Opinion ID: 2610859
Heading Depth: 3
Heading Rank: 1

Heading: The Attorney's Fees Incurred in the Defense of Wade.

Text: Progressive maintains that American General cannot recover the costs incurred in defense of Wade. It argues American General as a subrogated insurer has only the rights Wade would have against Progressive and is entitled to recover only the amount actually paid out to discharge the obligation. Because Wade paid no attorney's fees and therefore has no right to fees against Progressive, American General has no such right. We reject this argument. We have already determined that Progressive had a duty to defend, and, because of the nature of the coverages involved, the obligation fell exclusively to Progressive. It refused to fulfill its obligation, forcing American General to continue defense or potentially subject itself to liability for breach of its good faith and fiduciary obligations to Wade. Progressive's breach of its duty did not relieve it of its obligations, even though the defense was undertaken by the other insurer. See Price, 101 N.M. at 442-43, 684 P.2d at 528-29 (secondary insurer not relieved of obligation to defend, even though primary insurer provided defense); Lujan, 84 N.M. at 238, 501 P.2d at 682 (insurer liable to insured for reasonable expenses incurred in defense for breach of duty to defend). If Wade had provided the defense himself, Progressive would have been liable for his attorney's fees. American General undertook the defense, as it undertook to pay the settlement, and as subrogee it is able to assert these costs against Progressive. We have previously determined that an excess insurer exposed to liability by virtue of its coverage that has undertaken a defense has the right to be reimbursed for those costs under a theory of subrogation against the primary insurer that refused to defend, State Farm Mutual Automobile Insurance Co. v. Foundation Reserve Insurance Co., 78 N.M. 359, 431 P.2d 737 (1967). It would certainly be anomalous in a situation like this where the defending insurer was ultimately not responsible for coverage to not require the insurer responsible for coverage to bear the costs of defense.