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Associated Aviation Underwriters v. Wood9/29/2004
e plaintiff who alleges injuries arising out of a single, discrete set of facts, determination of a Morris agreement's reasonableness would hinge on the legal merits of the plaintiff's liability claims (including causation), the validity of any affirmative defenses the insured might be able to assert, and the nature and extent of the plaintiff's damages. Individualized evidence on all those elements presumably would be presented and considered. Obviously, however, this is not such a case.
At the outset, we note that AAU's argument is purely legal; it does not directly challenge the trial court's factual finding that, " t the time the Morris agreement was entered into, the claims of each potential plaintiff could not be individually evaluated[, and i]t is unknown, and perhaps unknowable, when or if each and every individual plaintiff's claim could have been individually evaluated, as a practical matter." Nor does AAU contest the trial court's finding that, " t is common practice in the settlement of a mass tort case to negotiate an overall resolution of the case rather than attempt a claim by claim resolution. Such practice is both reasonable and acceptable." Finally, AAU does not challenge the finding that TAA/City in fact had "analyzed this settlement on a 'global' basis."
In any event, we conclude that AAU's argument is premised on an overly narrow reading of Morris and fails to acknowledge that reasonableness is determined by more than only the merits of a claimant's case. Rather, that determination involves consideration of the totality of the circumstances in the underlying litigation. Neither Morris nor Himes states that the merits of a claimant's case must be given more weight than the other factors bearing on a Morris agreement's reasonableness. The legal merits of the claimant's case, albeit important, are but one relevant factor to be considered in evaluating whether an insured's settlement is reasonable and prudent. See Morris, 154 Ariz. at 120, 121, 741 P.2d at 253, 254 (insurer is bound if settlement shown to be reasonable and prudent "under all the circumstances"; reasonableness depends on "facts bearing on the liability and damage aspects of claimant's case, as well as the risks of going to trial ") (emphasis added); see also Himes, 205 Ariz. 31, 37, 66 P.3d at 85-86.
Indeed, under Morris, an insured's actual liability need not be established as a prerequisite to finding a Morris agreement reasonable. Rather, an insured or claimant need only establish that the potential for the insured to be held liable was such that settlement with the claimant was reasonable. Morris, 154 Ariz. at 120, 741 P.2d at 253; see Trim, 274 N.W.2d at 37 (" ack of negligence or otherwise is but a part of the reasonableness analysis...."); cf. Munzer v. Feola, 195 Ariz. 131, 32, 34, 985 P.2d 616, 622 (App. 1999) (although insurer precluded from litigating on remand "the substantive merits" of the underlying case, insurer was free to discover facts relating to the "liability aspect" of malpractice claim). Thus, because the merits of a claimant's case and, in turn, the insured's liability, need not be fully established before a settlement can be deemed reasonable under Morris, the more amorphous standard of potential liability is used.
Here, TAA/City's potential exposure was revealed, albeit to a limited extent, when it lost its motion for summary judgment on Barbara Valenzuela's claims in Valenzuela. See 102, supra. As the trial court found, because TAA/City had lost that motion, "counsel for the TAA and the City reasonably believed that it was more likely than not that the plaintiffs would get their case to a jury...." In addition, TAA/City was well aware of the di
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