National Union Fire Insurance Co. of Pittsburgh v. Seagate Technology, Inc.
466 F. App'x 653
9th Cir.2012Background
- Seagate appeals a district court judgment denying/disposing related to defense duties among insurers in a California-based coverage dispute.
- National, AIU, and AISLIC cross-appeal, seeking to uphold district court rulings that AIU had a defense duty and that other insurers’ defense duties terminated.
- The district court initially held a duty to defend based on the underlying complaint’s allegations.
- This court reverses the district court’s determination that AIU owed a duty to defend and that other insurers’ duties terminated; otherwise affirms remaining issues.
- The case involves whether a duty to defend existed, whether an excess insurer can have a defense duty, and related issues of bad faith, indemnity timing, and prejudgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend by AIU as excess insurer | Seagate argues AIU owed a duty to defend regardless of primary exhaustion. | AIU, as excess insurer, has no duty to defend until primary limits are exhausted. | AIU owed no defense duty; district court erred in finding AIU defended. |
| Continuation/termination of the duty to defend by other insurers | Allegations potentially triggered ongoing duty to defend; district court erred. | Primary insurers’ lack of defense or evolving facts could terminate duties. | Duty to defend did not conclusively terminate; district court erred in terminating it. |
| Bad faith denial of defense | Withholding defense constituted bad faith. | Denial was not unreasonable or without proper cause; investigation and policy comparison supported it. | No bad faith; denial was not unreasonable. |
| Indemnity and ripeness | If duty to defend exists, indemnity may follow; if not, no indemnity. | Indemnity issue is not ripe while duty to defend is unsettled. | Indemnity remains potentially ripe; not decided because duty to defend issue is unresolved. |
| Prejudgment interest related to invoices | Interest is appropriate from invoice dates where damages are calculable. |
Key Cases Cited
- Horace Mann Ins. Co. v. Barbara B., 846 P.2d 792 (Cal. 1993) (broad duty to defend when suit potentially seeks covered damages)
- Montrose Chem. Co. v. Superior Court, 861 P.2d 1153 (Cal. 1993) (duty to defend triggered by potential coverage; resolve in insured’s favor)
- Diamond Heights Homeowners Ass’n. v. Nat’l Am. Ins. Co., 277 Cal. Rptr. 906 (Cal. Ct. App. 1991) (excess insurer exhaustion rule; not liable where primary not exhausted)
- Ticor Title Ins. Co. v. Employers Ins. of Wausau, 48 Cal. Rptr. 2d 368 (Cal. Ct. App. 1995) (no defense duty for excess insurer if primary not exhausted)
- Certain Underwriters at Lloyd's of London v. Superior Court, 16 P.3d 94 (Cal. 2001) (potential indemnity/defense considerations when duty exists)
- Love v. Fire Ins. Exch., 271 Cal. Rptr. 246 (Cal. Ct. App. 1990) (bad faith standard requires unreasonable withholding of defense)
- Hanson v. Prudential Ins. Co. of Am., 783 F.2d 762 (9th Cir. 1985) (insurers’ denial alone not bad faith absent unreasonable withholding)
- Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264 (9th Cir. 2010) (de novo review of summary judgment; state-law interpretation per decisions)