IMG Worldwide, Inc. v. Great Divide Insurance Co.
704 F. App'x 562
| 6th Cir. | 2017Background
- IMG Worldwide was insured by Great Divide (primary CGL policy) and Westchester (excess/umbrella). Great Divide had primary duty to defend and unlimited defense-cost liability under its CGL policy; Westchester’s duty was excess and arose only if Great Divide failed or limits were exhausted.
- Plaintiffs sued IMG in Florida (2008). Both insurers refused to defend, claiming no “property damage.” IMG incurred roughly $8M in defense costs and later settled with the Florida plaintiffs.
- Great Divide settled with IMG in 2010 for $1,250,000 (allocating $250,000 to defense-cost reimbursement) and IMG released Great Divide. IMG then sued Westchester; a jury awarded IMG covered indemnity, and on appeal this Court held Westchester had a duty to defend once Great Divide refused.
- On remand Westchester sued Great Divide seeking equitable recovery of defense costs Westchester paid after defending IMG. The district court granted partial summary judgment for Westchester, applying equitable indemnification and ordering reimbursement (~$8M plus interest).
- Great Divide appealed, arguing (1) its settlement with IMG extinguished Westchester’s ability to recover from Great Divide and (2) Westchester failed to prove the elements for equitable indemnification (no close relationship/notice). The Sixth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (Westchester) | Defendant's Argument (Great Divide) | Held |
|---|---|---|---|
| Whether Westchester may seek equitable indemnification from Great Divide for defense costs it paid after Great Divide refused to defend | Westchester: Yes — Great Divide was primarily liable; fairness requires indemnification because Westchester paid costs Great Divide should have borne | Great Divide: No — its settlement with IMG released obligations and prevents Westchester from obtaining subrogation/indemnity; Westchester has no contractual subrogation rights | Held for Westchester: equitable indemnification allowed; settlement did not extinguish the third-party equitable claim |
| Whether equitable indemnification (rather than contribution or subrogation) is the appropriate remedy | Westchester: Indemnification fits because Great Divide was primarily liable and Westchester paid what Great Divide should have paid | Great Divide: Westchester’s claim resembles subrogation; parties lacked necessary relationship/notice for indemnity | Held: Equitable indemnification appropriate because Great Divide had primary duty to defend and defense costs accrued before IMG’s settlement |
| Whether Great Divide received a benefit or lacked notice (defeating equitable relief) | Westchester: Great Divide was on notice of the underlying suit and potential excess involvement; it intervened and had opportunities to protect its interests | Great Divide: It received no benefit and lacked sufficient notice/control to justify equitable relief; enforcing indemnity would overburden Great Divide after settlement | Held: Great Divide had notice and a close-enough relationship; equitable relief not barred by its settlement with IMG |
| Whether enforcing indemnity would undermine settlement sanctity or impose double liability | Westchester: Requiring primary insurer to pay what it should have paid does not impair settlements between insured and primary insurer | Great Divide: Judgment would make it pay more than its fair share and punish a valid settlement | Held: Court rejects this concern; indemnity restores fairness and does not jeopardize settlements here |
Key Cases Cited
- Goodyear Tire & Rubber Co. v. Aetna Cas. & Sur. Co., 769 N.E.2d 835 (Ohio 1995) (allocating liability among multiple insurers in certain coverage contexts)
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) (equitable restitution requires restoring particular funds or property in defendant’s possession)
- Motorists Mut. Ins. Co. v. Huron Rd. Hosp., 653 N.E.2d 235 (Ohio 1995) (discussing implied contracts of indemnity between related parties)
- Travelers Indem. Co. v. Trowbridge, 321 N.E.2d 787 (Ohio 1974) (distinguishing indemnity from contribution; indemnity compels complete reimbursement)
- Aetna Cas. & Sur. Co. v. Buckeye Union Cas. Co., 105 N.E.2d 568 (Ohio 1952) (equitable indemnity where primary refuses or fails to discharge obligation)