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King County v. The Travelers Indemnity Co.

United States District Court, W.D. Washington

April 16, 2018

KING COUNTY, a Washington municipal corporation, Plaintiff,


          Barbara Jacobs Rothstein U.S. District Court Judge.


         This matter comes before the Court on two distinct but similar motions. The first is a motion filed by Defendants, Cross-Defendants, and Counterclaimants Great American Insurance Company and Great American Insurance Company of New York (collectively, “Great American”), for (1) Order Approving Settlement and Barring Claims, and (2) Dismissal of Claims, Dkt. No. 464. That motion seeks approval of the settlement between King County and Great American, dismissal of all claims by and against Great American in this matter, and entry of an order barring future claims for “contribution, subrogation, and related claims” against Great American. Id. at 2. The second is a Motion filed by Defendant Zurich American Insurance Company (“Zurich”), for (1) Order Barring Contribution Claims, and (2) Dismissal of Claims, Dkt. No. 468, which notifies the Court of settlement between Zurich and King County and seeks dismissal of all claims against Zurich in this matter, and entry of an order barring future claims for “contribution, reimbursement, subrogation, indemnification, and related claims” against it. Id. at 1.

         Plaintiff King County has filed a Notice of Partial Joinder as to both motions, joining the motions to the extent they seek the aforementioned dismissals and claim-bar orders. Non-settling Defendants Lexington Insurance Company and National Union Fire Insurance Company of Pittsburgh, PA (the “AIG Defendants”) have filed responses to both motions, which are joined by numerous other non-settling Defendants. The AIG and other non-settling Defendants do not object to the settlements reached between King County and the moving parties, but do object to entry of claim-bar orders that do not adequately protect their interests. Although the two motions are based on differing facts, they raise materially identical legal issues. Having reviewed the pleadings filed in support of and opposition to the motions, the Court finds and rules as follows.


         In late 2014, King County filed this lawsuit against Travelers Indemnity Co. and a number of other insurers. King County is seeking a determination of the insurers' liability for defense and indemnity related to a federal enforcement action for contamination at sites in and around the Lower Duwamish Waterway in Seattle. See Pl.'s Second Am. Compl. at 10-11, Dkt. No. 175. In 2016 King County amended its complaint to add Defendants Great American and Zurich, among others, claiming they owed King County coverage as an additional insured, under certain policies issued to an entity not a party to this lawsuit. Zurich and Great American denied liability, and both pled counterclaims against King County. Other insurers in this case filed cross-claims for contribution against Great American and Zurich, and Zurich also pled cross- and counter-claims against other insurers in this case, seeking a determination of its rights and obligations with respect to each of these parties.

         In 2017, the two moving insurers reached settlements with King County. Great American agreed to pay King County $800, 000 in exchange for full release of all claims against it; Zurich agreed to pay King County $1.6 million in exchange for full release of claims against it. As a condition of these settlements, the moving parties agreed to file the instant claim-bar motions.


         A. Standard for Claim-Bar Order

         As the Court has previously noted in this case in an order granting a similar motion, and in other cases decided in this District, the Court has “the inherent equitable power to enter an order precluding subsequent claims for contribution . . . by non-settling parties.” See Order Granting Cont. Cas. Co. et al.'s Mtn. to Approve Settlement, Dkt. No. 446, citing Bank of Am. v. Travelers Indem. Co., No. C07-0322-RSL, 2009 WL 529227, at *1 (W.D. Wash. March 2, 2009). Such 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 Lloyd's, 133 P.3d 1068, 1079 (Wn. App. 2006)). However, “the public policy favoring settlement and the Court's interest in expeditiously clearing complex litigation from its docket must . . . ‘be tempered by the need to assure factual fairness and the correct application of legal principles' when considering a contribution bar.” Bank of Am., 2009 WL 529227, at *1 (quoting Franklin v. Kaypro Corp., 884 F.2d 1222, 1225 (9th Cir. 1989)). Therefore, a bar order is only appropriate where (1) the proposed settlement is reasonable; and (2) the interests of the non-settling defendants are protected. Id. These criteria are examined below.

         B. The Parties Do Not Dispute That the Two Settlements Are Reasonable

         None of the parties, including the AIG Defendants, dispute the reasonableness of the proposed settlements reached either between Great American and King County, or Zurich and King County. The reasonableness requirement is “not a high hurdle; . . . the Court must simply ensure that the settlement is not patently collusive or inadequate.” Id. In their motions, the moving parties assert that they have resolved their claims in arm's-length negotiations, and both provide substantive, undisputed detail in their motions about the underlying claims, the processes of the settlement negotiations, and the terms of the settlements. Great American contends its agreement to pay King County $800, 000 in exchange for King County's dismissal of its environmental claims against it-past, present, or future-is reasonable. Similarly, Zurich claims that after “protracted, arm's-length negotiations, ” its decision to pay King County $1.6 million in full settlement of the outstanding claims between them is reasonable. These assertions are undisputed. There is no evidence, and no claim, that the settlements are collusive or inadequate, and the AIG Defendants do not object to the reasonableness of the substance of either settlement. The Court finds that neither settlement is “patently collusive or inadequate, ” and holds that for purposes of both motions, the first requirement for issuing a claim-bar order is therefore met.

         C. The Non-Settling Defendants Are Entitled to a Claim-Bar Order That Adequately Protects Their Interests

         The second issue the motions present is whether settlement and a claim-bar order leaves the non-settling Defendants with adequate protection against an unfair allocation of liability. See Franklin, 884 F.2d at 1231 (“A bar order is appropriate only where the proposed settlement is reasonable and the interests of the non-settling defendants are protected.”). Although public policy favors settlement of complex, multi-defendant litigation, a court should not prevent non-settling defendants from seeking ...

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