Wal-Mart Stores Inc., National Union Insurance Company of Pittsburg v. RLI Insurance Company
Published: Jun. 14, 2001 | Result Date: Mar. 23, 2001 | Filing Date: Jan. 1, 1900 |Case number: 995074 – $0
Facts
This case arose out of a personal injury product liability action filed on May 15, 1998 entitled Boykin et al. v.
Wal-Mart Stores, Inc. in San Diego County Superior Court. The product at issue was a torchiere style halogen
floor lamp which was allegedly distributed by Cheyenne Industries, Inc. and sold by Wal-Mart in April or May
of 1997 to the mother of a five-year-old child. The bulb of the halogen lamp allegedly exploded, lighting a
residential fire that started in the bedroom of the five-year-old child, Jazmin Boykin. Jazmin suffered severe
injuries, including second and third degree burns over 80 percent of her body. JazminÆs mother and aunt also
suffered injuries, but to a lesser extent. Although primary emphasis in the underlying action was given to the
product liability claims concerning the allegedly defective lamp, the Boykin plaintiffs also claimed that Wal-
Mart was guilty of an intentional tort in selling the lamp with the knowledge that it or its component parts were
defective and unreasonably dangerous.
The Boykin plaintiffs further alleged that the injuries from the fire were enhanced by
negligently manufactured or defective bedding that was distributed by Wal-Mart. Finally, the
Boykin plaintiffs asserted a claim based on faulty or miswired fire alarm against the
builder/owner of the Boykin residence. After settling the claims involving the bedding materials,
the Boykin plaintiffs made a demand of $11 million to settle all of the remaining claims against
both Cheyenne and Wal-Mart. The letter stated that the offer was "meant as a global, policy
limits demand as to Cheyenne and Wal-Mart." After receipt of this offer, Wal-Mart insisted that
both St. Paul Insurance Company and RLI Insurance Company satisfy the settlement demand in
full on behalf of both Cheyenne and Wal-Mart. CheyenneÆs two insurance companies - its
general liability insurer St. Paul Surplus Lines and its excess liability insurer RLI - funded the
settlement under a reservation of rights after Wal-Mart and its insurance company, National
Union, refused to fund any part of the settlement paid to the child and her family. St. Paul paid
$1 million of the settlement and RLI paid $10 million. The trial court approved the settlement,
finding that it was made in good faith pursuant to California law. National Union and Wal-Mart
then filed the instant action in federal court in Arkansas seeking a declaration that Wal-MartÆs
vendor agreement with Cheyenne governed the apportionment of liability as between Wal-MartÆs
and CheyenneÆs insurance companies. Wal-MartÆs and National UnionÆs position was that it owed
no money to fund the settlement of the underlying Boykin action. While RLI paid its limits, it
maintained at all times that pursuant to the express terms of its policy, it provided only excess
insurance as far as Wal-Mart was concerned. During the Boykin litigation, RLI repeatedly,
although unsuccessfully, demanded that National Union, as Wal-MartÆs primary insurer, take part
in efforts to settle the case. RLI eventually filed a cross-claim for contribution against Wal-Mart
and National Union in the Arkansas federal court.
Result
On March 23, 2001, after cross-motions for summary judgment were filed by each of the parties in the federal action, the court denied plaintiff Wal-MartÆs and National UnionÆs motion for summary judgment. Defendant and cross-claimant RLI Insurance CompanyÆs motion for summary judgment was granted, however, entitling RLI to recover $10 million from National Union and Wal-Mart. The federal district court in Arkansas found that the RLI excess insurance policy did not obligate RLI to pay as damages all sums Cheyenne is legally obligated to pay under its contract with Wal- Mart. Instead, the limits of liability contained within the RLI policy explicitly required the exhaustion of all available coverage before the RLI limits became applicable. In sum, the court determined that the RLI policy was not implicated by the Boykin settlement. Thus, the court ruled that National Union and Wal-Mart should have funded $10 million of the settlement of the Boykin case and that RLI was entitled to recover the $10 million it paid for National Union and Wal-Mart in the underlying matter.
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