EQUALCONSIDERATIONARTICLE
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Morris Agreements are sometimes threatened prior to, or during, a
mediation in which the plaintiff has demanded an amount within policy
limits, but there remains a large gap between the insurer’s and the
plaintiff’s valuation of the claim. A claim may realistically have a value
lower than the demand, but a plaintiff may use the threat in an attempt
to pressure the insurer to pay more to avoid a stipulated judgment in
excess of policy limits. This threat is usually accompanied by a specific
demand by the insured to settle the claim at any amount within policy
limits. This is understandable, as the insured usually does not take
issue with the amount paid; the insured only wants settlement of the
claim without risk of personal exposure.
Although these situations pose difficult choices to insurers, they are
also risky for plaintiffs because they become “all or nothing” propositions based on the ultimate issue of whether the insurer gave “equal
consideration” to the demand. If it has, the insured will have breached
the cooperation clause by entering the agreement, resulting in no
coverage. This translates to a situation in which the plaintiff possesses
a meaningless judgment and cannot execute against the policy limits.
When an insurance carrier is given a “take it or leave it” demand accompanied with a threat of a Morris Agreement, it needs to analyze its
consideration of the demand in light of the Pruett factors. If it has done
so, and if the demand continues to be unreasonable, the insurer need
not hastily agree to “overpay” in light of a Morris threat. If a plaintiff’s
demand remains unreasonable, and equal consideration has been
provided, it is the plaintiff who risks receiving
nothing in pursuing a Morris Agreement that
is ultimately deemed to be in violation of the
policy’s cooperation clause.
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Reference Guide to AZ Law
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ABOUT THE AUTHOR
JEFF COLLINS
Jeff Collins works with insurance carriers in matters involving insurance-related disputes including bad faith, breach of contract and declaratory judgments.
He also handles matters involving coverage issues including policy interpretation for many insurance lines, including commercial, professional and
personal. Contact Jeff at 602.263.7346 or [email protected].