Leflet v. Redwood Fire & Casualty Insurance
226 Ariz. 297
| Ariz. Ct. App. | 2011Background
- Hancock built Trailwood homes and faced a certified class action for defects (1997–2000); Hancock, CUIC, and Clarendon mediated a settlement that included a Damron/Morris-type assignment of claims to NPIs.
- The October 7, 2004 settlement record involved Hancock and Direct Insurers paying $375,000 and assigning rights to Plaintiffs to pursue Subcontractors and NPIs, with a stipulated judgment to be determined later, in exchange for Plaintiffs not executing against Hancock/Direct Insurers.
- Final written agreement (January 14, 2005) set the judgment at $8.475 million, with Plaintiffs limiting Subcontractor claims to indemnification for Hancock’s costs and fees.
- NPIs intervened in 2006 and later sought summary judgment (2008) arguing Hancock failed to give Morris-mandated notice and that the agreement breached Morris cooperation requirements.
- The trial court granted summary judgment for NPIs, excusing them from defense/indemnity and awarding fees to be paid by Plaintiffs; the Court of Appeals affirms the notice breach and Morris-excess issues but vacates and remands attorney’s fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Morris agreement complies with Morris parameters | NPIs and Hancock sought to bind NPIs via a Morris-type settlement | The agreement could be a Morris settlement | Not a compliant Morris agreement; invalid as to NPIs |
| Whether proper notice to NPIs was provided | Notice requirement under Morris not satisfied | Notice given was insufficient to bind NPIs | Insufficient notice; Morris requirements not met |
| Whether the attorney's-fee award under §12-341.01 was proper | Fees should be awarded against NPIs/under class dynamics | Fees appropriate due to bad-faith settlement | Trial court abused discretion; vacate fee award; remand for reconsideration |
Key Cases Cited
- United Services Automobile Ass'n v. Morris, 154 Ariz. 113 (Ariz. 1987) (sets Morris framework for insurer-insured settlements)
- Safeway Ins. Co. v. Guerrero, 210 Ariz. 5 (Ariz. 2005) (public policy safeguards; limits on Morris-like uses)
- Parking Concepts, Inc. v. Tenney, 207 Ariz. 19 (Ariz. 2004) (insurer notice requirements for Morris agreements)
- Regal Homes, Inc. v. CNA Ins., 217 Ariz. 159 (Ariz. App. 2007) (limits on Morris-like settlements; ensure proper terms)
- Chaurasia v. Gen. Motors Corp., 212 Ariz. 18 (Ariz. App. 2006) (special considerations for class actions under fee statutes)
- Sparks v. Republic Nat'l Life Ins. Co., 132 Ariz. 529 (Ariz. 1982) (insurance bad-faith action arising from contract; fee considerations)
- Solimeno v. Yonan, 224 Ariz. 74 (Ariz. App. 2010) (statutory fee provision interpretation in contract actions)