Commerce Insurance Co. v. Szafarowicz ( 2019 )


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    SJC-12655
    SJC-12656
    COMMERCE INSURANCE COMPANY vs. JUSTINA M. SZAFAROWICZ, special
    representative,1 & others.2
    JUSTINA M. SZAFAROWICZ, special representative,3       vs.   MATTHEW S.
    PADOVANO & others.4
    Worcester.     March 7, 2019. - October 1, 2019.
    Present:    Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher,
    & Kafker, JJ.
    Motor Vehicle, Insurance. Insurance, Motor vehicle insurance,
    Insurer's obligation to defend, Interest. Practice, Civil,
    Wrongful death, Declaratory proceeding, Interest.
    Negligence, Wrongful death. Declaratory Relief. Interest.
    Escrow.
    Civil action commenced in the Superior Court Department on
    January 21, 2014.
    1   Of the estate of David M. Szafarowicz.
    2 Matthew Padovano; Stephen Padovano; and Damion Szafarowicz
    and Alysha Szafarowicz, by their mother and next friend, Justina
    M. Szafarowicz.
    3   Of the estate of David M. Szafarowicz.
    4   Stephen Padovano and Kona Enterprises, Inc.
    2
    A motion to deposit money with the court or in an interest-
    bearing account was heard by Richard T. Tucker, J.
    An application for leave to prosecute an interlocutory
    appeal was allowed by Ariane D. Vuono, J., in the Appeals Court,
    and the appeal was reported by her to a panel of that court.
    The Supreme Judicial Court on its own initiative transferred the
    case from the Appeals Court.
    Civil action commenced in the Superior Court Department on
    August 23, 2013.
    Motions to stay were heard by David Ricciardone, J., and
    the case was heard by him.
    The Supreme Judicial Court on its own initiative
    transferred the case from the Appeals Court.
    John P. Graceffa (Lawrence M. Slotnick also present) for
    Commerce Insurance Company.
    David R. Bikofsky & Michael K. Gillis (Joseph I. Rogers
    also present) for Justina M. Szafarowicz & others.
    Stephanie V. Corrao & Laura A. Foggan, of the District of
    Columbia, Richard J. Riley, & Peter C. Kober, for Complex
    Insurance Claims Litigation Association & another, amici curiae,
    submitted a brief.
    Kim V. Marrkand & Mathilda S. McGee-Tubb, for Massachusetts
    Insurance and Reinsurance Bar Association, amicus curiae,
    submitted a brief.
    GANTS, C.J.     These appeals present three issues that arise
    where a motor vehicle insurer recognizes its duty to defend its
    insureds in a wrongful death action, but does so under a
    reservation of rights, and then brings a separate action seeking
    a declaratory judgment that it owes no duty to indemnify its
    insureds for damages arising from the wrongful death action
    under the "Optional Bodily Injury To Others" provision of the
    insurance policy.
    3
    As to these three issues, we conclude, first, that there
    was no abuse of discretion in the judge's denial of the
    insurer's motions to stay trial in the wrongful death action
    until the question of coverage had been determined in the
    declaratory judgment action.
    Second, over the insurer's objection, the parties settled
    the wrongful death action before trial through agreements in
    which the defendants admitted to negligence, agreed that the
    amount of damages would be determined through a damages
    assessment hearing, and assigned all their rights under the
    insurance policy to the plaintiff.5   In return, the plaintiff
    agreed to release the defendants from liability and seek damages
    only from the insurer.   Because of the amount of damages
    assessed (more than $5 million, plus prejudgment interest) and
    because the policy obligated the insurer to pay postjudgment
    interest, the insurer moved to deposit with the court the policy
    limits and the accrued postjudgment interest under Mass. R. Civ.
    P. 67, 
    365 Mass. 835
    (1974), in an attempt to prevent the
    continued accrual of postjudgment interest pending resolution of
    the declaratory judgment action and the insurer's appeal in the
    wrongful death action.   We conclude that the judge did not abuse
    5 We refer to these agreements as "settlement/assignment
    agreements" throughout this opinion.
    4
    his discretion in denying the insurer's motion to deposit these
    funds.
    Third, we conclude that, where the insurer timely objected
    to the settlement/assignment agreements, and where it is
    obligated to pay the accrued postjudgment interest on the
    wrongful death judgment, the insurer may be bound by the amount
    of that judgment only where a judge determines that the
    settlement/assignment agreements were reasonable under the
    circumstances.   Here, the settlements were executed with no
    determination of reasonableness.     We therefore vacate the
    wrongful death judgment and remand the case to the Superior
    Court for a hearing on the reasonableness of the
    settlement/assignment agreements.6
    Background.   The relevant factual and procedural background
    is not materially in dispute.   On August 3, 2013, shortly after
    a verbal altercation at a bar in Leominster, David M.
    Szafarowicz was struck and killed by a vehicle operated by
    Matthew Padovano, who later pleaded guilty to voluntary
    manslaughter in connection with the fatal incident.     The vehicle
    was owned by Matthew's father, Stephen Padovano, who had
    6 We acknowledge the amicus briefs submitted by the Complex
    Insurance Claims Litigation Association and the American
    Property Casualty Insurance Association, and by the
    Massachusetts Insurance and Reinsurance Bar Association.
    5
    purchased an automobile insurance policy from Commerce Insurance
    Company (Commerce).7
    Justina M. Szafarowicz, David's mother, in her capacity as
    special representative of David's estate (estate), brought a
    wrongful death action against the Padovanos in the Superior
    Court, claiming that David's death was caused by Matthew's gross
    negligence in operating a motor vehicle that was negligently
    entrusted to him by Stephen.8   Under the Commerce insurance
    policy, Stephen was covered for bodily injury to others by
    compulsory insurance in the amount of $20,000 per person, and by
    optional insurance in the additional amount of $480,000 per
    person.
    Commerce acknowledged its duty to defend the Padovanos in
    the wrongful death action under its policy.9   See Metropolitan
    7 We refer individually to members of the Padovano and
    Szafarowicz families by their first names to avoid confusion,
    but we refer collectively to the Padovanos.
    8 Justina, as special representative of her son's estate
    (estate), also claimed that Kona Enterprises, Inc. (Kona), which
    operated the bar where the incident took place, was negligent in
    failing to provide adequate supervision and security to David at
    its premises. The estate reached a settlement with Kona, and it
    is not a party to this appeal.
    9 The Commerce Insurance Company (Commerce) motor vehicle
    policy at issue states:
    "We [(Commerce)] have the right to defend any lawsuit
    brought against anyone covered under this policy for
    damages which might be payable under this policy. We also
    6
    Prop. & Cas. Ins. Co. v. Morrison, 
    460 Mass. 352
    , 357 (2011)
    (Morrison), quoting Billings v. Commerce Ins. Co., 
    458 Mass. 194
    , 200-201 (2010) ("An insurer has a duty to defend an insured
    when the allegations in a complaint are reasonably susceptible
    of an interpretation that states or roughly sketches a claim
    covered by the policy terms").
    As to its duty to indemnify for damages, Commerce
    acknowledged its duty to pay the $20,000 in compulsory insurance
    (and ultimately paid the estate this amount) but issued a
    reservation of rights regarding the $480,000 in optional
    insurance.    By doing so, Commerce effectively reserved its right
    to refuse to indemnify the Padovanos beyond $20,000 for damages
    arising from the wrongful death action if it were determined
    that David's death was caused by Matthew's intentional act, and
    was therefore not an "accident" covered by the terms of the
    policy.10    See 
    Morrison, 460 Mass. at 357
    , quoting A.W.
    have a duty to defend any such lawsuit, even if it is
    without merit, but our duty to defend ends when we tender,
    or pay to any claimant or to a court of competent
    jurisdiction, with the court's permission, the maximum
    limits of coverage under this policy. We may end our duty
    to defend at any time during the course of the lawsuit, by
    tendering, or paying the maximum limits of coverage under
    the policy, without the need for a judgment or settlement
    of the lawsuit or a release by the claimant."
    10Commerce also reserved its rights to refuse to indemnify
    on the ground that Matthew was not identified as a designated
    driver on the policy.
    7
    Chesterton Co. v. Massachusetts Insurers Insolvency Fund, 
    445 Mass. 502
    , 527 (2005) (duty to defend "is independent from, and
    broader than, [the] duty to indemnify"); Three Sons, Inc. v.
    Phoenix Ins. Co., 
    357 Mass. 271
    , 276 (1970) ("A reservation of
    rights . . . notifies the insured that the insurer's [defense]
    is subject to the later right to disclaim liability").
    On January 21, 2014, approximately five months after the
    estate initiated the wrongful death action, Commerce brought a
    separate declaratory judgment action against the Padovanos and
    the estate, seeking a declaration from the court that Commerce
    had no obligation under its optional insurance coverage to
    indemnify the Padovanos for the damages arising from the fatal
    incident.   The wrongful death action and the declaratory
    judgment action were consolidated for discovery purposes only.
    On April 21, 2016, less than three weeks before the trial
    in the wrongful death case was scheduled to begin, Commerce
    filed an emergency motion to intervene and participate in that
    case pursuant to Mass. R. Civ. P. 24, 
    365 Mass. 769
    (1974).
    Commerce noted that, based on the summary of evidence proffered
    by the prosecutor at Matthew's plea hearing, on the night of
    David's death, Matthew and his girlfriend got into a dispute
    with David at a bar and the staff asked the three to leave.
    Matthew and his girlfriend went out the back door, where
    Matthew's vehicle was parked, and David left through the front
    8
    door and walked into the bar's parking lot.   Rather than depart,
    Matthew returned in his vehicle to the bar's parking lot, where
    he saw David and drove near him.   David gestured toward Matthew,
    who then accelerated his vehicle and ran over David, dragging
    him for forty to fifty feet, killing him.
    Commerce noted that, in the wrongful death action, the
    estate's attorneys had presented a quite different description
    of events that was consistent with their theory of negligence.
    The estate's attorneys contend that when Matthew returned in his
    vehicle to the bar's parking lot, he was frightened by unknown
    persons who came from the bar with knives, and did not see David
    when he ran over him.
    Commerce argued that it should be permitted to intervene
    because neither the estate nor the Padovanos had any incentive
    to offer evidence tending to show that the incident was not an
    accident, because all parties to the action "would prefer that
    insurance coverage exist for this loss."    Commerce wished to
    ensure that, if a judgment were to issue in the wrongful death
    action premised on the finding that David's death was caused by
    Matthew's negligence rather than by his intentional conduct, it
    would not be procedurally foreclosed in the declaratory judgment
    action from litigating the dispositive issue whether David's
    death arose from an accident.
    9
    The judge ordered that the wrongful death trial be
    continued, and conducted a hearing on Commerce's motion to
    intervene on May 4, 2016.   In his decision denying the motion to
    intervene, issued on August 22, 2016, the judge acknowledged
    that Commerce had reason to be concerned about the risk of
    "underlitigation" in the wrongful death suit -- which he
    defined, quoting Pryor, W. Page Keeton Symposium on Tort Law,
    The Stories We Tell:   Intentional Harm and the Quest for
    Insurance Funding, 
    75 Tex. L. Rev. 1721
    , 1722 (1997), as "a
    plaintiff's choice to plead and prove negligence rather than or
    in addition to intentional tort theories when, absent insurance
    considerations, the plaintiff would either frame the case solely
    as an intentional tort claim or emphasize the intentional tort
    claim."   The judge noted the "legitimate interest" of a
    liability insurer in preventing improper underlitigation of tort
    claims, and recognized that it would be "patently unfair" to
    require Commerce to be bound by a jury's negligence finding in
    the wrongful death action if it were denied the means to
    challenge the validity of that finding.
    But the judge also recognized the need to balance the
    rights of the insurer with those of the insured.   He noted,
    first, that the Padovanos would be "severely compromised" in
    their ability to defend themselves if their insurer were
    permitted to actively participate in the trial and offer
    10
    evidence that Matthew intentionally struck David.     Second,
    citing concerns raised in Goldstein v. Gontarz, 
    364 Mass. 800
    (1974), the judge noted that Commerce's participation would
    alert the jury to the possible existence of insurance coverage
    for the automobile that caused David's death, and to the
    possibility that an insurer may therefore be responsible to pay
    some or all of the damages if liability were found.    
    Id. at 808
    ("Exposing juries to [evidence of insurance coverage] is
    condemned because it is not itself probative of any relevant
    proposition and is taken to lead to undeserved verdicts for
    plaintiffs and exaggerated awards which jurors will readily load
    on faceless insurance companies supposedly paid for taking the
    risk").
    Seeking to balance these considerations, the judge chose to
    adopt a "carefully balanced procedural solution" crafted by the
    Court of Appeals of Maryland in Allstate Ins. Co. v. Atwood, 
    319 Md. 247
    (1990) (Atwood).    The Atwood court concluded that, where
    there is a risk of underlitigation, it is not appropriate to
    allow the "insurer to intervene in the trial of the tort suit
    against its insured," 
    id. at 258,
    but leaving an insurer with no
    legal avenue to challenge a potentially collusive damages award
    would be contrary to "considerations of public policy and
    fairness."   
    Id. at 262.
      Therefore, the court ruled that "the
    insurer should be able to bring a post-tort trial declaratory
    11
    judgment action" where the judge "would first determine, as a
    legal matter, whether the issue, which was resolved in the tort
    trial and which determines insurance coverage, was fairly
    litigated in the tort trial."   
    Id. If the
    judge were to
    determine that it was fairly litigated, then there would be no
    relitigation of the issue in the declaratory judgment action.
    However, if the judge were to determine that it was not fairly
    litigated, "then the insurer should be permitted to relitigate
    the matter in the declaratory judgment action."    
    Id. The motion
    judge declared that this procedure would be consistent with our
    holding in Blais v. Quincy Mut. Fire Ins. Co., 
    361 Mass. 68
    , 70-
    71 (1972) -- that an insurer is bound by an underlying judgment
    as to insurance coverage, so long as there is no "fraud or
    collusion" -- with the declaratory judgment action determining
    whether the tort action was indeed tainted by fraud or
    collusion.11
    After the denial of its motion to intervene, Commerce moved
    to stay the wrongful death trial until after the question of
    insurance coverage was resolved in the declaratory judgment
    action.   Another judge denied the motion.12
    11Commerce does not appeal from the denial of its motion to
    intervene in the wrongful death action.
    12Commerce filed another emergency motion on December 13,
    2016, to stay proceedings of the wrongful death action until the
    12
    Shortly before the wrongful death trial was scheduled to
    begin, the estate and the Padovanos entered into agreements to
    settle the wrongful death suit.   Under the agreements, Matthew
    agreed that he "grossly negligently" caused David's injuries,
    and Stephen admitted liability for negligent entrustment of the
    vehicle.   The parties agreed that damages would be determined in
    a jury-waived proceeding.   The estate agreed that it would not
    seek to collect or enforce any judgment against the Padovanos
    beyond the amount payable under their insurance policy, and the
    Padovanos agreed both to assign to the estate all their rights
    with respect to insurance coverage and to cooperate with the
    estate in litigation related to insurance coverage.
    Commerce timely objected in writing to the proposed
    settlements, arguing that this type of settlement/assignment
    agreement should not be permitted.   Among the objections it
    lodged were objections to the assignment of rights by its
    insureds against the insurer; to consent to judgment in excess
    of policy limits; and to the court's role in assessing damages,
    if the estate were to request that a judgment enter as to the
    amount assessed.   Commerce also renewed its objection to the
    denial of its motions to stay the wrongful death case until the
    declaratory judgment action was tried.
    declaratory judgment action had been fully litigated.   That
    motion was also denied.
    13
    The same judge who had denied Commerce's motions to stay
    overruled Commerce's objections to the settlement and to the
    assessment of damages hearing, and conducted a hearing to assess
    the amount of damages in the wrongful death action.   On December
    28, 2016, the judge ordered that judgment enter in favor of the
    estate in the amount of $5,617,510.   The judge later agreed to
    reduce the judgment by $150,000, to reflect the $150,000
    received in settlement from Kona Enterprises, Inc. (see note 
    8, supra
    ), and judgment ultimately entered, nunc pro tunc to
    December 28, in the amount of $7,669,254.41 (damages in the
    amount of $5,467,510 plus prejudgment interest in the amount of
    $2,201,744.41).
    Commerce filed a notice of appeal on January 26, 2017,
    challenging the denial of its motions to stay the wrongful death
    action so that the declaratory judgment action could be
    adjudicated first, and the overruling of its objections to the
    settlement.
    On February 15, 2017, Commerce paid the estate $20,000, the
    limit of its compulsory bodily injury coverage.   On April 21,
    2017, in an attempt to stop the accrual of postjudgment interest
    on the wrongful death judgment during the pendency of the
    declaratory judgment action and its appeal from the wrongful
    death judgment, Commerce filed a motion asking the court's
    permission to deposit with the court -- or, in the alternative,
    14
    to deposit in an interest bearing account -- the policy limit of
    its optional bodily injury coverage ($480,000), plus already
    accrued postjudgment interest, pursuant to Mass. R. Civ. P. 67.
    Rule 67 provides in relevant part:
    "In an action in which any part of the relief sought is a
    judgment for a sum of money or the disposition of a sum of
    money or the disposition of any other thing capable of
    delivery, a party, upon notice to every other party, and by
    leave of court, may deposit with the court all or any part
    of such sum or thing."
    Commerce's obligation to pay postjudgment interest derives
    from the provision in the policy where the insurer agrees:
    "We will pay, in addition to the limits shown for
    Compulsory and Optional Bodily Injury to Others . . .
    [i]nterest that accrues after judgment is entered in any
    suit we defend. We will not pay interest that accrues
    after we have offered to pay up to the limits you
    selected."13
    Given the amount of the wrongful death judgment, Commerce
    alleges that, unless allowed to deposit these funds, it would be
    obliged to pay postjudgment interest, at the twelve percent
    annual rate of interest established by statute, see G. L.
    c. 231, § 6B, accruing at a rate of over $920,000 per year from
    the date of the judgment.
    13 The policy language at issue is found in the standard
    Massachusetts automobile insurance policy, which is "prescribed
    by statute and controlled by the Division of Insurance."
    Ramirez v. Commerce Ins. Co., 
    91 Mass. App. Ct. 144
    , 147 (2017).
    As discussed infra, this provision of the standard policy was
    later amended, but the amendment has no effect on these cases.
    15
    Another judge denied Commerce's motion to deposit these
    funds.    The judge noted that in Davis v. Allstate Ins. Co., 
    434 Mass. 174
    , 183, 186 (2001), we held that, to stop the accrual of
    postjudgment interest, the insurer must make an unconditional
    offer of payment of the full policy limit, plus the accrued
    postjudgment interest.    Here, the offer of payment of the
    optional bodily injury coverage limit was not unconditional;
    Commerce would seek its return if it prevailed in the
    declaratory judgment action.   The judge, while acknowledging our
    observation in Davis that an insurer "may be able to control its
    postjudgment interest obligations by paying the policy limits
    (with accrued interest) into court," 
    id. at 187
    n.13, concluded
    that accepting a deposit reflecting a conditional offer to pay
    would be inconsistent with the requirement that Commerce first
    make an unconditional offer to pay the policy limits.
    Commerce petitioned for relief from the judge's
    interlocutory order pursuant to G. L. c. 231, § 118.    A single
    justice of the Appeals Court allowed Commerce's petition,
    concluding that the issue "presents extraordinary circumstances
    warranting an interlocutory appeal."    We transferred both
    appeals to this court on our own motion.
    On February 21, 2019, during the pendency of these appeals,
    another Superior Court judge resolved the declaratory judgment
    action.   After a jury-waived trial, the judge ruled that
    16
    Commerce has no duty to indemnify the Padovanos for any claims
    arising from the optional bodily injury coverage of its
    automobile policy because Matthew "decided to hit the
    accelerator of the vehicle knowing to a substantial certainty
    that the vehicle would strike David," and therefore David's
    "injuries and death did not arise out of an accident under the
    policy."14   As a result of that declaratory judgment, Commerce
    has no obligation to pay any amount of the $7.7 million judgment
    in the wrongful death action beyond the $20,000 it already paid
    under its compulsory bodily injury coverage.    But under the
    terms of the policy, Commerce still has an obligation to pay
    postjudgment interest on the judgment.    The focus of these
    appeals is now on the scope of that obligation -- that is, how
    much in postjudgment interest Commerce must pay under the
    policy.
    Discussion.   We address Commerce's three claims of error on
    appeal.
    1.   Motions to stay.   Commerce claims that the judge abused
    his discretion in denying its motions to stay the proceedings of
    the wrongful death suit action until its parallel declaratory
    14The judge also ruled that Steven did not   provide false
    information on his application for insurance by   failing to list
    Matthew as a "customary operator." Because the    judge found that
    David's death did not arise from an "accident,"   this ruling did
    not affect the grant of declaratory judgment to   Commerce as to
    the issue of coverage for the events at issue.
    17
    judgment action could be tried and the issue of coverage
    resolved.   See Travenol Lab., Inc. v. Zotal, Ltd., 
    394 Mass. 95
    ,
    97 (1985) ("a motion to stay proceedings is ordinarily a matter
    addressed to the sound discretion of the trial judge").     We
    conclude that the judge did not abuse his discretion in denying
    the stay.
    "Where there is uncertainty as to whether an insurer owes a
    duty to defend, the insurer has the option of providing the
    insured with a defense under a reservation of rights, filing a
    declaratory judgment action to resolve whether it owes a duty to
    defend or to indemnify, moving to stay the underlying action
    until a declaratory judgment enters, and withdrawing from the
    defense if it obtains a declaration that it owes no duty to the
    insured."   
    Morrison, 460 Mass. at 358-359
    .   An insurer who
    provides its insured with a defense under a reservation of
    rights is not entitled as a matter of law to a stay of the
    underlying action so that the issue of coverage can be resolved
    first in a declaratory judgment action.   See 16 L.R. Russ & T.F.
    Segalla, Couch on Insurance 3d § 232:65, at 232-90 (2005)
    (Couch) ("An insurer suing for a declaratory judgment to
    determine its obligation to defend a suit pending against the
    insured does not, however, have the right to obtain a stay of
    the pending suit").
    18
    A judge deciding an insurer's motion to stay may properly
    consider, among other matters, whether a stay will delay the
    final resolution of the underlying tort action, initially by
    proceeding first with the trial in the declaratory judgment
    action and then, if the insurer were to prevail, by the need for
    the insured to retain its own counsel if the insurer were then
    to withdraw its defense.   See Parking Concepts, Inc. v. Tenney,
    
    207 Ariz. 19
    , 24 (2004) (en banc) (fundamentally unfair to
    claimant to "be compelled to await the outcome of satellite
    coverage litigation before seeking redress for his [or her]
    injuries").15
    It is also proper to consider whether disposition of the
    tort action may be expedited, rather than delayed, by first
    resolving whether an insurer would be responsible for paying all
    or part of any settlement or judgment.   See O'Bannon v.
    Friedman's, Inc., 
    437 F. Supp. 2d 490
    , 496 (D. Md. 2006) (prompt
    resolution of coverage issue in declaratory judgment action can
    15It may also be relevant whether all parties to the
    underlying action are also parties to the declaratory judgment
    action and thus able to adequately represent their interests.
    See G. L. c. 231A, § 8 ("When declaratory relief is sought, all
    persons shall be made parties who have or claim any interest
    which would be affected by the declaration, and no declaration
    shall prejudice the rights of persons not parties to the
    proceeding"); 16 L.R. Russ & T.F. Segalla, Couch on Insurance 3d
    § 232:67, at 232-93 (2005) (observing that "concerns for
    stepping on the factual issues in the underlying action are, of
    course, lessened when all the parties to that action are parties
    to the declaratory judgment and able to litigate the point").
    19
    "dispel doubt among the parties, . . . allow[] them to move
    forward with settlement talks," and may, at times, "expedite the
    resolution of the underlying complaint").
    A judge may also consider whether trying the tort action
    first might render the declaratory judgment action moot if the
    insured were to prevail.   See, e.g., Guaranty Nat'l Ins. Co. v.
    Beeline Stores, Inc., 
    945 F. Supp. 1510
    , 1515 (M.D. Ala. 1996)
    (where insured "could prevail in the underlying lawsuit . . .
    the issue of whether [insurer] must indemnify [insured] would be
    moot"; "[t]he time and effort the court and the parties would
    have put toward resolving the issue would be wasted"); LabMD,
    Inc. v. Admiral Ins. Co., 
    323 Ga. App. 906
    , 908 (2013) ("a
    declaratory judgment action regarding an insurer's duty to
    defend can be rendered moot where the underlying liability
    lawsuit has proceeded to judgment").
    In addition, a judge may consider whether the insurer would
    be unfairly prejudiced in the adjudication of the declaratory
    judgment action if it were to be bound by a finding made in the
    adjudication of the underlying tort case.   See North Star Mut.
    Ins. Co. v. Kneen, 
    484 N.W.2d 908
    , 911 (S.D. 1992).
    Here, the judge who denied Commerce's motion to intervene
    protected Commerce from the risk that it would be unfairly
    prejudiced by a finding of negligence in the wrongful death
    action by allowing Commerce to ask a court for a determination
    20
    whether that issue was fairly litigated in the wrongful death
    action.   And, in fact, we know now that Commerce was not
    prejudiced in the declaratory judgment action by the parties'
    stipulation to negligence because the judge in that action
    independently determined that David's injuries and death were
    caused by Matthew's intentional conduct, not an accident,
    without making any mention of the stipulation in the settlement
    or giving any apparent weight to it.    Where Commerce was
    protected from prejudice and where a stay would have delayed a
    wrongful death trial that had already been continued because of
    Commerce's emergency motion to intervene, the judge did not
    abuse his discretion by denying the motions to stay.
    2.    Motion to deposit funds.   A motion to deposit a sum of
    money with the court pursuant to Mass. R. Civ. P. 67 is
    generally left to the sound discretion of the judge.   See
    Augustine v. Rogers, 
    47 Mass. App. Ct. 901
    , 903 (1999).      Where
    Commerce's offer to deposit its policy limit for optional bodily
    injury coverage was conditional, that is, Commerce wanted
    $480,000 of the deposit returned if it prevailed in the
    declaratory judgment action, we conclude that the judge did not
    abuse his discretion in denying Commerce's motion to deposit
    these funds with the court (or, in the alternative, to deposit
    them in an interest-bearing account) for the purpose of stopping
    the accrual of postjudgment interest.
    21
    In 
    Davis, 434 Mass. at 175
    , 178 n.7, the vehicle that
    struck and injured the plaintiff was insured by Allstate
    Insurance Company (Allstate) under the standard Massachusetts
    automobile insurance policy, which contained the same provision
    as the Commerce policy regarding the payment of postjudgment
    interest.   Allstate defended its insured at trial in accordance
    with its duty to defend under the policy.       
    Id. at 175.
       Before
    trial, Allstate offered the plaintiff payment of the $25,000
    policy limits in exchange for a release of its insured from all
    liability relating to the accident.     
    Id. The plaintiff
    declined.   
    Id. After a
    jury trial, judgment entered against the
    insured in an amount slightly greater than $400,000 on October
    18, 1990, well in excess of the $25,000 policy limit for bodily
    injury to another person.    
    Id. at 175-176.
    On July 1, 1996, after the Appeals Court affirmed the
    judgment and Allstate did not seek further appellate review,
    Allstate made an unconditional payment to the plaintiff of the
    $25,000 policy limits.    
    Id. at 176-177.
        The plaintiff claimed
    that Allstate was liable under the policy for postjudgment
    interest accrued from the date of judgment to the date that
    Allstate tendered the unconditional payment of the policy
    limits.   
    Id. at 177.
       Allstate claimed that it was not required
    to pay any postjudgment interest because it had offered its
    policy limits before trial, albeit on the condition that the
    22
    plaintiff release its insured from all liability.     
    Id. at 177-
    178.
    We held that, under the postjudgment interest provision of
    the policy, where Allstate owed its insured a duty to defend him
    in the lawsuit, Allstate was required to pay the interest that
    accrued after judgment was entered until it "offered to pay" the
    policy limits.   
    Id. at 183.
      Interpreting the insurance policy
    at issue "according to the 'fair meaning of the language used,
    as applied to the subject matter,'" 
    id. at 179,
    quoting Bilodeau
    v. Lumbermens Mut. Cas. Co., 
    392 Mass. 537
    , 541 (1984), we
    concluded that "offered to pay" did not mean "offered to settle"
    Davis, supra at 183.   Rather, "Allstate was required to make an
    unconditional offer to pay the policy limits in order to
    terminate its express obligation to pay postjudgment interest."
    
    Id. Where it
    made only a conditional offer until it
    unconditionally paid the policy limits on July 1, 1996, we held
    that Allstate was required to pay postjudgment interest from the
    date of judgment through that date.    
    Id. at 183-184.
    In Davis, we observed that "[t]he clear majority of courts,
    interpreting a standard interest clause in a motor vehicle
    liability insurance policy, have held insurers liable for
    postjudgment interest on the entire amount of the judgment,
    notwithstanding the fact that the policy limits may cover only a
    portion of the judgment."    
    Id. at 181.
      We explained that this
    23
    rule serves to protect injured plaintiffs from unreasonable
    delays by insurers or, where delay arises from an appeal, to
    compensate the plaintiffs for that delay.   
    Id. at 182.
      And we
    further observed that, while interpreting the policy in
    accordance with its plain language imposes a burden on insurers,
    it is not an "unfair burden," where the insurer "remain[s] in
    control of both the tolling of interest and the litigation" and
    can toll the accrual of interest at any time by offering to pay
    the policy limit.   
    Id., quoting Fratus
    v. Republic W. Ins. Co.,
    
    147 F.3d 25
    , 29 (1st Cir. 1998).
    Citing the dissenting opinion in Davis, Commerce argues
    that we should revisit Davis to the extent that it unfairly
    penalizes an insurer for pursuing a meritorious appeal on behalf
    of the insured, where "the interest that mounts on the judgment
    during an appeal will soon eclipse the policy limit."     Davis,
    supra at 193 (Sosman, J., concurring in part and dissenting in
    part).   We decline to revisit the Davis court's interpretation
    of the language of the standard automobile policy regarding
    postjudgment interest.   Although "[t]he principle of stare
    decisis is not absolute . . . adhering to precedent is our
    'preferred course because it promotes the evenhanded,
    predictable, and consistent development of legal principles,
    fosters reliance on judicial decisions, and contributes to the
    actual and perceived integrity of the judicial process.'"     Shiel
    24
    v. Rowell, 
    480 Mass. 106
    , 108 (2018), quoting Payne v.
    Tennessee, 
    501 U.S. 808
    , 827 (1991).
    The principle of adhering to long-standing precedent is
    particularly pronounced where "the Legislature has declined to
    exercise its authority to overturn the court's interpretation of
    a statute."   Commonwealth v. Rivera, 
    445 Mass. 119
    , 128 (2005).
    In 2016, the standard Massachusetts automobile insurance policy,
    which is prescribed by statute, was amended to reduce the scope
    of postjudgment interest that an insurer is required to pay.      It
    now provides that interest will accrue only "on that part of a
    judgment or arbitration award that is within [the insurer's]
    limits of liability which accrues after the judgment or award in
    any matter [it] defend[s]."     Notably, the Legislature did
    nothing to change the provision stating that the insurer "will
    not pay interest that accrues after [it has] offered to pay up
    to the limits" of the policy.    Specifically, it did not amend
    "offered to pay" to read "offered to settle," and therefore
    implicitly left intact our interpretation of "offered to pay" as
    an unconditional offer.
    Commerce claims that the motion judge's ruling was an abuse
    of discretion because we noted in a footnote in 
    Davis, 434 Mass. at 187
    n.13, that an insurer "may be able to control its
    postjudgment interest obligations by paying the policy limits
    (with accrued interest) into court."    We disagree.   First, this
    25
    was not a holding of the court; we "[left] the availability of
    this procedure for another day because it [was] not involved in
    [that] case."   
    Id. Second, under
    our holding in Davis, the rule
    67 deposit offered by Commerce, even if accepted by the court,
    would not stop the accrual of postjudgment interest because it
    was not an unconditional offer to pay the full policy limits.16
    
    Id. at 183.
      Lastly, unlike some other jurisdictions, rule 67 in
    Massachusetts does not expressly provide for abatement of
    postjudgment interest when money is deposited with the court.
    Compare JTX Tax, Inc. v. Flowers, 
    311 Ga. App. 495
    , 496-497
    (2011) (Georgia equivalent to rule 67 provides that "[w]here the
    thing deposited is money, interest thereupon shall abate"
    [citation omitted]).    Where the proffered rule 67 deposit was
    not mandated by Davis and would not have stopped the accrual of
    postjudgment interest, the motion judge did not abuse his
    discretion in denying Commerce's rule 67 motion.
    3.   Settlement/assignment agreements.   Having concluded
    that Commerce remains obligated to pay accrued postjudgment
    interest, the next issue we must confront is whether Commerce
    16In contrast, it might be an abuse of discretion for a
    judge to decline to accept a rule 67 deposit to stop the accrual
    of postjudgment interest where the deposit was an unconditional
    offer to pay the policy limits, and the plaintiff refused to
    accept payment directly, causing postjudgment interest to
    continue to accrue. We need not decide the issue because those
    are not the facts present before us in these appeals.
    26
    may challenge the validity or amount of that judgment, where its
    objection to the settlement agreement was overruled and where
    there was a substantial risk of underlitigation in the
    negotiation of that agreement.
    Commerce, supported by the amici, claims that it is not
    bound by the settlement because of the provision in the policy
    that states, "If any person covered under this policy settles a
    claim without our consent, we will not be bound by that
    settlement."   Where an insurer acknowledges its duty to
    indemnify the insured for damages arising from a claim, and
    thereby agrees to pay a judgment arising from a settlement
    within the policy limits, the insurer will not be bound by a
    settlement entered into without its consent where material,
    actual prejudice is shown.   See Augat, Inc. v. Liberty Mut. Ins.
    Co., 
    410 Mass. 117
    , 123 (1991) (recognizing that "consent-to-
    settlement . . . and cooperation provisions . . . give an
    insurer the opportunity to protect its interests," and where
    insured commits breach of one of these provisions, insurer may
    disclaim liability where it proves actual prejudice from
    breach); MacInnis v. Aetna Life & Cas. Co., 
    403 Mass. 220
    , 223
    (1988) ("an insurer must prove material prejudice resulting from
    its policyholder's violation of a consent-to-settlement
    provision in order to rely on that violation as an affirmative
    27
    defense to a claim for underinsured motorist coverage
    benefits").
    But where, as here, the insurer agrees to pay for the
    defense of a claim against an insured under a reservation of
    rights, and thereby reserves its right to seek a declaration
    from a court that it owes no obligation to indemnify the insured
    for damages arising from the claim, the insurer has no right to
    control the defense with respect to the settlement of the claim.
    See Three Sons, Inc. v. Phoenix Ins. Co., 
    357 Mass. 271
    , 276-277
    (1970).   See also Herbert A. Sullivan, Inc. v. Utica Mut. Ins.
    Co., 
    439 Mass. 387
    , 406 (2003) (recognizing that insurer may not
    "reserve its rights to disclaim liability while also insisting
    on retaining control of the insured's defense"); Travelers
    Indem. Co. v. Dingwell, 
    884 F.2d 629
    , 639 (1st Cir. 1989)
    ("well-established policy that an insurer who reserves the right
    to deny coverage cannot control the defense of a lawsuit brought
    against its insured by an injured party").
    Where an insurer reserves its right to indemnify, the
    insured faces the risk that he or she alone will be responsible
    to pay the judgment.   The insured is entitled to mitigate that
    risk by entering into a settlement that will either protect him
    or her from liability or diminish the amount of a judgment that
    he or she might be obligated to pay.   See Three Sons, 
    Inc., 357 Mass. at 276
    ("If liability is established, or a settlement
    28
    reached, and the insurer has a valid ground for disclaimer, the
    insured is left with a liability which, had he been able to
    defend or settle on other terms, might never have existed").
    Where the insurer has not agreed to pay a judgment, it
    cannot prevent its insured from protecting his or her financial
    interests through a settlement.   See United Servs. Auto. Ass'n
    v. Morris, 
    154 Ariz. 113
    , 119 (1987) (en banc) (Morris) ("[a]n
    insurer that performs the duty to defend but reserves the right
    to deny the duty to pay should not be allowed to control the
    conditions of payment"; insured must not be left without
    recourse "to take reasonable measures to protect himself [or
    herself] against the danger of personal liability").   See also
    Miller v. Shugart, 
    316 N.W.2d 729
    , 734 (Minn. 1982) ("insurer
    who is disputing coverage [may not] compel the insureds to
    [forgo] a settlement which is in their best interests").
    Therefore, an insured does not commit a breach of this provision
    of its policy by settling a case without the insurer's consent
    where the insurer is defending the claim under a reservation of
    rights.
    Such a settlement, if enforceable, would certainly bind the
    parties to the settlement; it is quite a separate issue whether
    it would bind the insurer where the insurer is not a party to
    the settlement and did not consent to it.   Commerce contends
    that it should not in any way be bound by the
    29
    settlement/assignment agreements executed by the estate and the
    Padovanos, which provided that
       the insured defendants agreed to admit liability for
    negligence, to have the amount of damages determined by the
    judge at an assessment of damages hearing, and to assign
    all rights arising from their insurance coverage to the
    plaintiff; and
       the plaintiff agreed to release the defendants from all
    liability arising from the incident.
    Here, Commerce was not bound by the parties' stipulation of
    negligence; the judge who granted Commerce declaratory judgment
    made a de novo determination that Stephen's death arose from
    Matthew's intentional act and was not an accident.   See 14
    
    Couch, supra
    at § 199:48, at 199-93, citing 
    Morris, 154 Ariz. at 120-121
    ("upon entry of a settlement agreement between the
    claimant and [insureds] who were being defended under a
    reservation of rights . . . , the liability insurer was not
    bound by the settlement stipulations that the actions giving
    rise to the claim were either negligent or intentional, and the
    insurer could litigate the issue of intentional acts").      Nor
    will it be bound, under its optional bodily injury coverage, to
    pay the damages determined at the assessment hearing, because it
    obtained a declaratory judgment that it was not obligated to pay
    these damages.
    30
    But where Commerce recognized its duty to defend, and paid
    the compulsory bodily injury coverage of $20,000, it does owe a
    duty under its policy to pay "[i]nterest that accrues after
    judgment."    Therefore, the issue we confront is whether it is
    bound to pay such interest on the judgment arising from the
    settlement.     If so, its liability to pay postjudgment interest
    would well exceed $2 million, far more than the $480,000 limit
    of liability for optional bodily injury coverage under the
    policy, which it has no obligation to pay following the
    declaratory judgment.
    We have yet to decide whether the amount of a prejudgment
    settlement/assignment agreement is enforceable against the
    insurer.     We have recognized that, where an insured tortfeasor
    defendant enters into a prejudgment settlement with an injured
    plaintiff in which the defendant assigns his or her rights to
    the plaintiff in return for a release from personal liability,
    there is the risk that "collusion may exist between the injured
    party and the tortfeasor."     Campione v. Wilson, 
    422 Mass. 185
    ,
    193 (1996).    This is because, as a result of such a settlement,
    "the insured . . . loses the incentive to contest his liability
    or the extent of the injured party's damages either in
    negotiations or at trial."     
    Id. at 191,
    quoting Freeman v.
    Schmidt Real Estate & Ins., Inc., 
    755 F.2d 135
    , 139 (8th Cir.
    1985).   See Spellman v. Shawmut Woodworking & Supply, Inc., 445
    
    31 Mass. 675
    , 681 (2006) (where there is agreement for judgment,
    assignment of rights, and covenant in assignment not to pursue
    satisfaction of agreement against defendant, "we do not overlook
    the possibility of collusion or fraud").
    But we do not join the minority of States that, because of
    the risk of collusion, declare such settlement/assignment
    agreements to be unenforceable where an insurer has honored its
    duty to defend.   See, e.g., Associated Wholesale Grocers, Inc.
    v. Americold Corp., 
    261 Kan. 806
    , 846 (1997) ("an insurance
    company should not be required to settle a claim when there is a
    good faith question as to whether there is coverage under its
    insurance policy"); State Farm Fire & Cas. Co. v. Gandy, 
    925 S.W.2d 696
    , 713-714 (Tex. 1996) (concluding that prejudgment
    settlement/assignment agreement "confuse[s] and distort[s]"
    positions of parties, and prohibiting such agreements under
    certain circumstances where defendant's insurer has made good
    faith effort to adjudicate coverage issues prior to adjudication
    of plaintiff's claim).   See also State Farm Mut. Auto. Ins. Co.
    v. Freyer, 
    2013 MT 301
    , ¶¶ 36-38 (stipulated settlement that
    relieves insured of any financial stake in outcome of case gives
    insured "little incentive to minimize the settlement amount"
    and, if permitted, "would allow insureds to unilaterally inflate
    policy limits anytime an insurer tests coverage through a
    declaratory action").
    32
    If we were to declare such settlement/assignment agreements
    always to be unenforceable, we would effectively prevent
    defendants whose insurer has offered a defense under a
    reservation of rights from being able to protect themselves from
    the risk that they will be held personally responsible to pay a
    judgment that they could ill afford.   See 
    Morris, 154 Ariz. at 118
    (insured party, if prohibited from entering into settlement
    while defended under reservation of rights, "risk[s] financial
    catastrophe").   Moreover, the risk of collusion must be balanced
    against policy considerations that encourage settlement
    agreements, and "by settled law that most contract claims are
    assignable" and that "contracts not to sue . . . are usually
    valid."   
    Spellman, 445 Mass. at 681-682
    .
    Balancing these risks and benefits, we conclude that an
    insurer who defends a claim under a reservation of rights is
    bound by the amount of a judgment arising from a prejudgment
    settlement/assignment agreement where (1) the insurer is given
    notice of the settlement/assignment agreement and an opportunity
    to be heard by the court before judgment enters; (2) the insurer
    contests the judgment; and (3) the insured, after hearing, meets
    his or her burden of showing that the settlement is reasonable
    in amount.   See Patrons Oxford Ins. Co. v. Harris, 
    2006 ME 72
    ,
    ¶ 18, quoting 
    Morris, 154 Ariz. at 120
    (settlement/assignment
    agreements are valid where "the insured or claimant can show
    33
    that the settlement was reasonable and prudent"); 
    Miller, 316 N.W.2d at 735
    ("The burden of proof is on the claimant . . . to
    show that the settlement is reasonable and prudent").
    In deciding whether a settlement/assignment agreement is
    reasonable, a judge, examining the totality of the circumstances
    at a reasonableness hearing, should determine whether the amount
    of the settlement is reasonable in light of "the facts bearing
    on the liability and damage aspects of plaintiff's claim, as
    well as the risks of going to trial."    
    Miller, 316 N.W.2d at 735
    .    See Patrons Oxford Ins. 
    Co., 905 A.2d at 827
    (in
    determining reasonableness of settlement, judge should consider
    "the possibility of the insured's liability, risk of an adverse
    verdict, and the damages portion of the claimant's case").
    Because the consequence of a settlement/assignment agreement is
    that the plaintiff may collect damages only from the insurer,
    having released the insured defendants from personal liability,
    a reasonable settlement amount may not exceed the limits of the
    insured's potential insurance coverage, because the plaintiff
    may recover in damages no more than that from the insurer.     See
    Kelly v. Iowa Mut. Ins. Co., 
    620 N.W.2d 637
    , 644-645 & n.6 (Iowa
    2000) (noting that insurer has "no obligation" to pay settlement
    amount "in excess of its [policy] limits").    See also Babcock &
    Wilcox Co. v. American Nuclear Insurers, 
    635 Pa. 1
    , 30 n.18
    (2015) (unless insurer acts in bad faith, reasonable settlement
    34
    "confined to the previously contracted policy limits").    And
    where optional bodily injury coverage, as here, requires a
    finding that the plaintiff's injuries were caused by an accident
    rather than by intentional conduct, the probability of such a
    finding may also be considered in determining the amount of a
    reasonable settlement.   See 
    Miller, supra
    (highlighting
    importance of considering risk of adverse verdict); Patrons
    Oxford Ins. 
    Co., supra
    (same).
    Binding an insurer to the amount in a settlement/assignment
    agreement that meets a reasonableness test is consistent with
    the approach of the majority of courts, which allow such
    agreements if they meet certain conditions.    See Great Divide
    Ins. Co. v. Carpenter, 
    79 P.3d 599
    , 610 (Alaska 2003) (approach
    declaring settlement/assignment agreements void as against
    public policy contrary to Alaska case law and "contrary to the
    decisions of most of the other states whose courts have ruled on
    the validity" of such agreements); Harris, Judicial Approaches
    to Stipulated Judgments, Assignments of Rights, and Covenants
    not to Execute in Insurance Litigation, 47 Drake L. Rev. 853,
    859 & n.31 (1999) (collecting cases where "[m]ost courts" have
    permitted settlement/assignment agreements).    The majority
    approach allows unauthorized settlements with stipulated
    liability to be enforced "so long as such agreements are made
    fairly, with notice to the insurer, and without fraud or
    35
    collusion on the insurer, and the settlement is reasonable and
    prudent" (footnote omitted).    14 
    Couch, supra
    at § 199:48, at
    199-92.
    We focus only on reasonableness, rather than "collusion,"
    because every settlement/assignment agreement risks being
    characterized as "collusive" simply because the parties have
    negotiated a settlement where only the insurer is at risk of
    paying the plaintiff's damages and the defendant will be
    released from liability.    But if this is enough to defeat a
    settlement/assignment agreement, then all judgments arising from
    such agreements will be deemed unenforceable against the
    insurer, regardless of the amount.   Where the insurer expresses
    concern that the plaintiff and the insured defendant have
    colluded to improperly inflate the judgment, that concern may be
    considered in evaluating the reasonableness of the settlement
    amount.
    In the wrongful death action, Commerce objected on the
    record to the settlement/assignment agreements between the
    estate and the Padovanos.   We conclude that, in doing so, it
    preserved its right to be heard on the question whether the
    amount of the settlement was reasonable in the manner we have
    now described.   The settlement/assignment agreements here are
    not immune from a reasonableness review simply because the
    parties elected to have the amount of damages determined by a
    36
    judge at an assessment of damages hearing.   For all practical
    purposes, by agreeing that damages will be so calculated, the
    parties essentially agreed that the settlement amount is the
    amount of damages that would have been awarded had liability
    been found at a bench trial, without any compromise of the
    amount based on the risk of a finding that the defendants were
    not negligent.
    Because no reasonableness review was conducted, we vacate
    the judgment and remand the case to the Superior Court for a
    hearing on the reasonableness of the settlement/assignment
    agreements.   Where the amount of the judgment arising from the
    settlement/assignment agreements was greater than $500,000, the
    limits of the insured's combined mandatory and optional bodily
    injury coverage, we conclude that the amount obtained through
    the settlement is per se unreasonable.   But a reasonableness
    hearing is needed to allow the judge to determine what would
    have been a reasonable settlement amount under the
    circumstances, and a new judgment in that amount shall enter.
    Postjudgment interest will accrue nunc pro tunc from the date of
    the original judgment, December 29, 2016, on the judgment amount
    that the court deems reasonable.
    We note that the procedure we direct on remand is different
    from what we expect to happen in the future where an insurer
    successfully challenges a settlement/assignment agreement before
    37
    judgment.    Where the challenge is made before judgment enters, a
    judge who decides that the amount set forth in (or determined
    by) the settlement/assignment agreement is not reasonable may
    decline to enter a judgment in that amount, and invite the
    parties to renegotiate an agreement that might prove reasonable
    in amount.   Here, where so much time has passed since the
    judgment entered, we do not believe that to be a reasonable
    alternative under the circumstances.     We therefore direct the
    judge instead to make his or her own determination of a
    reasonable settlement amount so that postjudgment interest may
    be paid on that amount.
    Conclusion.      The orders denying Commerce's motions to stay
    the wrongful death action and denying Commerce's rule 67 motion
    are affirmed.   The entry of judgment in the wrongful death
    action is vacated, and the matter is remanded for a
    reasonableness hearing to be conducted in a manner consistent
    with this opinion.
    So ordered.