After Establishing That It Did Not Have A Duty To Defend, Insurer Was Entitled to Reimbursement From The Insured of Previously Paid Defense Costs
Great Am. Ins. Co. v. Chang, 2013 U.S. Dist. LEXIS 159197 (N.D. Cal. Nov. 6, 2013)
In Chang, the district court held that an insurer was entitled to reimbursement of uncovered defense costs even though the general liability policy did not contain a provision expressly providing for such reimbursement.
The insurance coverage dispute in this case arose from underlying state court actions and government orders concerning the alleged contamination of a San Mateo, California property owned by the Changs. Great American agreed to defend Chang and his wife under a reservation of rights and sought declaratory relief and reimbursement. After receiving a ruling that it never had a duty to defend the Changs in the underlying actions, the carrier moved for summary judgment on its reimbursement count.
The Changs raised four main arguments in opposition to Great American’s motion, all of which the court rejected. First, the Changs argued that they were entitled to coverage under the Great American policies. The court, however, had previously rejected that argument when it determined that Great American never had any duty to defend, and it refused to amend its decision on that issue. Second, the Changs argued that the Great American policies do not provide for reimbursement. The court, however, pointed out that the California Supreme Court addressed that issue in Buss v. Superior Court, 16 Cal. 4th 35 (1997), holding that the insurer’s right to reimbursement of defense costs not even potentially covered under the insurance policy “is implied in law as quasi-contractual, whether or not it has one that is implied in fact in the policy as contractual.” Id. at 51. Third, the Changs argued that Great American should first seek reimbursement from the Changs’ other insurers. The court held that this argument was rejected in Burlington Insurance Co. v. Alan, 2013 U.S. Dist. LEXIS 31051, at *7 (N.D. Cal. Mar. 5, 2013), and it rejected the Changs’ position on those same grounds. Finally, the Changs argued that the timing of Great American’s motion was problematic because trials in the Changs’ other litigations were imminent. The district court, however, concluded that the “pertinent question is whether Great American is entitled to reimbursement, not what impact reimbursement will have on the Changs.” 2013 U.S. Dist. LEXIS 159197, at *9-10.
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