Bad Faith Blog

An excess liability insurance carrier filed a state court declaratory judgment action seeking a declaration that a primary liability insurer was obligated to pay the entire judgment against the insured, as well as prejudgment interest and costs. After removal to federal court, the primary insurer counterclaimed seeking a declaratory judgment that the excess carrier was liable for equitable indemnity and equitable subrogation. The district court ruled that the primary insurer had a claim for equitable subrogation (not equitable indemnity), but that jury questions remained regarding whether the excess insurer had unreasonably refused to settle the underlying personal injury action within its policy limits.