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Great American Insurance Co v. Norwin School District

June 8, 2006

GREAT AMERICAN INSURANCE COMPANY, PLAINTIFF,
v.
NORWIN SCHOOL DISTRICT, DEFENDANT AND THIRD-PARTY PLAINTIFF,
v.
SHOFF CONSTRUCTION AND DESIGN, INC. AND FOREMAN PROGRAM & CONSTRUCTION MANAGERS, INC., THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Magistrate Judge Mitchell

Judge McVerry

MEMORANDUM ORDER

Plaintiff, Great American Insurance Company ("Great American"), brought this action against Defendant, Norwin School District ("Norwin"), arising out of Norwin's failure to obtain Great American's consent prior to paying a contractor and its retainage of certain fees in connection with two construction projects for which Great American served as surety. Norwin filed a counterclaim against Great American and a third-party complaint against both the contractor, Shoff Construction & Design, Inc. ("Shoff") and the construction manager, Foreman Program & Construction Managers, Inc. ("Foreman"). Shoff and Foreman filed cross-claims against each other and Shoff filed a counterclaim against Norwin.

On November 30, 2005, four motions for summary judgment were filed. On March 20, 2006, the Court entered an Order (Docket No. 79) that adopted a Report and Recommendation filed on February 13, 2006 (Docket No. 71) and yielded the following results: 1) the motion for summary judgment filed by Great American (Docket No. 43) was granted; 2) the motion for summary judgment filed by Shoff as to the cross-claims filed against it by Foreman (Docket No. 48) was granted; 3) the motion for summary judgment filed by Norwin against Foreman (Docket No. 49) was granted as to Counts V and VII of the Third-Party Complaint (the breach of contract claims) and denied with respect to Counts VI and VIII (the negligence claims); and 4) the motion for summary judgment filed by Foreman (Docket No. 53) was granted with respect to Counts VI and VIII of the Third-Party Complaint and denied as to Counts V and VII. The following claims remained for disposition: 1) Norwin's claims against Shoff (Counts I-IV of the Third-Party Complaint); 2) Shoff's counterclaim against Norwin; and 3) Shoff's cross-claim against Foreman.

Presently pending before the Court are the following motions. Great American and Norwin have both filed motions for judgment (Docket Nos. 85, 89). Foreman has filed a motion for leave to file an amendment to its answer to the Third-Party Complaint to assert additional affirmative defenses (Docket No. 91) and a motion for a hearing on this motion (Docket No. 97). Norwin and Shoff have filed a joint motion to withdraw their remaining claims (Docket No. 92). Finally, Foreman has filed a pleading captioned "Counter-Motion to Norwin's Motion for Entry of Judgment" (Docket No. 99), which is actually a request for the Court to vacate the Order (Docket No. 79) adopting the Report and Recommendation (Docket No. 71) and granting and denying the four motions for summary judgment as summarized above and to dismiss all claims against Foreman with prejudice.

Foreman's Motions

Foreman's motions are based upon an Agreement, signed by Great American, Norwin and Shoff on December 15, 2005 but not revealed to Foreman until April 18, 2006, in which these parties settled certain claims and made certain promises and arrangements in this case. Foreman characterizes this Agreement as a "Mary Carter agreement"*fn1 and contends that the failure of the parties to reveal its existence to the Court or to Foreman subjected Foreman to prejudice in two respects: 1) it prevented Foreman from advancing additional affirmative defenses to Norwin's Third-Party Complaint; and 2) it extinguished Norwin's liability to Great American and thereby precludes Norwin from seeking indemnification from Foreman for amounts it would never have to pay. Foreman requests leave to amend its answer to the Third-Party Complaint to include new affirmative defenses, asks for a hearing on this motion, and moves the Court to vacate its Order granting summary judgment for Great American and for Norwin as against Foreman on Norwin's breach of contract claims and to dismiss Norwin's claims against it with prejudice.

Great American and Norwin respond that: 1) Foreman's liability to Norwin is based on breach of contract, not indemnification, and therefore the Agreement does not alter the result; 2) Foreman's request to amend its affirmative defenses is futile; and 3) Foreman's arguments were already presented to and rejected by the Court.

The Pennsylvania Supreme Court has stated that:

The eponymous "Mary Carter agreements" arise when, in a setting of multiple defendants, one or more, but less than all, of the defendants reach an agreement with the plaintiff, but wish to retain some interest in the outcome of the litigation. Although there are as many variations as there are creative lawyers, these agreements usually have the following features:

(1) the agreeing defendant(s) guarantees the plaintiff a minimum payment, often the limit of defendant's liability insurance;

(2) the plaintiff agrees not to enforce against the agreeing defendant(s) any subsequent judgments;

(3) the agreeing defendant(s) remains a part of the action and payments to plaintiff are reduced if money is recovered, by settlement or judgment, from the non-agreeing defendant(s); and

(4) the agreement is "secret" in that there is an understanding that it will not be disclosed unless required by rules of court or ...


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