Facts

The Emerald Bay Community Association (EBCA) was insured by Federal Insurance Co. and Golden Eagle Insurance Co. In 2001, EBCA was sued for breach of contract. Both Federal Insurance and Golden Eagle initially joined in the underlying action; however, Golden Eagle withdrew formally during the discovery phase. Federal Insurance ultimately paid $2 million to settle the case. Subsequently, Federal Insurance sought contribution and equitable subrogation or indemnity from Golden Eagle.

PLAINTIFF'S CONTENTIONS:
Federal Insurance claimed that Golden Eagle breached its duty to defend EBCA by withdrawing during discovery and abandoning the insured. As such, Federal Insurance claimed they were entitled to contribution for defense and settlement costs.

Damages

Federal Insurance claimed Golden Eagle owed it $3.1 million for reimbursement.

Result

The court found that Golden Eagle had breached its duty to defend its insured and was therefore liable to reimburse Federal Insurance for all the defense costs but not for the settlement costs. The court awarded plaintiff $1,175,133.

Other Information

Both parties have filed appeals.