California Court Addresses Payment of Self-Insured Retention

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In its recent decision in National Fire Ins. Co. of Hartford v. Federal Ins. Co., 2012 U.S. Dist. LEXIS 641 (N.D. Cal. Jan. 4, 2012), the United States District Court for the Northern District of California had occasion to consider the issue of whether an insured was required to satisfy a self-insured retention with its own funds, or whether the retention could be paid by other insurance.

The insured in National was a restaurant located within a hotel. The restaurant hosted a graduation party at which a three-year old girl fell to her death from a balcony. The girl’s family brought a wrongful death suit, initially against the hotel only, which was insured by Federal Insurance Company. The hotel tendered its defense to National, the primary insurer for the restaurant, on the basis that the hotel qualified as an additional insured under the restaurant’s policy. While National initially denied coverage to the hotel, it later paid its policy limit to plaintiffs in order to secure a settlement on behalf of the restaurant and the hotel. National then brought a contribution claim against Federal...

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