Ace American Insurance Co. v. Fireman's Fund Insurance Co.

INTRODUCTION

A film industry worker was seriously injured on a film set. His employer had two primary insurance policies with Fireman’s Fund Insurance Company, and an excess insurance policy with Ace American Insurance Company. The injured worker sued, Fireman’s Fund defended the case, and the case eventually settled with the participation of and contributions from both insurers.

Ace American then sued Fireman’s Fund for equitable subrogation, alleging that the injured worker initially offered to settle his case within the limits of the Fireman’s Fund policies, and that Fireman’s Fund unreasonably rejected those settlement offers. Ace American alleged that as a result, it was required to contribute to the eventual settlement, which exceeded the limits of the Fireman’s Fund policies.

The question before us is whether Ace American has stated viable causes of action for equitable subrogation and breach of the duty of good faith and fair dealing, or whether the lack of a judgment in the employment injury case bars Ace American’s claims. We find that because Ace American, the excess insurer, alleged it was required to contribute to the settlement of the underlying case due…