Risk Insider: Jeff Hallman

Could Walmart Be Forced to Go to Trial by Its Excess Carriers?

By: | August 4, 2014

Jeff Hallman is the vice president in charge of National Accounts at RPA Insurance Services in Parsippany NJ, a commercial property / casualty retail agency specializing in the hospitality industry. He can be reached at [email protected]

Actor/comedian Tracy Morgan has filed suit against Walmart in Trenton, New Jersey as a result of a Walmart truck striking his limousine, seriously injuring Morgan and killing another passenger. The lawsuit demands unspecified compensatory and punitive damages.

New Jersey: Insurers are barred from paying punitive damage awards

Although New Jersey allows plaintiffs to seek punitive damages, the state bars insurers from paying punitive damages awards. New Jersey believes that allowing insurers to pay punitive damages would mitigate the intended impact of punitive damages.

It is no secret that it is possible to buy punitive damages insurance “offshore”. Insurance regulators typically frown upon this practice, viewing it as a circumvention of the spirit of the punitive damages law.

So Walmart’s options would be to purchase an “offshore” punitive wrap and be seen as circumventing the law or be held solely responsible for punitive damages.

Walmart driver charged criminally

Because there are numerous news reports alleging wrongdoing on the part of Walmart and the driver of the tractor-trailer, the risk of a punitive damages award resulting from a trial is a very real possibility. The Walmart driver is charged with vehicular homicide and assault by auto, according to news reports.

Precarious position for Walmart?

Walmart representatives say they are “committed to doing the right thing”, but the plaintiff’s attorney could still press for punitive damages. This would put Walmart in a precarious situation.

The two sides will presumably enter into talks exploring an out-of-court settlement. Clearly, it would be in Walmart’s best interest if it could settle the case quickly and without a high profile public trial. The company’s next hope would be that the case eventually fades from the public’s view with minimal damage to Walmart’s brand and reputation.

Please note that I am neither an attorney nor connected in any way to either side of the case.  Bear with me though and suppose that the plaintiff’s attorney not only presses the demand for punitive damages, but that damage demand turns out to be more than the compensatory damages demand.

How it might play out

A possible negotiating strategy for the plaintiff attorney might be to “float” to an out-of-court settlement offer based on the sum of the compensatory and punitive damages demand and then discount it in order to incent the defense to settle and not risk going to trial.

Even if Walmart’s liability retention is five million or as high as 10 million dollars, this loss could easily reach well beyond those levels. The defense team representing Walmart’s excess carriers could realize that they might be better off forcing the case to trial, reasoning that they are legally barred from paying anything other than the compensatory damages portion of the final judgment.

If this happens, Walmart could very well end up with the high profile trial that it does not want and in addition, be left twisting in the wind with regard to any final adjudication on punitive damages.

Read all of Jeff Hallman’s Risk Insider contributions.

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