Robert P. Ulbricht v. Cbs Corp ( 2020 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
CBS CORPORATION, a Delaware ) No. 79490-6-I
corporation, f/k/a VIACOM, INC., ) (Consolidated with
successor by merger to CBS ) No. 79590-2-I)
CORPORATION, a Pennsylvania )
corporation, f/k/a WESTINGHOUSE ) DIVISION ONE
ELECTRIC CORPORATION; )
ELLIOTT COMPANY, d/b/a ELLIOTT ) UNPUBLISHED OPINION
TURBOMACHINERY COMPANY; )
FRASER’S BOILER SERVICE, INC.; )
GENERAL ELECTRIC COMPANY; )
GOULDS PUMPS (IPG), INC.; )
HONEYWELL INTERNATIONAL INC., )
successor-in-interest to ALLIED )
SIGNAL, INC., successor-in-interest to •)
BENDIX CORPORATION; )
IMO INDUSTRIES, INC., individually )
and as successor-in-interest to DE LAV )
AL TURBINE, INC., and ADEL )
WIGGENS; INGERSOLL-RAND
COMPANY; )
ITT CORPORATION, as successor-in- )
interest to FOSTER VALVES; )
MET ALCLAD INSULATION )
CORPORATION; )
METROPOLITAN LIFE INSURANCE )
COMPANY; )
PM NORTHWEST, INC.; )
SABERHAGEN HOLDINGS, INC., as )
successor to TACOMA ASBESTOS )
COMPANY and THE BROWER )
COMPANY; )
SEQUOIA VENTURES, INC., formally )
known as and as successor in interest )
to BECHTEL CORPORATION, )
BECHTEL, INC. BECHTEL MCCONE )
COMPANY, BECHTEL GROUP, INC.; )
)
No. 79490-6-1/2
SULZER PUMPS (US), INC., formally )
known as SULZER BINGHAM PUMPS, )
INC.; )
UNION CARBIDE CORPORATION; )
WARREN PUMPS, LLC, individually )
and as successor in interest to QUIMBY )
PUMP COMPANY; )
ZURN INDUSTRIES, LLC, as )
successor in interest to ERIC CITY )
IRONWORKS, )
)
Appellant, )
v.
ROBERT PAUL ULBRICHT and )
KAREN ULBRICHT, husband and wife; )
HEIDI L. ULBRICHT, ROBERT S. )
ULBRICHT,
)
Respondent. )
) FILED: February 10, 2020
HAZELRIGG-HERNANDEZ, J. — Intervenor United States Fidelity & Guarantee
(USF&G) appeals a superior court’s determination of reasonableness of a $4.5
million covenant judgment in favor of Robert and Karen Ulbricht and their
dependent adult children (collectively, Ulbrichts). The covenant judgment was
reached by counsel for the Ulbrichts and the sole remaining defendant in the suit,
PM Northwest, days before trial was to commence and as PM Northwest was still
left with uncertainty as to their insurers’ position on defending them. The insurers
for PM Northwest, USF&G and National Union Fire Insurance Company,
intervened in the proceedings on reasonableness with the agreement of the
parties. USF&G avers the court improperly considered previous asbestos verdict
information and assigns error to a number of the findings of fact. We affirm the
superior court’s determination of reasonableness.
-2-
No. 79490-6-1/3
FACTS
In January 2018, Robert Ulbricht and his wife, Karen,1 filed suit against 20
defendants, including PM Northwest, seeking damages for bodily injury from
exposure to asbestos. The record indicates that Robert came into contact with
asbestos through activities involving various contractors between 1973 and 1999
when he worked at the Texaco Oil Refinery (the plant) in Anacortes, Washington.
In April 2018, the Ulbrichts amended their complaint a second time to include their
two dependent adult children as plaintiffs. Due to Robert’s mesothelioma
diagnosis, the case was given an expedited trial date of August 6, 2018.
PM Northwest was a maintenance contractor at the plant; it did not
manufacture asbestos or bring asbestos insulation onto the site. The duration of
PM Northwest’s work at the plant was disputed. PM Northwest asserted several
defenses to the Ulbrichts’ claims, including one based on the statute of repose
which was denied on summary judgment. Prior to the summary judgment motion,
the trial court struck 17 of PM Northwest’s affirmative defenses, including employer
negligence and superseding cause.
Attorneys for both the Ulbrichts and PM Northwest were deposed in
preparation for the reasonableness hearing. Counsel for PM Northwest has
defended asbestos cases since 2001. He estimated that 80 percent of all his cases
ended in defense “victor[ies].” PM Northwest’s counsel also recognized PM
Northwest as a “major player” in the case. The attorney identified three key
defenses for his client: 1) a lack of causal link, 2) comparative negligence on
1 Because all of the plaintiffs share the same last name, we use their first names for clarity.
We intend no disrespect.
-3-
No. 79490-6-1/4
Robert’s part, and 3) assertion of error as to trial court’s decision on the statute of
repose. Counsel acknowledged that the chance of prevailing on the first two
defenses was “not very good.” The defense also recognized the difficulty that PM
Northwest had with credibility challenges if the case proceeded to trial, given the
expected testimony of four former PM Northwest employees discrediting the
company president’s denial of working with insulation at the plant. Counsel knew
that a “formidable witness” who was an expert in asbestos was expected to testify
for the plaintiffs. Perhaps most critically, he was also aware of the likelihood that
his client would have to declare bankruptcy if an adverse verdict was entered.
Counsel for the Ulbricht family has represented plaintiffs in asbestos
litigation since 1994, taking approximately 20 cases to verdict. The attorney’s firm
handles approximately 30 asbestos cases a year. The attorneys for PM Northwest
and the Ulbrichts tried numerous asbestos cases against each other over the
years. The Ulbrichts’ attorney was aware of the mounting obstacles that PM
Northwest was facing as trial approached.
In March 2018, PM Northwest notified one of its insurers, United States
Fidelity & Guaranty Company (USF&G) of the Ulbrichts’ claim. USF&G refused to
defend or indemnify under the policy and would take no further action until PM
Northwest located and produced a copy of the applicable policies. On July 10,
2018, PM Northwest obtained the policy information, but not the formal policy
documents, and contacted Travelers and AIG Insurance seeking to open claims
under these policy numbers. Shortly after, PM Northwest provided the insurers
with the demand letter from Plaintiffs. Defense counsel tendered the claim to
-4-
No. 79490-6-1/5
Travelers and AIG, through a risk management company, during the mediation on
July 18, 2018, but the insurers still refused to take any action. At that time, PM
Northwest advised the insurers that trial was set to begin on August 6, 2018. The
Ulbrichts sent PM Northwest a $3.5 million settlement demand, which PM
Northwest’s counsel described as “ridiculous” and “too high” for a settlement. No
counter offer was made.
During the mediation on July 18, 2018, the assigned mediator, a retired
judge experienced in asbestos litigation, suggested to defense counsel that PM
Northwest consider a covenant judgment given that they had yet to receive
authority to extend an offer since no insurance company had agreed to defend or
indemnify. Between this July 1 8th mediation and an August 1st meeting of counsel,
much had worsened as to PM Northwest’s prospects at trial. PM Northwest’s
president testified in a deposition that they never worked with asbestos, in direct
contrast to the testimony of former employees. PM Northwest’s industrial hygiene
expert witness testified that she agreed PM Northwest’s conduct at the plant
violated safety regulations, and the Ulbrichts had brought a spoliation motion. Both
sides were actively preparing for trial. The Ulbrichts’ attorney expected a verdict
above $6 million based on recent asbestos verdicts in Washington and Oregon.
After offset of the aggregate settlements already obtained, a verdict would likely
result in a judgment of $4.5 to $5.5 million against PM Northwest. Defense counsel
similarly estimated the likely outcome of a trial and advised PM Northwest that a
potential adverse verdict could range from $1 to $6 million.
-5-
No. 79490-6-116
Counsel for both sides decided to meet two days before trial to explore
settlement possibilities one last time. At the meeting, defense counsel revealed
that the insurers had thus far declined to provide defense or indemnity. Both
parties’ attorneys then began to explore resolution through covenant judgment.
Plaintiffs’ counsel identified the risk of such a resolution for his clients due to
“trading one litigation for the other.” Given the recent developments since the last
mediation and the contingent nature of such a resolution, Plaintiffs’ counsel
increased the demand by $1 million from their previous settlement offer to a total
of $4.5 million. Defense counsel did not see another alternative to protect his client
and also considered the recent verdicts in Washington State. Defense counsel felt
$4.5 million was “within the range of possible verdicts” and advised his clients to
agree to the covenant judgment in that amount, with an assignment of all rights to
pursuea coverage action against its insurers.
Following entry of the resolution, both parties stipulated to intervention by
PM Northwest’s insurers to challenge the reasonableness of the amount of the
covenant judgment.2 A reasonableness hearing occurred on November 29, 2018
with video testimony by Robert and live testimony from Karen. The parties
provided both written and oral argument. The superior court entered its findings
of fact and conclusions of law on December 26, 2018 and determined the covenant
judgment was reasonable. USF&G timely appeals the superior court’s ruling on
the reasonableness of the covenant judgment.
2 The second insurer, National Union Fire Insurance Company, also intervened in the
litigation as to reasonableness with USF&G and initially joined in their appeal of that ruling.
However, National Union voluntarily dismissed their appeal during the pendency of the matter
before this court.
-6-
No. 79490-6-1/7
ANALYSIS
I. Reviewing a Reasonableness Determination
We review a superior court’s determination of reasonableness for abuse of
discretion. Water’s Edge Homeowners Ass’n v. Water’s Edge Assocs., 152 Wn.
App. 572, 584, 216 P.3d 1110 (2009). “A trial court abuses its discretion when its
decision is manifestly unreasonable or based upon untenable grounds.” Boguch v.
Landover Corp., 153 Wn. App 595, 619, 224 P.3d 795 (2009).
“When an insurer refuses to settle a claim, the insured may negotiate a
settlement on its own and then seek reimbursement from the insurer.” Chausee v.
Maryland Cas. Co., 60 Wn. App. 504, 509-1 0, 803 P.2d 1339 (1991). An insurer
is only liable for the amount of a settlement that is reasonable and made in good
faith. Evans v. Cont’l Cas. Co., 40 Wn.2d 614, 628, 245 P.2d 470 (1952). In
Chausee, this court adopted the factors from Glover v. Tacoma General Hospital,
to apply to the reasonableness of covenant judgments. Chausee, 60 Wn. App. at
512; Glover, 98 Wn.2d 708, 717, 658 P.2d 1230 (1983). RCW4.22.060 provides
the opportunity for a party to request a reasonableness hearing and places the
burden on the party requesting settlement to prove the reasonableness of such.
Application of the Chausee factors focuses on weighing them based on the facts
of the case at issue.
When a trial court evaluates a covenant judgment for reasonableness the
factors applied are:
[T]he releasing person’s damages; the merits of the releasing
person’s liability theory; the merits of the released person’s defense
theory; the released person’s relative faults; the risks and expenses
-7-
No. 79490-6-118
of continued litigation; the released person’s ability to pay; any
evidence of bad faith, collusion, or fraud; the extent of the releasing
person’s investigation and preparation of the case; and the interests
of the parties not being released.
Chausee, 60 Wn. App at 512 (citing Glover, 98 Wn.2d at 717) (alterations in
original). Perhaps most critically for our examination, courts have consistently held
that “[nb one factor controls and the trial court has the discretion to weigh each
case individually.” ki.; See also Besel v. Viking Ins. Co. of Wis., 146 Wn.2d 730,
739, 49 P.3d 887 (2002).
II. Consideration of Previous Verdicts
USF&G argues that the superior court improperly considered “a purely
hypothetical settlement amount based on the range of verdicts,” instead of the
amounts that had been discussed at the prior mediation and were all rejected. This
was not improper. A reasonableness hearing examines the amount of the
proposed covenant judgment by applying the Chausee factors, not necessarily the
amounts previously discussed. See, e.g., Chausee, 60 Wn. App. at 510; Hidalgo
v. Barker, 176 Wn. App. 527, 537, 309 P.3d 687 (2013). In the current case, the
parties were in quite different positions when they arrived at the covenant judgment
days before trial than they were during the court-ordered mediation session.
In Sharbono v. Universal Underwriters Insurance Co., both the plaintiff and
defendant submitted jury verdict research at the reasonableness hearing. 139 Wn.
App. 383, 404, 161 P.3d 406 (2007). The defendants argued on appeal that the
research submitted by the plaintiff included verdicts that were unrepresentative for
-8-
No. 79490-6-1/9
the case. j.~. Division Two of this court held that the court properly relied on the
research, which included past jury verdicts, when evaluating the reasonableness
of the covenant judgment. ki. In the current case, the court’s consideration of
recent verdicts provided by both counsel for PM Northwest and the Ulbrichts
operated as a basic framework from which to evaluate reasonableness and was
not an abuse of discretion. This situation is analogous to Sharbono, except that
instead of critiquing the specific past verdicts that were reviewed at the hearing,
USF&G challenges the court’s ability to look to previous verdicts at all. This
argument by USF&G is unsupported by the case law. The court’s consideration
of past asbestos verdicts in applying the Chausee factors did not constitute abuse
of discretion.
Ill. Plaintiffs’ Risk and Expense of Pursuing a Bad Faith Claim
USF&G next argues that the court erred by considering the risk of continued
litigation for the Ulbrichts in the overall reasonableness determination. Washington
courts recognize that covenant judgments are distinct from settlements. “[T]he
amount of a covenant judgment is the presumptive measure of an insured’s harm
caused by an insurer’s tortious bad faith if the covenant judgment is reasonable.”
Besel, 146 Wn.2d at 738. A covenant judgment is distinct from a cash settlement,
in that it does not release a tortfeasor from liability and is only an agreement to
seek recovery from a specific asset. Bird v. Best Plumbing Grp., LLC, 175 Wn.2d
756, 765, 287 P.3d 551 (2012). “The insurer still must be found liable in the bad
-9-
No. 79490-6-U1O
faith action and may rebut the presumptive measure by showing the settlement
was the product of fraud or collusion.” j.ç~
The trial court did not abuse its discretion by considering the future bad faith
litigation that would be necessary to enforce the covenant judgment. It is proper
for the trial to contemplate the risks and costs involved when evaluating the
reasonableness of the proposed covenant judgment. This is what the Chausee
factor ‘risks of continued litigation” encompasses for a court to consider and weigh.
At oral argument, USF&G advanced the notion that this factor does not include
possible future suits and only refers to the risk of continuing the current suit; we
are not persuaded.
As the Ulbrichts point out, the covenant judgment was within the possible
verdicts contemplated by both parties. USF&G focuses on conclusion of law 23,
where the superior court recognized “[w]hile covenant judgments and settlements
overlap in many ways, they are nevertheless separate and distinct agreements
that cannot be referred to interchangeably.” The court went on to discuss the risks
of continued litigation to PM Northwest in the current suit and the risk that the
Ulbrichts “may recover nothing from PM Northwest’s insurers” in a future bad faith
suit. This sort of reasoning is exactly what the Chausee factor ‘risks of continued
litigation” is designed to capture. The superior court made a total of six conclusions
of law under this factor of risks and expenses of continued litigation and considered
the reasonableness of the resolution holistically.
Further, if the court could not consider litigation beyond the current suit, as
USF&G argues, then courts would be unable to consider outside bankruptcy
- 10-
No. 79490-6-I/li
proceedings as they did in Werlinger v. Warner. 126 Wn. App. 342, 350-51 109
P.3d 22 (2005). The contemplation of the risks associated with a covenant
judgment that were considered by the attorneys for both PM Northwest and the
Ulbrichts during their meeting before the start of trial reinforces the conclusion that
it was something the court should and did consider in terms of how the final
covenant judgment was reached. USF&G argues that PM Northwest’s motivation
for pursuing this covenant judgment is to escape exposure. This is the very nature
of a covenant judgment and likely the most common reason that they are pursued,
which is why a court has the authority to review a proposed covenant judgment for
reasonableness. The court did not abuse its discretion by considering the risks
inherent in future suit against the insurers in the context of a reasonableness
determination.
IV. The Superior Court’s Findings and Conclusions
USF&G further argues that a number of the superior court’s findings were
not supported by substantial evidence. We disagree. A reasonableness hearing
necessarily involves factual findings which will not be disturbed as long as
substantial evidence supports them. Water’s Edge, 152 Wn. App. at 584. Our
review is limited to whether substantial evidence supports the findings, and if so,
whether the findings support the conclusions of law from the trial court. Panorama
Vill. Homeowners Ass’n v. Golden Rule Roofing, Inc., 102 Wn. App. 422, 425, 10
P.3d 417 (2000). “Substantial evidence is evidence that is sufficient to persuade
a fair-minded person of the truth of the declared premise.” ki. The burden is on
-11-
No. 79490-6-1/12
the challenging partyto showthatthefinding of fact is notsupported bythe record.
Id.“Washington courts have found a trial court’s reasonableness determination
to be valid even when the trial court fails to list any of the Chausee factors and
instead simply mentions that the parties addressed the factors in their briefs and
the trial court considered the briefs.” Water’s Edge, 152 Wn. at 585. Even more
dispositive, ‘[n]o one factor controls and the trial court has discretion to weigh each
case individually.” Chausee, 60 Wn. App. at 512. USF&G only assigns error to
conclusions under four of the nine Chausee factors. Additionally, the four
conclusions identified by USF&G in its assignments of error on appeal are not the
only conclusions under those corresponding factors. Even if we disregarded all
four conclusions as urged by USF&G, the reasonableness ruling could still be
independently affirmed on the basis of any number of the unchallenged findings
and conclusions.
In looking to the two findings challenged on appeal, finding 8 has five factual
components, each of which is supported by substantial evidence and occurred in
the three weeks between the mediation and the attorneys’ meeting days prior to
trial. First, the record before this court makes it clear that “all remaining
defendant’s settled.” Second, “PM Northwest’s CR 30(b)(6) representative
reaffirmed testimony from a decade ago that the company had no involvement with
asbestos materials in stark contrast to the testimony of Mr. Ulbricht and PM
Northwest’s own employees.” This is supported by the July 24, 2018 deposition
of PM Northwest’s representative, Richard Huntley Jr. Third, “PM Northwest’s sole
- 12-
No. 79490-6-1/13
expert testified that the company violated OSHA regulations in its handling of
asbestos materials, causing Plaintiffs to subpoena the expert in their case in chief.”
This is anchored in the deposition of the Ulbrichts’ counsel regarding the expert’s
testimony and by the witness list provided in preparation of trial.
Fourth, “[p]Iaintiffs filed a spoliation motion based on evidence that work
records had been destroyed after the company had become aware of its asbestos
liabilities.” This motion was included in the record. The fifth component is “PM
Northwest had repeated communications with representatives of intervenors
USF&G and National Union apprising them of the fast approaching trial date,
neither insurer agreed to furnish defense of indemnity prior to trial.” This also is
supported by copies of email communications with the insurers and depositions of
counsel which make clear that this was the crux of the reasoning behind PM
Northwest’s counsel determination that it was necessary to explore a covenant
judgment.
Finding 11 addresses the procedural posture and history of the case and is
supported, in part, by the simple fact of a covenant judgment coming before the
court on a reasonableness hearing. This finding states:
Based on PM Northwest’s perilous litigation posture and, in the
absence of indemnity coverage, inability to satisfy a multi-million
verdict in this case, the parties discussed resolution through
covenant judgment. Plaintiffs’ counsel proposed that PM Northwest
enter into a $4.5 million stipulated judgment together with a covenant
by Plaintiffs not to execute said judgment against Defendant’s assets
and limit their recovery to any insurance coverage available to PM
Northwest to satisfy the judgment. PM Northwest’s counsel agreed
to discuss the proposed settlement with his client.
- 13-
No. 79490-6-1114
In the record there are emails and depositions that support the assertion that the
Ulbricht’s’ counsel proposed that PM Northwest enter into a $4.5 million judgment.
PM Northwest’s counsel admitted that as trial approached he felt their chances of
winning were getting worse, that his client would be unable to satisfy the possible
judgment against it, and that this compelled him to discuss the possibility of a
covenant judgment. The record supports the portion of finding stating that there
was an “absence of indemnity coverage.” The fact that PM Northwest’s counsel
admitted he would discuss the proposal with his clients is supported by the signed
agreement itself. Each of the component parts of the two challenged findings are
well supported by the record; therefore, substantial evidence exists to support
them.
The superior court properly utilized the factors laid out in Chausee and the
conclusions of law entered by the court logically flow from the unchallenged facts
that were found in the case. The conclusions show the trial court’s work in
evaluating each of the factors under Chausee. We have upheld trial courts’
weighing of the factors even without such a clear record. See Martin v. Johnson,
141 Wn. App. 611, 620, 170 P.3d 1198 (2007). Here, USF&G’s assignment of
error to conclusions of law found by the court are without merit. Further, as noted
above, USF&G does not assign error to even half of the conclusions under the four
corresponding Chausee factors. Again, as precedent is clear that no one factor
controls, the court’s reasonableness determination could be affirmed even if we
disregarded those findings and conclusions challenged by USF&G. However, we
find that the superior court’s findings and conclusions in their entirety were proper
- 14 -
No. 79490-6-1/15
as they were supported by substantial evidence in the record, and the conclusions
of law properly followed.
The trial court’s determination of reasonableness is affirmed.
V
WECONCUR:
I I
- 15-