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amount of the judgment is found to be unreasonable, the trier of fact starts with that
amount and goes down until it reaches what
it considers to be a reasonable amount. This
amount is likely to be higher than what a jury
might award starting at zero and going up.
At first blush, it may seem attractive in
a Morris setting to attempt to set damages
at a default hearing to defend against later
claims that a judgment was not reasonable.
However, the plaintiff is exposed to the risk
that the insurer may intervene in the default
hearing process, because an insurer must
be notified when the parties’ intend to enter into a Morris agreement and when the
agreement has been executed. The insurer
then has a right to trial by jury on the issue
of damages in a default proceeding where
the trier of fact will establish a reasonable
amount starting from zero and going up. 35
An insurer, however, only gets one bite at
the apple: If it intervenes, then it likely will
not be permitted to challenge damages in a
later action to determine coverage.
Morris agreements can be dangerous to
the party taking an assignment of any claims
because if the coverage defense upon which
the reservation of rights was based is found
to be valid, the party taking the assignment
usually recovers nothing. 36 Therefore, the
more uncertain the question of coverage,
the more risky a Morris agreement becomes.
Similarly, a Morris agreement becomes less
Breach of the Duty to Give
appealing as the amount of assets an insured
has against which a judgment may be exe-
Equal Consideration to an
In State Farm Mut. Auto. Ins. Co. v. Peaton, 37 the Court of Appeals examined the
cooperation clause in the context of an insurer’s duty to equally consider the financial
interests of its insured with its own when
confronted with a settlement offer. There,
the underlying case involved a significant
personal injury. Before an answer to the
complaint had been filed, the plaintiff demanded the policy limits plus interest until
paid. Ten days later, the plaintiff made another policy limits demand that did not include interest. The insurer accepted the second demand and thought it had a settlement
until the plaintiff suggested that payment of
interest was still a part of the agreement.
The determination of what is
reasonable usually involves a battle of
experts, with the plaintiff calling
someone to testify that the judgment
was reasonable and the insurer calling
someone to testify that it was not.
This process usually favors the plaintiff.