Bad faith suit stemming from motel rape settles for $4M

A bad faith and tortious interference suit between a motel manager and a 16-year-old who was raped in his motel has settled for $4 million.

The plaintiff was raped by two assailants at a motel after the resident-manager negligently gave the assailants a key to a vacant room and permitted them to take the victim into it, according to information provided by the plaintiff’s attorney, Matthew O’Grady of the O’Grady Law Firm in St. Louis.

The motel’s insurance carrier initially defended the manager under a reservation of rights, citing an exclusion for assault and battery in the policy.

The manager rejected the reservation of rights and demanded a full defense and indemnity through his personal counsel.

The insurer purported to agree to withdraw the reservation of rights, but later stated in a letter to the manager’s attorney the defense would be subject to the policy conditions and exclusions, according to information provided by O’Grady.

Six weeks after the letter, the insurer filed a motion for summary judgment against the manager in a declaratory judgment action on the policy, despite earlier promises to dismiss the manager from the declaratory judgment action.

After learning about the motion, the manager and plaintiff entered into a 537.065 settlement agreement, determining that the motion for summary judgment inside the declaratory judgment was a denial of coverage.

The insurer dismissed the manager from the declaratory judgment action after being advised of the agreement, but the insurance defense counsel appointed by the insurer refused to withdraw after being instructed by the manager and his personal counsel.

O’Grady said the insurer instead sent the insurance defense counsel to find the manager and discuss if the agreement was what he really wanted. They met three times and reviewed the agreement.

The manager went on to breach the agreement and refused to cooperate with his obligations under it, prompting the plaintiff’s bad faith and tortious interference suit.