A federal appeals court on Thursday upheld a lower court’s ruling against a Swiss Re unit in a dispute involving a home improvement retailer that rejected a settlement offer that led to a $6 million jury verdict.
A customer of Eau Claire, Wis.-based Menard Inc., a home improvement chain, filed a negligence lawsuit against the retailer in state court after he was struck by an employee-operated forklift in 2016, according to Thursday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago i North American Elite Insurance Co. v. Menard Inc.
Under its insurance program, Menard was responsible for a self-insured retention of $2 million, after which Axa XL unit Greenwich Insurance Co. provided $1million in coverage, and Swiss Re unit North American Elite Insurance Co. provided coverage of up to $25 million per occurrence, according to the ruling.
On the first day of trial, the plaintiff offered to settle for $1,985,000, or just below Menard’s self-insured retention. Menard’s lawyer did not respond to the settlement offer, even after North American urged the company to accept it.
Shortly before the verdict, Menard entered into a “high-low” settlement agreement with the plaintiff promising to pay at least $500,000 regardless of the verdict in exchange for maxing out the payout at $6 million.
The jury returned a $13 million verdict, which was reduced to a $6 million settlement under the agreement. North America indemnified Menard for liability exceeding $3 million, while reserving the right to seek compensation, the ruling said.
North American filed suit in US District Court in Chicago, alleging that Menard had breached its obligations under Illinois law by rejecting the settlement offer and proceeding to trial.
The district court dismissed the case and was upheld by a three-judge panel of the appeals court. “North American did not exercise its right to participate in the defense, exposing it to the risk that Menard would make legal choices it did not like,” the ruling said.
“Menard’s negotiation of a high-low settlement agreement with the plaintiff in the underlying lawsuit shows that it took some steps to limit its insurers’ potential liability, rather than gamble with their money.
“We also have no doubt that Menard’s payment obligations were an ample justification for minimizing any potential damages. But it is enough that North America is not entitled to the benefit of someone else’s findings,” the panel said, affirming the lower court.
Attorneys in the case had no comment or did not respond to a request for comment.