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Himes v. Safeway Insurance Company3/27/2003
AFFIRMED IN PART; REVERSED IN PART; REMANDED
We examine in this opinion the burden of proof and legal standard applicable in determining to what extent a Damron/Morris agreement represents a reasonable settlement that is binding on an insurer.
I.
Holly Castano ("Castano") was severely injured in an automobile accident. Without attempting to fully describe her injuries, we note that Castano suffered a diffuse axonal injury to her brain which resulted in spastic quadreparesis. She has no use of her left arm or leg. She can slightly move her right leg and has limited use of her right arm. She has the ability to communicate but suffers distorted long term and short term memory problems. Some evidence put the cost of her past and projected medical care at $7 million.
Castano's mother, Patricia Himes ("Himes"), sued Steven Botma ("Botma") on behalf of herself and Castano. Botma, an insured of Safeway Insurance Company ("Safeway"), was the driver of the car which caused the collision with the vehicle in which Castano was a passenger. Safeway insured Botma under a policy which provided him the minimum statutory limits of $15,000 per person and $30,000 per accident. Himes also sued General Motors Corporation ("GM") and Joe Gambino Chevrolet ("Gambino"), the manufacturer and distributor, respectively, of the car in which Castano was riding. Himes contended that Castano's passenger seat was defective and collapsed during the collision, causing her injuries to be more severe.
Safeway retained counsel for Botma. That counsel filed an answer and counterclaim on Botma's behalf. The counterclaim alleged that Botma's liability had been extinguished by Himes' acceptance of a policy limits settlement. The counterclaim was severed for trial and tried to a jury. The jury found in favor of Himes, concluding that there had been no settlement.
After the trial against Botma was completed, and the case against GM and Gambino was set for trial, Botma and Himes entered into a Damron/Morris agreement. Botma consented to have judgment entered against him in the amount of $12 million and assigned all of his rights against Safeway to Himes, and in return Himes agreed not to execute against Botma's personal assets. The basis for the Damron/Morris agreement was Botma's contention that Safeway had breached its duty to give equal consideration to Botma's interests by failing to settle the case within policy limits, thereby freeing Botma to negotiate a settlement to protect his personal assets. Judgment was entered against Botma in accordance with the Damron/Morris agreement on March 21, 2000. The product liability claim against GM and Gambino proceeded to trial. After a nine-week trial, and while the jury was deliberating, the claims against GM and Gambino were settled and dismissed with prejudice.
Prior to entry of the stipulated judgment, Safeway was allowed to intervene as of right under Arizona Rule of Civil Procedure 24(a). Safeway filed a motion, and then an amended motion, for new trial and for judgment as a matter of law as to the verdict and judgment in favor of Himes on Botma's counterclaim.
The trial court denied the motion. Safeway also requested, and was granted, an evidentiary hearing as to the reasonableness of the settlement between Botma and Himes. Safeway also moved the trial court to withhold entry of the stipulated judgment until the amount of the judgment had been proved to be reasonable. The trial court denied this request.
Following the evidentiary hearing, the trial court ruled that the $12 million Damron/Morris agreement was reasonable to the extent of $9 million. Himes then mo
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