Friday, February 12, 2010

U.S. District Court orders equitable contribution under Texas law

In Stonewall Ins. Co. v. Travelers Cas. & Sur. Co., __ F. Supp.2d __, 2010 WL 6395 (D. Mass.) several insurers were on the risk for silicosis claims brought against Jacksonville Shipyards, Inc. The insurers attempted to coordinate a strategy for dividing the defense costs, but could not agree on how to reduce and allocate the costs. They all recognized, however, that the defense costs were exorbitant.

The impasse caused one of the insurers, S & S, to take control of the litigation on behalf of all of the insurers. The London Insurers refused to cooperate with S & S and disclaimed an responsibility for defense costs paid by S & S.

Judge Harrington of the United States District Court for the District of Massachusetts held that under Texas law the London Insurers were required to equitably contribute to the defense costs, which means that "where one insurance company paid in full for losses that are also covered by another insurance company, the paying insurance company can obtain contribution from the-nonpaying insurance company."

Judge Harrington held that the London Insurers must reimburse S & S 30 percent of teh defense costs. According to Judge Harrington, that figure was derived from tje percentage S & S stated in its answers to interrogatories that the London Insurers owed. (Presumably the answers to interrogatories contained back up figures for this assertion, although the opinion does not make that clear.)

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