Liberty Mutual Fire Insurance Co. v. Michael Baker International, Inc.

JoElle Satterthwaite and her son (plaintiffs) were injured in a car accident. The collision occurred at an intersection where engineering firm Michael Baker International, Inc. (Michael Baker) (defendant) was working on a construction project. The Satterthwaites brought suit against Michael Baker, alleging that the firm breached its duty of care with regard to traffic control at the intersection. Michael Baker’s primary insurer was Liberty Mutual Fire Insurance Co. (Liberty) (plaintiff), under a policy that limited claims to $2 million each. However, Michael Baker had a separate, third-party insurance policy that capped claims at $15 million, subrogated to Michael Baker’s recovery of actual damages. Liberty initially provided Michael Baker with a defense attorney. The Satterthwaites sought to settle with Michael Baker for $12 million, but the Liberty attorney rejected the proposal. Liberty then filed its own action against Michael Baker, seeking a declaratory judgment that Liberty was not obligated to provide coverage or legal defense in the Satterthwaites’ action. Michael Baker hired new counsel, who succeeded in settling the Satterthwaite case for $13 million. Through the third-party policy, Vermont General Insurance Company (VGIC) reimbursed Michael Baker for the $13 million settlement, plus $439,446 in fees for Michael Baker’s new legal representation. Michael Baker counterclaimed against Liberty for breach of contract, seeking to recover the $13,439,446 in damages (i.e., the settlement amount plus the legal costs). Liberty moved for partial summary judgment, arguing that VGIC had already made Michael Baker whole for the full damages amount.