Tracy Morgan Auto Crash Has Walmart, Insurers Navigating Courts Over Huge Settlement

In court documents, two insurance companies say that the comedian's resumption of his career runs contrary to previous representations given to them.
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More than two years after a Walmart truck driver plowed into a limousine van carrying comedian Tracy Morgan and others on the New Jersey Turnpike, the fight continues in court over who is responsible for picking up the costs of legal settlements.

In the aftermath of the July 7, 2014, crash, Walmart was hit with a lawsuit by Morgan, comedian Ardie Fuqua, as well as Morgan's assistant Jeffrey Millea and his wife, Krista Millea, claiming that the retail giant was careless and negligent by letting a sleep-deprived driver operate its motor vehicle. In May 2015, that lawsuit was settled a couple months after Walmart came to a separate $10 million deal to resolve claims from the children of late comedian James McNair.

Although the terms of Morgan's confidential settlement have never been revealed, it appears he got a huge pay-out. According to court papers filed by a couple of the insurers involved in the dispute, "more than 90% of the settlements entered into by Wal-Mart were for the Morgan and Fuqua claims," which given the other $10 million deal would seem to suggest that Walmart paid at least $90 million to Morgan and Fuqua to put the controversy to bed. 

But the dispute lingers on and now focuses on whether Ohio Casualty Insurance Company and Liberty Insurance Underwriters have an obligation to fund what they consider to be an "exorbitant settlement."

In an amended complaint that's been filed, Walmart is charged with not having properly investigated and evaluated the claims and not providing the insurers with written reports summarizing settlement negotiations. What's more, the insurers point to "post-settlement events" as factoring.

According to the insurers' lawsuit, "After Wal-Mart had paid the settlement amounts to Morgan, he resumed his entertainment career in a manner which was completely contrary to what Wal-Mart and its defense counsel had represented to the insurers in late April and throughout May 2015 would happen in demanding that the insurers consent to and fund this exorbitant settlement. For example, since mid-June 2015, Morgan has appeared on national TV, presenting an Emmy Award; hosting Saturday Night Live; appearing on Jimmy Kimmel Live!; appearing on the Tonight Show; filming scenes for an upcoming Hollywood feature; agreeing to start a half-hour comedy pilot on a cable network; and embarking on a multi-date comedy tour in cities throughout the United States and Canada."

Walmart has responded with counterclaims asserting that it made "extraordinary efforts" to keep insurers in the loop about the claims and settlement discussions and that the insurers delayed the settlement by making pretextual demands for more information. The retail giant also says it was exposed to additional financial harm by litigating the Morgan suit.

For example, in Sept. 2014, The Hollywood Reporter first revealed that Walmart was attempting to mitigate its liability by faulting Morgan for not wearing a seatbelt.

"Media and online commentators reacted overwhelmingly negatively to Wal-Mart's assertion of the seat belt defense," states the company in its counterclaims. "Wal-Mart's exposure to potential punitive damages, and the significant financial and reputational risks to Wal-Mart of litigating the Morgan Lawsuit, both combined to place Wal-Mart under economic duress."

The ongoing battle between Walmart and the insurers — which included a notice for a Morgan deposition last April — has been bouncing back and forth between state and federal court in the last 10 months.

Originally, in a lawsuit filed in a New Jersey state court last October, Ohio Casualty and Liberty Insurance sued Walmart and three other insurers refusing to make payments to fund the settlement.

In response, Walmart had the case removed to federal court with the claim that these other insurers were fraudulently joined to avoid diversity jurisdiction.

Last December, a federal judge decided to realign the parties as Walmart vs. the insurers and remand the case back to state court.

Then, last month, Walmart entered into a settlement with one of the parties — XL Insurance America, based in Delaware — and removed the case to a federal court for the second time. The retailer asserts that now that XL is no longer involved in the litigation, the case once again features complete diversity between plaintiffs and defendants, making it ripe for federal jurisdiction. 

On Wednesday, U.S. District Judge Louis Goodman is scheduled to have a teleconference with the parties to go over pending motions, documents being sought, deadlines and a possible motion by the insurers to throw it back to a state court.

Eventually, after the parties figure out where the legal fight takes place, the parties may get around to addressing the merits of the claims with more detail about the car crash, the settlement and who is really on the hook for what appears to be one of the biggest negligence settlements in the past few years.

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