The Influence Of Settlements On Contribution Claims


Originally Published in Insurance Law360 on 3-16-2012

Disputes among insurers regarding claims for contribution are not new, but appear to be on the increase. Whether it involves disagreements among primary liability insurers regarding their respective defense or indemnity obligations for various long tail exposures, such as asbestos, or among all risk and boiler and machinery insurers regarding responsibility for first party property damage, insurers are increasingly joining issue over their respective rights and obligations. As a result, insurers are also more frequently confronting issues relating to the effects of settlement agreements on contribution claims against other insurers. One issue that arises is how an insurer can structure a settlement with its insured so as to preserve to the fullest extent possible contribution claims against non-settling insurers.

Recently, a California federal court’s decision in MGA Entertainment Inc. v. The Hartford Group, et al., Case No. ED CV 08-0457 (C.D. Calif. Feb. 24, 2012) (Order Granting Lexington and Chartis Excess Insurers’ Motions for Summary Judgment) illustrated both the potential pitfalls for a settling insurer who later brings an equitable contribution claim and the means by which the settling insurer can preserve its contribution rights. In that case, the insured, MGA Entertainment, filed separate lawsuits against its insurers, including Lexington Insurance Co. and Evanston Insurance Co., arising from a coverage dispute surrounding the defense of MGA Entertainment in its well-publicized trade secrets battle with Mattel Inc. over the popular Bratz doll line.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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