A woman slipped and fell inside a bar and sustained serious injuries. The bar was found liable and ordered to compensate her $500,000, plus $112,000 in prejudgment interest. However, the company’s liability insurance maxed out at $500,000 per person per incident. How could the plaintiff collect?
A writ of attachment is a court order to “attach” or seize an asset. A prejudgment writ of attachment can be used prior to the conclusion of a case, while the outcome is pending, to freeze assets and ensure compensation will be available to the plaintiff in the event he or she is awarded damages.
Usually, you will see this request in cases prior to trial when the defendant is attempting to hide assets or has previously committed fraud.
However, by effectively seizing the company’s liquor license until the owners paid, the plaintiff could ensure payment because without a liquor license, the bar could not legally sell alcohol.
In Graf, once the court granted the request for a writ of attachment, both the bar and the plaintiff asked the court to compel the bar’s insurance company to pay the cost of a bond that would release the attachment. This would have required to the insurer to post $115,000 in cash or other assets, as well as pay an annual $2,300 premium.
The insurer refused this request on the grounds that the $500,000 payout represented the maximum limit of coverage on the policy. Next, there was a settlement agreement in which the plaintiff agreed to discharge the writ of attachment of the liquor license against the bar in exchange for the right to pursue the insurer for all damages. In this way, the bar could begin operations again, and the plaintiff would be free to collect all potential damages arising out of the situation.
Plaintiffs need to be careful in these types of arrangements because there must be assurance that the insurer will be made to pay. Here, the lawsuit was first brought in state court and later moved to federal court. A magistrate overseeing the case granted the insurer’s motion to dismiss the claim, finding the $500,000 damage amount was the most the insurer was required to pay. The magistrate reasoned that forcing the insurer to pay the bond would have stretched the insurer’s liability in violation of the clear terms of the policy.
The plaintiff appealed, but the First District Court of Appeals affirmed the magistrate’s ruling. While the decision is disappointing, the plaintiff did not “lose” her case. She was still able to secure the $500,000 policy coverage limit.
Graf v. Hospitality Mut. Ins. Co., June 11, 2014, U.S. Court of Appeals for the First Circuit
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