Case Study: DGS Wins Appeal in Groundbreaking Insurance Case
We represented an insurer on appeal in a groundbreaking case that tested whether an insurer is bound by a collusive settlement between a plaintiff and the insured. The case arose from the crash of a light plane, in which the pilot and both passengers were killed. The passengers were elk hunting guides who had chartered the plane to scout the high country near Durango for elk. The families of the two passengers sued the charter company and the estate of the pilot. The insurer had issued two liability policies covering the charter company.
Before trial, the plaintiffs offered to settle for $800,000. When the insurer declined, the plaintiffs entered into a collusive settlement in which the defendants consented to entry of judgment for $5.3 million. The plaintiffs promised never to collect the judgment from the defendants and to seek payment only from the insurer. The insurer paid policy limits of $1.7 million, but the plaintiffs demanded payment of interest, over and above policy limits, on the $5.3 million collusive judgment. In a garnishment action against the insurer, the trial court agreed and entered judgment against the insurer for nearly $2 million.
On appeal, we persuaded the Colorado Court of Appeals to reverse, on the ground that an insurer is not bound by a collusive settlement between its insured and a plaintiff. The case made new law in Colorado.
You can view a copy of the opinion here.
