Thomas Shannahan v. Rhode Interlocal Risk Management Trust

March 1, 2022
Supreme Court
No. 2020-81-Appeal.
(PC 14-2393)
Thomas Shannahan et al. :
v. :
Rhode Interlocal Risk Management :
Trust.
NOTICE: This opinion is subject to formal revision
before publication in the Rhode Island Reporter. Readers
are requested to notify the Opinion Analyst, Supreme
Court of Rhode Island, 250 Benefit Street, Providence,
Rhode Island 02903, at Telephone (401) 222-3258 or
Email: opinionanalyst@courts.ri.gov, of any
typographical or other formal errors in order that
corrections may be made before the opinion is published.
Supreme Court
No. 2020-81-Appeal.
(PC 14-2393)
Thomas Shannahan et al. :
v. :
Rhode Interlocal Risk Management :
Trust.
Present: Suttell, C.J., Goldberg, Robinson, Lynch Prata, and Long, JJ.
OPINION
Justice Goldberg, for the Court. This case came before the Supreme
Court on December 8, 2021, pursuant to an order directing the parties to appear
and show cause why the issues before us should not be summarily decided. The
plaintiffs, Thomas Shannahan,1 Thomas Wilson, the Estate of Donald P. Twohig,
and Donald D. Twohig, all individually and as assignees of the City of Central
Falls (plaintiffs), appeal from a final judgment entered in favor of the defendant,
Rhode Island Interlocal Risk Management Trust (defendant), following the grant of
the defendant’s motion for summary judgment pursuant to Rule 56 of the Superior
Court Rules of Civil Procedure. After examining the record and memoranda
1
On October 15, 2021, the plaintiffs filed a suggestion of death, upon information
and belief, stating that plaintiff Thomas Shannahan had passed away on or about
September 2, 2021.
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submitted by the parties, we are satisfied that cause has not been shown and, thus,
the appeal may be decided at this time. For the reasons stated herein, we affirm the
judgment of the Superior Court.
Facts and Travel
The underlying facts of this lengthy litigation are set forth in Shannahan v.
Moreau, 202 A.3d 217 (R.I. 2019) (Shannahan I). See Shannahan I, 202 A.3d at
221-26. In that case, we stated, “[t]oday we close the book on what was a sad and
scandal-plagued chapter in the history of the City of Central Falls * * *.” Id. at
221. Because the case before us is wholly lacking in merit, we meant what we said
in Shannahan I; this case is summarily dismissed. A few months after this Court
affirmed summary judgment with respect to the underlying claims in Shannahan I,
see id. at 231, 232, defendant filed a motion for summary judgment in plaintiffs’
action against defendant in which plaintiffs had asserted that defendant wrongfully
and in bad faith denied plaintiffs’ underlying third-party insurance claims. The
trial justice granted defendant’s motion for summary judgment, and plaintiffs
timely filed an appeal.
Standard of Review
“This Court reviews a grant of summary judgment de novo.” Sullo v.
Greenberg, 68 A.3d 404, 406 (R.I. 2013) (brackets omitted) (quoting Sacco v.
Cranston School Department, 53 A.3d 147, 149-50 (R.I. 2012)). “Examining the
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case from the vantage point of the trial justice who passed on the motion for
summary judgment, ‘we view the evidence in the light most favorable to the
nonmoving party, and if we conclude that there are no genuine issues of material
fact and that the moving party is entitled to judgment as a matter of law, we will
affirm the judgment.’” Id. at 406-07 (brackets omitted) (quoting Sacco, 53 A.3d at
150).
“Summary judgment is appropriate only when the ‘pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law.’” Sola v. Leighton, 45 A.3d 502,
506 (R.I. 2012) (brackets omitted) (quoting Plunkett v. State, 869 A.2d 1185, 1187
(R.I. 2005)). “Where the facts suggest only one reasonable inference[,]” the trial
justice may treat the issue as a matter of law. See Deutsche Bank National Trust
Company, for Registered Holders of Ameriquest Mortgage Securities, Inc. v.
McDonough, 160 A.3d 306, 311 (R.I. 2017).
“Although summary judgment is recognized as an extreme remedy, * * * to
avoid summary judgment the burden is on the nonmoving party to produce
competent evidence that ‘proves the existence of a disputed issue of material
fact.’” Sullo, 68 A.3d at 407 (brackets omitted) (quoting Mutual Development
Corporation v. Ward Fisher & Company, LLP, 47 A.3d 319, 323 (R.I. 2012)).
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However, “summary judgment should enter against a party who fails to make a
showing sufficient to establish the existence of an element essential to that party’s
case * * *.” Correia v. Bettencourt, 162 A.3d 630, 635 (R.I. 2017) (quoting
Newstone Development, LLC v. East Pacific, LLC, 140 A.3d 100, 103 (R.I. 2016)).
Analysis
General Laws 1956 § 9-1-33(a) sets forth the basis for a bad-faith claim
against an insurer and provides, in pertinent part:
“Notwithstanding any law to the contrary, an insured
under any insurance policy as set out in the general laws
or otherwise may bring an action against the insurer
issuing the policy when it is alleged the insurer
wrongfully and in bad faith refused to pay or settle a
claim made pursuant to the provisions of the policy, or
otherwise wrongfully and in bad faith refused to timely
perform its obligations under the contract of insurance.”
(Emphasis added.)
It is undisputed that plaintiffs were not the “insured” under defendant’s insurance
policy; the City of Central Falls was the insured. Nevertheless, plaintiffs have
contended that they were assignees of the rights of the City of Central Falls under
defendant’s insurance policy, pursuant to an order of the United States Bankruptcy
Court for the District of Rhode Island granting an assented-to motion for relief
from automatic stay to proceed with the case at the Superior Court, and the
Superior Court’s consent order granting plaintiffs’ motion to substitute the City of
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Central Falls as defendant. We are hard-pressed to understand plaintiffs’
reasoning.
Even if the parties intended to assign plaintiffs the right to bring a bad-faith
claim against defendant, in Mello v. General Insurance Company of America, 525
A.2d 1304 (R.I. 1987), we held that “an insured may assign its bad-faith claim
against its insurer to the injured claimant for the limited purpose of recovering the
difference between the judgment received against the insured and the insurance-
policy limits.” Mello, 525 A.2d at 1306 (emphasis added). It is clear that the
holding in Mello was starkly limited to the facts of that case, where an insurer had
refused to settle the case within the limits of the policy and the plaintiff was
awarded a judgment in excess of that policy amount, for which the insured was
responsible. Id. The insured thereafter assigned to the plaintiff its bad-faith claim
against the insurer. Id. This is the essence of insurer bad faith, reflecting Rhode
Island’s policy to place the burden of excess judgments on the insurer and not on
the insured.
The case before us, however, presents a drastically different set of facts. Cf.
Imperial Casualty and Indemnity Company v. Bellini, 947 A.2d 886, 888, 893 (R.I.
2008) (holding that, where the plaintiff was assigned the insured’s rights after
succeeding on the underlying claims but there was no excess judgment, such a set
of facts was radically different from Mello). The City of Central Falls assigned
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only its rights to coverage under defendant’s insurance policy with respect to the
underlying claims by plaintiffs against the City of Central Falls; there is no
evidence that the bad-faith claim was ever assigned to plaintiffs. Furthermore,
there was no judgment in plaintiffs’ favor—let alone a judgment in excess of the
insurance policy limits.
The plaintiffs point to this Court’s reasoning in Skaling v. Aetna Insurance
Company, 799 A.2d 997 (R.I. 2002), to support their contention that defendant
failed to properly investigate their claims. We note, however, that Skaling was a
first-party action where the plaintiff was an insured seeking indemnification from
his own insurance carrier. See Skaling, 799 A.2d at 1003. That is not the case at
bar; plaintiffs’ claims against the City of Central Falls were dismissed on summary
judgment, and their bad-faith action against defendant was a third-party claim.
Even if plaintiffs were proper assignees of the City of Central Falls, they
have not met their burden for a bad-faith action. This Court has held that “bad
faith ‘is established when the proof demonstrates that the insurer denied coverage
or refused payment without a reasonable basis in fact or law for the denial.’”
Bellini, 947 A.2d at 893 (quoting Skaling, 799 A.2d at 1010). “A plaintiff must
demonstrate an absence of a reasonable basis in law or fact for denying the claim
or an intentional or reckless failure to properly investigate the claim and subject the
result to cognitive evaluation.” Skaling, 799 A.2d at 1012 (emphasis added). “The
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standard that this Court employs in making that determination is the ‘fairly
debatable’ standard[,]” which allows an insurer “to debate a claim that is fairly
debatable.” Bellini, 947 A.2d at 893 (quoting Skaling, 799 A.2d at 1010, 1011).
“That inquiry turns on ‘whether there is sufficient evidence from which reasonable
minds could conclude that in the investigation, evaluation, and processing of the
claim, the insurer acted unreasonably and either knew or was conscious of the fact
that its conduct was unreasonable.’” Id. (brackets omitted) (quoting Skaling, 799
A.2d at 1011).
Affording weight to the fact that there was a fully reasonable, and by no
means frivolous, debate as to whether or not the plaintiffs’ underlying claims in
Shannahan I were meritorious, see generally Shannahan I, 202 A.3d 217, we
simply cannot say that the plaintiffs established either “an absence of a reasonable
basis in law or fact for denying the claim[s]” or that the insurer intentionally or
recklessly “failed to properly investigate” the purported claims. Skaling, 799 A.2d
at 1012. Accordingly, the defendant’s position meets the “fairly debatable”
standard. “We would further observe that the sheer duration of the litigation in this
case constitutes another indicator that [the defendant’s] conduct in this case did not
constitute bad faith.” See Bellini, 947 A.2d at 894.
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Conclusion
For the reasons set forth in this opinion, we affirm the judgment of the
Superior Court. “It is time for this litigation to end.” Arena v. City of Providence,
919 A.2d 379, 396 (R.I. 2007); see Palazzo v. Alves, 944 A.2d 144, 155 (R.I. 2008)
(“There is nothing more to be said; this case is over.”). The papers in this case
may be returned to the Superior Court.
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STATE OF RHODE ISLAND
SUPREME COURT – CLERK’S OFFICE
Licht Judicial Complex
250 Benefit Street
Providence, RI 02903
OPINION COVER SHEET
Thomas Shannahan et al. v. Rhode Interlocal Risk
Title of Case
Management Trust.
No. 2020-81-Appeal.
Case Number
(PC 14-2393)
Date Opinion Filed March 1, 2021
Suttell, C.J., Goldberg, Robinson, Lynch Prata, and
Justices
Long, JJ.
Written By Associate Justice Maureen McKenna Goldberg
Source of Appeal Providence County Superior Court
Judicial Officer from Lower Court Associate Justice Melissa E. Darigan
For Plaintiffs:
Philip E. Irons, Esq.
Attorney(s) on Appeal
For Defendant:
Michael DeSisto, Esq.
SU-CMS-02A (revised June 2020)