Opinion ID: 800001
Heading Depth: 4
Heading Rank: 3

Heading: Other federal cases

Text: 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.