Trial Magazine

After discovering during a traffic stop that your client was the subject of an arrest warrant for aggravated assault, police officers violently pulled your client through his open car door window and to the ground for handcuffing. The top of your client’s head, followed by his left shoulder, impacted the asphalt first. Your client reports that when his head hit the ground, he “saw stars,” and then almost immediately felt a searing pain deep in his left shoulder. When officers stood him up and walked him to the police car, he felt nauseated and unsteady.

While transporting your client to the hospital, officers warned him that he “better not cause problems for them.” Your client sat in jail for eight months until the charges were dismissed after it was discovered that the wrong person had been named in the warrant. Fearing for his safety, he did not report the use of force or his injuries to anyone. Your client tells you that since the incident, he suffers from headaches regularly, his shoulder continues to hurt, and he “has not been himself.”

The hospital records provide: “Patient arrived in police custody. Officers report patient fought with police. Small laceration left hand. Cleaned/bandaged. Advised follow up primary doctor. Tylenol as needed. No other complaint.” The jail records provide: “Inmate prior treatment at hospital for laceration left hand. No other medical issues observed/reported. Told how to sign up for sick call.”

The hospital and jail medical records, however, fail to capture an accurate or complete picture of your client’s injuries. If the hospital and jail medical records are the only documentation of your client’s injuries that make it into the claims file, your client can expect to receive, at best, a nuisance value settlement offer.

You recommend that your client sees a neurologist and an orthopedic surgeon. The neurologist reports that your client has post-concussion syndrome that will last indefinitely. The orthopedic surgeon reports that your client suffered a rotator cuff tear that will require surgery. Then you interview your client’s wife and learn that for the 17 years before the incident they had a great marriage. But since the incident, your client has been depressed, suffers from mood swings, has angry outbursts, spends little time talking with his wife, and has become a recluse resigned to their bedroom when he is home. Your client’s wife is contemplating divorce.

The neurologist explains that the emotional changes reported by your client’s wife are symptoms consistent with post-concussion syndrome. If you serve a settlement demand that includes the records from the neurologist and orthopedic surgeon, along with a video statement from your client’s wife, the outcome will be different.

But why the different outcomes? Same incident. Same defendants. The reason is because most times, the defendant’s insurance company controls the litigation. The decision to settle is largely driven by the information that makes it into the claims file. Your job as counsel is to ensure the insurer gets the full picture of your client’s injuries. Here is how.

1 Plead Carefully

Be careful in your pleadings or you could plead your client out of insurance coverage. Since the U.S. Supreme Court’s decision in Monell v. Department of Social Services,¹ municipalities can be held liable under 42 U.S.C. §1983 if a policy, practice, or custom of the municipality caused a constitutional injury.

For instance, in an unlawful death case against a municipality due to an employee’s reckless conduct authorized by municipal policy, discuss the egregious conduct that caused the death but don’t call the officers murderers. A municipality has no legal duty to train police officers not to engage in obvious criminal conduct.² As such, criminal conduct (as opposed to reckless conduct) is almost certainly going to be excluded from insurance coverage—so “murder” will fall outside the scope of coverage.

In a §1983 lawsuit, punitive damages may be awarded to punish conduct that has an evil motive or intent or conduct that involves a reckless or callous indifference to the federally protected rights of others.³ However, states are not consistent on the insurability of punitive damages.⁴

2 Insist on Separate Counsel

Most times, a single lawyer is retained to represent both the municipality and its employee. After Monell, however, the interests of a municipality and its employees, as they relate to being defendants in a §1983 action, are in conflict.⁵ Most courts appear to address the issue on a case-by-case basis.⁶ But in at least one jurisdiction, New Jersey, the Rules of Professional Conduct expressly proscribe dual representation of a municipality and its employee.⁷ One could fairly argue that it is malpractice to engage in dual representation of a municipality and its employees, or in the alternative, to not raise the conflict issue with the court.⁸

If faced with this situation, file a motion to seek disqualification of defense counsel, which, if granted, will force the insurer to hire additional counsel and risk having defendants point the finger at each other at trial. Simply filing the motion will force defense counsel to take positions on certain issues to avoid disqualification—for example, whether the municipality has agreed to indemnify the individual defendants. In the alternative, ask the court to issue an order precluding the municipality from asserting certain defenses, such as that the employee violated the municipality’s policies and training.

3 Request the Entire Insurance File

The federal rules require the defendant to disclose “any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment in the action or to indemnify or reimburse for payments made to satisfy the judgment.”⁹ This includes reinsurance agreements.¹⁰ As the plaintiff attorney, you are entitled to inspect the entire agreement, not just the declarations.¹¹

During discovery, serve a subpoena on the insurer to obtain information concerning similar types of claims. Do this because, like insurance companies, municipalities are risk averse and report everything to their insurer. These files often contain a treasure trove of information, such as notice of similar bad conduct that never resulted in litigation, witness statements obtained in the normal course of business while processing claims, and admissions or other statements against interests.

While you may get pushback from the insurer, in the federal arena, your client has strong arguments in favor of disclosure.¹² Obtaining documents from the insurer’s files to bolster your claims is a significant piece of evidence in your client’s favor.

4 Demand Settlement Early and Often

Write to the insurance defense lawyer often and remind the lawyer why the case should be settled. These letters get forwarded to the insurance company and placed into the claims file. These letters increase the insurer’s risk because most states impose a duty on the insurer to initiate settlement discussions when liability has become reasonably clear.13 The more information that lands in the claims file that objectively tips the scale toward settlement, the better—it makes refusing to settle seem less reasonable.

Case value is driven by the law and facts. If an insurer ignores an opportunity to settle, it could be exposed to a bad faith claim. Being risk averse, insurance companies do not want to be in a position where the top is popped off the policy—meaning, the insurer is required to pay the entire judgment regardless of the policy limits. A breach of the duty of reasonable settlement is just that scenario.

5 Name the Right Defendants

When it comes to civil rights claims, joint and several liability is alive and well.¹⁴ So when you plead your claims, you should have at least one insured defendant against whom liability is almost certain. The knowledge that your client can collect the entire judgment—even amounts assessed against judgment-proof co-defendants—from the one insured defendant is a reason for the insurer to come to the settlement table.

6 Send Individualized Settlement Demands

Send settlement demands to each insured defendant, in differing amounts, based on their respective conduct in contributing to creating the injury. At the same time, issue a global settlement demand to the defendants. Remind defense counsel in writing that it is in the best interest of the individual defendants to settle the case with the insurer’s money, instead of risking a trial.

During depositions, ask the individual defendants whether they will be indemnified for punitive damages. Also ask whether their lawyer has issued a written demand to the insurance company to settle within policy limits. This will undoubtedly lead to some uncomfortable post-deposition discussions between the deponents and their counsel.

While the law and facts are important, a firm understanding of how insurance works and how it will apply in the context of your client’s case is equally crucial.

AAJ Resources

• Civil Rights Section
• “Creating Change: An Introductory Primer for Police Misconduct and Civil Rights Cases” (Complimentary Webinar), https://www.pathlms.com/aaj/courses/21443

Devon M. Jacob is the founder of Jacob Litigation in Mechanicsburg, Pa., and can be reached at djacob@jacoblitigation.com.

Notes

1. Monell v. Dep’t of Social Servs., 436 U.S. 658 (1978).
2. Freeman v. McGorry, 2022 WL 3030789, at *4 (E.D. Pa. Aug. 1, 2022) (citing Hernandez v. Borough of Palisades Park Police Dep’t, 58 F. App’x 909, 915 (3d Cir. 2003)).
3. Smith v. Wade, 461 U.S. 30 (1983).
4. In five states, punitive damages are generally uninsurable (California, Colorado, New York, Rhode Island, and Utah). Punitive damages are generally insurable in 26 states. Of the remaining states, eight (Florida, Illinois, Indiana, Kansas, Minnesota, New Jersey, Oklahoma, and Pennsylvania) preclude insurability of directly assessed punitive damages but permit coverage for punitive damages awarded for vicarious liability. The law is unsettled in the District of Columbia and eight states (Connecticut, Maine, Massachusetts, Missouri, North Dakota, Ohio, South Dakota, and Texas). See Richard Porter & Sarah Champion, A Review of the U.S. Punitive Damages Liability Landscape, Chubb Bermuda, Mar. 2022, https://tinyurl.com/2xd5s9a2.
5. See Van Ooteghem v. Gray, 628 F.2d 488, 495 n.7 (5th Cir. 1980), aff’d in part, vacated in part on other grounds, 654 F.2d 304 (5th Cir. 1981) (en banc) (per curiam), cert. denied, 455 U.S. 909 (1982) (The municipality should be permitted to argue that its policies pass constitutional muster and that the employee did not act in accordance with same, and the employee should be permitted to argue that the only reason he acted in the manner that he did is because his department’s policies permitted him to do so. And the stakes are high because while punitive damages cannot be awarded against a municipality, punitive damages can be awarded against the employee. Importantly, if punitive damages are awarded against the employee, they will be held personally liable for same).
6. See, e.g., Patterson v. Balsamico, 440 F.3d 104, 114 (2d Cir. 2006).
7. The New Jersey Rules of Professional Conduct are clear and absolute: A public entity may never waive a concurrent conflict of interest. See N.J. Rules of Pro. Conduct 1.7(b)(1) (“provided, however, that a public entity cannot consent to any such representation”); In re Fitchett, 877 A.2d 263 (N.J. 2005) (stating “the Rules of Professional Conduct absolutely proscribe dual representation when one of the clients is a public entity” and imposing a 3-month suspension from the practice of law) (citing In re Berkowitz, 642 A.2d 389 (N.J. 1994)).
8. Your client could be prejudiced if the conflict is not addressed, as any judgment obtained could be collaterally attacked and is subject to reversal. Specifically, the individual defendants could fairly argue on appeal that they did not provide “informed consent” to the joint representation, that their personal interests were not properly represented at summary judgment or trial, that any verdict and award of punitive damages should be set aside, and that they should be entitled to a new trial.
9. Fed. R. Civ. P. 26(a)(1)(A)(4); see also Regalado v. Techtronic Indus. N. Am., Inc., 2015 WL 10818616 (N.D. Tex. 2015) (The production requirement “is absolute, and does not require a showing of relevance.”) (citing Heights of Issaquah Ridge Owners Ass’n v. Steadfast Ins. Co., 2007 WL 4410260, at *4 (W.D. Wash. Dec. 13, 2007).
10. U.S. Fire Ins. Co. v. Bunge N. Am., Inc., 244 F.R.D. 638, 642 (D. Kan. 2007) (“because reinsurers ‘carry[ ] on an insurance business’ and ‘may be liable . . . to indemnify [insurers] for payments made to satisfy the judgment’ reinsurance agreements fall within the plain language of the rule”).
11. See Morock v. Chautauqua Airlines, Inc., 2007 WL 2875223, at *1 (M.D. Fla. Oct. 3, 2007).
12. Federal Rule of Evidence 501 mandates the application of state privileges in civil actions or proceedings for which state law supplies the rules of decision, and federal privileges for issues or proceedings arising under federal law. Federal courts generally do not recognize an insured-insurer privilege. See Petersen v. Douglas Cnty. Bank & Trust Co., 967 F.2d 1186, 1188 (8th Cir. 1992); Gottlieb v. Bresler, 24 F.R.D. 371, 372 (D.D.C. 1959) (“Work product prepared in the ordinary course of business is not protected from discovery.”); Jones v. Nationwide Mut. Fire Ins. Co., 2010 WL 181753, at *1 (M.D. Pa. Jan. 12, 2010); see also Stevens v. Sullum, 2023 WL 2226794 (M.D. Pa. Feb. 24, 2023) (“Even after litigation is justifiably anticipated, routine or ordinary investigations or reports are not work-product and may be obtained as normal discovery without a special showing of need.”) (citing Harper v. Auto Owners Ins. Co., 138 F.R.D. 655, 661 (S.D. Ind. 1991)).
13. An insurance company’s decision not to settle a lawsuit must be made in good faith and supported by actual evidence. A decision not to settle must be a thoroughly honest, intelligent, and objective one. See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 323 A.2d 495, 503 (N.J. 1974); BrightView Enter. Solutions, LLC v. Farm Family Cas. Ins. Co., 2023 WL 1794850 (D.N.J. Feb. 7, 2023).
14. “[I]t is well-established that comparative fault does not apply in the Section 1983 context.” Estate of Hurtado v. Smith, 2022 WL 2439088, at *3 (D. Colo. July 5, 2022) (quoting Bevan v. Valencia, 2018 WL 3187356, at *7 (D.N.M. June 28, 2018)). See, e.g., Fourhorn v. City & Cnty. of Denver, 2008 WL 5423349, at *3 (D. Colo. Dec. 30, 2008) (“Section 13-21-111.5 is not applicable to diminish . . . parties’ liability for federal law claims.”); Cordova v. City of Albuquerque, 816 F.3d 645, 659 (10th Cir. 2016), abrogated on other grounds by Thompson v. Clark, 142 S. Ct. 1332 (2022) (“Comparative negligence is not applied in suits for violations of federal constitutional rights.”) (quotation omitted); Kellum v. Bernalillo Cnty., 2015 WL 12861334, at *2 (D.N.M. June 12, 2015) (“Comparative fault is inapplicable to claims brought under 42 U.S.C. §1983.”).