A federal district court in Pennsylvania has ruled that an insurance company extinguished its subrogation right by allowing its insured to sign a general release as part of her settlement of a claim with one alleged tortfeasor.
The Case
Barbara A. Baum, a tetraplegic Pennsylvania resident who utilized a wheelchair for mobility prior, asserted that she was struck by a motor vehicle operated by Leanne Diamond as she exited a Target department store and headed toward her vehicle in the parking lot.
Following the accident, Ms. Baum filed a claim with Ms. Diamond's insurance company, State Farm. State Farm offered Ms. Baum the $50,000 policy limits of Ms. Diamond's liability insurance.
Ms. Baum sought and obtained consent to settle the claim from her insurer, Metropolitan Property and Casualty Insurance Company ("MetLife"). The settlement included a general release signed by Ms. Baum.
Ms. Baum then submitted an underinsured motorist claim to MetLife for $325,000.
MetLife offered Ms. Baum $20,000 for full settlement of her claim, which Ms. Baum declined.
MetLife subsequently offered Ms. Baum $25,000 to settle her underinsured motorist claim.
Ms. Baum declined that offer, and sued MetLife breach of contract and bad faith.
Relying on Pennsylvania's comparative negligence statute, 42 Pa. Cons. Stat. § 7102(a.2), under which parties in a tort action may submit a nonparty "who has entered into a release with the plaintiff with respect to the action" to the trier of fact for the limited purpose of apportioning liability, MetLife moved to include Simon Property Group, Inc., South Hills Village Associates, L.P., and the Target Corporation on the verdict slip. MetLife contended that a paved pathway leading from the store entrance to the handicapped parking spaces had been blocked by snow accumulation on the day of the accident and that each of the nonparties might be partially liable for failing to clear the pathway.
The MetLife Policy
The MetLife policy provided:
SETTLEMENT . . .Ms. Baum's Settlement with State FarmWe are not bound by any judgment, settlement or agreement against any person or organization obtained without our consent. . . .
ADDITIONAL DUTIES
All insureds must cooperate with us in investigating an accident.
We may require the insured to take appropriate action to preserve the insured's right to recover damages from any other person responsible for the accident or BI. In any lawsuit against us, we may require the insured to join the responsible person as a defendant.
Ms. Baum's settlement with State Farm included a release that provided that Ms. Baum:
hereby releases and forever discharges Leanne Diamond, Justin Diamond, their heirs, executors, administrators, agents and assigns, and all other persons, firms or corporations liable or, who might be claimed to be liable, none of whom admit any liability to [Ms. Baum] but all expressly deny any liability, from any and all claims . . . which have resulted or may in the future develop from [the] accident which occurred on or about January 31, 2014, at or near Target Parking Lot. . . .
The District Court's Decision
The district court denied MetLife's motion.
In its decision, the district court explained that Ms. Baum had sought and had obtained MetLife's consent to settle her claim with State Farm, Ms. Diamond's insurance company, and to sign the general release.
The district court pointed out that MetLife had not invoked its contractual right to require Ms. Baum to take "appropriate action" – including instructing Ms. Baum to enter into a more limited joint tortfeasor release – to preserve its right to recover from any and all responsible parties.
Instead, the district court found, MetLife had extinguished its subrogation rights by providing Ms. Baum consent to settle her claim through a general release.
The district court reasoned that including Simon Property, South Hills, and Target on the verdict form would allow MetLife to circumvent the consequences of the general release. Prior to receiving Ms. Baum's consent-to-settle demand, MetLife had six months to investigate the accident, review available video footage, and seek additional evidence and testimony from Ms. Baum, the district court said. It concluded that MetLife could "not invoke the existence of possible joint tortfeasors at this late juncture to restore its forfeited subrogation rights to [Ms.] Baum's detriment."
The case is Baum v. Metropolitan Property and Casualty Ins. Co., No. 2:16-CV-623 (W.D. Pa. Jan. 11, 2018). Attorneys involved include: For BARBARA A. BAUM, Plaintiff: Joseph R. Froetschel, Scott D. Glassmith, LEAD ATTORNEYS, Gismondi & Associates, P.C., Pittsburgh, PA. For METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY, trading and doing business as METLIFE AUTO & HOME, Defendant: R. Sean O'Connell, LEAD ATTORNEY, Craig W. Beil, Robb Leonard Mulvihill LLP, Pittsburgh, PA.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].