## Facts

- JoElle Satterthwaite and her son were injured in a vehicle collision at an intersection within an active construction area.
- The intersection was part of a construction project where Michael Baker International, Inc. (MBI), an engineering firm, performed work tied to traffic control and related services.
- The Satterthwaites sued MBI, alleging MBI breached its duty of care in connection with traffic control at the intersection.
- MBI had primary liability insurance issued by Liberty Mutual Fire Insurance Company (Liberty), with limits of $2 million per claim.
- MBI also had separate insurance providing up to $15 million in coverage; that policy provided reimbursement while giving the paying insurer subrogation rights tied to MBI’s recovery of damages.
- Liberty initially provided MBI a defense attorney in the Satterthwaite litigation.
- The Satterthwaites offered to settle for $12 million, but the Liberty-provided attorney rejected the offer.
- Liberty later filed a federal action seeking a declaratory judgment that it had no obligation to defend or indemnify MBI in the Satterthwaite suit.
- MBI retained new counsel and settled the Satterthwaite case for $13 million.
- Vermont General Insurance Company (VGIC), through the separate policy, reimbursed MBI for the $13 million settlement and paid $439,446 for MBI’s new defense fees and costs.
- MBI asserted counterclaims against Liberty for breach of contract and sought to recover $13,439,446 (settlement plus defense costs) as damages.
- Liberty moved for partial summary judgment, arguing MBI had no recoverable damages because VGIC had already paid the settlement and defense costs.

## Issues

1. Whether Liberty was entitled to partial summary judgment because MBI allegedly suffered no recoverable damages after VGIC reimbursed the settlement and defense costs.
2. Whether, on this record, Liberty could treat VGIC’s payments as a complete offset (including based on subrogation-related arguments) to defeat MBI’s breach-of-contract damages claim as a matter of law.

## Decision

- The court denied Liberty’s motion for partial summary judgment.
- The court declined to rule, as a matter of law, that VGIC’s reimbursement eliminated MBI’s damages on its counterclaims against Liberty.
- The court concluded that Liberty’s “made whole” argument raised questions about the effect of third-party payments, including possible subrogation and allocation issues, that did not justify summary judgment against MBI’s damages theory at this stage.

## Legal Principles

- Summary judgment is inappropriate when the moving party fails to show it is entitled to judgment as a matter of law on the record presented.
- In an insurance-coverage and duty-to-defend dispute, an insured’s claimed damages for amounts paid to settle the underlying case and for defense costs are not automatically wiped out merely because another insurer reimbursed those amounts.
- Payments by a separate insurer may affect who ultimately receives any recovery (for example, through subrogation or reimbursement rights), but such payment does not necessarily defeat the insured’s damages claim against the insurer alleged to have breached its obligations.
- A defendant insurer cannot necessarily avoid liability simply by pointing to compensation the insured received from a different source; whether and how any offset applies may require further development of the facts and the parties’ contractual and equitable rights.

## Conclusion

The court refused to grant Liberty partial summary judgment based solely on the fact that VGIC reimbursed MBI for the $13 million settlement and related defense costs, holding that those third-party payments did not, as a matter of law, eliminate MBI’s claimed contract damages against Liberty and leaving any subrogation or allocation effects for later resolution.


Liberty Mutual Fire Insurance Co. v. Michael Baker International, Inc., 2022 WL 1568923 (2022)