IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
PAMELA I. MONTGOMERY,
Individually and as Adrninistrator
of the Estate of
THOMAS J. MONTGOMERY,
THOMAS K. MONTGOMERY,
JEREMY MONTGOMERY, and
HARRY I. MONTGOMERY,
Plaintiffs__,, C.A. No. N11C-11-047 AML
V¢
WILLIAM MOORE AGENCY, INC.,
LYNN M. HITCHENS, and
MID-STATE INSURANCE, INC.,
\/\/\/\/\y\J\/\J§/\_/§/\./\/\J\J\J§/
Defendants.
Date Submitted: March 7, 2016
Date Decided: March 31, 2016
MEMORANDUM OPINION
Upon Defendants’ M0ti0n for Summary Judgment
DENIED
Tirnothy E. Lengkeek, Esq., Young ConaWay Stargatt & Taylor, LLP, Wilrnington,
DelaWare, Attorney for Plaintiffs.
Thornas P. Leff, Esq., Casarino Christrnan Shalk RanSom & Doss, P.A.,
Wilmington, Delaware, Attorney for Defendant William Moore Agency
Krista R. Sarnis, Esq., Eckert Seamans Cherin & Me1lott, LLC., Attomey for
Defendant Mid-State Insurance, Inc.
LEGROW, J.
In their motion for summary judgment presently before the Court,
Defendants contend that a stipulation assigning to Plaintiffs certain claims for
negligence is either (l) unenforceable because the stipulation released the
assignors from liability for damages, thereby extinguishing any negligence claim,
or (2) void as the product of collusion. For the reasons set forth below, I conclude
Defendants are incorrect on both counts. Plaintiffs are entitled to pursue the
assigned claims in a jury trial scheduled to begin in a matter of weeks.
Back_ground_
The following facts are drawn from the record currently before the Court,
viewed in the light most favorable to the non-moving party. Mr. and Mrs. Poynter
(the "Poynters") own two businesses: Poynter’s Tree Farm ("PTF") and Christmas
Shop, Inc. ("CSI" and collectively with PTF, "PTF/CSI"). Their daughter, Robin
Achenbach, and her husband, Mark Achenbach ("Achenbach" and collectively
with Robin, the "Achenbachs") own property leased by the Poynters from which
the Poynters grow Christmas trees to supply their business. The Achenbachs also
worked at CSI during the holiday season..
On June 28, 2004, Achenbach used his personal vehicle to drive an
exterminator to and from the leased property in order to obtain an estimate for
spraying bug-infested trees with insecticides. On the way back to the
exterminator’s office, Achenbach drove directly in the path of a motorcycle driven
for a covenant not to execute in instances of failure to procure requested
insurance."” The Supreme Court of South Dakota concluded: "We fail to see why
legally it should make any difference who sues the insurer-the insured or the
insured’s assignee."”
Here, although the Montgomerys agreed not to execute or collect on the
judgment, the fact of the judgment itself has consequences. For example, potential
creditors will be able to discover the existence of the judgment. The Poynters will
not be released from the judgment until all efforts are exhausted to collect from the
various insurers or agencies. The fact that the Montgomerys will not execute on
that judgment does not alter those consequences. Under Starr, and similar cases, I
find that the Stipulation created a conditional release or a covenant not to execute,
not a present, operative release,
B. The Defendants have not demonstrated by a preponderance of the
evidence that the Stipulation was unreasonable or the product of bad
faith.
As a preliminary matter, it first is necessary to resolve the burden of proof
underlying the question of whether the agreement is unreasonable or collusive¢_
Although it was not raised in the briefs, the parties agreed on the standard during
oral argument: Plaintiff bears the burden of producing evidence that the agreement
52 1a
33 1a ar 637 (ciring Red Gzam 011 Co. v. Lawlor, 528 N.w.zd 524 (Iowa 1995)).
10
is "prima facie reasonable."34 The burden then shifts to the insurer to show, by a
preponderance of the evidence, that the agreement was "neither reasonable nor
reached in good faith."35 Several other courts have adopted that standard and,
since it was agreed upon by the parties, l will apply it here. In my view, Plaintiffs
have established that the Stipulation is "prima facie reasonable." Defendants have
not produced evidence of unreasonableness.
lt is evident, as Defendants reluctantly acknowledge, that the Poynters
continued to face the prospect of liability even after the 2009 Summary Judgment
Decision due to the possibility that decision would be reversed on appeal.% Given
the Montgomerys’ efforts to pursue an interlocutory appeal, it is reasonable to
conclude an appeal of the 2009 decision would have been filed after a final order
was entered in that litigation. lt also is reasonable to conclude there was at least a
fair prospect that appeal would have succeeded. As this Court explained in its
February 27, 2015 decision denying Defendants’ motion for summary judgment,
"there is substantial evidence from which a jury could conclude that Achenbach
was the Christmas Shop’s employee or agent."” This prospect of liability renders
34 Ayers v, C & D Gen. Comracr@rs, 269 F.Supp.2d 911 (W.D. Ky. 2003) wiring Grzggs v_
Bertram, 443 A.2d 163, 173-74 (1082)).
35 .it_z_-_:;.i@,»,;; ass F.s~t;;z_;;_._zd ar 916.
361:[}13°.1*&='::&§ oral azi§;_zv_;§ij*a°ent, Defendants’ counsel acknowledged that the Poynters’ surrendered
defense"- the summary judgment decision - was not "absolutely winning;" see Mz`a'western
Ina'em. C0. v. Laikin, 119 F.Supp.2d 831, 845 (S.D. Ind. 2000) (fmding an "absolute defense"
was not surrendered but agreeing that where an insured surrenders "an obviously winning
defense to all liability, that surrender would be evidence of bad faith or collusion").
37 Montgomery v. William Moore Agency, 2015 WL 1056326 (Del. Super. Feb. 2'7, 2015).
ll
reasonable the Poynters’ and PTF/CSI’s decision`to enter into the Stipulation. The
burden thus shifts to Defendants, who have failed to establish by a preponderance
of the evidence that the Poynters’ and PTF/CSI’S concession of liability and
assignment of their claims in exchange for the conditional release was either
unreasonable or the product of bad faith. Defendants’ evidence of collusion is: (1)
the fact that summary judgment was granted to the Poynters and PTF/CSI; (2) the
familial relationship between the Poynters and Achenbachs; and (3) the two-year
window between the 2009 Summary Judgment Decision and the Stipulation,
The Poynters may well have wanted to shield their daughter and son-in-law
from liability, but little discovery was taken on the issue and the Defendants
adduced no evidence of collusion from the discovery they did take. For example,
Defendants deposed the Poynters’ personal counsel, who negotiated the
Stipulation, but Defendants point to no evidence of collusion from that deposition..
lt appears the two-year delay between 2009 and 20ll was attributable to the
Montgomerys’ change in counsel, rather than any collusive intent by the parties to
the Stipulation. lt also is significant that the concession of agency by the
Achenbachs, Poynters, and PTF/CSI is not binding on Defendants and will not be
offered into evidence at trial by the Montgomerys. Thus, Defendants remain free
12
to contest agency at trial, an issue this Court already has determined is a disputed
fact that must be submitted to the jury.38
Contrary to Defendants’ argument, my conclusion that the Stipulation and
assignment are valid and enforceable does not contravene public policy. Public
policy favors allowing insured parties to act in their best interest.39 An insured
"must be allowed to consider all available options-particularly if the possibility
1340
exists that the insurer will be absolved from providing coverage. Facing the
possibility that the 2009 Summary Judgment Decision would be overturned on
appeal and they would be left with a substantial judgment against them, the
Poynters behaved rationally. Defendants are in no worse position by the Poynters’
decision than Defendants would have faced if the summary judgment decision had
been overturned on appeal.
38 ld.
39 See Mz`ller v. Shugart, 316 N.W.Zd 729, 733-34 (Minn. 1982) ("If as here, the insurers are
offered a settlement that effectively relieves them of any personal liability, at a time when their
insurance coverage is in doubt, surely it cannot be said that it is not in their best interests to
accept the offer. Nor, do we think,_ can the insurer who is disputing coverage compel the
insureds tf;€~i~--§I"»?§re go a settl§tti:¢if’tz£=_"»_>i_»".’§:ii£~‘}l:` i-z'-z their best iz°'§x*);i.*lz"t.->_-Sts.").
"° Ayers, F.supp.zd at :~"§11z-c