Delaware Business Litigation Report

Superior Court Declines to Perform Post-Settlement Allocation of Class Claims and Holds Insurer Responsible for Negotiated Settlement and for Insured's Attorneys' Fees

Premier Parks, Inc. v. TIG Insurance Co., C.A. No. 02C-04-126-PLA, 2006 WL 2709235 (Del. Super. Ct. Sept. 21, 2006). The parties filed cross-motions for summary judgment on counterclaims in an ongoing declaratory judgment action. The plaintiff, TIG Insurance Company ("TIG"), sought a declaration that it was only liable to pay an allocated share of a global settlement that its insured, Six Flags, Inc. ("Six Flags") negotiated in a class action civil rights lawsuit that alleged that Six Flags had engaged in discriminatory practices at one of its amusement parks. TIG also sought a declaration that it was not responsible for covering the attorneys' fees that Six Flags incurred in defending the class action and negotiating the settlement. TIG contended that at least two, and at most six, of the twelve class action claims against Six Flags were not covered under its policy, and that if the court weighted the claims properly, TIG would be responsible for no more than 42 percent of the total settlement amount. TIG argued that because the settlement agreement did not allocate the damages between covered and non-covered claims, and because the parties could not even agree which claims were covered, the court should (1) allocate the settlement and hold TIG liable only for covered claims, and (2) decide which of the claims asserted in the class action were covered under the policy. TIG further contended that if the court could not allocate the damages, TIG should not be held liable for even the covered claims. Finally, TIG maintained that because Six Flags retained its own defense counsel, TIG was not responsible for the attorneys' fees that Six Flags incurred in defending the class action and related Department of Justice investigation into the discrimination claims. Six Flags responded that if TIG wanted the settlement allocated by claim, it should have directed Six Flags' attorneys, or TIG's own counsel, who attended almost every mediation session, to request an allocation of the claims during the settlement negotiations. Six Flags also argued that there was no logical way to allocate the settlement because of the complexity of the class action claims. Applying Oklahoma law, the court held that it could not "reasonably be expected to perform a post-settlement allocation of the class action claims." The court held that TIG bore the burden of proving allocation due to its lack of interest or involvement in the case before and during settlement negotiations and its failure to adequately request allocation from Six Flags. Because the claims could not be allocated, the court held that TIG was responsible for indemnifying Six Flags for the total amount of the settlement as determined by its applicable coverage period. Citing TIG's failure to timely respond to Six Flags' request to select and retain its own counsel and TIG's previous approval of all other similar requests by Six Flags, the court also concluded that TIG was responsible for Six Flags' attorneys' fees. Share