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Darlene Scanlan v. United States of America and State Farm Mutual Automobile Insurance Company

November 9, 2011


The opinion of the court was delivered by: Magistrate Judge Morton Denlow


This case is before the Court on the amended cross-claim brought by the United States of America ("United States") against State Farm Mutual Automobile Insurance Company ("State Farm") seeking to recover $50,000. The United States claims that an attorney for State Farm represented to it that State Farm would contribute its automobile insurance policy limit of $50,000 to the United States towards a settlement, if the United States settled the underlying personal injury case with the Plaintiff Darlene Scanlan ("Plaintiff"). The United States eventually settled the personal injury case with Plaintiff for $70,000 and then made demand for the $50,000 from State Farm. State Farm refused because in the interim, it had directly settled for $50,000 Plaintiff's claim against its insured, John Kupiec ("Kupiec") for $50,000. This cross-claim and trial followed to determine whether State Farm owes the United States $50,000.

The Court held a one-day bench trial on October 17, 2011. The Court has carefully considered the testimony of the five attorney witnesses, the parties' trial exhibits, the parties' proposed findings of fact and conclusions of law, and the closing arguments of counsel. The following constitute the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. To the extent certain findings of fact may be deemed conclusions of law, they shall also be considered conclusions. Similarly, to the extent matters contained in the conclusions of law may be deemed findings of fact, they shall also be considered findings.



1. This case has a long and involved history which includes two state court cases and three federal cases. The saga begins on December 12, 2006, when the Plaintiff was struck in a crosswalk by a vehicle operated by John Kupiec, a United States postal employee, who was driving his personal vehicle. Dkt. 1. Kupiec had a personal auto insurance policy with State Farm with a $50,000 policy limit. SF 1-81.*fn1

2. Plaintiff retained Thomas Boleky ("Boleky") of the law firm of Corboy & Demetrio ("Corboy firm") to represent her in connection with her claims arising out of the accident. The Corboy firm filed suit on behalf of Plaintiff and against Kupiec in the Circuit Court of Cook County (10 L 788). Kupiec was represented in the litigation by attorney James Byrne ("Byrne") of the law firm of Bruce Farrel Dorn & Associates. He represents State Farm insureds. (T. 29). Byrne testified at trial.

3. In the course of discovery in the state court case, Kupiec disclosed that he was working for the U. S. Postal Service at the time of the accident. (T. 15). Thereafter, Plaintiff filed an administrative claim with the Postal Service seeking $125,000 in damages under the Federal Tort Claims Act ("FTCA"). (T. 125-26).

4. Assistant United States Attorney Gina E. Brock ("Brock") was assigned to defend the United States. (T. 74). On March 13, 2008, the United States removed the state court lawsuit to federal court (08 C 1506). The United States substituted itself as a party defendant in place of Kupiec and moved to dismiss the lawsuit for failure to exhaust administrative remedies. The motion was granted on June 16, 2008. Dkt. 10.


5. On July 10, 2008, after completing the administrative process, Plaintiff filed a personal injury suit directly against the United States under the FTCA arising out of the December 12, 2006 accident. Dkt. 1.*fn2 The driver of the vehicle, Kupiec, was not named as a defendant.

6. On July 14, 2008, Byrne faxed a release to Boleky, Plaintiff's attorney, offering to pay the full policy limit of $50,000 in exchange for a release by Plaintiff of State Farm and Kupiec, the named insured under the State Farm policy. (T. 33-34); SF 17-18. The proposed release did not include a release for the United States. Id. Boleky rejected the $50,000 offer.

(T. 34-35).

7. In October 2008, Brock learned from Boleky that State Farm had tendered a $50,000 settlement offer to Plaintiff. (T. 76).

8. The case was referred to this Court to conduct a settlement conference. Dkt. 15. The parties later consented to this Court's jurisdiction. Dkt. 20. The Court set a settlement conference for March 24, 2009. Dkt. 22.

9. On January 14, 2009, in preparation for the settlement conference, Boleky sent a settlement letter to Brock requesting $125,000 from the United States to settle the case. US 28-29. The Corboy firm viewed the case as one in which liability would be favorable to Plaintiff and the issue at trial would simply be damages. (T. 57).

10. Brock coordinated the defense of the case with Wendy Widemann-Hudson ("Hudson"), an attorney who worked out of the National Torts Center in St. Louis. (T. 147). Hudson works for the Postal Service and she was the client representative. Hudson reported to Ruth Przybeck ("Przybeck"), Chief Counsel Torts for the Postal Service at the National Torts Center. Brock, Hudson and Przybeck all testified at the trial.

11. Following receipt of Plaintiff's settlement demand of $125,000, Hudson consulted with Przybeck to obtain settlement authority. On February 20, 2009, Hudson authorized Brock to settle the case for up to $65,000. US 30. As of this date, Brock had not spoken to Byrne about the case. (T. 103). Hudson understood that the $65,000 would all come from Postal Service funds, and the $65,000 figure was based on an assessment of the merits of the case. (T. 129-31). At the same time, Hudson requested Brock to talk with her supervisor to determine if the United States was an additional insured under Kupiec's State Farm policy. US 30. At no time prior to the settlement conference did the United States ever request or receive a copy of the insurance policy from State Farm. (T. 118-19). In fact, Brock never saw a copy of the State Farm policy until sometime in 2010. (T. 119).

12. On February 23, 2009, Brock sent Boleky a letter offering to settle the case on behalf of the United States for $50,000. US 31-32. As of this date, no representation had been made by Byrne that the United States was an additional insured under the State Farm policy. (T. 106, 149). The amount being offered was to be Postal Service funds, since no attempt had been made to this point to determine whether the United States was covered under Kupiec's State Farm policy. The Postal Service believed that liability against its employee was "pretty clear" and its offer was not dependent upon the State Farm policy. (T. 115).

13. Kubiec's deposition took place on March 12, 2009. Byrne and Brock spoke on March 12. (T. 18). Byrne explained to Brock that he was prepared to contribute the $50,000 policy limit towards a settlement, but that Brock and Boleky should work it out. (T. 36-37, 45). Byrne did not tell Brock that the United States was also insured under the policy.

(T. 41). Byrne did not tell Brock that he would voluntarily tender the $50,000 to the United States. (T. 37-38). Byrne did not have a copy of the insurance policy in his possession, nor did he review it. (T. 14, 25). Byrne is not involved in insurance coverage issues on behalf of State Farm. (T. 30). Although Brock has a different recollection of the conversation, and the subsequent conversation between Brock, Hudson and Byrne, the Court finds Byrne's version credible. (T. 81-82). It is clear that Byrne was prepared to tender the $50,000 policy limit in exchange for a full release, but he also desired that Plaintiff's counsel and Brock agree on how and to whom the $50,000 should be paid. Byrne wanted to be sure that he was only going to pay a total of $50,00. There simply is no indication that Brock or Hudson ever confirmed with Byrne in writing his alleged representation that the United States was an insured under the State Farm policy or that he had agreed to send the United States a check for $50,000. (T. 137). There was no promise made by Byrne, but rather, attorneys hearing two different versions of the same conversation. The Court would have expected the United States to confirm such an important representation and promise in writing to Byrne if it had in fact been made. There was no such confirmation.

14. Shortly before the settlement conference, Boleky contacted Byrne to confirm that the State Farm $50,000 offer to Plaintiff was still ...

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