A critical aspect of a great deal of U.S. civil litigation is the role of insurance. In a huge number of cases, there’s at least one “case-within-a-case,” two or more nested layers of litigation, with the plaintiff’s liability case against the defendant at the core and, orbiting, a defendant’s claim for insurance coverage. (Some times there are layers of insurance, multiple policies, reinsurance, excess insurance, umbrella coverage, multiple defendants and their layers of coverage etc etc).
As all experienced civil litigators know, there are short-cuts, to penetrate the multiple lawyers and layers, and cut to the chase — a Miller Shugart settlement, for example.
A sues B. B believes he is liable to A and believes he has insurance to cover the liability. B’s insurer denies coverage. A and B agree that damages are $X. They enter a settlement whereby they stipulate to judgment of $X contingent on A’s satisfying the judgment against B’s insurer, rather than against B himself.
Makes sense?
Sure. But A’s lawyer better make a very careful analysis whether B has any insurance coverage at all. Otherwise, double-bogey. No $$ from B, no $$ from B’s insurer.
Judge Jerome Abrams counseled last year in a William Mitchell College of Law Journal of Law and Practice article:
Counsel are cautioned that the relative ease of past Miller Shugart settlements should be replaced with circumspection whenever there is the potential for any portion of the loss to be outside the coverage of applicable insurance. As appealing as it may be to accept a large settlement and have only to litigate with an insurer to collect, Corn Plus tells us allocation between covered and uncovered portions of the claim is an essential prerequisite to enforcement of a Miller Shugart settlement agreement.
U.S. District Court Judge Richard H. Kyle, Sr. (D. Minn.), recently reiterated the lesson.