812 F.3d 1147
8th Cir.2016Background
- Valspar (manufacturer) faced benzene-related suits; Continental and National Union were among several primary insurers implicated.
- Continental defended Valspar and sought contribution from other insurers; National Union refused, citing a fronting arrangement under which Valspar would bear defense costs.
- Continental sued National Union for a declaration that National Union had a duty to defend and must contribute to defense costs; Valspar intervened because it might have to reimburse National Union.
- The district court held National Union had a duty to defend and ordered National Union to pay one-seventh of Continental’s defense costs; Valspar appealed that ruling.
- The appeal centers on whether National Union’s contractual arrangements (fronting/reimbursement obligations to Valspar), Continental’s agreements with Valspar, or Continental’s alleged payment failures defeat Continental’s right to equitable contribution from National Union.
Issues
| Issue | Plaintiff's Argument (Valspar) | Defendant's Argument (Continental/National Union) | Held |
|---|---|---|---|
| Whether National Union had a duty to defend under Minnesota law | National Union’s fronting arrangement meant it had no duty to defend or pay, only Valspar did | Policy language conferred the right and duty to defend on National Union despite reimbursement/indemnity arrangements | National Union had a duty to defend; duty may exist independent of who ultimately pays |
| Whether an insurer with a duty to seek contribution when it may recoup from the insured | Requiring contribution from National Union is equivalent to requiring Valspar to contribute, contradicting the court’s ruling that Continental cannot sue Valspar directly | Contribution among insurers is distinct; Continental sues National Union, not Valspar, and insurers with overlapping duties should share costs | Contribution claim against National Union is permissible even if National Union may later seek indemnity from Valspar |
| Whether Continental’s agreement not to recover from Valspar bars contribution from National Union | Continental’s promise not to sue Valspar should preclude recovery that indirectly burdens Valspar | The agreement not to sue Valspar does not waive Continental’s independent right to seek contribution from other insurers | Agreement with Valspar does not prevent Continental from suing National Union for contribution |
| Whether Continental’s alleged breaches of its duty to defend preclude equitable contribution | Continental delayed or failed to reimburse small amounts, so equity should bar contribution | Continental provided the defense and paid the vast majority; minor disputes don’t amount to breach that bars contribution | Minor payment disputes did not constitute a breach sufficient to deny equitable contribution |
Key Cases Cited
- Cargill, Inc. v. Ace Am. Ins. Co., 784 N.W.2d 341 (Minn. 2010) (primary insurer with duty to defend has equitable right to seek contribution from other primary insurers with a duty to defend)
- Eng’g & Constr. Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695 (Minn. 2013) (clear policy language is enforced according to plain meaning)
- Liberty Mut. Ins. v. Pella Corp., 650 F.3d 1161 (8th Cir. 2011) (duty to defend can require insurer to conduct and control the defense)
- Murray v. Greenwich Ins. Co., 533 F.3d 644 (8th Cir. 2008) (insurer’s obligation to defend encompasses more than mere payment)
- Wooddale Builders, Inc. v. Md. Cas. Co., 722 N.W.2d 283 (Minn. 2006) (insurer contractually required to defend cannot seek contribution from another insured for the defense it owes)
- Aerojet-Gen. Corp. v. Transp. Indem. Co., 948 P.2d 909 (Cal. 1998) (fronting arrangements can eliminate an insurer’s duty to defend under the policy at issue)