American Continental Insurance v. American Casualty Co. of Reading, PA.

The issue in this case is the allocation of responsibility

between insurers for settlement of an underlying action for wrongful death. The defendant hospital and defendant nurse were found jointly liable by jury verdict. The verdict did not allocate fault. Both the hospital and its employee, the nurse, were covered by primary and excess insurance policies issued by American Continental Insurance Company (American Continental). The nurse also was covered by an individual policy issued by American Casualty Company of Reading, Pa. (American Casualty). American Continental paid the entire settlement of the underlying case, then obtained a judgment from the trial court in this action for declaratory relief requiring American Casualty to reimburse it for the amount it paid in excess of the first $1 million of the settlement.

As originally briefed, the parties argued over their rights of subrogation. American Casualty argued that American Continental, as the hospital’s insurer, must pay the entire amount because the hospital was ultimately liable in the underlying action under Labor Code sections 2800 and 2802. 1 These statutes require an employer to indemnify its employee for…