Liberty Mut. Fire Ins. Co. v. Michael Baker Int'l, Inc.

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LIBERTY MUTUAL FIRE INSURANCE CO., Plaintiff, v. MICHAEL BAKER INTERNATIONAL, INC., Defendant.

No. 2:19-cv-00881-JNP-DAO

United States District Court, D. Utah

February 10, 2022

Daphne A. Oberg, Magistrate Judge

MEMORANDUM DECISION AND ORDER DENYING PLAINTIFF'S SECOND MOTION FOR SUMMARY JUDGMENT

Jill N. Parrish United States District Court Judge

Before the court is Plaintiff Liberty Mutual Fire Insurance Co.'s (“Liberty”) second motion for summary judgment. This motion arises from a dispute between Liberty and its insured, Michael Baker International, Inc. (“Michael Baker”). The dispute began when Liberty sought a declaratory judgment that it need not provide coverage for or defend two lawsuits brought against its insured, Michael Baker, for injuries suffered in a construction zone where Michael Baker performed work. In response, Michael Baker filed several counterclaims seeking to recover expenses incurred as a result of one of the underlying lawsuits, as well as expenses incurred in the present declaratory judgment action. In the motion before the court, Liberty seeks summary judgment on Michael Baker's counterclaims, arguing that Michael Baker has suffered no recoverable damages. For the following reasons, the court DENIES Liberty's motion.

FACTUAL BACKGROUND

While Liberty Mutual seeks a declaratory judgment related to two separate lawsuits against Michael Baker for injuries arising from the same construction zone, Michael Baker's damages counterclaims-which are the subject of this motion-pertain to only one of the underlying lawsuits.^[1] Therefore, the court will confine its discussion of facts to the relevant underlying lawsuit.

I.UNDERLYING CAR ACCIDENT

Michael Baker is an engineering firm that focuses on solving complex infrastructure challenges. In April 2017, Michael Baker contracted with RLW/Clyde, a contractor, to provide engineering and other design services in connection with the construction of four interchanges on Bangerter Highway. The interchanges are located at the intersection of 11400 South and Bangerter Highway in South Jordan, Utah.

On January 25, 2018, JoElle Satterthwaite (“Satterthwaite”) drove northbound on Bangerter Highway with her young son, Jackson Satterthwaite (collectively, “the Satterthwaites”) unsecured in the back seat. Satterthwaite turned left onto 11400 South. As she turned across the southbound lanes, a speeding motorist traveling southbound struck her vehicle, injuring Satterthwaite. The impact also ejected her son from the vehicle, causing him life-altering, permanent injuries.

As a result of the accident, the Satterthwaites sued Michael Baker, among others, asserting a single cause of action for negligence/recklessness. The Satterthwaites alleged that Michael Baker breached its duty of care for a number of reasons, among other things, failing to provide adequate signage and traffic lights at the intersection, implementing a defective traffic control plan at the intersection, and failing to properly train and supervise personnel working at the intersection.

The lawsuit carried significant exposure for Michael Baker. It involved a catastrophic injury to a young child. And it involved the delicate issue of a parent who perhaps bore some responsibility for the accident. The attorney hired by Liberty to represent Michael Baker stated that the case rated as a ten on a 1-10 scale of seriousness for Michael Baker.

II. DEFENSE OF THE SATTERTHWAITE ACTION

On December 13, 2018, Liberty agreed to defend Michael Baker in the Satterthwaite lawsuit, subject to a reservation of rights. ECF No. 185-2, at 61-64. Essentially, Liberty provided a defense to Michael Baker, but reserved the right to disclaim insurance coverage and indemnification at a later date based on policy exclusions. Liberty cited three potential policy endorsements that could apply to limit coverage. ECF No. 212-2, at 4 (citing CG 22 34 04 13; CG 22 43 04 13; and CG 2116 04 13).

Liberty hired one of its panel lawyers, Robert Thompson (“Thompson”) of the firm Snow, Christensen, and Martineau, to defend Michael Baker. Liberty and Thompson had a longstanding relationship-Liberty had hired Thompson on a number of occasions prior to the Satterthwaite action and hired Thompson to represent insureds in about twenty matters following the Satterthwaite action. ECF No. 185-2, at 32.

At the same time, the Liberty adjuster assigned to the case recommended that Liberty open a separate “coverage file” to handle the coverage issues independently from the underlying defense. Id. at 116-17. Nearly nine months later, Liberty referred the coverage matter to a conflict adjuster, Adam Woellert, in early September 2019. Id. at 138. On November 8, 2019, Liberty filed this lawsuit seeking a declaratory judgment that it need not provide coverage for or defend the Satterthwaite action. Liberty did not alert Michael Baker in advance that it planned to file this lawsuit.

On August 22, 2019, the Satterthwaites demanded a $12, 000, 000 settlement from Michael Baker. Thompson did not discuss the settlement demand with Michael Baker or respond to the Satterthwaites. ECF No. 185-4, at 86-87. On November 8 2019-the same day that Liberty filed this declaratory judgment action-Liberty's counsel in this action, Matthew Lalli (“Lalli”), rejected the settlement proposal, citing Liberty's determination that Michael Baker's policy excluded the underlying accident. ECF No 185-3, at 5. Liberty Mutual did not inform Michael Baker that it had rejected the Satterthwaites' settlement offer. No 185-4, at 86-87. Michael Baker found out about the rejection via discovery in the present case. The Satterthwaites then increased the settlement demand to $52, 000, 000. Lalli rejected the heightened settlement demand again, citing Liberty's determination that coverage was excluded. Id. at 63.

During this time, Thompson hired a traffic-control expert, Robert Chamberlin (“Chamberlin”), to testify on behalf of Michael Baker. Chamberlin had a number of damaging opinions regarding Michael Baker's work at the intersection, including that the traffic-control plan “was deficient, ” although it did not violate the Department of Transportation standards. Id. at 103. Chamberlin also agreed that Michael Baker could have opted for a “less ambiguous” traffic signal. Id. Ultimately, Chamberlin opined that Michael Baker bore joint responsibility for the design and approval of the traffic control plan. Id. at 110. Thompson included this information in a supplemental expert designation he transmitted to the Satterthwaites' counsel on December 20, 2019. Id. at 125.

At this point, Michael Baker had serious reservations about the progression of events. Specifically, Michael Baker was concerned that Liberty had impeded Thompson's efforts to resolve the Satterthwaite matter by failing to give him necessary settlement authority and adequate resources to defend the case, that Thompson had engaged an expert whose opinions were critical of Michael Baker's work, and that Liberty's denial of any duty to indemnify Michael Baker created a conflict of interest necessitating independent counsel. Additionally, Michael Baker worried that Thompson had never tried a similarly serious case involving severe injuries to a child and questionable conduct by a parent that may have contributed to the injuries. Finally, Michael Baker found it odd that Liberty's coverage counsel, Lalli, responded to multiple settlement offers in an action purportedly being litigated by Thompson. In light of its concerns, Michael Baker engaged James Brogan (“Brogan”) of DLA Piper to lead Michael Baker's defense in the Satterthwaite action. On Brogan's recommendation, Michael Baker later engaged Heidi Goebel of Goebel Anderson as well. Once they joined the team, both Brogan and Goebel observed that several decisions Thompson made in defending Michael Baker concerned them.

On March 17, 2020, Michael Baker wrote to the Liberty adjuster explaining its decision to retain Brogan and requesting that Liberty pay Brogan's fees. ECF No. 177-1, at 30-34. Liberty did not respond. On April 1, 2020, Michael Baker contacted Liberty's adjuster, this time to explain its decision to retain Goebel. ECF No. 185-4, at 176-77. Again, Michael Baker requested that Liberty pay Brogan and Goebel's fees. Id. On April 6, 2020, Liberty responded, stating that it would be willing to consider replacing Thompson with Brogan or Goebel subject to Thompson's rate structure and other contractual requirements by Liberty. Id. at 179-80. Michael Baker replied, requesting that Liberty provide the relevant contractual requirements and rate structure. Id. at 182. Liberty never provided that information. Instead, Michael Baker paid the fees for Brogan and Goebel. In the end, Brogan and his team settled the case for $13, 000, 000.

III. MICHAEL BAKER'S INSURANCE POLICIES

The Satterthwaite accident occurred on January 25, 2018. At the time of the accident, Michael Baker held a Commercial General Liability policy (“CGL policy”) issued by Liberty. See ECF No. 175-1, at 6-183 (CGL Policy No. TB2-681-004145-717). The CGL policy included an “Each Occurrence Limit” of $2, 000, 000. Id. at 7. The CGL policy also included a $250, 000 deductible.

Michael Baker also obtained a Professional Liability policy (“PL policy”) from Lloyd's Syndicate No. 2623. Id. at 185-240. The aggregate limit for any one claim under the PL policy was $15, 000, 000. Id. at 185. In addition, the PL policy was subject to a $200, 000 deductible and a self-insured retention of $2, 500, 000. ECF No. 177-1, at 6. Michael Baker contracted with Vermont General Insurance Company (“VGIC”) to reimburse Michael Baker for the PL policy's deductible and self-insured retention. Id.

IV. MICHAEL BAKER'S...