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R.C. Wegman Construction Company v. Admiral Insurance Company and Brian Budrik

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On Petition for Rehearing.

Admiral’s petition for rehearing contends that we held that “where there is a possibility of a verdict in excess of policy lim‐ its, there is a conflict of interest between the insurer and the in‐ sured.” This characterization ignores the facts that led us to find a conflict (actually just alleged facts, since the complaint was dismissed by the district court). We said that “the conflict in this case arose when Admiral learned that an excess judgment (and therefore a settlement in excess of the policy limits, as judgment prospects guide settlement) was a nontrivial probability in Budrik’s suit” (emphasis added). Among the facts supporting that characterization were (1) the nature and severity of the plaintiff’s injury, (2) the settlement demand in excess of policy limits, (3) the fact that the case had been slated for trial (and in fact tried), (4) the plaintiff’s securing at trial an award double the policy limit, (5) Admiral’s admission that its primary litigating strategy was to downplay Wegman’s responsibility rather than to deny liability, and (6) Admiral’s failure to warn Wegman that it had adopted a strategy that placed Wegman in jeopardy of an excess judgment. Admiral’s attorney has admitted taking a gamble by proceeding to trial in hopes of a ruling that Weg‐ man’s share of liability was below 25 percent, which would turn a $2 million damages award into a $500,000 award, well below Admiral’s $1 million policy limit. Rather than being warned by Admiral, Wegman discovered that the case was going to trial only through an accidental conversation just days before the trial began.

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