RLI Ins. Co. v. CNA CAS. OF CALIFORNIA

A primary insurer and an excess insurer each paid $1 million to settle a claim against their insured, who was involved in a fatal traffic accident. After the case against the insured settled, the excess insurer brought this equitable subrogation action against the primary insurer, alleging that the primary insurer unreasonably refused an offer to settle the tort claim against the insured for an amount within the primary insurer’s $1 million policy limit.

The trial court correctly granted judgment on the pleadings in favor of the primary insurer. The excess insurer cannot maintain a subrogation action against the primary insurer, based on an unreasonable refusal to settle the underlying tort claim, because the tort claim did not go to trial, and no excess judgment was entered against the insured. We decline to follow a contrary rule set forth in Fortman v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1394 [ 271 Cal.Rptr. 117 ] (Fortman).

FACTS

Appellant RLI Insurance Company and respondent CNA Casualty of California are liability insurers for Jim Aartman, Inc. (Aartman). CNA provides Aartman with $1 million in primary coverage under a general liability policy. RLI provides…