State law will reply to them:
(1) UNDER GEORGIA LAW AND THE FACTS OF THIS CASE, DID THE PARTIES ENTER A BINDING SETTLEMENT AGREEMENT WHEN THE INSURER GRANGE ACCEPTED THE WOODARDS' OFFER IN WRITING?
(2) UNDER GEORGIA LAW, DOES O.C.G.A. § 9-11-67.1 PERMIT UNILATERAL CONTRACTS WHEREBY OFFERORS MAY DEMAND ACCEPTANCE IN THE FORM OF PERFORMANCE BEFORE THERE IS A BINDING, ENFORCEABLE SETTLEMENT CONTRACT?
(3) UNDER GEORGIA LAW AND THE FACTS OF THIS CASE, DID O.C.G.A. § 9-11-67.1 PERMIT THE WOODARDS TO DEMAND TIMELY PAYMENT AS A CONDITION OF ACCEPTING THEIR OFFER?
(4) UNDER GEORGIA LAW AND THE FACTS OF THIS CASE, IF THERE WAS A BINDING SETTLEMENT AGREEMENT, DID THE INSURER GRANGE BREACH THAT AGREEMENT AS TO PAYMENT, AND WHAT IS THE REMEDY UNDER GEORGIA LAW?
These important questions are self-explanatory, especially given their historical context.
The answers? Maybe not so much. The answers provided by the Georgia Supreme Court to these questions may guide more than judges, lawyers, and parties pursuing claims and defenses under Georgia law. The Supreme Court's answers may extend beyond Georgia to the nation.
A liability insurer has a special defense against a consent judgment by its insured and a claimant. In most such cases filed in U.S. jurisdictions, the liability carrier can collaterally attack the consent judgment or other allegedly conclusive underlying settlement by putting on proof that the underlying judgment or settlement was itself the product of fraud, collusion, or "bad faith."
Such was the defendant liability carrier's defense against a bad-faith lawsuit filed under Nebraska law in Metropolitan Prop. & Cas. Ins. Co. v. Westport Ins. Corp., 131 F. Supp. 3d 923 (D. Nebr. 2015).
Nebraska law follows the clear majority if not unanimous rule that the burden of proof is on the liability carrier to prove its defense in such a case, and notwithstanding, that the insured "may be required to make a prima facie showing that the settlement was entered into in good faith and that the amount of the settlement amount [sic] is reasonable." Metropolitan Prop. & Cas. Ins. Co. v. Westport Ins. Corp., 131 F. Supp. 3d 923, 929-30 (D. Nebr. 2015). On the facts recited in incredible detail throughout the Court's opinion in that case, the Court agreed with the plaintiff that a sufficient prima facie showing had been made. The Court accordingly denied the liability carrier's motion for summary judgment on its defense of collusion in that case.
UNDER LAW AND FACTS ON REQUESTED JURY INSTRUCTION.
In this final iteration of Stalley v. Allstate Ins. Co., No: 6:14-cv-1074-Orl-28DAB, 2016 WL 3282371 (M.D. Fla. June 10, 2016), appeal docketed, No. 16-14816 (11th Cir. July 11, 2016), Stalley was apparently not a Powell case after all, and a crucial plaintiff's requested jury instruction was apparently supported neither by the law nor the evidence in the record at the conclusion of the case:
IV. Conclusion
The authorities cited by Plaintiff do not establish the existence of a “presumption” under Florida law in a jury trial setting regarding the possible outcome of settlement efforts. This Court does not read Powell as creating any such presumption; instead, as noted earlier, this Court construes the statement in Powell that “[a]ny question about the possible outcome of a settlement effort should be resolved in favor of the insured” as an accurate, well-established statement of the movant's burden on a motion for directed verdict—the context in which that statement was made. Plaintiff has identified no Florida state court decision discussing or approving a jury instruction informing the jury that it should resolve “any question about the possible outcome of a settlement effort” in favor of the insured. No binding Eleventh Circuit precedent to this effect has been brought to the Court's attention either. Furthermore, Plaintiff's proposal of language requiring “conclusive proof” by an insurance company to overcome the supposed “Powell presumption” is wholly lacking in support. Thus, this Court concludes that the portion of Plaintiff's proposed Special Instruction 3 quoted earlier in this order is not an accurate statement of Florida law in the context of jury instructions, and accordingly this Court concluded that it was not appropriate to include that proposed language in the jury instructions in this case.
Stalley v. Allstate Ins. Co., No: 6:14-cv-1074-Orl-28DAB, 2016 WL 3282371, at *6 (M.D. Fla. June 10, 2016), appeal docketed, No. 16-14816 (11th Cir. July 11, 2016).
In an earlier appearance of Stalley, on an earlier record, the same District Judge ruled that the record at that time potentially supported Powell and accordingly denied Allstate's motion for summary judgment at that time. The Court's stated rationale included the Powell rule. See Stalley v. Allstate Ins. Co., No. 6:14-cv-1074-Orl-28DAB, 2016 WL 1752764, at *8 (M.D. Fla. April 29, 2016), quoting Powell v. Prudential Property & Casualty Insurance Co., 584 So. 2d 12, 14 (Fla. 3d DCA 1991), review denied, 598 So. 2d 77 (Fla. 1992).
The Powell rule of initiating settlement negotiations when the likely damages in the underlying case are greater than available policy limits ("when damages are great") and when the insured's underlying liability is probable ("when liability is probable"), is not a hard-and-fast legally constructed duty despite being called a "rule." Instead, it varies with the facts, as the rulings in Stalley so clearly display.
This article is being posted simultaneously on Insurance Claims Bad Faith Law Blog and on Insurance Claims and Issues Blog.
HSBC was accused by the Federal Government of what amounts to laundering money for terrorists. The Feds settled the HSBC matter although they had good chances of success if they went to trial against HSBC and especially against many of its officers and employees. What trial lawyer would not want to have the prosecution side of a case against terrorists and their sympathizers? Apparently the Feds. See Gretchen Morgenson in her "Fair Game" column published in this morning's Sunday New York Times, "A Bank Too Big to Jail" (posted Online on July 15, 2016), which you can also post in your browser at http://www.nytimes.com/2016/07/17/business/a-bank-too-big-to-jail.html?ref=business&_r=0. Ms. Morgenson's column features an unofficial report released by Republican staffers of the U.S. House Financial Services Committee without the Committee's approval. Although obviously partisan, it appears that this investigative report offers a lot of actual evidence and not just opinions.
For example, after the Feds decided not to take the HSBC case to trial, they wanted so much to settle with HSBC that they offered immunity from prosecution to HSBC's officers and employees if only HSBC would settle. The HSBC settlement apparently offers a lesson in settling on unfavorable terms. Anyone who has ever settled a case knows that once the other side of a negotiation knows that your side wants to settle badly, that is exactly how your side will almost certainly end up settling, which is badly.
… GRANTS LIABILITY INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT OF NO BAD FAITH IN SETTLEMENT IN "Powell CASE" IN FLORIDA.
The District Judge who held the Affordable Care Act unconstitutional and was later reversed by the U.S. Supreme Court, granted a liability carrier's motion for no bad faith failure to initiate settlement negotiations on the ground that the record did not reflect causation of the claimed bad faith damages. Welford v. Liberty Ins. Corp., No.: 3:15-cv-333/RV-CJK, 2016 WL 3360431 (N.D. Fla. June 2, 2016).
In First Mercury Ins. Co. v. Nationwide Sec. Serv's, Inc., No. 1–14–3924, --- N.E.3d ----, 2016 IL App (1st) 143924, 2016 WL 2927799 (Ill. App. Ct., 1st Dist., 3d Div., May 18, 2016), the claimants and the policyholder settled claims for 3,671 "blast faxes" against the policyholder although there were no claims for bad faith against the policyholder's carrier. The carrier at all times denied indemnity coverage for the harm allegedly caused by the policyholder's blast faxes, but provided the policyholder with an independent defense under a reservation of rights.
The policyholder settled anyway. The claimants, who took an assignment of rights against the carrier, asserted that the carrier could not contest the settlement because it acted in bad faith.
However, because neither the claimants nor the policyholder had ever alleged a claim of bad faith against the carrier, instead the Illinois appellate court ruled that they could not estop the carrier to contest the settlement:
¶ 18 As a preliminary matter, we address CE Design's argument that First Mercury breached its duty to settle in good faith and therefore is estopped from contesting coverage. Neither Litt nor CE Design filed a complaint or countercomplaint alleging a cause of action for bad faith refusal to settle. (Citation omitted.) Such an argument is therefore not properly before this court.
The Illinois appellate court affirmed a judgment of no coverage in favor of the carrier in this case.
Goldman Sachs thinks the value of its latest mortgage practices settlement is $1.5 Billion. That is the amount by which Goldman will reduce its 4Q earnings in 2015.
Since banks settle their mortgage practices exposure for about 2% of the money they take in from marketing, selling, and servicing their mortgages portfolio, we can reasonably assume that Goldman's take was about $75 Billion for the period in question, which is 2005 to 2007. That's an informed calculation, a reasonable estimate, of course.
The press has not said how much money Goldman took in from its mortgage practices in 2005 to 2007. That figure was probably not in Goldman's press release.
Goldman Sachs announced that it settled claims which a task force of Federal and State regulators might make against Goldman related to Goldman's marketing and sale of "faulty mortgage securities to investors." The press dutifully reported Goldman's press release that Goldman settled for "up to $5 Billion." See, e.g., Matthew Goldstein, "Dealbook Online / Goldman to Pay Up to $5 Billion to Settle Claims of Faulty Mortgages" (New York Times Online, posted on January 14, 2016); Ken Sweet Associated Press Copyrighted Report published in Washington Post Online, "Business / Goldman Sachs to Pay $5 Billion in Mortgage Settlement" (Online January 14, 2016).
Goldman's announcement disguised the true value which it put on the settlement.
It does not value this settlement anywhere near $5 Billion.
Speaking of recovery of damages allegedly the result of lender force-placed insurance, a Magistrate Judge ordered his Final Approval of Class Action Settlement in a South Florida case followed here and on Insurance Claims and Issues blog, Lee v. Ocwen Loan Servicing, LLC, No. 14-CV-60649, 2015 WL 5449813 (S.D. Fla. September 14, 2015) (Goodman, USMJ). The publicly accessible order is here: Download Lee v Ocwen Loan Servicing.Order Final Approval Class Action Settlement.091415 (SD Fla No. 14.60649).. A person objecting to the settlement appealed after the Magistrate Judge overruled her objections and granted Final Approval to the Class Action Settlement. That appeal is pending under the case style Margo Perryman v. Ocwen Loan Servicing, appeal docketed, No. 15-14630 (11th Cir. October 14, 2015).
Member of the American Law Institute and of the ALI's Members Consultative Group on the Restatement Project drafting the Law of Liability Insurance. Author of numerous books and articles on insurance and bad faith law, including “Litigation and Prevention of Insurer Bad Faith" (Third Edition Thomson Reuters West, in Two Volumes, with 2016 Supplements in process).
Kim Marrkand, Esquire's article on the RLLI's Section 24 "Duty to Make Reasonable Settlement Decisions" brings the refreshing perspective of a practicing lawyer to the subject. The title of Ms. Marrkand's article says it all so far as I am concerned, and I agree with her perspective entirely: "Duty to Settle: Why Proposed Sections 24 and 27 Have No Place In A Restatement of the Law of Liability Insurance." To her credit, Ms. Marrkand puts her article's text at the service of her article's title, starting with her observation that the RLLI's "duty to make settlement decisions" is known to practicing lawyers as the liability carrier's "duty to settle." She fleshes out her very welcome article with a fine sense of accuracy, except perhaps in one particular. There is so much good in her article that I hesitate to point out the inaccuracy, except that it is an important one.
In the course of critiquing the Restatement's treatment of situations where the claimant does not make a settlement demand, Ms. Marrkand goes off the rails a little with a suggestion that "[t]he argument that insurers have a duty to initiate settlement offers has been rejected by courts …."[6] Actually, judicial recognition of a duty to initiate settlement offers under certain circumstances even where the claimant has not made a settlement demand, is a well-documented majority view.
In a forthcoming article in Insurance Litigation Reporter,[7] I have provided the results of a forensic examination of every case I found in which the issue has arisen of whether a liability carrier either has an affirmative legal duty to initiate settlement negotiations in the absence of a settlement demand from the claimant, or in which the issue of extracontractual or "bad faith" liability to go to the jury even though the claimant has not made a settlement demand.
The results are clear. When the additional factors are also present in any case that the insured's liability is probable and that the damages likely to be recovered by the claimant are "great" in the sense that they exceed the liability insurance policy limit, 16 Courts are in favor of submitting the issue to a jury of whether a liability carrier should be held liable in any given case for "bad faith" on account of the carrier's failure to even initiate settlement negotiations, and even though the claimant did not make a settlement demand.
In these 16 cases, and they represent the decided majority view on the subject, the Courts have made clear that the issue of a liability carrier's extracontractual, "bad faith" liability would be a jury question under such circumstances even though the claimant never made a settlement demand. It is also important to the outcomes in these cases that the carrier must have had a reasonable opportunity to settle the underlying claim before the carrier can be exposed to bad faith liability.[8]
Three other cases were found apparently holding to the contrary, but these authorities are what may be described as "soft" on the issue, each for its own reasons.[9] Out of a total of 19 cases, then, 16 rather "hard" authorities support the idea of a liability carrier affirmatively initiating settlement negotiations even in the absence of a settlement demand from the claimant, while only the remaining 3 rather "soft" authorities would not support the idea.
In the context of this special issue of the Rutgers University Law Review devoted to the RLLI, Ms. Marrkand is not alone in her erroneous alignment of case law on the issue of a liability carrier's exposure to bad faith liability when a claimant does not make a settlement demand. She quickly accepted the notion in one case in a 5-to-4 decision[10] which treated the Courts' imposition of an affirmative legal duty to initiate settlement negotiations more or less as the equivalent of a summary judgment or a directed verdict determining the carrier's exposure when it is really a jury issue under the circumstances outlined above.
Ms. Marrkand's article, however, ultimately does not go any farther down this rabbit trail. To her credit, she addresses the gist of the settlement issue in her 28 pages, whereas the four professors collectively spent 200 pages in their descriptions of it. Ms. Marrkand's article focuses attention on the central question of the reason for existence of Section 24 in the RLLI: How does the four-factor test in Section 24, even when buttressed by its numerous supporting comments offered by the Reporters, improve upon the one-factor test employed by the vast majority of Courts called upon to determine the appropriate measure of bad faith liability for a liability carrier's failure to settle the underlying case against its insured, to wit:
A liability insurer must give at least equal consideration to the insured's interests as to its own in determining whether and how to settle the underlying claim against its insureds.[11]
This is the test which is most often employed by the Courts. To the degree that it is not the test employed in the Restatement -- and it pretty clearly is not the same test as things stand now -- the Restatement is not a Restatement of the law at all but, as Ms. Marrkand so eloquently suggests, it is instead an unauthorized revision of the law and a "Restatement" in name only.
Given the design and structure of Section 24, a possible solution for improvement probably will not lie in proposed edits or revisions here and there. Instead, as the author has suggested elsewhere,[12] one solution may be to add two new subsections to the existing four subsections of RLLI Section 24, in order to clarify the text and conform Section 24 more nearly to the prevailing law:
(5) Bad faith on the part of an insurance company is failing to settle a claim when, under all the circumstances, it could[13] and should have done so, had it acted fairly and honestly toward its insured and with at least equal consideration[14] for her, his, its, or their interests.
(6) The lack of a formal settlement demand is only one factor to be considered in determining bad faith. Where liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations. Whether and how a liability insurer initiates settlement negotiations, if at all, depends on the facts of each particular case.
[1] Kim V. Marrkand, "Duty to Settle: Why Proposed Sections 24 and 27 Have No Place In a Restatement of the Law of Liability Insurance," 68 Rutgers U.L. Rev. 201 (2015).
[2] Kenneth S. Abraham, "The Liability Insurer's Duty to Settle Uncertain and Mixed Claims," 68 Rutgers U.L. Rev. 337 (2015).
[3] Bruce L. Hay, "A No-Fault Approach to the Duty to Settle," 68 Rutgers U.L. Rev. 321 (2015).
[4] Leo P. Martinez, "The Restatement of the Law of Liability Insurance and the Duty to Settle," 68 Rutgers U.L. Rev. 155 (2015).
[5] Jeffrey E. Thomas, "The Standard for Breach of a Liability Insurer's Duty to Make Reasonable Settlement Decisions: Exploring the Alternatives," 68 Rutgers U.L. Rev. 229 (2015).
[6] Kim V. Marrkand, "Duty to Settle: Why Proposed Sections 24 and 27 Have No Place In a Restatement of the Law of Liability Insurance," 68 Rutgers U.L. Rev. 201, 216 n.74 (2015).
[7] Dennis J. Wall, "The American Law Institute and Good Faith Settlement Duties of Liability Carriers: The Scope of a Duty to Initiate Settlement Negotiations, What the ALI Restatement of the Law of Liability Insurance Has to Say About It, and the ALI Reporters' Notes," 21 Ins. Lit. Rptr. 597 (Dec. 23, 2015). A copy of this article is accessible at one of the author's websites: www.lenderforceplacedinsurance.com.
[8]Id. One of these jurisdictions is Arizona. The article contains citations to two cases, Safeway Insurance Co. v. Botma and Fulton v. Woodford. The full citation of Fulton is Fulton v. Woodford, 26 Ariz. App. 17, 22, 545 P.2d 979, 984 (Ariz. Ct. App. Div. 1, Dep't B, 1976).
[10]American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842 (Tex. 1994). Without stating or implying any unintended disrespect for either the person or the institution, neither the author of the opinion in that 5-to-4 case nor the court that rendered that decision have made their mark on the world by demonstrating superior legal scholarship.
In addition, the cited decision was rendered only after a previous decision to the contrary in the same case was withdrawn; this 5-to-4 opinion was substituted for it on rehearing. Texas later addressed this issue in a 5-2-2 decision which appears to place Texas among the three more or less "con" jurisdictions on this subject discussed in the text of the current article: Rocor Int'l, Inc. v. National U. Fire Ins. Co., 77 S.W.3d 253, 261-62 (Tex. 2002).
[11] 1 Dennis J. Wall "Litigation and Prevention of Insurer Bad Faith" § 3:1, 2015 Supp. p. 12 (3d ed. Thomson Reuters West).
[12] Dennis J. Wall, "The American Law Institute and Good Faith Settlement Duties of Liability Carriers," supra note 7.
[13] Explicitly inserting the concept that in order to be liable for "bad faith" in settlement, it is necessary for the trier of fact to find first that the liability carrier "could" have settled the case against the insured, addresses the issue of the liability carrier confronting a "reasonable opportunity to settle within policy limits" without taking sides from among the competing cases as to which party has the burden of proof on this issue.
[14] Expressly injecting the "at least equal consideration" wording into the "without policy limits" notion already expressed in Restatement Section 24 strengthens the section's position as a Restatement of the law and not as an expression of advocacy for what the law has never been, but what it might be in the future.
There are ten jurisdictions from which cases have been reported and found in which the Courts have declared a legal duty for liability insurance companies to initiate settlement negotiations even in the absence of a settlement demand from the claimant. Oklahoma is one such jurisdiction.
However, in a recent case it was held that an excess carrier did not have a duty to initiate settlement negotiations until the underlying, primary carrier exhausted its policy limits, as the excess insurance policy required before any obligation of the excess carrier came into being.
Or so the Tenth Circuit Court of Appeals has predicted. SRM, Inc. v. Great Am. Ins. Co., 798 F.3d 1322, 1325-26, 1329 (10th Cir. 2015) (predicting Oklahoma law in a case of apparent first impression concerning an excess liability carrier).
Ever wonder whether a liability carrier has a duty in a particular case to protect its insured by accepting an agreement offered by the claimant (1) to consent to judgment now, (2) not to execute on the insured's assets now or later, and (3) to try the bad faith case later? Well, if you have been wondering, perhaps you have not been paying attention.
The Eleventh Circuit answered this question pretty easily in a recent case. Here is the short and the long of it, first the short answer which comes as no surprise to anyone practicing in this area:
In sum, an insurer owes no duty under Florida law to enter into a so-called Cunningham [v. Standard Guaranty Insurance Co., 630 So. 2d 179 (Fla. 1994)] agreement and likewise owes no duty to its insured to enter into a consent judgment in excess of the limits of its policy.
Kropilak v. 21st Century Ins. Co., 806 F.3d 1062, 1070 (11th Cir. 2015) (case involved Florida substantive law).
And here is the long (and also hardly surprising) answer from the Eleventh Circuit in the same case:
Even if what Kropilak and Collins have proposed is different than a Cunningham agreement, Kropilak and Collins have failed to explain why an insurer is obligated to enter into the agreement proposed here when Florida law does not obligate insurers to enter into a Cunningham agreement. The agreement proposed by Kropilak and Collins, with its requirement for the entry of a consent judgment in excess of the policy limits, would arguably extend the obligation of an insurer beyond what would be required in a Cunningham agreement. In Cunningham, the insurer simply agreed to try the bad-faith action in advance of the underlying tort claim. 630 So. 2d at 180. While an insurer has a duty to act in good faith to offer the policy limits under appropriate circumstances to avoid exposing its insured to a judgment in excess of those policy limits, it has no duty on behalf of its insured to agree to a consent judgment in excess of policy limits and then subject itself to a suit for bad faith for the amount in excess of the policy limits.
Kropilak v. 21st Century Ins. Co., 806 F.3d 1062, 1069 (11th Cir. 2015).
So, no surprises here. At least we know that this appeal did not change the law, which is certainly welcome news for liability insurance carriers and practitioners who represent them in Florida and elsewhere.
The newspaper report says that GEICO refused to allow the injured claimant's attorney to "interview" the policyholder to confirm that he did not have any assets beyond the $100,000 policy limit of his GEICO policy. The article does not say so, but injured claimants' attorneys generally want to pin down that the likely defendant has no assets beyond her or his liability insurance policy limits, before the attorneys will recommend that their clients accept an offer of policy limits before suit is filed.
The plaintiff's attorney basically told the reporter that that decision left no alternative but to sue GEICO's policyholder at that point. It also led to bad faith claims, obviously. The jury in the bad faith case found that GEICO is responsible for damages of $8.5 Million, which with accumulating interest as of the time of the report amounts to $9.6 Million. See Jane Musgrave, Palm Beach Post Online, Friday, October 30, 2015.
The headline on this newspaper report says "Jury: Due to 'Bad Faith,' GEICO Owes $8.6 Million on $100K Policy," which seems to confuse the amount of the jury's bad faith verdict, $8.5 Million, with the amount of that verdict combined with continually accumulating interest which through the date of the newspaper report apparently resulted in a new total of $9.6 Million. Moreover, the reporter says that GEICO's attorney did not return her telephone call. We may have to wait for a judicial opinion to find out what went on in this matter.
In a decision in line with the decisions of many other Courts in insurance-bad-faith-failure-to-settle cases, a U.S. District Judge in the Southern District of Florida has denied a policyholders' motion for partial summary judgment on the legal effect of whether the insurance carrier had a realistic possibility of settling the underlying case. The Court held in the bad faith case that "whether an insurer had a realistic opportunity to settle is relevant to the determination of bad faith, and that the insurer bears the burden of proof on this issue." Lopez v. Allstate Fire & Cas. Ins. Co., Case No. 14-20654-Civ-COOKE/TORRES, 2015 WL 5320916, *3 (S.D. Fla. September 14, 2015).
The Court cited settled law in the Powell case, Powell v. Prudential Prop. & Cas. Ins. Co., 584 So. 2d 12, 14 (Fla. 3d DCA 1991), review denied, 598 So. 2d 77 (Fla. 1992), in support of its holding along with two other U.S. District Court decisions on point from the Northern District of Florida.
What is at first surprising about this ruling, and really the only thing about this ruling that is potentially surprising, is that in so ruling the Court in this case agreed with the insurance carrier's argumentthat the insurance carrier bears the burden of proof on this affirmative defense. After a moment's thought, this is not so surprising. Defendants like the insurance carrier in this case bear the burden of proving their affirmative defenses. If the Court was going to allow this crucial affirmative defense to stand as pleaded, then the carrier-defendant had to acknowledge that it bears the burden of proving it.
Here is the affirmative defense which the Court accordingly ruled withstood the plaintiffs'-policyholders' motion for partial summary judgment on the insurance-bad-faith-failure-to-settle claim alleged in Lopez:
There was no realistic possibility of settlement within the policy limits pursuant to DeLaune v. Liberty Mutual Ins. Co., 314 So. 2d 601 (Fla. 4th DCA 1975)[, cert. denied, 330 So. 2d 16 (Fla. 1976)], because of Plaintiffs' attorney['s] …deliberate scheme to try and manufacture a reason to reject Allstate's good faith offer to settle Plaintiffs' claims as evidenced by his intentionally withholding pertinent information that was requested by Allstate, by feigning outrage over reasonable questions asked by defense counsel[,] …by feigning outrage over the “Colossus” letter which he knew was a letter that was automatically computer generated sent out on every file, by misrepresenting that the Colossus letter was an attempt to settle the claim, and by otherwise acting in a manner so as to obstruct and/or delay settlement of the claim.
Lopez v. Allstate Fire & Cas. Ins. Co., Case No. 14-20654-Civ-COOKE/TORRES, 2015 WL 5320916, *3 (S.D. Fla. September 14, 2015).
International Space Station "Good Morning". / NASA.
Hawaii became the most recent jurisdiction to recognize an excess carrier's rights of equitable subrogation to the insured's bad faith claims against the insured's primary carrier, in answer to certified questions in St. Paul Fire & Marine Ins. Co. v. Liberty Mut. Ins. Co., 135 Haw. 449, 353 P.3d 991 (2015).
The Hawaiian high court recognized the validity of the excess carrier's subrogation rights even where a primary insurer has paid its own policy limit toward settlement and their mutual insured incurred no loss. St. Paul Fire & Marine Ins. Co. v. Liberty Mut. Ins. Co., 135 Haw. 449, 353 P.3d 991, 992, 996 (2015).
It has been held that a liability insurer does not waive its “no settlement without consent” provision just by permitting the policyholder to offer a settlement with an amount of money which was less than the amount for which the policyholder ultimately settled the underlying case. Piedmont Office Realty Trust, Inc. v. XL Specialty Ins. Co., ___ Ga. ___, 771 S.E.2d 864, 866 (Ga. 2015):
In this case, . . . the plain language of the insurance policy does not allow the insured to settle a claim without the insurer's written consent. It also provides that the insurer shall only be liable for a loss which the insured is “legally obligated to pay.” Finally, the policy contains a “no action” clause which stipulates that the insurer may not be sued unless, as a condition precedent, the insured complies with all of the terms of the policy and the amount of the insured's obligation to pay is determined by a judgment against the insured after a trial or a written agreement between the claimant, the insured, and the insurer. In light of these unambiguous policy provisions, we hold that Piedmont is precluded from pursuing this action [an alleged breach of an excess insurance contract and a statutory claim of bad faith failure to settle] against XL because XL did not consent to the settlement and Piedmont failed to fulfill the contractually agreed upon condition precedent.
When an insurance company put “advice of counsel” at issue with respect to its settlement of the underlying case, it thereby waived the attorney-client privilege. When the insurance carrier’s officers testified about the reasons they settled the underlying case, they helped to establish the discovery exception to work product qualified immunity, all in the case of Seneca Insurance Co. v. Western Claims, Inc., 774 F.3d 1272 (10th Cir. 2014)(applying Oklahoma law of attorney-client privilege).
The carrier sued an adjuster for indemnity and negligence in that case. The carrier “affirmatively put at issue its attorney’s advice by invoking ‘advice of counsel’ to support its claims in this litigation.” Seneca Insurance Co. v. Western Claims, Inc., 774 F.3d 1272, 1277 (10th Cir. 2014).
The carrier in that case had to prove that the underlying settlement was reasonable in order to recover on its indemnity claim against the adjuster. The carrier alleged that it relied on the advice of counsel that the settlement was reasonable. This allegation was a waiver of the privilege under established law.
The second aspect of the case was that the carrier’s own testimony further established that certain correspondence concerning the settlement was not protected from discovery as work product. The carrier’s own officers testified that they “generally” relied on the advice of counsel rather than on their own reasons for settling the underlying case. Seneca Insurance Co. v. Western Claims, Inc., 774 F.3d 1272, 1277 (10th Cir. 2014). This testimony helped to build a record that there was no substantial equivalent of the evidence which could be obtained without undue hardship, and so the evidence was not protected as work product.
Where the issue involves settling the underlying case, the law of Western Claims in Oklahoma is likely to be followed elsewhere.