Opinion ID: 2100698
Heading Depth: 1
Heading Rank: 7

Heading: Equitable Contribution verses Equitable Subrogation

Text: [¶ 16.] NFU has never denied that both its primary policy and umbrella policy covered this risk and that it would have to pay a significant portion of the damages, and NFU accepted this responsibility. The trial court's declaratory judgment found that before NFU settled the claim, it put Farm & City on notice that it would be seeking contribution. Farm & City maintained that it was not liable because its policy was last in priority. Based on the stipulated facts of this case, the trial court ruled that the parties were only concurrently liable and applied the doctrine of equitable contribution as the ground for NFU's reimbursement from Farm & City. However, this Court has found that Farm & City was primarily liable in relation to the NFU umbrella policy. It is well settled that one secondarily liable, who is forced to pay because of the refusal, or failure after demand, of the one primarily liable to discharge the obligation, has the right of indemnity from the one primarily liable. Maryland Cas. Co. v. American Family Ins. Group of Madison, Wis., 199 Kan. 373, 385, 429 P.2d 931, 941 (1967) (citing Aetna Cas. & Sur. Co. v. Buckeye Union Cas. Co., 157 Ohio St. 385, 392, 105 N.E.2d 568, 571-72). Consequently, equitable contribution is not the appropriate ground for relief under the circumstances of this case. [2] However, since Farm & City was, in fact, primarily liable, the doctrine of equitable subrogation is the appropriate ground for reimbursement. [¶ 17.] Equitable subrogation applies when an insurer has paid the principal debtor's obligation to the common underlying claimant, and thereafter succeeds to the claimant's rights against the principal debtor.... This doctrine encompasses actions in which an excess insurer sues a primary insurer for reimbursement. Progressive Ins. Co. v. Universal Cas. Co., 347 Ill.App.3d 10, 19, 282 Ill.Dec. 953, 961, 807 N.E.2d 577, 585 (2004) (citing T. Hamilton & T. Stark, Excess-Primary Insurer Obligations and the Rights of the Insured, 69 Def. Couns. J. 315, 318 (2002)); See also Church Mut. Ins. Co. v. Smith, 509 N.W.2d 274, 276-77 (S.D.1993) (discussing excess insurer's recovery of attorney's fees from primary insurer by subrogation). Accordingly, NFU is entitled to recover under the equitable remedy of subrogation. [¶ 18.] We hold that NFU is entitled to reimbursement in the amount of the Farm & City policy limits. Therefore, we reverse and remand for the trial court to enter a judgment in favor of NFU in the amount of $50,000 plus interest. In addition, as the prevailing party NFU is entitled to costs and disbursements under SDCL 15-17-37. [¶ 19.] GILBERTSON, Chief Justice, and SABERS, KONENKAMP, and ZINTER, Justices, concur.