The U.S. 8th Circuit Court of Appeals, interpreting Minnesota law, recently determined that the insured had the burden of allocating a settlement between covered and uncovered claims.
In United Health Group, Inc. v. Executive Risk Specialty Ins. Co., 870 F.3d 856 (8th Cir. 2017) the 8th Circuit Court of Appeals considered the burden of proof regarding allocation of settlements between covered and uncovered claims in the professional liability insurance context. The court could find no definitive Minnesota law establishing which party bore the burden of proof regarding allocation of settlements between covered and non covered claims. Therefore, the 8th Circuit predicted how the Minnesota Supreme Court would rule when faced with the issue. The court predicted that under Minnesota law, the insured bore the burden of allocating any settlement between covered and uncovered claims. In order to meet this burden, the insured was required to present evidence with sufficient specificity to allow the trier-of-fact to make a non-speculative, reasoned judgment about what the parties knew at the time of the settlement regarding the insured’s relative liability for covered and non-covered claims. The court suggested that the insured could consider testimony from the attorneys involved in the underlying lawsuits, evidence developed in those underlying lawsuits, expert testimony, or a review of the underlying transcripts in order to bring forth sufficient evidence to permit allocation. The court also found that circumstances that happened after the settlement would only be relevant insofar as they informed the trier-of-fact on how a reasonable party would have valued the claims at the time of the settlement.