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DeMarco v. Travelers Insurance Co.

Supreme Court of Rhode Island

November 18, 2014

Wayne DeMarco et al.
Travelers Insurance Company et al

Providence County Superior Court. (PB 06-6103). Associate Justice Patricia A. Hurst.

For Plaintiff: Robert A. D'Amico II, Esq.

For Defendant: Anthony R. Zelle, Pro Hac Vice.

Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.


Page 617

Goldberg, Justice.

The plaintiff, Wayne DeMarco (DeMarco or plaintiff),[1] was severely injured in a collision while a passenger in a motor vehicle owned by insureds of the defendant, Travelers Insurance Company (defendant or Travelers). After obtaining a judgment for money damages in the prior underlying tort action, the plaintiff settled with the insureds in exchange for an assignment of any claims that the insureds had against Travelers and filed this action. A justice of the Superior Court granted partial summary judgment, which this Court affirmed.[2] Thereafter, an order entered requiring the defendant to pay all interest accrued on the underlying judgment pursuant to G.L. 1956 § 27-7-2.2.[3] The defendant alleges that this order was entered in the absence of subject-matter jurisdiction. Specifically, the defendant contends that the issue of prejudgment interest was rendered moot by an order entered in the underlying tort action which characterized the judgment as " satisfied in full" --thus depriving the Superior Court of subject-matter jurisdiction. For the reasons set forth below, we affirm the Superior Court order directing payment of prejudgment and postjudgment interest in accordance with § 27-7-2.2.[4]

Facts and Travel

This Court extensively addressed the facts and travel of this case in DeMarco v. Travelers Insurance Co., 26 A.3d 585 (R.I. 2011) (DeMarco I). Therefore, we will

Page 618

discuss only recent events and any relevant facts necessary for context.

On September 10, 2003, DeMarco, while traveling as a passenger in a motor vehicle owned by Virginia Transportation Corporation (Virginia Transportation) and operated by Virginia Transportation's owner, Leo H. Doire (Doire), seriously was injured when the vehicle struck two utility poles. Another passenger, Paul Woscyna (Woscyna), also sustained serious injuries. Travelers insured the vehicle for a policy limit of $1 million.

On March 4, 2004, DeMarco instituted a personal injury action in the Superior Court against Virginia Transportation and Doire (underlying tort action).[5] Prior to and during the course of the underlying tort action, DeMarco made several written settlement demands upon Travelers to settle for the policy limits of $1 million. On February 2, 2004, DeMarco's attorney wrote Travelers, before filing suit, seeking payment of the policy limits to DeMarco. Later, on February 25, 2004, DeMarco's attorney again wrote Travelers asking to settle for the policy limits and also informed Travelers of potential Asermely [6] liability if it did not settle the claim. By letter dated February 27, 2004, Travelers responded and informed DeMarco that other claims existed as a result of the accident and that, therefore, Travelers could not exhaust its entire policy limits on DeMarco. Additionally, Travelers' counsel informed the claim services director for Travelers (1) that Asermely liability would not apply in the circumstances of this case because there were multiple claimants and (2) that exhausting the policy limits on one claimant might violate Travelers' fiduciary obligations to its insureds. Over the course of the next year, on April 19, June 7, and June 29, 2005, DeMarco's attorney wrote to Travelers' counsel seeking to engage in settlement negotiations. Further, on July 22, 2005, DeMarco's attorney wrote to Travelers' counsel yet again, offering to settle for the policy limits. There was no response from Travelers or its counsel to any of these communications, and Travelers' efforts, if any, to resolve this case, with or without the participation of its insureds, remains an open question.

On July 11, 2006, approximately three months before trial was set to begin, Travelers sought a global settlement--for the policy limits[7]--with DeMarco, Woscyna,[8] and National Grid USA Service Company, Inc. (National Grid).[9] Travelers' offer to have the three parties divide the policy limits amongst themselves was not accepted; and, on August 15, 2006, Travelers commenced an interpleader action in the Superior Court where it sought--unsuccessfully--to deposit the policy limits into the registry of the court.[10] On August 23, 2006, DeMarco's attorney--for the final time--offered to settle for the policy limits.

Page 619

Travelers responded to DeMarco's final demand and rejected the offer to settle. On September 14, 2006, after the parties engaged in unsuccessful mediation, Travelers offered to pay DeMarco $550,000 and Woscyna $450,000, " in exchange for a complete release from both claimants" in favor of Virginia Transportation and Doire. The offer was contingent on acceptance by both DeMarco and Woscyna. Although Woscyna was prepared to accept the offer, DeMarco rejected the offer by letter dated September 15, 2006.

The underlying tort action proceeded to trial on September 18, 2006. On September 22, 2006, a jury returned a verdict in favor of DeMarco in the amount of $2,053,795. With statutory interest, the total amount of the judgment was $2,801,939.07. On the same day, an attorney independently retained by Doire wrote to Travelers informing Travelers that it was Doire's position that Travelers was responsible for the entire judgment entered against Doire in light of Travelers' failure to settle with DeMarco. Apparently, Virginia Transportation and Doire were now facing bankruptcy. Travelers again sought mediation, by letter dated October 30, 2006.[11]

On November 17, 2006, mediation commenced among DeMarco, Virginia Transportation, Doire, Woscyna, and Travelers. As a result of this mediation, Travelers paid the sum of $450,000 to Woscyna in exchange for a release of Virginia Transportation, Doire, and Travelers from all liability. Furthermore, Travelers agreed to pay $550,000 to DeMarco. DeMarco agreed to release both Virginia Transportation and Doire but conditioned that release upon an assignment of any claims Virginia Transportation and Doire might have against Travelers. The release specifically excepted Travelers " from any and all claims that Releasors may have against Travelers in any way arising from the Litigation or any aspect thereof." Virginia Transportation and Doire assigned " any and all claims and causes of action that [Virginia Transportation and Doire] may have" against Travelers to DeMarco. This assignment was made " in consideration of the General Release executed contemporaneously herewith[.]" Later, on January 3, 2007, the trial justice who presided over the underlying tort action entered an order that provided: " After hearing thereon and in consideration thereof judgment entered in favor of the plaintiffs on September 22, 2006, plus taxed costs in the amount of $5,879.32. Said judgment is satisfied in full."

On November 22, 2006, DeMarco commenced this action in Superior Court against Travelers, its counsel, and counsel's law firm. The first two counts of the six-count complaint sought: (1) a declaratory judgment in accordance with Asermely v. Allstate Insurance Co., 728 A.2d 461 (R.I. 1999), requiring Travelers to pay the entire judgment from the underlying tort action; (2) a declaratory judgment pursuant to § 27-7-2.2 declaring Travelers liable for prejudgment interest on the judgment in the underlying tort action. On September 23, 2008, a justice of the Superior Court granted summary judgment for plaintiff on counts one and two and denied defendant's cross-motion for summary judgment on counts one, two, three, and four.[12] Although the issues concerning the

Page 620

release were argued on summary judgment--and rejected by this Court on appeal--the effect (if any) of the judgment satisfied order had not been raised before the Superior Court. Final judgment on counts one and two, pursuant to Rule 54(b) of the Superior Court Rules of Civil Procedure, subsequently was entered.[13] The defendant timely appealed; and, on July 12, 2011, this Court issued its opinion in DeMarco I, in which we vacated the judgment in count one and remanded that count for trial, and affirmed the judgment in count two.[14]

With respect to count one, this Court held that, because the circumstances of this case involved multiple claimants, it was a question of fact as to the reasonableness of Travelers' conduct with respect to the duty it owed its insureds under Asermely. See DeMarco I, 26 A.3d at 614. We remanded count one to the Superior Court for a trial. Id. at 615. We affirmed count two. Id. at 629. We concluded that the language of § 27-7-2.2 (the rejected settlement offer statute) was clear and unambiguous and required the insurer to pay both prejudgment and postjudgment interest. DeMarco I, 26 A.3d at 617. Moreover, we determined that the general ...

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