District Court Holds that an Insurer’s Claim for Equitable Subrogation Against an Insured’s Co-Defendant Failed Because the Insurer Did Not Claim the Co-Defendant Caused the Underlying Damage at Issue
Guidry v. U.S. Department of the Interior , 2014 U.S. Dist. LEXIS 24787 (N.D. Cal. Feb. 25, 2014)
In Guidry, the district court held that, in an action where an underlying co-defendant (the “conservancy”) breached a contract by failing to name the other underlying co-defendant (the “tour company”) as an additional insured under its insurance policy, the tour company’s insurer could not maintain a claim for equitable subrogation to recover all the underlying defense costs it paid because it did not allege that the conservancy’s negligence was the cause of the accident that led to the underlying lawsuit.
In Guidry, the insured tour company was hired by a national park conservancy. As part of their contract, the conservancy was to add the tour company as an additional insured to the conservancy’s insurance policy, but failed to do so. Following a tram accident, the tour company was sued and its insurer accepted coverage. The conservancy’s insurer denied coverage, however, because the tour company was not an insured under that policy. The tour company’s insurer (through the tour company) filed a claim for equitable subrogation against the conservancy, alleging that the conversancy should be responsible for the defense of the tour company due to its failure to add the company to its policy.
The district court found that the insurer could not maintain its subrogation action because the basis for the action was not that the conservancy caused the conduct that led to the tram accident, but that the conversancy wrongfully failed to obtain insurance for the tour company. The court reasoned that, in this situation, the insurer could not claim to be in a superior equitable position to the conservancy in regard to the tram accident, meaning its claim could not succeed. The court also rejected the argument that merely being involved in the underlying wrongdoing—through the hiring of the tram company—was enough to establish liability because the case law allowing an insurer to seek subrogation involved situations where the defendant allegedly caused the damage at issue.
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