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United States Fire Insurance Co. v. Worcester Insurance Co.1/20/2005
ld make a payment equal to the maximum policy limits either to settle a claim against the insured or in total or partial satisfaction of a judgment against the insured upon conclusion of the litigation [emphasis added]. See Lumbermens Mut. Cas. Co. v. McCarthy, 90 N.H. 320, 324 (1939). [Footnote omitted.] For example, in the case of multiple claims against an insured, good faith settlement with one claimant, or payment of all or part of a judgment favoring one claimant, the policy language would have the effect of discharging the insurer from defending additional claims beyond the policy limits. See Johnson v. Continental Ins. Cos., 202 Cal. App. 3d 477, 485 (1988). The insurer, having exhausted the policy limits and provided a defense, the insured could not reasonably expect more [emphasis in original]. The situation is different, however, when an insurer seeks to pay the full amount of coverage without a judgment and without obtaining a release of the insured from at least one personal injury claimant."
That duty, the argument continues, precludes an insurer from squandering its policy limit and then abandoning the insured without having obtained as much protection for its insured as is reasonably possible while leaving the insured subject to further litigation.
Although we, of course, accept the settled and obvious premise of US Fire's argument, that Worcester had the duty to act reasonably and in good faith in fulfilling its contractual obligations to indemnify and to defend Youngblood in accordance with the terms of its policy, there is nothing in the record that even remotely suggests that Worcester squandered its policy limit in fully settling five claims in exchange for $150,500 and partially settling the sixth for $849,500. Had Worcester done as US Fire seems to argue, that is, first paid its policy limit to St. Paul, US Fire then would have been left to defend against the remainder of St. Paul's claim ($1,900,000) as well as negotiate settlements with the remaining five claimants that had been obtained by Worcester for $150,500. In the absence of any record support for the allegation that Worcester "squandered" its policy limits without obtaining adequate protection for Youngblood, we think the argument is no more than a complaint that Worcester failed to give US Fire's interests priority over those of Youngblood.
US Fire next argues that whether Worcester had exhausted its policy limit was a disputed question of fact. It claims that in settling the claims against Youngblood, Worcester paid three of the five claimants a total of $3,000 in counsel fees which they incurred in defending against Worcester's action against them under G. L. c. 231A. There are three problems with US Fire's argument.
First, none of the arguments now raised on appeal by US Fire appear, from the record appendix before us, to have been presented to the judge prior to her ruling on the cross-motions for summary judgment. Rather, and as best we can determine, this issue was raised for the first time on US Fire's motion for reconsideration and motion to vacate the judgment pursuant to Mass.R.Civ.P. 60(b), 365 Mass. 828 (1974).
Second, US Fire's argument before us is based on information set out in the three claimants's settlement petitions. However, those petitions were provided to US Fire by Worcester well before argument was held on the cross-motions for summary judgment. Nonetheless, US Fire did not raise this issue that it now presents on appeal until after the judge had ruled on the cross-motions.
Third, those settlement petitions do not support US Fire's argument that Worcester paid $3,000 in counsel fees to the claimants and then deducted that amount from
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