Brock v. Jim Hipner, LLC, Case No. 4-15-cv-84

• Decision Date: 25 January 2017
• Docket Number: Case No. 4-15-cv-84
• Parties: Huey Brock, Plaintiff, v. Jim Hipner, LLC, Robert Lopez, Does 1 Through 50, Inclusive, Defendants.
• Court: U.S. District Court — District of North Dakota

Huey Brock, Plaintiff, v. Jim Hipner, LLC, Robert Lopez,Does 1 Through 50, Inclusive, Defendants.

Case No. 4-15-cv-84

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NORTH DAKOTA

January 25, 2017

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

I. BACKGROUND

A. The accident and the partial settlement

On March 31, 2011, Huey Brock ("Brock") was involved in a car accident with a truck owned by Jim Hipner, LLC ("Hipner") and operated by Robert Lopez, Hipner's employee. As a result of injuries sustained in the accident, Brock became quadriplegic. At the time of the accident, Hipner had a $1 million primary insurance policy with Great West Casualty Company ("Great West"). Hipner also carried a $2 million excess insurance policy with Century Surety Company ("Century"). Prior to any litigation, Brock, Hipner, Lopez, and Great West entered into a settlement agreement dated March 23, 2013 (Docket No. 9-1), under which Great West agreed to pay Brock the policy limit of $1 million. The motion currently before the court focuses upon the effect of this agreement in relation to Brock's current negligence claim against Hipner and Lopez.

The settlement agreement, in pertinent part, provides:

SETTLEMENT AGREEMENT AND RELEASE

WHEREAS a motor vehicle collision occurred on March 31, 2011, at or about 6:15 p.m., on US Highway 2 east of Williston, North Dakota, involving multiple motor vehicles, including one owned by Jim Hipner, LLC, WHEREAS Huey Brock sustained injuries as a result of that accident, which include, but are not limited to: Quadriplegia,

WHEREAS at the time, Jim Hipner LLC had a policy of liability insurance coverage providing $1,000,000.00 per occurrence combined single policy limit coverage with Great West Insurance Company to indemnify it and, furthermore, had a $2,000,000.00 excess or umbrella insurance policy with Century Surety Company, which would indemnify him to said amount.

* * * *

WHEREAS Huey Brock claims that the amount needed to fully compensate him for his damages, injuries and losses exceeds the sum of the liability of both the Great West Insurance Company policy and the Century Surety Company policy,

WHEREAS Huey Brock and Jim Hipner LLC are desirous of resolving that portion of Huey Brock's claim that involves the financial responsibility of Great West Insurance Company, and of limiting the financial exposure of Jim Hipner LLC, its owners, agents, and employees (including Robert Lopez) on the basis of an agreement consistent with Drake v. Ryan, 514 N.W.2d 786 (Minn. 1994), allowing Huey Brock to take the $1,000,000.00 policy limit of the liability insurance coverage from Great West Insurance Company and preserving his claims related to any and all coverage provided by Century Surety Company,

WHEREAS Huey Brock expressly reserves any and all rights and claims he has against Jim Hipner LLC and Robert Lopez to the extent of any insurance coverage provided by the Century Surety Company policy, and accordingly, this Settlement Agreement and Release does not have the effect of a general release,

NOW THEREFORE in consideration of the payment of the policy limit of $1,000,000.00 by Great West Insurance Company on behalf of Jim Hipner LLC and Robert Lopez, the receipt of which is acknowledged, Huey Brock agrees as follows:

1. Settlement. Huey Brock and Jim Hipner LLC agree that the reasonable value of all of Huey Brock's claims for damages growing out of the injuries sustained in the motor vehicle collision of March 31, 2011, are in an amount in excess of $3,000,000.00. Huey Brock stipulates and agrees to settle a portion of his claim against Jim Hipner LLC and Robert Lopez for a total of the policy limit of $1,000,000.00, pursuant to the principles of Drake v. Ryan, 514 N.W.2d 786 (Minn. 1994), and agrees that said damages will be collectable only from applicable liability insurance coverage, and not from the personal assets of Jim Hipner LLC, its owners, agents and employees, including Robert Lopez. In the event that a judgment is entered upon Huey Brock's claims, Huey Brock will only seek to satisfy such judgment from Century Surety Company or any other liability insurance company providing coverage to Jim Hipner LLC or Robert Lopez, and any such judgment is explicitly not satisfiable by attachment of, nor shall it become a lien upon, any assets or property of JimHipner LLC or Robert Lopez.

2. Release. Huey Brock, upon payment of the $1,000,000.00 liability limits by Great West Insurance Company, hereby releases Jim Hipner LLC, its owners, employees (including Robert Lopez), or any other person or entity affiliated with Jim Hipner LLC, and Great West Insurance Company, from any and all liability arising out of the injures and damages which he sustained as a result of the motor vehicle collision of March 31, 2011, on US Highway 2 east of Williston, North Dakota, except as such claims are preserved herein and satisfiable out of liability insurance coverage provided by Century Surety Company or any other liability insurance company.

* * * *

4. Limitation of Claim Against Jim Hipner LLC and Robert Lopez. Huey Brock agrees to limit his claim against Jim Hipner LLC, its owners, agents or employees, including Robert Lopez, to the available liability insurance coverage from Century Surety Company and not to pursue Jim Hipner LLC or Robert Lopez for any personal assets. Huey Brock expressly agrees and acknowledges that Jim Hipner LLC, its owners, agents, or employees, including Robert Lopez, are not personally exposed to any liability to Huey Brock beyond insurance coverage available from Century Surety Company and Huey Brock will only seek to satisfy any judgment he obtains against Jim Hipner LLC or Robert Lopez by means of insurance coverage available to them. However, if a verdict or judgment is obtained by Huey Brock in excess of the insurance coverage available from Century Surety Company, Huey Brock will seek to satisfy any judgment against Century Surety Company for any and all amounts in excess of the umbrella or excess insurance coverage amount.

5. All Other Claims Preserved. Consistent with the above terms, Huey Brock preserves every other claim, against every person, by this agreement. It is agreed that Huey Brock is not fully compensated by the payment of $1,000,000.00 by Great West Insurance Company for the injures which he received in this collision.

6. Assignment. Jim Hipner LLC hereby assigns to Huey Brock its right to indemnity from Century Surety Company, and all other rights and/or claims against Century Surety Company, or any other liability insurance company providing coverage to Jim Hipner LLC, including but not limited to claims for breach of the covenant of good faith and fair dealings, bad faith, breach of contract, and/or for the amount of this settlement, together with its right to recover attorney's fees, costs and expenses in pursuing his claim and coverage under the Century Surety Company policy of insurance.

(Docket No. 9-1).

B. The two other cases

Following the settlement agreement, three separate litigations ensued before this court, including this case. The current motion requires examination of the two other cases.

1. Century Surety Co. v. Jim Hipner LLC, Case No. 4-12-cv-164

On December 4, 2012, Century filed a declaratory judgment action seeking a declaration it had no obligation to defend or indemnify Hipner in connection with any claims relating to the accident. Century Surety Co. v. Hipner, LLC, No. 4-12-cv-164, 2015 WL 11143135 (D.N.D. April 24, 2015). Both parties moved for summary judgment. Id. at *1. The court granted Century's motion, in part, on April 25, 2015. In the order, the court concluded Wyoming law controlled interpretation of the insurance contract between Century and Hipner. Id. at **4-7. The court also concluded Hipner complied with the notice requirement necessary to trigger insurance coverage. Id. at **8-10.

With respect to whether Century had a duty to defend and indemnify the defendants, the court concluded that, given the "ultimate net loss" provision of its policy, its coverage was not triggered until liability and the amount of damages were determined by either a settlement or a judgment in excess of the underlying policy limits. And, because there was neither, the court concluded there was no present duty to defend or indemnify. Id. at *12 ("There is arguably no right of action or claim under the excess insurer's policy until such time as liability and the amount of damages have been determined by reason of a settlement or a judgment in excess of the underlying policy limits."). The court then limited its declaration to the following:

[Century] is not obligated to defend or indemnify Hipner LLC or Lopez at this point in connection with any claims arising out of or relating to the accident that occurred on March 31, 2011. However, in the event a justiciable controversy exists in the future, both the primary carrier and the excess carrier may be obligated to defend or indemnify.

Id. at *13.

While there is some language in the court's decision which suggests that the court read the settlement agreement as Brock having released defendants from all liability whatsoever with respect all claims, there are other statements, including that set forth above, where the court notes the possibility of Brock still being able to file an action against them and that Century may be obligated to provide both a defense and indemnity. The court will return to this later. Suffice it to say now, however, that anything the court stated about the extent of the release was not necessary to the limited declaration that Century had no present duty to defend or indemnify since there was neither a judgment of liability on the part of the defendants, much less an action filed against them seeking a determination of their liability, or a triggering settlement.

Even though Century was the prevailing party with respect to the court's limited declaration, it appealed that part of the court's decision...