199 A.3d 523
R.I.2019Background
- In 2002 Eric Stricklett's car struck 11-year-old Scott Alves; Scott incurred substantial medical bills. Stricklett's insurer was Summit with $25,000/$50,000 limits.
- Summit initially denied the claim in 2003 after investigating and said it would make no offers; the Alveses continued treatment but did not make a policy‑limit demand then.
- In 2011 the Alveses re-engaged counsel, provided updated bills (totaling well above $25,000), demanded $300,000, and asserted Summit would be liable for interest and excess damages under Asermely if it failed to settle. Summit offered the $25,000 policy limit, which the Alveses rejected; they then sued Stricklett.
- Summit filed a declaratory-judgment action asking the court to declare it had no duty to pay interest or amounts beyond policy limits; the Alveses counterclaimed asserting Summit owed prejudgment interest and damages beyond limits.
- The Superior Court ruled for Summit; on appeal the Rhode Island Supreme Court affirmed but on different grounds, holding Summit owed no duty to the Alveses absent an assignment or an offer within policy limits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer owes third‑party claimants an Asermely duty (good‑faith duty to settle) absent assignment | Alveses: Asermely, Skaling II, DeMarco create an insurer duty to third parties without assignment; assignment not required | Summit: Asermely and progeny apply only to insureds or assignees; Auclair bars fiduciary duty to strangers | Court: No duty owed to third parties without assignment; Asermely does not extend to strangers. |
| Whether Asermely applies when no written policy‑limit offer was made to the insurer | Alveses: Insurer should proactively settle especially where injuries severe and limits small | Summit: Asermely requires a reasonable written demand within policy limits and reasonable notice to insurer | Court: Asermely requires a written offer within policy limits; none was made, so Asermely inapplicable. |
| Whether Summit breached duty by its investigation/handling (bad faith) | Alveses: Summit failed to adequately investigate and should have anticipated liability | Summit: Investigation (police report review) was reasonable; denial not in bad faith | Court: Because no duty existed to Alveses, court did not reach or rely on findings about Summit’s investigation. |
| Whether Summit must pay prejudgment interest or amounts above policy limits as a matter of law | Alveses: Statutes and precedent (Skaling I) support prejudgment interest when insurer refuses to cover contractual limits | Summit: Statutory and contractual limits and prerequisites (offer, assignment) not met | Court: Declined to decide statutory prejudgment interest because no duty to Alveses; Summit not liable to Alveses for amounts beyond limits. |
Key Cases Cited
- Asermely v. Allstate Ins. Co., 728 A.2d 461 (R.I. 1999) (establishes insurer fiduciary duty to insured/assignee to consider reasonable written offers within policy limits)
- Skaling v. Aetna Ins. Co., 742 A.2d 282 (R.I. 1999) (first‑party UIM context; insurer duty to engage in settlement negotiations)
- Skaling v. Aetna Ins. Co., 799 A.2d 997 (R.I. 2002) (clarifies fairly debatable standard and insurer’s investigatory obligations under good‑faith duty)
- DeMarco v. Travelers Ins. Co., 26 A.3d 585 (R.I. 2011) (applies Asermely in multi‑claimant context; discusses assignment and release issues)
- Auclair v. Nationwide Mut. Ins. Co., 505 A.2d 431 (R.I. 1986) (no fiduciary duty owed by insurer to adverse third‑party claimants)