There is a wealth of case law concerning the extent to which insurers may be entitled to contest the merits of consent judgment settlements in which their policyholders assign their contractual (and extra-contractual) rights against the insurer in return for a covenant not to execute. As many insurers have discovered to their misfortune, moreover, much of this case law is adverse to insurers and often limits their defenses to issues of coverage and claims of fraud and collusion. As a result, insurers very often seek to intervene in the tort case to challenge the amount of the agreed damages and create a detailed factual record to support subsequent claims of fraud and collusion. But may a liability insurer intervene to challenge the verdict itself by picking up its insureds’ abandoned post-trial motions or, if necessary, pursuing an appeal to set aside the excess verdict? 

That issue is due to be considered this October by the Supreme Judicial Court of Massachusetts in the matter of Bejarano v. Goldberg. In 2003, Jose Bejarno two obstetric residents,

Alisa Goldberg and Julie Miner, for their alleged negligence in failing to recommend a cesarean section delivery to their supervisor during the course of Bejarano’s birth in 1997. The suit was defended by the defendants’ insurer, CRICO. 

In late 2007, a jury awarded $26.5 million in damages to the plaintiff. The defendants filed timely JNOV motions as well as a request for a remittitur. While the post-trial motions were pending, however, Drs. Goldberg and Miner negotiated a covenant not to execute on the judgment with Bejarno in exchange for an assignment of their claims against CRICO and CRICO’s payment of $9.6 million, the remainder of its policy limits. The settlement agreement did not provide for withdrawal or dismissal of the pending post-trial motions or address them in any way.

 Once it became clear that the insureds were not going to contest the jury verdict by pursuing the post-trial motions or pursue any appellate remedies, CRICO moved to intervene to do so. However, its Motion to Intervene was denied by the Superior Court (Cratsley, J.). The Court noted that the post-trial motions had merit and could “support serious prospects for reversal.”   Nevertheless, Judge Cratsley refused to allow CRICO to intervene to press these claims.  The Superior Court ruled that because CRICO had paid its policy limits and no longer had any direct liability and because the insured’s liability would not need to be retried in the subsequent 93A suit, CRICO did not have a sufficiently direct interest to warrant intervention. The Superior Court relied on Bolden v. O’Connor Café of Worcester, Inc., 50 Mass. App. Ct. 56, 67 (2000), in which the Massachusetts Appeals Court ruled that a trial court did not abuse its discretion in denying intervention under somewhat similar circumstances.

Bejarano subsequently filed a bad faith action against CRICO based upon the assignment of the insured physicians’ policy rights arguing that CRICO acted negligently in failing to settle her lawsuit. The suit seeks treble damages pursuant to M.G.L. c. 93A based upon the $26.5 million judgment.

CRICO has argued on appeal, however, that Bolden is entirely distinguishable as the plaintiff in that case had not argued that the tort judgment would have res judicata or collateral estoppel effect in its 93A claim against the insurer. In any event, CRICO argues that the Supreme Judicial Court should not be bound by the limited analysis of this issue by the Appeals Court and should make an independent determination that a liability insurer’s interests will be impaired as a practical matter under such circumstances. 

CRICO is defended in its appeal by Steve Schreckinger who, for once, is back on the side of the angels.