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Associated Aviation Underwriters v. Wood9/29/2004
show that the entire amount of the stipulated judgment was reasonable, he or she may recover only the portion proved reasonable. Id. at 121, 741 P.2d at 254; see also Himes, 205 Ariz. 31, 14, 66 P.3d at 80.
"The test as to whether the settlement was reasonable and prudent is what a reasonably prudent person in the insureds' position would have settled for on the merits of the claimant's case." Morris, 154 Ariz. at 121, 741 P.2d at 254. But, " he indemnitee need not establish... that he would have lost the case; he need only establish that given the circumstances affecting liability, defense and coverage, the settlement was reasonable." Id. at 120, 741 P.2d at 253. "This involves evaluating the facts bearing on the liability and damage aspects of a claimant's case, as well as the risks of going to trial." Id. at 121, 741 P.2d at 254. We must uphold the trial court's factual determinations bearing on reasonableness unless they are clearly erroneous, but we review any legal conclusions de novo. Enter. Leasing Co. v. Ehmke, 197 Ariz. 144, 11, 3 P.3d 1064, 1068 (App. 1999).
Both Division One of this court and our supreme court have recently addressed the factors to be considered in determining a Morris settlement's reasonableness. See Parking Concepts, 207 Ariz. 19, 83 P.3d 19; Himes, 205 Ariz. 31, 66 P.3d 74. In Himes, Division One stated that the factors to be considered in examining a Morris agreement for reasonableness include:
" he releasing person's damages; the merits of the releasing person's liability theory; the merits of the released person's defense theory; the released person's relative faults ; the risks and expenses of continued litigation [on the merits];... any evidence of bad faith, collusion, or fraud; the extent of the releasing person's investigation and preparation of the case; and the interests of the parties not being released." 205 Ariz. 31, 33, 66 P.3d at 85, quoting Chausee v. Md. Cas. Co., 803 P.2d 1339, 1343 (Wash. Ct. App. 1991) (alterations in Himes ).
According to Himes, for Morris purposes, "a 'reasonably prudent person' is defined as a person who (1) has the ability to pay a reasonable settlement amount from his or her own funds and (2) makes a settlement decision as though the settlement amount came from those personal funds." 205 Ariz. 31, 23, 66 P.3d at 82 (footnote omitted). In other words, in order for a settlement to be reasonable, the insured must negotiate a settlement "as though the money that pays the settlement comes from his or her own pocket." Id. "Only by applying the [reasonableness] test in this fashion can the lack of arm's-length negotiation inherent in a Damron / Morris agreement be overcome and replaced with a standard by which an insurer not party to the agreement may be bound." Id.
C. Global Settlement
AAU contends the trial court erred in evaluating the merits of Intervenors' claims on a "global" or aggregate basis because, according to AAU, Morris required the trial court to consider the merits of each individual intervenor's tort claims and the amount of damages each intervenor might have been entitled to. In support of its argument, AAU focuses on the Morris court's statement that determination of a settlement's reasonableness depends on "what a reasonably prudent person in the insureds' position would have settled for on the merits of the claimant's case." 154 Ariz. at 121, 741 P.2d at 254. Essentially, AAU interprets that language to mean that "the merits of [each] claimant's case" must be considered in determining reasonableness. Id.
On its face, AAU's position is not entirely untenable. Indeed, we agree that in a straightforward case involving a singl
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