Insurance Company Denied Jury Trial
Insurance company not entitled to a jury trial during a hearing to determine whether an insured's settlement with a claimant was reasonable and not the product of fraud or collusion
Stephanie Grassia
August 15, 2011
The Washington Court of Appeals recently held that an insurance company has no right to demand a jury trial during a hearing designed under Washington law to determine the reasonableness of a settlement between a defendant/insured and an injured claimant. Bird v. Best Plumbing Group, LLC, 160 Wn. App. 1035 (Wash. Ct. App. 2011) (unpublished).
James Bird lives on hillside waterfront property in Seattle. In April 2005, his neighbor contacted Best Plumbing to repair a leaking sewer line. A Best employee, without Bird’s permission, entered Bird’s property and cut Bird’s sewage line. When Bird returned home from work, his system cycled on and engulfed him in an explosion of sewage. He fell, cracked his elbow, and vomited.
After Bird learned that Best had cut the line, he demanded that it be repaired, which Best claimed it did. However, over the next eight months, sewage continued to escape, causing instability to the hillside and damage to Bird’s house. Bird removed contaminated soil from his lot and attributed his subsequent heart attack to the physical labor involved in removing the soil.
In May 2006, Bird notified Best of the significant damage to his residence and hillside lot. Best’s liability insurance company, Farmers Insurance Exchange, appointed defense counsel without a reservation of rights. Bird eventually sued Best for trespass and negligence. In July 2008, after Best admitted that its employee entered Bird’s property without permission, the court granted Bird’s partial summary judgment motion on liability and proximate cause on his common law trespass claim, reserving the nature and extent of Bird’s damages for trial.
In November 2008, mediation efforts failed between Best and Bird. Bird later made a $1.2 million settlement demand, and Farmers countered at $350,000. Thereafter, Bird’s counsel wrote Best, asserting that its potential exposure exceeded the $2 million insurance policy limits. Bird also made a $2 million policy limits demand, which Farmers rejected.
Concerned about his company’s financial exposure, Best’s president retained personal counsel and reached a $3.75 million settlement that included an assignment of Best’s bad faith claims against Farmers, a stipulated judgment, and a covenant not to execute against Best. Bird then moved for a determination that the settlement was reasonable pursuant to Rev. Code. Wash. § 4.22.060. Farmers moved to intervene and, among other things, demanded a jury trial. After a reasonableness hearing over four days in July and September 2009, the court found that the $3.75 million settlement was reasonable. Farmers appealed the denial of its jury trial demand and the trial court’s determination that the settlement was reasonable.
The Washington Court of Appeals affirmed. First, after a lengthy examination of several arguments proffered by Farmers, the Court concluded that a reasonableness hearing under Rev. Code. Wash. § 4.22.060 is an equitable proceeding that affords no right to trial by jury. Second, the Court found that given the extent of damages, Best’s liability and financial circumstances, and the risks and costs of future litigation (known as the “Chaussee/Glover factors” in Washington), the trial court did not abuse its discretion in determining that the settlement was reasonable and not the product of fraud or collusion.
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