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Travelers Indemnity Company of Connecticut v. Worthington

Supreme Court of Alabama

October 13, 2017

Travelers Indemnity Company of Connecticut
v.
Angela Worthington

         Appeal from Limestone Circuit Court (CV-12-900356)

          WISE, JUSTICE.

         The defendant below, Travelers Indemnity Company of Connecticut ("Travelers"), appeals from Limestone Circuit Court's denial of its postjudgment motion seeking to set aside a judgment entered on a jury verdict in favor of the plaintiff below, Angela Worthington. We affirm.

         Facts and Procedural History

         On April 27, 2011, Worthington was a passenger in a vehicle being driven by her husband. A friend of the Worthingtons and the Worthingtons' two minor children were also passengers in the vehicle. While the Worthingtons' vehicle was stopped at a nonfunctioning traffic light, it was struck in the rear by a vehicle being operated by Camille Thomas. Worthington and the other occupants in her vehicle were injured as a result of the accident.

         At the time of the accident, the company Worthington's husband owned had a comprehensive insurance policy with Travelers that included uninsured-motorist ("UM") and underinsured-motorist ("UIM") coverage. The policy endorsement dealing with UM/UIM coverage provided, in pertinent part:

"C. Exclusions
"This insurance does not apply to:
"1. Any claim settled without our consent.
"However, this exclusion does not apply to a settlement made with the insurer of a vehicle described in Paragraph b. of the definition of 'uninsured motor vehicle.'
"....
"E. Changes in Conditions
"These conditions are changed for Uninsured Motorists Coverage as follows:
"....
"2. Duties in the Event of Accident, Claim Suit or Loss is changed by adding the following:
"....
"c. A person seeking Uninsured Motorists Coverage must also promptly notify us in writing of a tentative settlement between the 'insured' and the insurer of a vehicle described in Paragraph b. of the definition of an 'uninsured motor vehicle' and allow us 30 days to advance payment to that insured in an amount equal to the tentative settlement to preserve our rights against the insurer, owner, or operator of such a vehicle described in Paragraph b. of the definition of 'uninsured motor vehicle.'
"....
"F. Additional Definitions
"As used in this endorsement:
"....
"3. 'Uninsured motor vehicle' means a land motor vehicle or 'trailer':
"....
"b. That is an underinsured motor vehicle. An underinsured motor vehicle is a land motor vehicle or 'trailer' for which the sum of all liability bonds or policies at the time of an 'accident' provides a limit that is less than the amount an 'insured' is legally entitled to recover as damages caused by the 'accident.'"

         (Boldface type in original.)

         On December 7, 2012, Worthington's husband, individually, and Worthington, individually and as mother and next friend of the two minor children, filed a complaint in the Limestone Circuit Court against Thomas and Travelers.[1] The complaint included claims of negligence, wantonness, and negligence per se against Thomas. Worthington and her husband also included claims of loss of consortium. Finally, the complaint included a UM/UIM claim against Travelers.

         On January 18, 2013, Travelers filed its answer to the complaint. In its answer, Travelers set forth affirmative defenses, but it did not set forth any policy-based defenses.

         On October 28, 2014, Worthington's counsel notified Travelers' counsel that Worthington and Thomas had reached a proposed agreement to resolve Worthington's claims against Thomas for $56, 250, plus mediation costs and filing fees. Travelers advised Worthington of its intent to maintain its rights under Lambert v. State Farm Mutual Automobile Insurance Co., 576 So.2d 160 (Ala. 1991), and advanced the amount of the proposed settlement to Worthington; Thomas was not released, and the action therefore proceeded with her remaining as a defendant.

         On July 29, 2015, Worthington filed a motion for a partial summary judgment as to her negligence claim against Thomas.

         Subsequently, counsel for Worthington sent a letter to counsel for Thomas that was dated August 7, 2015, that stated:

"This letter will confirm that my client has authorized me to reject your offer to settle this case for $85, 000. Please advise your insured Mrs. Thomas that in the event there is a verdict in excess of $100, 000, we intend to execute on some of her assets even though there is a substantial underinsured motorist policy available. Your client, the insured, should be advised that we have offered to resolve this case against her for the policy limits of $100, 000. I strongly encourage you to alert Mrs. Thomas to that fact so she might seek independent counsel in her dealings with Allstate. In the event of a verdict in excess of $100, 000 it is the Plaintiff's right and option to satisfy that judgment in whatever ways we deem lawful and appropriate. That would include executing on any bank accounts, personal property or other assets owned by the insured. Of course that will not be necessary if Allstate will simply tender the policy limits.
"This letter is being written so there is no misunderstanding or future controversy over Allstate's action in this case. While I do not enjoy executing upon the assets of an individual, I believe that Allstate has not acted in good faith in working to resolve this claim. As a result, the personal property and assets of its insured are being exposed to the possibility of a substantial verdict, and I believe Allstate should be liable for any excess verdict.
"My client's offer to accept Allstate's policy limits while preserving its underinsured motorist claim shall expire August 10th, 2015 at 4:00 p.m. central standard time. Should you have any questions or need assistance please do not hesitate to call."

         On August 10, 2015, counsel for Thomas contacted counsel for Travelers and informed him that Worthington had entered into a settlement agreement with Thomas's insurer, Allstate. The agreement provided that Worthington would accept $95, 000 in exchange for Worthington's agreement to dismiss Thomas from the lawsuit with prejudice. At 11:13 a.m. on August 10, 2015, counsel for Worthington filed a letter informing the trial court that Worthington and Thomas had reached a pro tanto settlement and that the case would proceed as a UIM claim against Travelers. The letter also addressed scheduling issues that had arisen due to the death of the mother of one of the witnesses. In addressing scheduling, counsel for

         Worthington stated that, because a response to Worthington's motion for a partial summary judgment had not been filed, he assumed that liability would not be in question and that the only issue would be damages under the UIM policy.

         At 4:28 p.m. on August 10, 2015, Worthington filed a motion in limine. Among other things, she sought to exclude any evidence, mention, reference, or attempt to introduce evidence of the settlement between Worthington and Thomas. In her motion, Worthington argued:

"The settlement between [Worthington] and Ms. Thomas is completely irrelevant to Travelers' liability, and it is not admissible. Evidence must be excluded under Ala. R. Evid. 403 if 'its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.' Evidence of the settlement is inadmissible because it has nothing to do with the issue before this Court, and it will only serve to confuse the jury."

         Travelers did not respond to the motion in limine. The record does not reflect a ruling by the trial court on the motion. In fact, the notation on the case-action-summary sheet includes an entry on August 13, 2015, that states: "C002-IN LIMINE/NO ACTION." However, Travelers asserts that it is undisputed that the trial court granted the motion in limine.

         The case was called for trial at 9:00 a.m. on August 11, 2015. Travelers did not raise any arguments regarding the settlement agreement between Worthington and Thomas. Additionally, it never asserted that Worthington had forfeited her coverage under the policy by entering into the settlement agreement with Thomas without providing Travelers notice of the settlement and did not move to amend its answer to include a forfeiture-of-coverage defense. Subsequently, the trial court conducted voir dire, the jury was empaneled, and the trial was then recessed for the day at 2:00 p.m.

         At 8:44 a.m. on August 12, 2015, Worthington and Thomas filed a "Stipulation and Agreement to Dismiss Fewer Than All Defendants" in which they represented that "they have resolved the differences between themselves and agree for and request the Court to dismiss all of said plaintiff's claims against said defendant with prejudice. It is expressly understood that the plaintiff's claims as to remaining defendant, Travelers Indemnity Company of Connecticut, remain active and pending." The trial court subsequently entered an order dismissing Worthington's claims against Thomas with prejudice and dismissing Thomas from the action.[2] Travelers did not respond to this motion or object to Thomas's dismissal.

         The trial of this case resumed at 9:00 a.m. on August 12, 2015. Again, Travelers did not raise any argument that Worthington had forfeited her UIM coverage by settling her claims against Thomas without first complying with the procedures set out in Lambert and in the UIM policy. In fact, after the trial court gave the jury its preliminary instructions, the following occurred during a bench conference:

"[DEFENSE COUNSEL]: Your Honor, yesterday afternoon we talked about the policy and the payment and we had represented to the Court that we were not going to contest that the policy was in force and effect at the time. And it's my understanding that [Worthington's counsel] is going to at some point read a portion of the policy to the jury and I would just object to that on the record because it's not relevant.
"THE COURT: If there's no dispute about the policy being in question and covered, I wouldn't get into the details of it would be my thinking. I agree with that. Tell me what y'all's thoughts are.
"[WORTHINGTON'S COUNSEL]: My thought is this: First of all, if it's an exhibit that goes into evidence, I think we have a right to refer to it.
I think that's first. So if the policy comes into evidence, and I think we have the right to offer it into evidence, then I think any kind of exhibits that's there we've got a right to refer to.
"But secondly, and importantly, this is a contract entered into between Travelers and this family. She has a right I think to refer and point out to the jury these are the provisions of the contract, you know, we bought this contract and this is what covers it. A lot of the jurors in --prospective jurors had questions about, you know, was this covered by the policy whatnot and we simply want to early in her testimony offer the contract, show she paid for it, and refer them to the uninsured motorists portion of the policy.
"And our thought is that if it's an exhibit, and certainly, the contract should be able to be offered into evidence and if it's an exhibit that's admitted into evidence, we ought to have a right to refer to it. I don't expect to belabor it.
"THE COURT: My only thought is certainly you're going to do all [that] if you're trying to prove was there a contract in force and effect, but if the defendant is stipulating to the fact that there is a contract in force and effect and she's covered by this and we acknowledge that she's covered, to me, you know, that's my concern.
"[DEFENSE COUNSEL]: Yes, sir. I don't object to the introduction of the contract into evidence in the first place.
"[WORTHINGTON'S COUNSEL]: Well, then I'd like --I just would like to go further to say that this type of -- I'd like for them to admit if that's --first of all, I'll do whatever the Court obviously instructs.
"THE COURT: I just want to, you know, I don't want to overdo something. I want to be very clear about it. He's agreeing to it and is there any need, is my only thought.
"[WORTHINGTON'S COUNSEL]: And that's fine so long as we can stand up and say there is absolutely no dispute by Travelers that this is a type of policy that covers exactly what we're ...

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