Insurance, recommended bat death settlement

INSURANCE: Insurer satisfied Endorsement by recommending settlement of $850,000 verdict by $250,000 from manufacturer and $600,000 from insurer that would satisfy parents of deceased ball player (manufacturer declined settlement, appealed, lost)… insurer satisfied post-judgment interest provision of Endorsement by offering to pay the part of the judgment within policy limits, relieved of post-judgment interest, fees… Molloy.

Brandon Patch, 18, died after being hit in the head by a ball batted off Hillerich & Bradsby’s CB-18 aluminum bat 7/25/03. His parents sued H&B in State Court asserting manufacturing & design defect and failure to warn. H&B’s ACE policy indemnified H&B for $2 million, but it had a $250,000 self-insured retention for indemnity which meant that it had to pay the first $250,000 to satisfy any judgment or settlement. The policy also provided $1 million coverage per occurrence for Allocated Loss Adjustment Expenses (attorney fees, costs, post-judgment interest). H&B had a self-insured retention for this coverage in the amount of $350,000. These coverages were governed by a “Self-Insured Retention with ALAE Limits Endorsement.” A Helena jury returned an $850,000 verdict for Patches. H&B wanted to appeal; ACE wanted to put the case to rest. It recommended that H&B pay $250,000 (the self-insured retention for indemnity) and ACE pay $600,000. H&B did not heed this recommendation. ACE took the position that under the Endorsement it could stop paying post-judgment interest and attorney fees (Allocated Loss Adjustment Expenses) because it had recommended a settlement that was acceptable to Patches. H&B pursued its appeal and lost. Patch (Mont. 2011). ACE then paid $600,000 to H&B, which ACE considered its share of the judgment. It also paid what it believed was its share of the ALAE owed up to the point that it recommended settlement. H&B filed this suit, claiming that ACE wrongly refused to pay further post-judgment interest and fees after it recommended that they pay the verdict. The Court granted summary judgment for ACE 3/7/13 with this opinion to follow.

ACE argues that under Pgf. h of the Endorsement it had no obligation to pay Allocated Loss Adjustment Expenses after 11/17/09 when it recommended that H&B and ACE pay the full verdict. Pgf. h, by its plain language, applies only to “settlements.” The question is whether ACE’s recommendation was a recommendation to make a “settlement.” A settlement is a “binding contractual agreement … through which the parties arrange for final disposition of the case.”Carlson (26 MFR 31). “`Contractual agreement’ refers to any enforceable contract.” Id. The question is whether Patches’ willingness to accept an agreement to pay the verdict, which ACE recommended, was a “contractual agreement.” A contract is an “agreement to do or not do a certain thing.” MCA 28-2-101;Kluver (Mont. 2012). “Sufficient cause or consideration” is an essential element. “Consideration requires that the contracting parties, each as to the other, confer some legal benefit and/or incur some detriment as an inducement to performance.” MPEA (Mont. 1995). ACE’s recommendation to H&B was a recommendation to make a settlement. Had they paid the $850,000, Patches would have received payment of the judgment without the risk of it being vacated on appeal, and H&B and ACE would have been relieved of the obligation to pay post-judgment interest, among other benefits provided by the release (e.g., a disclaimer of liability). Since ACE satisfied the requirements of Pgf. h it had no “obligation to pay any `ALAE’ incurred in excess of the `ALAE Self Insured Retention’ after the time [it] requested [H&B to] tender the remaining limits.” H&B’s reading of the “unreasonably withhold its consent” provision in Pgf. h is not reasonable. The plain language means only that H&B cannot unreasonably withhold its consent to tender the self-insured retention if ACE requests that tender. It does not mean that H&B can force ACE to continue paying ALAE as long as H&B is reasonably withholding consent to a settlement.

ACE also argues that it was excused from paying further post-judgment interest after 11/17/09 under the “post-judgment interest clause” in §I of the Endorsement because it offered to pay that part of the judgment that is within applicable limits of insurance. H&B responds by honing in on the “In such event” phrase in the preceding sentence, and argues that this entire section only applies when ACE assumes defense of the case. ACE’s position is more persuasive. This clause is a catch-all at the end of §I. It is not, for example, labeled as a specific clause that applies only when ACE assumes the defense. ACE satisfied this clause because it “paid, offered to pay, or deposited in court that part of the judgment that is within the applicable limits of insurance.” H&B reasons that because ACE offered to pay only $600,000 it did not offer to pay all of the judgment as to trigger this clause. However, ACE did not have to pay the entire judgment including H&B’s $250,000 self-insured retention, because the “applicable limit of insurance” is the amount that ACE will pay in excess of the self-insured retention. §III.2 of the Endorsement states: “The LIMITS OF INSURANCE as shown in the Declarations shall apply in excess of the `Self Insured Retention’ shown in the Declarations. You agree to assume payment of the `Self Insured Retention’.” The “part of the judgment that is within the applicable limits of insurance” is $600,000 — $850,000 minus the $250,000 self-insured retention. When ACE offered to pay that amount it was relieved from paying further post-judgment interest. Contrary to H&B’s suggestion, the Endorsement does not require ACE to have extended that offer to Patches; it only requires ACE to have made an offer to pay the applicable part of the judgment, which it did.

There is no reason the UTPA claim should not be dismissed with prejudice and all pending motions dismissed as moot. Since ACE did not breach the contractual provisions at issue it cannot be liable under the UTPA. MCA 33-18-242(5). If H&B appeals and prevails, the UTPA claim and motion to strike will, like the phoenix, be resurrected.

Hillerich & Bradsby v. ACE American Ins., 40 MFR 219, 3/26/13.

Jason Ritchie, Kyle Gray, and Scott Mitchell (Holland & Hart), Billings, for H&H; John Williams & Thomas Jones (Cozen O’Connor), Seattle, and Perry Schneider (Milodragovich, Dale, Steinbrenner & Binney), Missoula, for ACE.