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Nautica Condominium Owners Association v. Aspen Specialty Insurance Co.

United States District Court, W.D. Washington

January 2, 2018

NAUTICA CONDOMINIUM OWNERS ASSOCIATION, Plaintiff,
v.
ASPEN SPECIALTY INSURANCE COMPANY, et al., Defendants.

          CONTRIBUTION BAR ORDER

          JAMES L. ROBART United States District Judge

         I. INTRODUCTION

         Before the court is Defendant Discover Property & Casualty Insurance Company ("Discover") and Plaintiff Nautica Condominium Owners Association's ("Nautica") (collectively, "Moving Parties") motion for a contribution bar order and dismissal of all claims against Discover with prejudice. (Mot. (Dkt. # 75).) Defendant Commonwealth Insurance Company of America ("Commonwealth") opposes the entry of the contribution bar order as proposed by the Moving Parties. (Resp. (Dkt. # 79).) The court has reviewed the parties' submissions, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court GRANTS the Moving Parties' motion for a contribution bar order and dismissal of all claims against Discover with prejudice.

         II. BACKGROUND & ANALYSIS

         This is an insurance coverage action brought by Nautica against multiple defendants. Eight defendant insurers have been dismissed from the instant suit with no contribution bar order. (See Dkt. ## 7-9, 21, 23, 32, 50, 66, 71, 73.) The Moving Parties have reached a settlement of $140, 000 through a mediation conducted on February 9, 2017. (Mot. at 1; see also Ortiz-Cotto Decl. (Dkt. # 76) ¶¶ 10-11, Ex. 8 "Settlement Agreement".) Four non-settling defendants remain. (See Mot. at 3.)

         As part of their settlement, the Moving Parties seek an order barring any non-settling defendant from seeking contribution from Discover. (Id. at 1-2.) Commonwealth objects that the proposed contribution bar "does not provide any protection to the non-settling insurers" and thus must be rejected. (Resp. at 2.) If the court were to enter a contribution bar order, Commonwealth requests that the court include two provisions: (1) "offsetting any future judgment by the settlement amount"; and (2) placing any risk of the settlement being inadequate on Nautica, rather than on the non-settling defendants. (Mat 3.)

         A court has the "inheritable equitable authority to enter an order precluding subsequent claims for contribution and indemnity by non-settling parties." Canal Indem. Co. v. Glob. Dev., LLC, C14-0823RSM, 2015 WL 347753, at *3 (W.D. Wash. Jan. 26, 2015). Contribution bar orders are "consistent with the public policy in Washington of encouraging settlement." Puget Sound Energy v. Certain Underwriters at Lloyd's, 138 P.3d 1068, 1079 (Wash.Ct.App. 2006). Without such orders:

Any single defendant who refuses to settle, for whatever reason, forces all others to trial. Anyone foolish enough to settle without barring contribution is ... allowing the total damages from which their ultimate share will be derived to be determined in a trial where they are not even represented.

         Franklin v. Kaypro Corp., 884 F.2d 1222, 1229 (9th Cir. 1989) (quoting In re Nucorp Energy Sec. Litig., 661 F.Supp. 1403, 1408 (S.D. Cal. 1987)).

         However, the public policy favoring settlement and the expeditious resolution of disputes must be balanced against the need for factual fairness and the correct application of legal principles. See Bank of Am. v. Travelers Indem. Co., C07-0322RSL, 2009 WL 529227, at *1 (W.D. Wash. Mar. 2, 2009). Thus, in considering whether a contribution bar is appropriate, the court requires that (1) the proposed settlement is reasonable, and (2) the interests of the non-settling defendants are protected. See Canal Indem. Co., 2015 WL 347753, at *3.

         The parties agree that the proposed settlement is reasonable. (Mot. at 14; Resp. at 2 ("Commonwealth does not generally object to the reasonableness of the settlement amount[.]"); Nautica Reply (Dkt. # 81) at 3; Discover Reply (Dkt. # 82) at 2.) But the parties disagree over whether the contribution bar order, as requested, would adequately protect Commonwealth's interests. (Compare Mot. at 14-15, with Resp. at 2-6.)

         "There is no single formula for determining whether non-settling parties' rights are protected when a bar order is entered." CanalIndem. Co., 2015 WL 347753, at *3. But the prospect that the non-settling defendant may face greater financial exposure if it is barred from seeking contribution does not, in itself, render a bar order inappropriate. King Cty. v. Travelers Indem. Co., C14-1957BJR, 2017 WL 785186, at *3 (W.D. Wash. Mar. 1, 2017).[2] Courts have recognized a variety of ways to protect the non-settling parties' rights. A non-settling defendant can be protected by its retention of the right to litigate coverage defenses, which if successful, may end up excusing that party from paying anything. Canal Indem. Co., 2015 WL 347753, at *4. Moreover, a non-settling defendant may be protected if the contribution bar leaves open the possibility for it to seek a future determination relating to the percentage of its liability or forcing the plaintiff to absorb the loss resulting from an inadequate settlement. Id. Or, the non-settling defendant may be protected by its ability to seek contribution from additional sources. For example, mKing County v. Travelers Indemnity Co., the court concluded that the non-settling defendants' rights were adequately protected because there were several remaining defendants from whom contribution could be sought. 2017 WL 785186, at *3.

         Here, the court concludes that Commonwealth's interests as a non-settling defendant are sufficiently protected. First, Commonwealth retains its right to seek coverage defenses, and if successful, Commonwealth would avoid payment obligations altogether. See CanalIndem. Co., 2015 WL 347753, at'*5; (see also Resp. at 3-4.) Moreover, the contribution bar order leaves open the possibility that Nautica will absorb any resulting shortfall from the settlement. See Id. Thus, if Commonwealth does not prevail on its defenses, it is free to seek a determination relating to the percentage of its liability or to attempt to force Nautica to bear the burden of the inadequate settlement. See id.; see also Cadet Mfg. Co. v. Am. Ins. Co., C04-5311FDB, 2006 WL 910000, at *2 (W.D. Wash. Apr. 7, 2006). Lastly, Commonwealth is free to seek contribution from the remaining non-settling defendants or the many defendants who do not have a contribution bar order in place. See King Cty., 2017 WL 785186, at *3. Commonwealth does not contend otherwise. (See generally Resp.) Thus, the court finds that Commonwealth's interests are adequately protected.

         Commonwealth contends that two provisions must be added to sufficiently protect its rights as a non-settling defendant: first, that the settlement amount be offset from any award of damages at trial, and second, that any risk of an inadequate settlement be placed on Nautica. (Resp. at 5-6.) Commonwealth seems to believe that these two ...


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