Wood v. Milionis Constr., Inc. (Majority)Annotate this Case
The issue central to this appeal centered on a “covenant judgment” arrangement: an insured defendant, facing suit by a plaintiff, settles claims without the insurer’s consent in exchange for a release from liability and assignment of potential bad faith claims against the insurer to the plaintiff. If the trial court deems the settlement reasonable, that settlement amount becomes the presumptive measure of damages in the later bad faith action brought by the plaintiff against the insurer. Insurer Cincinnati Specialty Underwriters (Cincinnati), challenged the trial court’s order approving as reasonable a $1.7 million settlement between plaintiffs, Anna and Jeffrey Wood (Woods), and Cincinnati’s insureds, Milionis Construction Inc. (MCI) and Stephen Milionis. A divided Court of Appeals held the trial court abused its discretion because the reasonableness finding credited a defense expert’s evaluation of contract damages at $1.2 million despite other evidence in the record suggesting the defense’s evaluation of damages never rose above $399,000. The Washington Supreme Court reversed and reinstated the trial court’s order. The Supreme Court found the trial court properly conducted the reasonableness hearing and evaluated the varied and conflicting evidence of contract damages. In addition, the court appropriately considered damages for plaintiffs’ extracontractual claims as well as allowable attorney fees. "In finding an abuse of discretion, the Court of Appeals majority misapprehended parts of the record and substituted its assessment of the competing damages evaluations for the trial court’s assessment."