Intervention: What s An Insurer To Do To Resolve Coverage Issues?

Transcription

1 Intervention: What s An Insurer To Do To Resolve Coverage Issues? Summary COMPENDIUM OF CASES ADDRESSING INSURER INTERVENTION Compared to other methods of resolving insurance coverage issues, e.g., declaratory judgment actions, there is a dearth of case law addressing intervention. Below is a summary of the available case law addressing the issue of intervention, including discussions about how and when such intervention is allowed. As noted, several courts have granted insurer s motions for permissive intervention for the limited purpose of proposing specific interrogatories, jury instructions or verdict forms. Several courts have found this procedure to be an efficient method for allocating the covered and uncovered portions of a damage award. Other courts have denied motions to intervene, often citing concerns of a potential conflict of interest or timeliness, or finding a declaratory judgment action to be the preferred method for resolving coverage issues. Whether Intervention is Permitted - The following courts have either granted permissive intervention for the limited purpose of proposing interrogatories and/or special verdicts or have spoken in support of such intervention:! Alabama. Thomas v. Henderson, 297 F. Supp. 2d 1311, 1326 (S.D. Ala. 2003) (emphasizing that the court s granting of the motion to intervene would not infer or imply that the Court would feel obligated to submit [the interrogatories or verdict forms] to the jury )! Connecticut. Knowling v. Hunt, 41 Conn. Supp. 389, 391, 577 A.2d 1144, 1146 (Super. Ct. 1990) (noting that if the court refused to permit intervention, then in all likelihood the issue in question [regarding coverage] would have to be litigated in another action, which is clearly contrary to the interests of judicial economy )! Florida. Employers Ins. of Wausau v. Lavender, 506 So. 2d 1166, 1167 (Fla. Dist. Ct. App. 1987) (technically denying the motion to intervene that was filed prior to trial, but permitting the insurer to seek intervention after the jury returned a verdict)! Illinois. Knapp v. Hankins, 106 F. Supp. 43, 48 (E.D. Ill. 1952); but see cases below.! Minnesota. Schubitzke v. Country Mut. Ins. Co., No. CV (DWF/LIB), 2012 WL , at *1 (D. Minn. Sept. 12, 2012)

2 ! Nevada. Fid. Bankers Life Ins. Co. v. Wedco, Inc., 102 F.R.D. 41, 45 (D. Nev. 1984)! Ohio. Infrasource Const. Serv., LLC v. E&M Piping, LLC, No. 1:12CV0261, 2012 WL , at *9 (N.D. Ohio Sept. 27, 2012); but see J4 Promotions, Inc. v. Splash Dogs, LLC, No. 2:09-CV-136, 2010 WL , at *1 (S.D. Ohio May 3, 2010) (denying a motion to intervene to assert a cross-claim for declaratory judgment for lack of timeliness)! Pennsylvania. Butterfield v. Giuntoli, 448 Pa. Super. 1, 25, 670 A.2d 646, 658 (1995) (reversing lower court s grant of summary judgment in favor of the insured regarding coverage because the insurer did not request specific jury instructions or interrogatories despite having the option to intervene)! Tennessee. Plough, Inc. v. Int'l Flavors & Fragrances, Inc., 96 F.R.D. 136, 137 (W.D. Tenn. 1982) (permitting intervention for the limited purpose of submitting special interrogatories, but reserving judgment until such time interrogatories [were] submitted on whether they shall be employed in returning a verdict ); ADT Servs. AG v. Brady, No , 2014 WL , at *3 (W.D. Tenn. Sept. 8, 2014)! Vermont. Pharmacists Mut. Ins. Co. v. Myer, 2010 VT 10, 15, 187 Vt. 323, 333, 993 A.2d 413, 420 (2010) (finding it impossible to determine what conduct was within a policy s coverage after the jury had returned a verdict and noting that to protect its interests and meet its burden it was incumbent upon [the insurer] to notify the trial court and the parties of the potential apportionment issue and of the need for special interrogatories allocating damages, to seek permission if necessary to attend the charge conference to propose such interrogatories, or even to intervene in the litigation if all else failed ) - The following cases have granted a motion to intervene for more substantive purposes:! Kansas. Ames v. Uranus, Inc., No. CIV. A L, 1992 WL , at *1 (D. Kan. Sept. 14, 1992) (granting the insurer s motion to intervene in order to seek a declaratory judgment on coverage issues)! Mississippi. Guar. Nat. Ins. Co. v. Pittman, 501 So. 2d 377, 380 (Miss. 1987) (finding that the circuit court erred when it refused to permit an insurer to intervene for the limited purpose of seeking to have a default judgment set aside)! Wisconsin. Int'l Paper Co. v. City of Tomah, Wisconsin, No. 00-C-539-C, 2000 WL , at *8 (W.D. Wis. Nov. 30, 2000) (granting the insurer s motion to intervene in order to seek a declaratory judgment on coverage issues); Richardson v. Helgerson, No. 15-CV-141-WMC,

3 WL , at *2 (W.D. Wis. May 26, 2015) (encouraging the insurer to either file a motion for summary judgment or a declaratory judgment action); but see Reliable Money Order, Inc. v. McKnight Sales Co., Inc., No. 10-C-242, 2013 WL , at *2 (E.D. Wis. Feb. 19, 2013) (finding motion to intervene untimely) - The following courts have denied motions for intervention, though several of these cases address unique fact scenarios, such as the insurer seeking intervention for a broader purpose than simply to propose special interrogatories and/or jury instructions or filing an untimely motion:! Arizona. Cooke v. Town of Colorado City, Ariz., No. CV PCT- JAT, 2013 WL , at *3 (D. Ariz. Sept. 19, 2013) (finding the motion to intervene to be untimely when it was filed the day before the final pretrial conference)! Illinois. Davila v. Arlasky, 141 F.R.D. 68, 73 (N.D. Ill. 1991) (finding a lack of subject matter jurisdiction); Sachs v. Reef Aquaria Design Inc., No. 06 C 1119, 2007 WL , at *2 (N.D. Ill. Oct. 5, 2007) (finding the motion to intervene untimely when the insurer waited more than a year after learning of the case to file the motion)! Indiana. Cromer v. Sefton, 471 N.E.2d 700, 707 (Ind. Ct. App. 1984) (ordering the trial court to deny an insurer s motion to intervene when the insurer attempted to contest coverage by way of summary judgment); Powell v. Tosh, No. 5:09-CV-121, 2012 WL , at *4 (W.D. Ky. Jan. 31, 2012) (denying an insurer s motion to intervene, the sole purpose of which was to obtain a stay until the declaratory judgment action in state court was resolved).! Kentucky. Powell v. Tosh, No. 5:09-CV-121, 2012 WL , at *4 (W.D. Ky. Jan. 31, 2012) (noting a potential conflict of interest and also that the motion was not timely when it was filed more than 30 months after the complaint was filed)! Maine. Donna C. v. Kalamaras, 485 A.2d 222, 224 (Me. 1984) (upholding a district court s denial of permissive intervention when the insurer sought intervention not just for limited purposes of requesting special findings from the jury, but to participate fully in the litigation).! Maryland. Allstate Ins. Co. v. Atwood, 319 Md. 247, 258, 572 A.2d 154, 159 (1990) (collecting cases and finding that the overwhelming majority have held that it is inappropriate for the insurer to intervene in the trial of a tort suit against its insured due to conflict of interest concerns) - 3 -

4 ! Mississippi. J.T. Shannon Lumber Co. v. Gilco Lumber, Inc., No. CIV. A. 2:07-CV-119, 2008 WL , at *2 (N.D. Miss. Oct. 7, 2008) (finding that the motion to intervene was untimely when it was filed ten months after the insurer sent the reservation of rights letter to the insured)! Nebraska. High Plains Co-op. Ass'n v. Mel Jarvis Const. Co., 137 F.R.D. 285, 290 (D. Neb. 1991) This court denied the motion because the insurer failed to demonstrate that its future defense in the coverage dispute has questions of fact in common with the main action. The court was also concerned with the potential for a conflict of interest between the insurer and the insured.! New Mexico. Nieto v. Kapoor, 61 F. Supp. 2d 1177, 1195 (D.N.M. 1999), aff'd, 268 F.3d 1208 (10th Cir. 2001) (citing a risk of a conflict of interest and finding that the the better course of action, rather than grant permissive intervention, is to allow the stayed declaratory action to resolve that conflict at the conclusion of the present litigation ); Navajo Nation v. Urban Outfitters, Inc., No. CV BB/LAM, 2016 WL , at *1 (D.N.M. Sept. 6, 2016)! New York. Restor-A-Dent Dental Labs., Inc. v. Certified Alloy Prod., Inc., 725 F.2d 871, 872 (2d Cir. 1984) The court noted that it would have been error for the district court to deny the motion to intervene simply because of timing. However, the court pointed to the following potential factors that may warrant denying a motion to intervene: o The insurer did not have any great need for the relief sought o There is no assurance that granting the motion to intervene would not unduly delay the main action o Potential conflict of interest between the insurer and the insured Finally, the court also noted that it would not have been an abuse of discretion had the district court granted the motion to intervene for the limited purpose of proposing interrogatories.! Ohio. Infrasource Const. Serv., LLC v. E&M Piping, LLC, No. 1:12CV0261, 2012 WL , at *12 (N.D. Ohio Sept. 27, 2012) (denying motion and noting a concern that an insurer who reserves the - 4 -

5 right to deny coverage cannot interfere with or influence the defense of the lawsuit brought against its insured ) Oklahoma. Minter v. Prime Equip. Co., No. CIV KEW, 2007 WL , at *1 (Sept. 5, 2007) (denying the insurer s motion to intervene because the insurer was providing the insured s defense, but also noting that the insurer is obligated to propose special interrogatories to determine coverage when the insurer is providing the defense)! Tennessee. Frank Betz Assocs., Inc. v. J.O. Clark Const., L.L.C., No. CIV.A 3:08-CV-00159, 2010 WL , at *3 (M.D. Tenn. June 4, 2010) The court found the following factors weighing against intervention: o Conflict of interest between insurer and the insured o Insurer failed to show any great need for intervention, primarily because it failed to identify the common questions of law and fact involved or produce a full copy of the policy o The insurer did not file a declaratory action and failed to inform the court why a declaratory judgment action would not efficiently dispose of the coverage issue! Wyoming. State Farm Mut. Auto. Ins. Co. v. Colley, 871 P.2d 191, 195 (Wyo. 1994) (finding that strong public policy concerns weigh against permitting an insurer from intervening in a tort suit). - Finally, one court has stated that the insurer need not intervene in the case in order to assert its policy limits later:! Idaho. Buckley v. Orem, 112 Idaho 117, 123, 730 P.2d 1037, 1043 (Ct. App. 1986) Timing and Timeliness of Motions to Intervene Courts that have granted intervention for this limited purpose have come to different conclusions as to when motions for intervention should be filed. Below is a sample of some holdings regarding proper timing. - The following courts have found motions to intervene filed prior to trial untimely: o Alabama. QBE Ins. Corp. v. Austin Co., 23 So. 3d 1127, 1133 (Ala. 2009) - 5 -

6 ! In this case, the court denied a motion for permissive joinder for untimeliness when the insurer filed its motion to intervene 16 months after it sent the insured a reservation of rights letter identifying coverage issues.! However, the insurer sought intervention for purposes of participating in discovery (in addition to requesting specific interrogatories and jury instructions) and discovery was substantially completed when the insurer filed its motion to intervene. o Arizona. Cooke v. Town of Colorado City, Ariz., No. CV PCT-JAT, 2013 WL , at *3 (D. Ariz. Sept. 19, 2013) (finding the motion to intervene to be untimely when it was filed the day before the final pretrial conference) o Illinois. Sachs v. Reef Aquaria Design Inc., No. 06 C 1119, 2007 WL , at *2 (N.D. Ill. Oct. 5, 2007) (finding the motion to intervene untimely when the insurer waited more than a year after learning of the case to file the motion) o Mississippi. J.T. Shannon Lumber Co. v. Gilco Lumber, Inc., No. CIV. A. 2:07- CV-119, 2008 WL , at *2 (N.D. Miss. Oct. 7, 2008) (finding that the motion to intervene was untimely when it was filed ten months after the insurer sent the reservation of rights letter to the insured) o Ohio. Davis v. Border, 2007-Ohio-692, 54, 170 Ohio App. 3d 758, 768, 869 N.E.2d 46, 53 (finding the motion to intervene untimely when it was filed fourteen months after the complaint was filed and two weeks prior to trial) - However, several courts are less concerned with when a motion to intervene is filed, as evidenced by the following examples: o Minnesota. Schubitzke v. Country Mut. Ins. Co., No. CV (DWF/LIB), 2012 WL , at *1 (D. Minn. Sept. 12, 2012) (finding the motion timely when it was filed less than three months after the scheduling order was issued and while the discovery period was still open) o Tennessee. Frank Betz Assocs., Inc. v. J.O. Clark Const., L.L.C., No. CIV.A 3:08-CV-00159, 2010 WL , at *3 (M.D. Tenn. June 4, 2010) (although denying the motion to intervene on other grounds, the court did not find the motion untimely, noting that earlier intervention would not have made any difference ) - The following courts have found that the insurer should take action either during or after the trial: o Florida. Employers Ins. of Wausau v. Lavender, 506 So. 2d 1166, 1167 (Fla. Dist. Ct. App. 1987) (finding that in the event that, but only after, the jury returns a - 6 -

7 punitive damage verdict against the University, [the insurer] is permitted to intervene for the same limited purpose of preparing jury instructions and a special interrogatory verdict for submission to the jury ) o New Mexico. Nieto v. Kapoor, 61 F. Supp. 2d 1177, 1195 (D.N.M. 1999), aff'd, 268 F.3d 1208 (10th Cir. 2001) (finding declaratory judgment - not a motion to intervene - should be filed after the insurer s participation in the litigation has concluded). o Pennsylvania. Butterfield v. Giuntoli, 448 Pa. Super. 1, 25, 670 A.2d 646, 658 (1995) (noting that the insurer could have requested specific instructions on the question, specific interrogatories, or special verdict forms, or intervene at the outset of the trial, during the trial, or immediately following the verdict - 7 -