127 F. Supp. 3d 649
E.D. La.2015Background
- Ameraseal and its employee Thomas were insured by ASIC (primary $1,000,000) and RSUI (excess $4,000,000). Plaintiff Barrow sued after a 2010 car accident; state court granted partial summary judgment on liability against Thomas.
- ASIC (primary) negotiated and offered its policy limits in February 2012 in exchange for a release that referenced the customary Gasquet procedure and left the insureds as nominal defendants.
- Barrow accepted ASIC’s offer; contemporaneous settlement drafts and communications referenced Gasquet-style releases and intent that the insureds have no further personal exposure.
- RSUI later paid Barrow $2,000,000 to resolve excess exposure and sued ASIC alleging ASIC’s bad faith defense forced RSUI to pay that amount.
- The Fifth Circuit reversed a summary judgment dismissal and remanded; after a bench trial the district court considered (1) whether the ASIC/Barrow settlement was a valid Gasquet release and (2) causation (whether ASIC’s conduct caused RSUI’s payment).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the ASIC/Barrow settlement constituted a Gasquet release of the insureds | RSUI: release language did not bar Barrow from collecting up to $4M from insureds; thus insureds still had a claim against ASIC | ASIC: parties used Gasquet language and intended insureds to be fully protected from personal exposure; insureds remained only nominal defendants | Court: Ambiguous text resolved by parol evidence — found by preponderance that parties intended a Gasquet release; insureds had no personal exposure |
| Whether RSUI can recover from ASIC by subrogation if insureds have no claim against ASIC | RSUI: Great Southwest allows recovery where primary’s bad faith increases excess exposure; collateral-source or policy reasons should not bar recovery | ASIC: Under Great Southwest/Gibbs, excess can recover only by subrogating to insureds’ rights; a full Gasquet release leaves insureds with no claim to subrogate | Court: Because Gasquet release extinguished insureds’ exposure, insureds had no claim against ASIC; RSUI therefore cannot subrogate and recover |
| Causation — whether ASIC’s alleged bad faith caused RSUI to pay $2M | RSUI: ASIC’s failure to defend/settle earlier increased value and forced larger excess payment; ASIC abandoned viable defenses (comparative fault) | ASIC: Barrow’s injuries, venue, and counsel made value > primary limits regardless; RSUI failed to show any measurable decrease from different defense | Court: RSUI failed to prove by preponderance that any ASIC conduct caused payment increase; trial evidence showed Barrow’s valuation was $4–5M and unlikely to settle for primary limit |
| Remedy / Entitlement to full amount RSUI paid | RSUI: seeks full $2M it paid as subrogated recovery | ASIC: not liable; no duty to RSUI and no subrogatable claim exists | Court: Judgment for ASIC; RSUI’s claims dismissed and costs assessed to RSUI |
Key Cases Cited
- Great Southwest Fire Ins. Co. v. CNA Ins. Cos., 557 So.2d 966 (La. 1990) (establishes that an excess insurer recovers from primary only by subrogation to insured's rights for damages caused by primary's bad faith)
- Gasquet v. Commercial Union Ins. Co., 391 So.2d 466 (La. App. 4 Cir. 1980) (approves settlement form releasing primary and insured while reserving claims against excess — the ‘‘Gasquet’’ release)
- RSUI Indem. Co. v. Am. States Ins. Co., 768 F.3d 374 (5th Cir. 2014) (appellate opinion clarifying need to prove causation for excess subrogation claims)
- Gibbs v. Liberty Mut. Ins. Co., 902 F.2d 361 (5th Cir. 1990) (concludes excess cannot recover where insured was fully released and had no liability to subrogate)
- St. Paul Ins. Co. of Bellaire, Tex. v. AFIA Worldwide Ins. Co., 937 F.2d 274 (5th Cir. 1991) (post-Great Southwest discussion of subrogation requirements between primary and excess insurers)