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Petersen v. Genesis Learning Centers12/13/2005
This case arises out of tragic circumstances. Defendant/Appellant Therapeutic Interventions, Inc. ("TII"), is a foster care provider for children in state custody. By contract with Genesis Learning Centers, TII provided foster care services to Eric, who is the son of Plaintiffs/Appellees Richard Petersen ("Petersen") and Karen Fosmire ("Fosmire") (collectively, "Plaintiffs"). Eric's younger sister Rachel lived with their mother, Fosmire. While Eric was on a home visit with Fosmire, he was left at home with Rachel. During this time, Eric murdered Rachel. The Plaintiffs thereafter filed a wrongful death lawsuit against TII, Genesis Learning Centers, and the State of Tennessee.
TII was insured under an insurance policy with coverage limits in the amount of $1,000,000. The TII policy is described as a "withering" policy, because all of the expenses associated with the defense of the lawsuit are subtracted from the coverage amount. In 2001, counsel for TII informed Plaintiffs' counsel that TII's insurance policy had such "withering" limits, and that all legal fees and expenses incurred in defending the case would reduce the amount remaining for settlement. At that time, the trial was scheduled to commence on May 17, 2004.
On Monday, May 10, 2004, counsel for TII, Christy Tosh Crider ("Crider"), received authorization from TII and its insurance company to make a written offer to the plaintiffs to settle the case for the remaining policy limits. On that day, Crider faxed a letter to Plaintiffs' counsel containing the following language:
I have been authorized to offer you the remaining limits under Therapeutic Intervention's insurance policy in exchange for a full and final release of all claims of Richard Petersen and Karen Fosmire against Therapeutic Interventions as well as an agreement to indemnify and hold harmless Therapeutic Interventions from claims by Genesis or Genesis' insurance company against Therapeutic Interventions. As you know, the insurance policy started at $1,000,000. The extensive fees and expenses in this case have eroded the limits. There is approximately $575,000 remaining on the insurance policy at this point. As you are aware, if Therapeutic Interventions tries this lawsuit, there will be significantly less money available to pay Mrs. Fosmire and Mr. Petersen. As you also know from the deficit sheets, they really do not have anything to offer beyond their limits and any excess judgment is not collectable.
(Hereinafter "May 10 offer"). Although Crider's letter estimated that the policy limits remaining at that time were "approximately $575,000," Crider had underestimated the amount of unbilled fees and expenses by about $50,000. In addition, as part of TII's trial preparation, a very expensive mock trial was scheduled for the night Crider faxed the letter.
On the day that the offer was sent, after the offer letter was faxed, Crider called Plaintiffs' counsel on the telephone and informed them that the mock trial was scheduled to take place that evening, and that "if there was anyway he could accept before the mock trial began, we would be able to stop some of the enormous expenses from further eroding the limits." The Plaintiffs did not accept the settlement offer at that point, and TII proceeded with the mock trial that evening. The cost of the mock trial was approximately $45,000, not including attorney's fees, videographers, and other providers.
On May 11, 2004, Plaintiffs' counsel called Crider on the telephone and requested that the settlement offer be kept open for forty-eight (48) hours. Crider claimed that in that conversation, she advised counsel for Fosmire that trial preparation would continue, whi
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