Century Indemnity Co. v. London Underwriters

This case presents the following question. When a primary insurer pays $500,000 of its insured’s $1.1 million settlement of a claim against the insured, and when the insured’s excess insurer pays the remaining $600,000 of the claim, and when the insured recovers indemnification of $500,000 from a third party, which of the two insurers is entitled to be reimbursed with the $500,000 received from the third party? Or do the two insurers receive pro rata shares of that $500,000? We hold that, on the facts of this case, the trial court’s judgment awarding the $500,000 to the excess insurer was correct.

A more detailed account of the facts leading up to the judgment is as follows.

On August 19, 1985, Donald T. Wells was electrocuted while working as an employee of Cates Transportation, Inc. (hereinafter Cates) on a worksite operated by Montgomery Drilling Company (hereinafter Montgomery). Cates was a subcontractor of Montgomery. Wells’s heirs brought a suit for wrongful death (hereinafter the Wells action) against Montgomery and others.

Prior to the electrocution of Wells, Montgomery had acquired two policies of insurance, both of which were in force and effect at the time…