Westport Insurance Corp. v. California Casualty Management Co., No. 17-15924 (9th Cir. 2019)
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The Ninth Circuit affirmed the judgment of the district court in this dispute between two insurance companies that arose after the settlement of certain claims brought against their insureds, holding that Cal. Gov’t Code 825.4 did not preclude Westport Insurance Corporation’s lawsuit against California Casualty Management Company and that the district court did not err in its judgment on all the remaining issues raised on appeal.
This diversity insurance coverage action concerned claims for $15.8 million brought by three former students against a school district and three of its school administrators. Westport defended and settled the claims for $15.8 million and sought repayment from California Casualty, the administrators’ insurer. The district court found California Casualty liable for $2.6 million plus prejudgment interest. The Ninth Circuit affirmed, holding (1) section 825.4 did not preclude Westport’s claim; (2) California Casualty’s claim that it was not obligated to contribute to the settlements under its policy was contrary to the plain test of its policy; (3) California Casualty’s challenge to the apportionment of liability with Westport was unavailing; and (4) the district court did not abuse its discretion in awarding prejudgment interest at ten percent from the dates Westport paid the settlements.
Court Description: California Insurance Law The panel affirmed the district court’s summary judgment entered in favor of Westport Insurance Company in a diversity insurance coverage action concerning claims for $15.8 million brought by three former students against Moraga School District and three of its school administrators. Westport, the primary and excess insurer of the District, defended and settled the claims for $15.8 million, and sought repayment from the administrators’ insurer, California Casualty Management Company. The district court found California Casualty liable for $2.6 million of the $15.8 million paid to the underlying plaintiffs collectively. California Casualty asserted that California Government Code § 825.4, which prohibits public entities from seeking indemnification from its employees, barred Westport’s lawsuit because the administrators were public employees, and therefore, the District must defend and pay the entire settlement fee without California Casualty’s contribution. The panel held that § 825.4 did not preclude Westport’s claim because § 825.4 does not contain a blanket ban on an employee’s insurer contributing to the employee’s defense and settlement costs. The panel further held that, here, the obligation to defend and indemnify still rested with the public entity and its insurer despite contribution from the employee’s insurance.
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