By Jarett Warner, Havkins, Rosenfeld, Ritzert & Varriale
The United States District Court for the District of Montana recently decided a case concerning the liability of an insurer for post-judgment interest and attorney’s fees to a metal bat company.
In Hillerich & Bradsby Co. v. Ace American Insurance Co., 2013 U.S. Dist. LEXIS 46976 (D. Montana March 26, 2013), the Court was faced with an insurance coverage issue.
Ace American Insurance Company (“Ace”) issued a commercial general liability insurance policy to metal bat manufacturer, Hillerich & Bradsby Company (“H&B”), that covered H&B for a July 2003 accident in which 18 year old American Legion player Brandon Patch was struck by a baseball hit off an H&B bat and died. H&B’s insurance policy with Ace provided H&B with $2 million in coverage, with a $250,000 self insured retention (SIR), which required H&B to pay the first $250,000 of any settlement or judgment. The insurance policy also had $1 million in coverage per occurrence for Allocated Loss Adjustment Expenses (such as attorneys’ fees, costs and post-judgment interest), with a $350,000 SIR.
The Patch accident led to a Montana state lawsuit, that ultimately resulted in a $850,000 verdict for the Patches. Although H&B sought to appeal the verdict, Ace wished to resolve the case by H&B paying its $250,000 SIR and Ace paying the remaining $600,000 pursuant to the terms of the insurance policy. H&B declined to follow Ace’s advice and appealed, while Ace maintained it did not have to pay any further post-judgment interest or attorneys’ fees since it recommended a settlement that was acceptable to the Patches.
H&B lost its appeal. Ace then paid $600,000 to H&B along with its share of the Allocated Loss Adjustment Expenses up to the point it recommended settlement following the verdict. H&B then started a lawsuit against Ace in the District Court of Montana.
The Court granted Ace’s motion for summary judgment, holding that Ace satisfied the policy Section IV.II.h Endorsement by recommending a settlement that was acceptable to the Patches and offering to pay its part of the judgment within the policy limits. Based on these conditions, the Court held that Ace was not required to pay any further Allocated Loss Adjustment Expenses.
In coming to its decision, the Court reviewed the policy’s Section IV.II.h Endorsement that states that:
When the insured’s liability is reasonably expected to exceed the “Self Insured Retention” stated in the Declarations, we may request the insured to tender the remaining limits of the “Self Insured Retention” in order to complete the settlement of any such claim or “suit”. The insured will not unreasonably withhold its consent to our request to tender remaining limits of the “Self Insured Retention”. Upon notification of the action taken, the insured shall promptly reimburse us for such part of the “Self Insured Retention” that has been paid by us. If we recommend a settlement which is acceptable to a claimant, which exceeds the “Self Insured Retention,” and is within the Limit of Liability, and the insured refuses to consent to such settlement offer, then our liability shall not exceed the amount for which the claim could have been settled if our recommendation had been accepted, exclusive of the “Self Insured Retention” to effect settlement of any claim or “suit” nor shall we have any obligation to pay any “ALAE” incurred in excess of the “ALAE Self Insured Retention” after the time we requested you tender the remaining limits.
Id.at *5-6.
The Court opined that although this Endorsement only applies to settlements, Ace’s recommendation to resolve the case with the Patches for the $850,000 verdict amount was a settlement. The Court reasoned that: “[h]ad ACE and H&B paid the $850,000 judgment to the Patches, that payment would have been supported by adequate consideration . . . . [t]he Patches would have received payment of the judgment without the risk of that judgment 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).” Id.at *8.
Further, the Court agreed with Ace’s position that it was not required to pay further post-judgment interest based upon Section I of the Endorsement because it satisfied the requirements of the clause due to the fact that Ace “paid, offered to pay, or deposited in court that part of the judgment that is within the applicable limits of insurance.”1 Id.at 12. The Court held that Ace satisfied its obligations by offering to pay $600,000.
Finally, the Court held that there was no merit to H&B’s claim under Montana’s Unfair Trade Practice Act, since Ace did not breach the contract provisions.
Jarett L. Warner is of Counsel at Havkins Rosenfeld Ritzert & Varriale. He concentrates his practice in defending sports and recreational venues and operators, construction companies and premises owners and managers in personal injury actions. He can be reached at jarett.warner@hrrvlaw.com
1 The Endorsement read:
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Allocated Loss Adjustment Expenses Coverages A and B below, but we shall have the right and opportunity to assume from the insured the defense and control of any claim or “suit”, including any appeal from a judgment seeking payment of damages covered under this policy that we believe are likely to exceed the “Self Insured Retention.” In such event, we and the insured shall cooperate fully. We shall pay interest only on that amount of any judgment we pay that accrues after entry of the judgment and before we have paid, offered to pay, or deposited in court that part of the judgment that is within the applicable limit of insurance shown in the Declarations. But the amount we will pay for damages and Allocated Loss Adjustment Expenses that are in excess of the “Self Insured Retention” is limited as described in Section III Limits of Insurance.
(See Policy, doc. 7-1 at 46.)
Id. at *9-10.
