Great American Assurance Company v. Zurich American Insurance Company

Background

The dispute involved three insurers that issued policies to Webcor Builders, the general contractor for the Millennium Tower. Great American issued a $25 million excess-liability policy for the June 30, 2008, to June 30, 2009 policy period. Zurich issued a primary $1 million policy for that period, and Westchester provided the first excess layer above Zurich, with a $25 million limit.

The underlying Millennium Tower litigation was resolved through a confidential global settlement. Zurich paid its remaining limit of $445,806, Westchester paid $23 million from its policy for the 2008–2009 period, and Great American paid its $25 million limit under a reservation of rights. Great American then sought reimbursement from Zurich and Westchester under equitable subrogation and equitable indemnity. Great American had originally asserted equitable contribution but agreed that claim was inapplicable on these facts.

Great American’s motion

Great American argued that the principal subsidence damage began during the 2007–2008 policy period, before Great American’s policy was issued. It relied on California insurance decisions concerning an insured’s selection of a policy period and the allocation of responsibility among insurers. The court held that those decisions did not require Great American to pay first and seek reimbursement later because Great American was asserting that its own policy did not provide coverage for the damage at issue.

The court nevertheless concluded that those decisions did not prevent Great American from pursuing any equitable remedy otherwise available. Equitable subrogation allows an insurer that paid a debt allegedly owed primarily by another insurer to pursue the insured’s rights against that insurer. Equitable indemnity allows a party that paid an obligation allegedly belonging entirely to a co-insurer to seek repayment in its own right.

The court denied Great American’s motion for summary judgment. Even assuming Great American had shown that the damage triggered coverage under the 2007–2008 insurance tower, it had not shown that its $25 million payment was an obligation that Westchester was primarily required to pay. The court also rejected Great American’s argument that a release between Westchester and Webcor created a basis for imposing liability beyond Westchester’s policy limits.

The court further held that Zurich’s motion for summary judgment had to be granted. Although the complaint asserted reimbursement claims against Zurich, Great American’s briefing did not argue that Zurich owed any reimbursement or identify another basis for Zurich’s liability.

Westchester’s motions

Westchester argued that equitable indemnity was unavailable as a matter of law and sought judgment on the pleadings and summary judgment. The court declined to hold that Great American was categorically barred from pursuing equitable indemnity, citing California authority allowing the theory when one party pays a debt that another was primarily responsible for paying and equity requires repayment. Westchester therefore was not entitled to judgment on that categorical theory.

Westchester also argued that Great American could not establish how the confidential global settlement payments should be allocated among different types of damage, including subsidence damage. The court found that Westchester had shown allocation might ultimately be difficult or impossible, but had not established that Great American’s claims failed as a matter of law at that stage. The court therefore denied Westchester’s summary-judgment motion.

Other motions and disposition

The court granted Zurich’s motion to strike Westchester’s unauthorized response to Zurich’s summary-judgment motion. It also granted Zurich’s request to file a reply addressing evidentiary objections, and granted the parties’ sealing motions.

The court’s conclusion states that Zurich’s summary-judgment motion was granted, the remaining substantive motions were denied, and the procedural motions identified in the order were granted.