Wayne DeMarco v. Travelers Insurance Company

Supreme Court
No. 2012-309-Appeal.
(PB 06-6103)
Wayne DeMarco et al. :
v. :
Travelers Insurance Company et al. :
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
222-3258 of any typographical or other formal errors in order that
corrections may be made before the opinion is published.
Supreme Court
No. 2012-309-Appeal.
(PB 06-6103)
(Dissent begins on Page 15)
Wayne DeMarco et al. :
v. :
Travelers Insurance Company et al. :
Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
OPINION
Justice Goldberg, for the Court. The plaintiff, Wayne DeMarco (DeMarco or
plaintiff),1 was severely injured in a collision while a passenger in a motor vehicle owned by
insureds of the defendant, Travelers Insurance Company (defendant or Travelers). After
obtaining a judgment for money damages in the prior underlying tort action, the plaintiff settled
with the insureds in exchange for an assignment of any claims that the insureds had against
Travelers and filed this action. A justice of the Superior Court granted partial summary
judgment, which this Court affirmed.2 Thereafter, an order entered requiring the defendant to
pay all interest accrued on the underlying judgment pursuant to G.L. 1956 § 27-7-2.2.3 The
1
The actual named plaintiffs in this action are Wayne DeMarco and Leesa DeMarco,
individually, as parents and legal guardians of Chayce DeMarco, a minor, and Brayden
DeMarco, a minor, and as assignees of Leo H. Doire, and Virginia Transportation Corporation.
2
DeMarco v. Travelers Insurance Co., 26 A.3d 585 (R.I. 2011) (DeMarco I).
3
General Laws 1956 § 27-7-2.2 provides:
“In any civil action in which the defendant is covered by liability insurance and in
which the plaintiff makes a written offer to the defendant’s insurer to settle the
action in an amount equal to or less than the coverage limits on the liability policy
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defendant alleges that this order was entered in the absence of subject-matter jurisdiction.
Specifically, the defendant contends that the issue of prejudgment interest was rendered moot by
an order entered in the underlying tort action which characterized the judgment as “satisfied in
full”—thus depriving the Superior Court of subject-matter jurisdiction. For the reasons set forth
below, we affirm the Superior Court order directing payment of prejudgment and postjudgment
interest in accordance with § 27-7-2.2.4
Facts and Travel
This Court extensively addressed the facts and travel of this case in DeMarco v. Travelers
Insurance Co., 26 A.3d 585 (R.I. 2011) (DeMarco I). Therefore, we will discuss only recent
events and any relevant facts necessary for context.
On September 10, 2003, DeMarco, while traveling as a passenger in a motor vehicle
owned by Virginia Transportation Corporation (Virginia Transportation) and operated by
Virginia Transportation’s owner, Leo H. Doire (Doire), seriously was injured when the vehicle
struck two utility poles. Another passenger, Paul Woscyna (Woscyna), also sustained serious
injuries. Travelers insured the vehicle for a policy limit of $1 million.
in force at the time the action accrues, and the offer is rejected by the defendant’s
insurer, then the defendant’s insurer shall be liable for all interest due on the
judgment entered by the court even if the payment of the judgment and interest
totals a sum in excess of the policy coverage limitation. This written offer shall be
presumed to have been rejected if the insurer does not respond in writing within a
period of thirty (30) days.”
4
The motion was captioned as “Motion * * * Calculating All Interest Due Pursuant to R.I.G.L.
§ 27-7-2.2 and to Determine the Operative Effect of the Judgment Satisfied Order in These
Proceeding [sic] After Remand.”
-2-
On March 4, 2004, DeMarco instituted a personal injury action in the Superior Court
against Virginia Transportation and Doire (underlying tort action).5 Prior to and during the
course of the underlying tort action, DeMarco made several written settlement demands upon
Travelers to settle for the policy limits of $1 million. On February 2, 2004, DeMarco’s attorney
wrote Travelers, before filing suit, seeking payment of the policy limits to DeMarco. Later, on
February 25, 2004, DeMarco’s attorney again wrote Travelers asking to settle for the policy
limits and also informed Travelers of potential Asermely6 liability if it did not settle the claim.
By letter dated February 27, 2004, Travelers responded and informed DeMarco that other claims
existed as a result of the accident and that, therefore, Travelers could not exhaust its entire policy
limits on DeMarco. Additionally, Travelers’ counsel informed the claim services director for
Travelers (1) that Asermely liability would not apply in the circumstances of this case because
there were multiple claimants and (2) that exhausting the policy limits on one claimant might
violate Travelers’ fiduciary obligations to its insureds. Over the course of the next year, on April
19, June 7, and June 29, 2005, DeMarco’s attorney wrote to Travelers’ counsel seeking to
engage in settlement negotiations. Further, on July 22, 2005, DeMarco’s attorney wrote to
Travelers’ counsel yet again, offering to settle for the policy limits. There was no response from
Travelers or its counsel to any of these communications, and Travelers’ efforts, if any, to resolve
this case, with or without the participation of its insureds, remains an open question.
5
Wayne DeMarco et al. v. Leo H. Doire and Virginia Transportation Corp., C.A. No. PC 04-
1171.
6
Asermely v. Allstate Insurance Co., 728 A.2d 461 (R.I. 1999).
-3-
On July 11, 2006, approximately three months before trial was set to begin, Travelers
sought a global settlement—for the policy limits7—with DeMarco, Woscyna,8 and National Grid
USA Service Company, Inc. (National Grid).9 Travelers’ offer to have the three parties divide
the policy limits amongst themselves was not accepted; and, on August 15, 2006, Travelers
commenced an interpleader action in the Superior Court where it sought—unsuccessfully—to
deposit the policy limits into the registry of the court.10 On August 23, 2006, DeMarco’s
attorney—for the final time—offered to settle for the policy limits. Travelers responded to
DeMarco’s final demand and rejected the offer to settle. On September 14, 2006, after the
parties engaged in unsuccessful mediation, Travelers offered to pay DeMarco $550,000 and
Woscyna $450,000, “in exchange for a complete release from both claimants” in favor of
Virginia Transportation and Doire. The offer was contingent on acceptance by both DeMarco
and Woscyna. Although Woscyna was prepared to accept the offer, DeMarco rejected the offer
by letter dated September 15, 2006.
The underlying tort action proceeded to trial on September 18, 2006. On September 22,
2006, a jury returned a verdict in favor of DeMarco in the amount of $2,053,795. With statutory
interest, the total amount of the judgment was $2,801,939.07. On the same day, an attorney
independently retained by Doire wrote to Travelers informing Travelers that it was Doire’s
7
The settlement offer was for the policy limits minus a prior $5,000 payment to DeMarco for
medical coverage.
8
Woscyna subsequently filed suit against Travelers in August 2006.
9
National Grid’s claim for damage to their utility poles later was settled personally with Virginia
Transportation and Doire. The utility poles belonged to The Narragansett Electric Company,
which now does business as National Grid.
10
Travelers pressed its interpleader action, which was denied after Travelers failed to satisfy the
justice of the Superior Court that it lacked a substantial interest in the outcome of the underlying
tort action.
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position that Travelers was responsible for the entire judgment entered against Doire in light of
Travelers’ failure to settle with DeMarco. Apparently, Virginia Transportation and Doire were
now facing bankruptcy. Travelers again sought mediation, by letter dated October 30, 2006.11
On November 17, 2006, mediation commenced among DeMarco, Virginia
Transportation, Doire, Woscyna, and Travelers. As a result of this mediation, Travelers paid the
sum of $450,000 to Woscyna in exchange for a release of Virginia Transportation, Doire, and
Travelers from all liability. Furthermore, Travelers agreed to pay $550,000 to DeMarco.
DeMarco agreed to release both Virginia Transportation and Doire but conditioned that release
upon an assignment of any claims Virginia Transportation and Doire might have against
Travelers. The release specifically excepted Travelers “from any and all claims that Releasors
may have against Travelers in any way arising from the Litigation or any aspect thereof.”
Virginia Transportation and Doire assigned “any and all claims and causes of action that
[Virginia Transportation and Doire] may have” against Travelers to DeMarco. This assignment
was made “in consideration of the General Release executed contemporaneously herewith[.]”
Later, on January 3, 2007, the trial justice who presided over the underlying tort action entered
an order that provided: “After hearing thereon and in consideration thereof judgment entered in
favor of the plaintiffs on September 22, 2006, plus taxed costs in the amount of $5,879.32. Said
judgment is satisfied in full.”
On November 22, 2006, DeMarco commenced this action in Superior Court against
Travelers, its counsel, and counsel’s law firm. The first two counts of the six-count complaint
sought: (1) a declaratory judgment in accordance with Asermely v. Allstate Insurance Co., 728
11
In this letter, Travelers’ independently retained counsel acknowledged that the insureds’
ability to contribute “to a settlement * * * will likely be extinguished if * * * DeMarco’s
judgment forces them into bankruptcy.”
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A.2d 461 (R.I. 1999), requiring Travelers to pay the entire judgment from the underlying tort
action; (2) a declaratory judgment pursuant to § 27-7-2.2 declaring Travelers liable for
prejudgment interest on the judgment in the underlying tort action. On September 23, 2008, a
justice of the Superior Court granted summary judgment for plaintiff on counts one and two and
denied defendant’s cross-motion for summary judgment on counts one, two, three, and four.12
Although the issues concerning the release were argued on summary judgment—and rejected by
this Court on appeal—the effect (if any) of the judgment satisfied order had not been raised
before the Superior Court. Final judgment on counts one and two, pursuant to Rule 54(b) of the
Superior Court Rules of Civil Procedure, subsequently was entered.13 The defendant timely
appealed; and, on July 12, 2011, this Court issued its opinion in DeMarco I, in which we vacated
the judgment in count one and remanded that count for trial, and affirmed the judgment in count
two.14
With respect to count one, this Court held that, because the circumstances of this case
involved multiple claimants, it was a question of fact as to the reasonableness of Travelers’
conduct with respect to the duty it owed its insureds under Asermely. See DeMarco I, 26 A.3d at
614. We remanded count one to the Superior Court for a trial. Id. at 615. We affirmed count
two. Id. at 629. We concluded that the language of § 27-7-2.2 (the rejected settlement offer
statute) was clear and unambiguous and required the insurer to pay both prejudgment and
12
Count three alleges a breach-of-contract claim and count four is a claim for insurer bad faith.
13
The judgment provided “Separate and Final Judgment pursuant to [Super. R. Civ. P] 54(b) is
hereby entered for [p]laintiff on [c]ounts I and II.”
14
This Court “vacate[d] the grant of partial summary judgment as to Travelers’ liability pursuant
to the principles set forth in Asermely, but we affirm[ed] the ruling with respect to the
applicability of the rejected settlement offer statute.” DeMarco I, 26 A.3d at 629.
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postjudgment interest. DeMarco I, 26 A.3d at 617. Moreover, we determined that the general
release granted to Virginia Transportation and Doire did not foreclose DeMarco’s ability to
maintain the assigned claims against Travelers. Id. at 625-26. As we stated:
“[I]t is our view that Travelers should not now be able to avoid
having to deal with Mr. DeMarco’s suit for excess damages by
claiming that it obtained a release for its insureds—and that
therefore the insureds had no claims to assign to Mr. DeMarco—
when the only reason the insureds were released from liability was
that they assigned to Mr. DeMarco the very rights that he is now
seeking to assert against Travelers.” Id. at 626.
Finally, we concluded that the Judgment Satisfied Order was not properly before the Court
because Travelers had not raised the issue in Superior Court and that the raise-or-waive rule
controlled. Id. at 629.
On remand, plaintiff sought a calculation of prejudgment interest. The Superior Court
justice granted plaintiff’s motion and determined that DeMarco I vacated final judgment on
count one, but that the final judgment entered on count two remained undisturbed. Moreover,
with respect to the judgment satisfied order, the Superior Court justice determined that Travelers
had waived this argument with respect to count two and stated “to the extent it remains alive and
impacts claims and counts other than [c]ount 2, [it] has not been properly presented in the
context of today’s motion.” After analyzing three different approaches to assessing interest, the
Superior Court justice ordered that interest be paid in the amount of $1,595,850.03. That
calculation has not been challenged on appeal.
By order dated June 11, 2012, Travelers was to make payment to DeMarco by June 22,
2012. Travelers timely appealed from that order.15 Despite the fact that additional claims
remain pending before the Superior Court, final judgment had entered previously on count two
15
Travelers also petitioned the Court for a writ of certiorari. The Court denied that petition on
March 21, 2013.
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pursuant to Rule 54(b) and was affirmed in DeMarco I. Additionally, we are of the opinion that
the payment order contains sufficient elements of finality so as to invoke the jurisdiction of this
Court. See McAuslan v. McAuslan, 34 R.I. 462, 472, 83 A. 837, 841 (1912).
Standard of Review
“As we consistently have articulated, ‘a claim of lack of subject[-]matter jurisdiction may
be raised at any time.’” Long v. Dell, Inc., 984 A.2d 1074, 1078 (R.I. 2009) (quoting Pollard v.
Acer Group, 870 A.2d 429, 433 (R.I. 2005)). The issue of subject-matter jurisdiction may be
raised at any time, cannot be waived or conferred by either party, and can be raised sua sponte by
the court. Rogers v. Rogers, 18 A.3d 491, 493 (R.I. 2011). Additionally, “[w]hether a court has
subject[-]matter jurisdiction over a controversy is reviewed de novo by the Supreme Court.” Ims
v. Audette, 40 A.3d 236, 237 (R.I. 2012) (citing Sidell v. Sidell, 18 A.3d 499, 504 (R.I. 2011)).
Analysis
On appeal, Travelers argues that the Superior Court was divested of subject-matter
jurisdiction over count two because of the prior judgment satisfied order in the underlying tort
action, despite the fact that this Court affirmed the judgment as to count two. Before this Court,
Travelers seeks to amalgamate subject-matter jurisdiction with mootness. Travelers contends
that DeMarco’s § 27-7-2.2 claim for interest was rendered moot because, after the judgment
satisfied order entered, there was no longer a justiciable controversy and, based on mootness, the
Superior Court was divested of subject-matter jurisdiction. Because issues regarding subject-
matter jurisdiction can never be waived and can be raised at any time, Travelers argues to this
Court that the Superior Court justice erred in deciding that Travelers had waived its mootness
argument. We reject this contention.
-8-
The judgment satisfied order was entered before our opinion in DeMarco I. In that case,
we concluded that issues with respect to that order were not properly before the Court because
they were not raised in Superior Court and therefore were deemed waived. DeMarco I, 26 A.3d
at 629. Travelers now seeks to engage in a collateral attack on the judgment in count two—
which this Court affirmed—by raising the judgment satisfied order. To the extent that Travelers
invites us to revisit our holding in DeMarco I and entertain issues that previously were waived,
we decline to do so.
We note that if, as Travelers argues, the judgment satisfied order rendered the
controversy moot and stripped the Superior Court or this Court of subject-matter jurisdiction,
then the same would have been true at the time of DeMarco I. These issues, however, were
never raised in DeMarco I. Despite this unique posture, we briefly address Travelers’ assertions
of subject-matter jurisdiction and mootness.
“A challenge to subject-matter jurisdiction ‘may not be waived by any party and may be
raised at any time in the proceedings.’” Boyer v. Bedrosian, 57 A.3d 259, 270 (R.I. 2012)
(quoting Pine v. Clark, 636 A.2d 1319, 1321 (R.I. 1994)). When considering claims for lack of
subject-matter jurisdiction, we are “refer[ring] only to the court’s power to hear and decide a
case and not to whether a court having the power to adjudicate should exercise that power.”
Narragansett Electric Co. v. Saccoccio, 43 A.3d 40, 44 (R.I. 2012) (quoting Mesolella v. City of
Providence, 508 A.2d 661, 666 (R.I. 1986)). Pursuant to G.L. 1956 § 8-2-14(a), the Superior
Court “shall have exclusive original jurisdiction of all other actions at law in which the amount
in controversy shall exceed the sum of ten thousand dollars ($10,000) * * *.” (Emphasis added.)
It cannot be disputed that DeMarco’s § 27-7-2.2 claim met the threshold requirement of § 8-2-
14(a). Furthermore, G.L. 1956 § 9-30-1 provides that the Superior Court has the power to
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entertain declaratory-judgment actions. Thus, the Superior Court was vested with jurisdiction
over DeMarco’s § 27-7-2.2 claim for interest.
Mootness is a distinct concept, separate and apart from subject-matter jurisdiction. See
Boyer, 57 A.3d at 271 (stating that a case may become moot “despite the court’s retention of
subject-matter jurisdiction” (citing Matos v. Clinton School District, 367 F.3d 68, 71 (1st Cir.
2004))). Concededly, some courts have treated mootness claims as implicating issues of subject-
matter jurisdiction. See, e.g., In re Jorden R., 979 A.2d 469, 479 (Conn. 2009) (“Mootness is a
question of justiciability that must be determined as a threshold matter because it implicates [a]
court’s subject[-]matter jurisdiction[.]” (quoting In re Melody L., 962 A.2d 81, 106 (Conn.
2009))). In our view, however, while mootness ranks high on the justiciability spectrum, and
may not be lightly overlooked, mootness does not equate with subject-matter jurisdiction. See
Town Houses at Bonnet Shores Condominium Association v. Langlois, 45 A.3d 577, 582 (R.I.
2012) (deciding appeal of a moot case that fell within mootness exception); see also Honig v.
Doe, 484 U.S. 305, 330 (1988) (Rehnquist, J., concurring) (“If our mootness doctrine were
forced upon us by the case or controversy requirement of [U.S. Const.] Art. III itself, we would
have no more power to decide lawsuits which are ‘moot’ but which also raise questions which
are capable of repetition but evading review than we would to decide cases which are ‘moot’ but
raise no such questions.”).
It is well established that “a case is moot if the original complaint raised a justiciable
controversy, but events occurring after the filing have deprived the litigant[s] of a continuing
stake in the controversy.” Bucci v. Lehman Brothers Bank, FSB, 68 A.3d 1069, 1079 (R.I. 2013)
(quoting Boyer, 57 A.3d at 272). Additionally, “[i]f this Court’s judgment would fail to have a
practical effect on the existing controversy, the question is moot, and [the Court] will not render
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an opinion on the matter.” Id. (quoting City of Cranston v. Rhode Island Laborers’ District
Council, Local 1033, 960 A.2d 529, 533 (R.I. 2008)). A narrow exception to the mootness
doctrine exists whereby a case that is moot may still be decided if it involves issues “of extreme
public importance, which are capable of repetition but which evade review.” Boyer, 57 A.3d at
281 (quoting Campbell v. Tiverton Zoning Board, 15 A.3d 1015, 1022 (R.I. 2011)). This could
not occur, of course, if mootness divested the Court of subject-matter jurisdiction.
Having previously determined in DeMarco I that the release executed in favor of Virginia
Transportation and Doire did not affect the claims assigned to DeMarco, DeMarco I, 26 A.3d at
626, Travelers now recycles the same arguments in the context of the judgment satisfied order,
fashioned as mootness.16 Specifically, Travelers attempts to evade liability based on the fact that
their insureds, to whom they owed a fiduciary duty to protect from excess liability, see
Asermely, 728 A.2d at 464; Medical Malpractice Joint Underwriting Association of Rhode
Island v. Rhode Island Insurers’ Insolvency Fund, 703 A.2d 1097, 1102 (R.I. 1997), secured the
protection of the judgment satisfied order in the face of an otherwise imminent bankruptcy by
16
The justice succinctly summarized the argument when she stated:
“As I understand Travelers’ argument * * * an insurer would not be required to
pay if its insured for some reason is excused or absolved from payment. That
would be the case regardless of whether the payment sought from the insurer is
based upon a direct claim or upon an assigned claim and regardless of whether it
is for an excess judgment, a breach of contract claim, a bad faith claim, or for
statutory interest under the Rejected Settlement Offer statute. This also would be
the case regardless of whether the insured’s escape from payment is the result of
an assignment and release, a ‘judgment satisfied’ order, an agreement to
permanently forbear from enforcing an execution, a discharge in bankruptcy, or
some other means. The insurer would be entitled to the benefit of the insured’s
escape from liability or payment. * * * Thus, as I understand the argument,
distilled, the ‘Judgment Satisfied’ order must be viewed in isolation, has
independent legal significance, and trumps all.”
The trial justice appropriately rejected this argument.
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assigning to DeMarco their claims against Travelers. We declared in DeMarco I, “an assignment
of rights in a case such as this is ‘a valuable means by which the insured may obtain protection
from his insurance and by which the third party may obtain compensation * * *.’” DeMarco I, 26
A.3d at 626 (quoting Stephen S. Ashley, Bad Faith Actions, Liability and Damages, § 7:18 at 7-
68 (1997)). Additionally, we previously have upheld an insured’s assignment of claims against
its insurer and refused to:
“obstruct an appropriate device for the payment of a claim by an
insurance carrier that has an obligation to its insured to absolve
him of liability without depriving itself of the right to pursue action
against another insurance carrier that it considers to be wholly or
partly liable for the loss.” Etheridge v. Atlantic Mutual Insurance
Co., 480 A.2d 1341, 1345 (R.I. 1984) (emphasis added).
The judgment satisfied order that was entered in accordance with the assignment of rights does
not alter the above quoted analysis.
The argument propounded by Travelers, that the judgment satisfied order rendered
DeMarco’s § 27-7-2.2 claim moot, amounts to the same form-over-substance analysis that we
rejected unequivocally in DeMarco I, 26 A.3d at 624 (citing Etheridge, 480 A.2d at 1345). The
settlement between DeMarco, Virginia Transportation, and Doire provided that only after “the
exchange of the [a]ssignment and the release” would the judgment be deemed satisfied, not that
the claims would be extinguished. Thus, the judgment satisfied order merely memorialized the
parties’ intentions as set forth in the settlement agreement.17 This is confirmed by a review of
the hearing transcript, where the original trial justice who directed the entry of the order stated:
17
In fact, at the hearing preceding the entry of the judgment satisfied order, counsel for DeMarco
explicitly stated that “we’ve continuously taken the position that our settlement agreement was
with Virginia and Leo Doire and had nothing to do with Traveler’s [sic]. * * * So I don’t want
the record to reflect that we consent to any explanation down the road that we consented or
agreed to any settlement with Traveler’s [sic].” In the face of this clear statement, in open court,
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“clearly my concern * * * was that I wasn’t looking immediately to
inflict any undue harm on the defendant’s business to see if there
was some way to find a resolution through that which has been
found. What happened is the settlement occurred and an
assignment of rights was given, which I’m going to assume would
shield the defendants from any further personal liability in this
matter.” (Emphasis added.)
In DeMarco I, 26 A.3d at 626, we declared,
“it is our view that Travelers should not now be able to avoid
having to deal with Mr. DeMarco’s suit for excess damages by
claiming that it obtained a release for its insureds—and that
therefore the insureds had no claims to assign to Mr. DeMarco—
when the only reason the insureds were released from liability was
that they assigned to Mr. DeMarco the very rights that he is now
seeking to assert against Travelers.”
See Pinto v. Allstate Insurance Co., 221 F.3d 394, 404 (2nd Cir. 2000) (“It defies common sense
to believe that [the injured plaintiff] contemplated receiving as consideration for her release of
[the insured] a right of [the insured’s] that no longer existed.”).
Rather, it is precisely because DeMarco received an assignment of rights from Travelers’
insureds that there exists a justiciable controversy. See Etheridge, 480 A.2d at 1346 (concluding
that a justiciable controversy existed following an assignment of rights). DeMarco was assigned
all claims that Travelers’ insureds had against Travelers. We held that DeMarco’s § 27-7-2.2
claim “encompass[ed] the case at bar and [is] to be applied on remand[.]” DeMarco I, 26 A.3d at
617. DeMarco’s § 27-7-2.2 claim was not extinguished merely because the judgment satisfied
order also entered. See Black v. Goodwin, Loomis & Britton, Inc., 681 A.2d 293, 300 (Conn.
1996) (“An insurer may not hide behind the language of the policy after the insurer abandons its
insured and the insured settles the claim by agreement.” (quoting Red Giant Oil Co. v. Lawlor,
528 N.W.2d 524, 532 (Iowa 1995))). Moreover, judgment was affirmed by this Court on
Travelers’ counsel remained silent; yet he raises the argument in this Court. Our decision in
DeMarco I speaks loudly.
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DeMarco’s § 27-7-2.2 claim. DeMarco I, 26 A.3d at 629. Yet, the prejudgment interest award
remains unpaid, demonstrating DeMarco’s continuing stake in the controversy. See Bucci, 68
A.3d at 1079 (requiring that litigants maintain a continuing stake in the controversy).
In this case, it was in the insureds’ pecuniary interests to assign their claims in exchange
for a release, in order to escape financial ruin, thus allowing those claims to be litigated later
between the assignee and the insurance company. The fact that the judgment satisfied order
memorialized the clear intent of the parties does not render the claims moot.
Finally, the justice of the Superior Court was correct in her conclusion that this Court
affirmed the entry of summary judgment on count two in DeMarco I.18 In DeMarco I, after
explicating the reasonableness test that needed to be applied to the Asermely claim which we
vacated and remanded, we declared that § 27-7-2.2 was “neither complex nor ambiguous” and
required that both prejudgment and postjudgment interest be assessed.19 DeMarco I, 26 A.3d at
617. The Court concluded, “we vacate the grant of partial summary judgment as to Travelers’
liability pursuant to the principles set forth in Asermely, but we affirm the ruling with respect to
18
Indeed, as this seasoned trial justice noted on remand: “[t]he Supreme Court didn’t, as
Travelers says in its papers, reverse me on [c]ount 2. If it did, this is the first time in twenty-two
years that I’ve not been able to recognize that I’ve been reversed.”
19
We note that the dissent seeks to condition any recovery on count two upon a determination on
count one. Amalgamating the claims, the dissent is implicitly creating a reasonableness standard
for § 27-7-2.2 claims, which standard is not found in the statute. This reasoning ignores our
venerable rules of statutory construction. “When interpreting a statute, our ultimate goal is to
give effect to the General Assembly’s intent. * * * The best evidence of such intent can be found
in the plain language used in the statute. Thus, a clear and unambigious statute will be literally
construed.” Martone v. Johnston School Committee, 824 A.2d 426, 431 (R.I. 2003) (citing
Stebbins v. Wells, 818 A.2d 711, 715 (R.I. 2003)). In DeMarco I, we recognized our previous
holdings that § 27-7-2.2 was “neither complex nor ambiguous.” DeMarco I, 26 A.3d at 617(quoting Skaling v. Aetna Insurance Co., 742 A.2d 282, 291 (R.I. 1999)). Thus, the Court must
give the words of the statute their plain and ordinary meaning. It is clear from a review of the
statute that there is no language which would suggest that § 27-7-2.2 liability is subject to a
reasonableness standard, akin to an analysis under Asermely. Accordingly, such an analysis has
no place in analyzing DeMarco’s § 27-7-2.2 claim.
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the applicability of the rejected settlement offer statute.” Id. at 629 (emphasis added). Thus, the
Superior Court justice did not err in concluding that count two had been affirmed or in ruling that
the payment order was consistent with our holding in DeMarco I. A determination that the
§ 27 7-2.2 claim for interest was extinguished because the summary judgment decision provided
that “Travelers * * * is liable for the judgment entered in [the underlying tort action], interest
included, to the extent that judgment remains unsatisfied” would be favoring the form-over-
substance argument that we repudiated in DeMarco I and reject herein.
Conclusion
For the reasons stated in this opinion, the order of the Superior Court is affirmed. The
papers may be returned to the Superior Court.
Justice Flaherty, with whom Justice Indeglia joins, dissenting in part and
concurring in part. I agree, in part, with the holdings of the majority, that Travelers waived its
arguments with respect to the judgment satisfied order and that the Superior Court had subject-
matter jurisdiction over the dispute throughout the litigation. I concur with the majority that
Travelers failed to raise the judgment satisfied order as a possible defense and that the trial
justice rightly concluded that the argument had been waived. I also accept the reasoning of the
majority that the Superior Court never was deprived of jurisdiction to resolve this case.
However, because it is my opinion that the imposition of excess interest under the provisions of
G.L. 1956 § 27-7-2.2 is at best premature, I must respectfully dissent from the majority’s holding
in this case.
In Asermely v. Allstate Insurance Co., 728 A.2d 461, 464 (R.I. 1999), this Court plowed
new ground when it seized the opportunity to promulgate a rule that addressed the vexing issues
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that arise when a plaintiff’s claim has the potential to exceed the available liability insurance
coverage protecting a defendant. In essence, the Court held in Asermely that when a plaintiff
offers to settle a claim for an amount that is within the policy limits, and the carrier declines to
settle, the insurer is at risk if a later judgment exceeds the policy limit, including applicable
interest. Id. The Court went on to say that an insurer’s good-faith calculation about the value of
a particular claim provides no safe harbor, and that the insurer, because of its fiduciary duty to its
insured, must assume the risk of a judgment that exceeds the limits of the contract of insurance.
Id. It is clear, however, that when it issued Asermely, this Court considered only claims that
involved one plaintiff and one defendant.
In DeMarco v. Travelers Insurance Co., 26 A.3d 585, 609 (R.I. 2011) (DeMarco I), the
Court was faced with a different and vastly more complicated situation that involved more than
one serious claim against an insured who clearly lacked sufficient coverage to satisfy both, or
perhaps either, claim without leaving the insured exposed, or even uninsured, against the other
serious claim. Altering the contours of its Asermely holding to address this issue, the Court,
with respect to count 1, vacated summary judgment in favor of plaintiff and remanded the matter
for a factual determination on whether the insurer had acted reasonably and in its insured’s best
interest in handling the multiple claims. Id. at 615 (“In view of the fact that we have today
explicated the parameters of the Asermely rule as it is to be applied in multiple claimant cases
where the combined claims exceed the policy limits, it is necessary for us to vacate the grant of
summary judgment for plaintiff with respect to count [1] of his complaint and remand for further
findings of fact so that it can be determined whether or not Travelers met its duty to its
insureds.”) However, the Court affirmed summary judgment in plaintiff’s favor with respect to
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count 2, involving § 27-7-2.2, the so called “rejected-settlement offer” statute.1 DeMarco I, 26
A.3d at 617.
An essential element of the Court’s decision in DeMarco I was that, irrespective of
whether Travelers might be found liable on the merits of the Asermely claim, count 1, after
remand, the summary judgment on the rejected-settlement offer statute, count 2, was affirmed.
DeMarco I, 26 A.3d at 616-17. On remand from this Court, and following this Court’s mandate
in DeMarco I, the trial justice granted a motion to calculate interest on count 2 and ascertained
the excess interest due to DeMarco from Travelers, a determination from which Travelers timely
appealed.
In its affirming of that judgment, there can be no doubt that this Court has literally
applied a statute which it concluded was clear and unambiguous in its language. DeMarco I, 26
A.3d at 617. The language of that statute is indeed unequivocal and unmistakable. Further, there
is no debate that there was a demand to settle on behalf of DeMarco at the policy limit, a refusal
to extend an offer to meet that demand, and an eventual judgment that surpassed the available
policy limits. Id. at 587-95.
However, it is perfectly clear to me that, similar to this Court’s holding in Asermely, the
statute anticipates a situation in which there is but one plaintiff and not, as here, multiple serious
claims, any one of which might well exhaust the available coverage under the relevant policy of
1
I dissented from the holding in DeMarco v. Travelers Insurance Co., 26 A.3d 585 (R.I. 2011)
because it was my opinion that a general release that had been executed by the plaintiff in the
named insureds’ favor extinguished all rights of the parties in the case, and that, after defendants
were absolved of all liability, with Traveler’s money, there was nothing left to assign. Id. at 629-
34. Because it was based on the release, the rationale for the dissent was overarching, and I
therefore saw no reason for further discussion with respect to count 2.
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insurance.2 Under the facts presented here, somewhat complicated by the Court’s holding in
DeMarco I, it is entirely possible that, after trial on remand of count 1, Travelers may be found to
have acted reasonably in protecting the interests of its insured in the face of multiple serious
claims yet nevertheless be responsible for enormous sums of interest on judgments involving
those very claims.
For that reason, it is my opinion that the literal application of the rejected-settlement offer
statute at this time, before it is determined whether Travelers has any liability whatsoever under
count 1, could very well lead to an absurd result. It is axiomatic that this Court will not construe
a statute, even if it is clear and unambiguous, in a way that may lead to absurdity. See Swain v.
Estate of Tyre ex rel. Reilly, 57 A.3d 283, 289 (R.I. 2012); DaPonte v. Ocean State Job Lot, Inc.,
21 A.3d 248, 251 (R.I. 2011); Skaling v. Aetna Insurance Co., 742 A.2d 282, 290 (R.I. 1999)
(Skaling I); Commercial Union Insurance Company v. Pelchat, 727 A.2d 676, 681 (R.I. 1999).
Indeed, it seems to me that the only way that Travelers could have avoided the rather
draconian impact of the majority’s holding in this case would have been for it to pay out the
entire policy limit to DeMarco and thus avoid the imposition of an enormous interest burden. Of
course, following that path would have left the insureds entirely unprotected against the also very
substantial Woscyna claim. Further, it would have resulted in, if not necessitated, Travelers
placing its own financial interests over the fiduciary duty that it owes to its insureds, something
that this Court has said in the strongest terms an insurance carrier may not do. See DeMarco I,
26 A.3d at 613; Skaling v. Aetna Insurance Co., 799 A.2d 997, 1012 (R.I. 2002) (Skaling II);
Bolten v. Quincy Mutual Fire Insurance Co., 730 A.2d 1079, 1080-81 (R.I. 1999); Asermely,
2
It is noteworthy that G.L. 1956 § 27-7-2.2 employs only singular words throughout, suggesting
that the General Assembly only intended the excess interest statute to apply in single plaintiff
cases.
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728 A.2d at 464; Medical Malpractice Joint Underwriting Association of Rhode Island v. Rhode
Island Insurers’ Insolvency Fund, 703 A.2d 1097, 1102 (R.I. 1997).
Given these applications, it is my opinion that the only reasonable interpretation of § 27-
7-2.2 would be to wait until Travelers’ liability, or lack thereof, has been determined after trial
on count 1.3 If found not to be liable, then, in my opinion, Travelers should bear no burden for
excess interest with respect to count 2. If, on the other hand, a factfinder concludes that
Travelers, in keeping with this Court’s holding in DeMarco I, did not act reasonably in light of
its fiduciary duties to its insureds, it would be liable for the entire judgment under the principles
set forth in Asermely and for all the interest on that judgment pursuant to § 27-7-2.2.
For these reasons, I respectfully dissent from the majority’s opinion in this case.
3
I do not agree with the majority’s characterization of the dissent as creating a reasonableness
standard for § 27-7-2.2. Certainly it is true that we employ a time-honored rule of construction
literally applying the plain language of an unambiguous statute. However, the rule that a clear
and unambiguous statute will not be literally applied if to do so would lead, as I believe it does
here, to an absurd result, is equally venerated. Please see citations above, supra.
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RHODE ISLAND SUPREME COURT CLERK’S OFFICE
Clerk’s Office Order/Opinion Cover Sheet
TITLE OF CASE: Wayne DeMarco et al. v. Travelers Insurance Company et al.
CASE NO: No. 2012-309-Appeal.
(PB 06-6103)
COURT: Supreme Court
DATE OPINION FILED: November 18, 2014
JUSTICES: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
WRITTEN BY: Associate Justice Maureen McKenna Goldberg
SOURCE OF APPEAL: Providence County Superior Court
JUDGE FROM LOWER COURT:
Associate Justice Patricia A. Hurst
ATTORNEYS ON APPEAL:
For Plaintiff: Robert A. D’Amico II, Esq.
For Defendant: Anthony R. Zelle, Pro Hac Vice