HIGHLANDS INSURANCE CO., Plaintiff-Appellee, v. CONTINENTAL CASUALTY CO., Defendant-Appellant

In this diversity action based on California law, primary insurer Continental Casualty Co. appeals from a judgment of the district court that it failed to negotiate a claim settlement in good faith and was therefore liable for the amount paid by excess carrier Highlands Insurance Co. Continental also appeals the district court’s prioritization of the four insurance policies involved, its ruling that Continental could not present evidence of comparative fault, and its award of pre-judgment interest. We have jurisdiction pursuant to 28 U.S.C. § 1291 , and we affirm.

I. Factual Background and Proceedings Below

On July 19, 1989, on Highway 126 in California, a car driven by Petra Hernandez collided with a pickup truck driven by Hector Diaz. Diaz caused the accident by negligently crossing over a double yellow line. Hernandez died instantly. Clarke Contracting owned the pickup truck, and Diaz was driving it within the scope of his employment for a joint venture between Lew Construction and Clarke.

Four different insurance policies applied to the accident — two insuring the truck (taken out by Clarke) and two insuring Diaz as a permissive driver (taken out by the joint venture).…