Opinion ID: 800001
Heading Depth: 3
Heading Rank: 2

Heading: Equitable Contribution under Ohio Law

Text: OneBeacon contends that Ohio law permits targeted insurers to seek equitable contribution from non-targeted insurers in order to ensure that no one insurer is responsible for more than its fair share of the loss. In support of this contention, OneBeacon cites to two Ohio cases holding that targeted insurers, like OneBeacon, may seek contribution from responsible non-targeted insurers with applicable policies: Goodyear Tire & Rubber Co. v. Aetna Casualty & Surety Co., 95 Ohio St.3d 512, 769 N.E.2d 835 (2002), and Pennsylvania General Insurance Company v. Park-Ohio Industries, Inc., 179 Ohio App.3d 385, 902 N.E.2d 53 (2008) ( Penn General I ). These cases, OneBeacon argues, make clear that Ohio law permits contribution actions between insurers, and that the Ohio Supreme Court could have easily excepted settling insurers if it desired to do so. Unsurprisingly, AMICO disagrees and directs our attention to the words responsible and applicable which the Ohio Supreme Court used to modify the types of insurers from whom OneBeacon would be able to seek equitable contribution. AMICO argues that, under Ohio law, when an insurer settles with a policyholder, even if the settlement is for less than the policy limit, the underlying policy is exhausted. See Triplett v. Rosen, Nos. 92AP-816, 92AP-817, 1992 WL 394867, at  (Ohio Ct.App. Dec. 29, 1992) (finding that public policy considerations that generally favor settlements allowed a $300,000 policy to be exhausted even though the parties settled for only $200,000). AMICO is unable, however, to point to any Ohio case law indicating that an exhausted policy is not an applicable or responsible policy for equitable-contribution purposes or otherwise. Rather, AMICO points to the theoretical underpinnings of what exhaustion actually means, reiterating the established rule that a settled insurer with an exhausted policy is no longer liable to the policyholder. The natural extension of this rule, AMICO argues, is that it would be incongruous for a settled insurer's policy to be worthless to a policyholder, yet still a basis for equitable contribution by a non-settling insurer. Whether Ohio law permits non-settling insurers to target settling insurers for equitable contribution has not been answered definitively by Ohio courts, but it has been answered by district courts within this circuit and by other circuit courts. In diversity cases such as this, we apply state law in accordance with the controlling decisions of the state supreme court. Allstate Ins. Co. v. Thrifty Rent-A-Car Sys., Inc., 249 F.3d 450, 454 (6th Cir.2001). If the state supreme court has not yet addressed the issue presented, we must predict how the court would rule by looking to all the available data. Id.
In Goodyear, the plaintiff sued a number of insurers seeking a declaratory judgment on claims for pollution-cleanup costs. 769 N.E.2d at 839. The Ohio Supreme Court considered two methods for allocating insurance coverage among the insurers. Id. at 840. The first approach, favored by the plaintiff, was an all sums approach in which the plaintiff may target one insurer, up to the limits of that insurer's policy, for full coverage of the loss. The targeted insurer may then seek contribution from the other insurers for any amounts for which they are potentially responsible. This method places the onus on the targeted insurer, rather than on the policyholder. Under the second approach, the pro rata method, each insurer must pay only the portion of the claim for which it is deemed responsible. This places the burden on the policyholder to join all relevant parties in the lawsuit. The Ohio Supreme Court adopted the all sums approach, noting that such a rule promotes economy for the insured while still permitting insurers to seek contribution from other responsible parties when possible. Id. at 841. That Court further noted that the insurers bear the burden of obtaining contribution from other applicable primary insurance policies as they deem necessary. Id. In Penn General I, Park-Ohio, a coil manufacturer, sought coverage from its insurer, Pennsylvania General, for costs and claims arising out of asbestos exposure at various work sites. 902 N.E.2d at 55. Pennsylvania General sought equitable contribution from three non-targeted insurers (which had not settled), but the trial court denied that request because Park-Ohio and Pennsylvania General had failed to properly notify the other insurers of the claim. Id. at 57. The Ohio Court of Appeals reversed, finding that the Goodyear decision permitting equitable contribution under the all sums approach controlled, and that a decision leaving the whole of the claim obligation on Pennsylvania General would be inequitable. Id. at 58. That court further stated that [s]ince the doctrine of contribution has its basis in the broad principles of equity, it should be liberally applied. Id. at 59. The Ohio Supreme Court affirmed, finding that the notification failure did not result in prejudice to the nontargeted insurers. Penn. Gen. Ins. Co. v. Park-Ohio Inds., 126 Ohio St.3d 98, 930 N.E.2d 800, 808 (2010) ( Penn General II ). AMICO asserts that neither case reveals a willingness to allow non-settling insurers to seek contribution from settling insurers and that such a reading is strained at best. In Goodyear, AMICO notes that the Ohio Supreme Court used the words applicable and responsible to describe the types of insurers from whom non-settling insurers can seek contribution, and it argues that we ought to give meaning to those words.
Although we have not addressed this issue, two decisions from district courts within the circuit have had the opportunity to do so. In GenCorp, Inc. v. AIU Insurance Co., GenCorp, a polymer manufacturer, sought payment on claims arising from an environmental cleanup. 297 F.Supp.2d 995, 997 (N.D.Ohio 2003), aff'd 138 Fed. Appx. 732 (6th Cir.2005). The action was against excess insurers because GenCorp had already settled with its primary insurers and some of its excess insurers. Id. at 998-99. The remaining excess insurers argued that because the combined limits of the settled insurers' policies exceeded GenCorp's claim liability, their excess policies should not be triggered. Id. at 1000. Alternatively, the excess insurers argued that if they were liable, they ought to receive settlement credits for the full amount of all policy coverage available under the settlements, rather than the actual amounts of the settlements. Id. The district court rejected these arguments, holding that [t]he settlements extinguished all claims . . . against the primary insurers. The excess insurers, therefore, cannot seek contribution from GenCorp's primary insurers because those insurers have no remaining liability to GenCorp. Id. at 1007. OneBeacon seeks to distinguish GenCorp by pointing to statements from that decision that allude to the inequity that results from requiring a carrier to pay for more than its bargained-for share of liability. But no court is asking OneBeacon to pay more than its contracted-for share of liability; any amount that OneBeacon would pay, settlement credits or not, would be less than or equal to its policy limit. Another court in the Northern District of Ohio adopted a similar view in Bondex International, Inc. v. Hartford Accident & Indemnity Co., a case in which the policyholder sought payment on claims arising from asbestos-related injuries. No. 1:03-CV-01322, 2007 WL 405938, at  (N.D.Ohio Feb. 1, 2007). The insurers refused to pay because the named insured parties were the successors to the tortfeasors, and not the tortfeasors themselves. Id. Colony, a primary insurer, settled with the policyholder. Id. at -2. A group of non-settling insurers then sought contribution from Colony. Id. The district court found for Colony, basing its decision on Ohio's policy supporting the finality and encouragement of settlements, even if upholding such a settlement creates a detriment to non-settling parties. Id. at  (citing Krischbaum v. Dillon, 58 Ohio St.3d 58, 567 N.E.2d 1291, 1301-02 (1991)). Allowing such contribution, the district court found, would undermine the finality of settlements. Id. The court further found that non-settling insurers may still seek settlement credits to reflect amounts paid out by settling insurers, such that the policyholder does not receive a windfall and the non-settling insurer is not liable for more than its contracted-for share of liability. Id. This Court affirmed on other grounds. Bondex Int'l, Inc. v. Hartford Acc. & Indem. Co., 667 F.3d 669 (6th Cir.2011). OneBeacon argues that Bondex is distinguishable because the parties there were permitted to seek settlement credits, whereas the state trial court's decision here precluded settlement credits. OneBeacon does not, however, explain why the legal analysis in Bondex should change based on whether the targeted insurer was previously granted settlement credits. The district court in Bondex did state, in dicta, that the Colony settlement should reduce whatever award is made against [the non-settling insurers], 2007 WL 405938, at , but the question presented in this case is not whether OneBeacon ought to be able to receive a credit to reflect AMICO's settlement, but whether OneBeacon ought to receive actual financial contributions from AMICO. The district court's dicta in Bondex is not applicable to the instant proceeding.
AMICO, like the district courts in Bondex and in this case, cites to a Third Circuit case, Koppers Co., Inc. v. Aetna Casualty & Surety Co., in support of its position. 98 F.3d 1440 (3d Cir.1996). In Koppers, the plaintiff entered into settlement agreements with several of its primary insurers, leaving only excess insurers as litigating defendants. Id. at 1443. The district court eventually found for the plaintiff, holding the excess insurers liable for the full amount of the claim and, as here, did not reduce the verdict to account for the prior settlements. Id. On appeal, the Third Circuit agreed with the defendant-insurers that the district court erred when it did not grant the defendants settlement credits. Id. at 1449. The Third Circuit noted that in order to preclude a double recovery by the plaintiff, and to ensure that no one insurer pays more than its fair share, the court must either (1) reduce the judgment to account for the settling insurers' apportioned shares of liability, or (2) permit the non-settling insurers to seek contribution from the settling insurers and, in turn, permit the settling insurers to seek reimbursement from [the plaintiff]. Id. at 1452. The Third Circuit predicted that the Pennsylvania Supreme Court would choose the former rule, commonly referred to as the apportioned share set-off rule, or settlement credits. Id. In doing so, that court effectively barred non-settling insurers, like OneBeacon, from seeking equitable contribution from settling insurers, like AMICO. Such contribution, that court reasoned, would defeat the finality of the settlement between the settling insurer and the policyholder. Id. at 1453. The Third Circuit also held, which AMICO urges us to do as well, that a settlement with a primary insurer exhausts the coverage and triggers the excess policy. Id. at 1454. This rule encourages settlement and allows the insured to obtain the benefit of its bargain with the excess insurer, while at the same time preventing the insured from obtaining a double recovery. Id. Under this rule it is the insured, rather than the excess insurer, that must make up the loss between the settlement amount and the underlying policy limit. Id. OneBeacon notes that the Second Circuit rejected this position in Maryland Casualty Co. v. W.R. Grace & Co., 218 F.3d 204, 208-12 (2d Cir.2000). But OneBeacon fails to acknowledge that all of the litigating parties in W.R. Grace the ones seeking contribution and those from whom contribution was soughthad already settled with the insured and that the appellants' contribution claim ultimately failed. Id. at 208. The Second Circuit did note, however, that [t]he notion that any settlement by which an insurer obtains a release from its insured, regardless of its terms, insulates that insurer from all contribution claims, is untenable. Id. at 210. That court went on to conduct an analysis of the equities, attempting to answer whether one party [was] unjustly enriched at the expense of another. . . . Id. at 212. W.R. Grace does not discuss whether the underlying state law, New York's, favored policies that encouraged settlement. [2] And, the Second Circuit declined to adopt OneBeacon's main argument when it reviewed the district court's decision in that case. The district court, in citing to a state-court decision, noted that the state-court case establish[ed] nothing beyond the undisputed principle that a paying insurer can recover from a non-paying insurer. Id. at 209 (citation omitted). Here, OneBeacon argues that this undisputed principle also stands for the proposition that a non-settling insurer may seek contribution from a settling insurer. The Second Circuit, presented with this principle, could have based its decision on this alternative rationale, but chose not to do so.