Source: http://dutytodefend.com/blue-ridge-reimbursement/
Timestamp: 2019-04-22 08:47:19+00:00

Document:
A liability insurer may settle a plaintiff’s lawsuit on behalf of and over the objection of its policyholder and then sue the policyholder for reimbursement of the amount of the settlement attributable to non-covered liability in order to avoid “unjust enrichment.” The insurer must satisfy three prerequisites to perfect a settlement reimbursement claim.
“[T]he prerequisites for seeking reimbursement for noncovered claims included in a reasonable settlement payment [are]: (1) a timely and express reservation of rights; (2) an express notification to the insureds of the insurer’s intent to accept a proposed settlement offer; and (3) an express offer to the insureds that they may assume their own defense when the insurer and insureds disagree whether to accept the proposed settlement.” In addition the settlement must be reasonable.
The law favors settlement, especially when it is “the most reasonable manner of disposing of the claim.” Code of Civ. Proc. §877.6 establishes a procedure by which trial court may satisfy due process of law to determine whether settlements are made in “good faith” and settlements are likely to be found to be reasonable if it is not “so far ‘out of the ballpark’ . . . as to be inconsistent with the equitable objectives of” the good faith settlement statute. While the Blue Ridge opinion did not assess the reasonableness of the insurer’s settlement, the means by which courts will assess the reasonableness of an insurer’s settlement that perfects a reimbursement claim will likely be consistent with these principles.
Standard liability policies include a “Separation of Insureds” provision that typically states: “[T]his insurance applies: . . . b. Separately to each insured against whom claim is made or ‘suit’ is brought.” Such a clause “creates an ambiguity which must be construed in favor of coverage that a lay policyholder would reasonably expect. A lay insured would reasonably anticipate that, under a policy containing such a clause, each insured’s coverage would be analyzed separately.” Thus, each of multiple policyholders should be treated separately as though each was the only policyholder, unaffected by the happenstance that others are also insured.
 Potter v. Pacific Coast Lumber Co. (1951) 37 Cal.2d 592, 602; Critz v. Farmers Ins. Group (1964) 230 Cal.App.2d 788, 800.
 Blue Ridge, supra, 25 Cal.4th at 501.
 LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1273 (LA Sound) (citations, quotation marks, and ellipses omitted).
 American Modern Home Ins. Co. v. Fahmian (2011) 194 Cal.App.4th 162, 164.
 Merritt v. Reserve Ins. Co. (1973) 34 Cal.App.3d 858, 870.

References: §877
 v. 
 v. 
 v. 
 v. 
 v.