King County v Travelers Indemnity Company et al

Filing 446

ORDER granting 386 third party defendants Continental Casualty Company, et al.'s motion to approve settlement and bar contribution and to dismiss claims; by Judge Barbara J. Rothstein.(RM)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 KING COUNTY, 10 Plaintiff, 11 12 13 v. Civil Action No. 2:14-cv-01957-BJR TRAVELERS INDEMNITY CO., PROVIDENCE WASHINGTON INSURANCE CO., et al., 14 Defendants. 15 16 17 I. ORDER GRANTING THIRD PARTY DEFENDANTS CONTINENTAL CASUALTY COMPANY, ET AL.’S MOTION TO APPROVE SETTLEMENT AND BAR CONTRIBUTION AND TO DISMISS CLAIMS INTRODUCTION 18 19 20 In 2013, Plaintiff King County tendered claims for defense and indemnity to a number of its insurers, including Continental Casualty Company, Phoenix Assurance Company of New 21 York, Commercial Insurance Company of Newark, New Jersey, Pacific Insurance Company, and 22 the Continental Insurance Company (collectively, “CNA”). CNA acknowledged King County’s 23 tender and assumed the County’s defense under a reservation of rights. However, many of the 24 County’s other insurers refused coverage, which led King County to file the instant insurance 25 action. Dkt. 1. One of these insurers, Defendant Travelers Indemnity Company and its affiliates (“Travelers”), filed a third-party complaint against CNA for allocation, subrogation, and 1 1 2 3 equitable indemnity. Dkt. 46. Having already resolved its coverage dispute with King County, CNA now seeks an order from the Court barring any additional contribution claims and moves to dismiss Travelers’ claims against it. The basis of CNA’s motion is a settlement agreement (“2016 Agreement”) with King 4 5 County in a related proceeding, in which CNA sought a declaratory judgment that King County’s 6 environmental claims were precluded by a prior settlement agreement (“1998 Agreement”) 7 between the parties. See Continental Casualty Co., et al. v. King County, Case. No. 2:15-cv8 9 00797-JCC, Dkt. 1. Travelers—joined by many of its co-defendants—opposes CNA’s motion. 10 Having reviewed the parties’ briefing, the record of the case, as well as the relevant legal 11 authority, the Court will grant CNA’s motion. The reasoning for the Court’s decision is set forth 12 below. 13 14 II. BACKGROUND The following facts are undisputed. In 1990, the United States, on behalf of the National 15 Oceanic and Atmospheric Administration (NOAA), filed a complaint against the Municipality of 16 17 Metropolitan Seattle (“Metro”). Dkt. 389-1, Ex. 1 at 3. The complaint sought to recover 18 damages from Metro for injury to, destruction of, and loss of natural resources resulting from the 19 release of hazardous substances in and around the Duwamish River and Elliott Bay. Id. In 1998, 20 King County, acting as Metro’s successor in interest, executed a settlement agreement with 21 22 CNA, in which CNA agreed to pay $3.1 million for the costs incurred by the County as a result of environmental contamination. Dkt. 389-1, Ex. 2 at 3. In exchange for this payment, King 23 24 25 County agreed to release CNA from any liability for past, present, and future claims that “allegedly arise out of or are in any way connected with” the Lower Duwamish Waterway and Elliott Bay. Id. at 4. 2 1 2 In 2013, King County tendered claims to a number of its insurers, including CNA, related to environmental cleanup efforts at the Lower Duwamish Waterway and Elliott Bay Superfund 3 sites. CNA accepted the County’s tender and assumed its defense under a reservation of rights. 4 While CNA was determining coverage, the County filed the instant insurance action against a 5 series of insurers that had refused coverage and defense, including Travelers. As part of this 6 litigation, Travelers filed a third-party complaint against numerous insurers, including CNA, for 7 allocation, subrogation, and equitable indemnity. Dkt. 46. 8 9 After concluding that its acceptance of the County’s tender was in error, CNA filed a 10 declaratory judgment action seeking a ruling that the 1998 Agreement precluded the claims that 11 King County had tendered to CNA in 2013. See Continental Casualty Co., et al. v. King County, 12 Case No. 2:15-cv-00797-JCC, Dkt. 1. In June 2016, CNA reached a settlement agreement with 13 the County. Id. at Dkt. 23. Pursuant to the terms of the 2016 Agreement, CNA—joined by King 14 County—now moves for an order dismissing Travelers’ third-party claims and barring any future 15 contribution claims by the non-settling insurers in this case. Travelers opposes this motion, 16 17 18 19 20 21 22 arguing that the 2016 Agreement is collusive and that a contribution-bar order would not adequately protect its interests. III. DISCUSSION This Court has “the inherent equitable power to enter an order precluding subsequent claims for contribution . . . by non-settling parties.” Bank of Am. v. Travelers Indem. Co., No. C07-0322-RSL, 2009 WL 529227, at *1 (W.D. Wash. March 2, 2009) (internal citation omitted). 23 24 25 Contribution-bar orders are recognized as “consistent with the public policy encouraging settlement.” Canal Indem. Co. v. Global Dev., LLC, No. 2-14-CV-00823-RSM, 2015 WL 347753, at *3 (W.D. Wash. Jan 26, 2015) (citing Puget Sound Energy v. Certain Underwriters at 3 1 2 Lloyd’s, 133 P.3d 1068, 1079 (Wash. App. 2006)). However, “the public policy favoring settlement and the Court’s interest in expeditiously clearing complex litigation from its docket 3 must . . . ‘be tempered by the need to assure factual fairness and the correct application of legal 4 principles’ when considering a contribution bar.” Bank of Am., 2009 WL 529227, at *1 (quoting 5 Franklin v. Kaypro Corp., 884 F.2d 1222, 1225 (9th Cir. 1989)). Therefore, a bar order is only 6 appropriate where (1) the proposed settlement is reasonable; and (2) the interests of the non- 7 settling defendants are protected. Id. 8 9 The reasonableness requirement is “not a high hurdle.” Id. “[T]he Court must simply 10 ensure that the settlement is not patently collusive or inadequate.” Id. Here, CNA asserts that 11 the Court should enter the proposed contribution-bar order because the 2016 Agreement is the 12 product of arms’s-length negotiation and is, therefore, reasonable. Travelers questions whether 13 the settlement was actually the product of arm’s-length negotiation and alleges that CNA and 14 15 King County conspired to craft a “sweetheart deal” through which King County can “extinguish its potential indemnification obligation” to Travelers and other insurers. Dkt. 405 at 7. 16 17 The indemnification obligation to which Travelers is referring ostensibly arises out of a 18 provision contained in the 1998 Agreement. The Agreement provides that King County will 19 defend, indemnify, and hold harmless CNA “from and against any demand, claim, suit, cause of 20 action, or request of other insurers of the County . . . including claims for apportionment, 21 indemnity, and contribution.” Dkt. 390-4, Ex. 2 at 5. Travelers insists that this indemnification 22 provision exists for the benefit of Travelers and other insurers similarly situated and may not be 23 24 25 extinguished. But the indemnification provision served the same purpose in 1998 as the bar order would now—it allows CNA to enter into a settlement unencumbered by the threat of further claims from non-settling parties. The 1998 Agreement neutralized this threat by 4 1 2 promising that King County would stand in CNA’s shoes in any future contribution litigation. The 2016 Agreement merely replaces that provision with a court order that serves the same 3 purpose while also advancing the public interest in settling complex, multiparty litigation and 4 “reward[ing] compromise.” Bank of Am., 2009 WL 529227, at *1. 5 As to the second requirement for a claim-bar order—that the interests of non-settling 6 parties be protected—Travelers argues that the order would “simply eviscerate” its rights to 7 contribution. Travelers’ provides no support—and the Court finds no authority—for its 8 9 argument that its right of contribution is unassailable. On the contrary, the Ninth Circuit has 10 approved an order extinguishing a non-settling party’s right of contribution even where the right 11 was guaranteed by federal statute. See Franklin, 884 F.2d at 1229. Weighing the “overriding 12 public interest in settling and quieting litigation,” the court determined that Congress had not 13 “intended the right to contribution to be inextinguishable.” Id. Likewise, this Court finds that 14 the 1998 Agreement does not prevent it from extinguishing Travelers’ right to seek contribution 15 from CNA in the interest of promoting settlement in this complex, multiparty litigation. 16 17 To the extent that Travelers is concerned about greater financial exposure if it is unable to 18 seek contribution from CNA, that concern “does not in itself render the bar order inappropriate.” 19 Canal Indem., 2015 WL 347753, at *5. Indeed, courts in this district have entered contribution- 20 bar orders that left non-settling defendants exposed to 50% or more of the total damages 21 22 awarded. Id. (citing Cadet Mfg. Co. v. Am. Ins. Co.,No. C04-5411FDB, 2006 WL 910000 at *2 (W.D. Wash. April 7, 2006); Zidell Marine Corp. v. Beneficial Fire and Cas. Ins. Co., No. C03– 23 24 25 5131RBL, at Dkt. #254, pg. 6 (W.D. Wash. May 24, 2004)). Here, in contrast, Travelers is one of over 20 remaining defendants in this case and is seeking contribution from several insurers. Thus, the Court is not convinced that Travelers would be left to shoulder an unreasonable burden 5 1 2 if CNA is extracted from this litigation. Further, any attempt by the Court to measure an individual insurer’s coverage obligation in order to ensure that each does not pay more than its 3 fair share would be inappropriate at this juncture. It is best left to the parties in this case to 4 determine how damages are fairly allocated. 5 6 Next, Travelers argues that the requested contribution-bar would be “one-sided” because it would dismiss Travelers’ claims against CNA while still allowing CNA to seek contribution 7 from it. Dkt. 405 at 2. CNA asserted counterclaims against Travelers in the third-party 8 9 contribution litigation, but has resolved to voluntarily dismiss the claims upon entry of a 10 contribution-bar order. Dkt. 413 at 7. The Court is therefore satisfied that the requested order 11 would not promote CNA's interests at the expense of Travelers. 12 13 14 Finally, Travelers asks the Court to revise the 2016 Agreement to include a proviso that King County will assume the risk of inadequate settlement and will be responsible for any difference between the settlement amount and CNA’s share of the damages awarded, if any. But 15 even if the bar order was not entered, CNA would not be directly responsible for any share of 16 17 damages awarded to King County because it was not named as a co-defendant in this action. 18 CNA’s exposure in this case is limited to the contribution claims that Travelers instituted against 19 it; its dispute with King County was resolved in a separate proceeding that ended in settlement. 20 Thus, the Court concludes that no such proviso is necessary to protect the interests of non- 21 22 settling insurers in this case. IV. CONCLUSION 23 24 NOW, THEREFORE, IT IS ORDERED AS FOLLOWS: 25 6 1 2 3 4 5 6 (1) The Court finds the 2016 Settlement Agreement between CNA and King County to be reasonable and hereby GRANTS CNA’s Motion for Order Approving Settlement and Barring Claims, and for Dismissal of Claims [Dkt. #386]. (2) The third-party claims brought by Travelers Indemnity Company, et al. [Dkt. #46] against Continental Casualty Company, Phoenix Assurance Company of New York, Commercial Insurance Company of Newark, New Jersey, Pacific Insurance 7 Company, and the Continental Insurance Company in civil action 2:14-cv-01957-BJR 8 9 10 are DISMISSED WITH PREJUDICE. (3) Any other future claims for contribution, allocation, subrogation, and equitable 11 indemnity against Continental Casualty Company, Phoenix Assurance Company of 12 New York, Commercial Insurance Company of Newark, New Jersey, Pacific 13 Insurance Company, and the Continental Insurance Company by the non-settling 14 insurers in this matter are also hereby BARRED. 15 16 17 Dated this 1st day of March, 2017. 18 19 20 A 21 22 Barbara Jacobs Rothstein U.S. District Court Judge 23 24 25 7

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