Stewart Smith Defeats $9 Million Equitable Contribution Claim

National law firm Stewart Smith has prevailed in an insurance coverage matter on behalf of two insurer clients involving an equitable contribution claim filed by two other insurers. While the case was venued in North Carolina, New York law applied. The insurers provided excess insurance coverage to the policyholder, which was facing numerous asbestos-related bodily injury claims. Various issues were litigated, including what allocation methodology applied, and the Court previously granted Stewart Smith’s motion seeking a ruling that defense costs under the clients’ policies were paid within limits.  

Two other insurers, which had been paying defense costs on behalf of the policyholder, brought contribution claims against Stewart Smith’s clients. They claimed they were entitled to be reimbursed over $9 million to cover their alleged overpayment of defense costs caused by the failure of Stewart Smith’s clients to pay defense costs.  While the equitable contribution case was pending, Stewart Smith’s clients settled with the policyholder, paying the indemnity limits of their triggered policies.

Despite the settlement, the other insurers refused to dismiss their contribution claims, asserting they were entitled to amounts in excess of policy limits as a matter of “equity.” The case presented a novel situation in which insurers were arguing that other insurers owed them millions of dollars in excess of limits based on equitable contribution. Obviously, cases seeking extracontractual damages are typically between an insured and insurer and involve allegations of bad faith that were not at issue here.

After Stewart Smith deposed the other insurers’ corporate representative, the firm filed and argued a motion for summary judgment asserting that, because their clients had paid the full limits of their policies, they had no further obligation to any party under New York law, let alone other insurers. The Court agreed with Stewart Smith’s argument and granted the firm’s motion on December 15, 2021. 

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