Insurance Law Update

June 30, 2006

Highlight Article

SafeCo Insurance Co. V. Superior Court

(Century Surety Co.) 2006 DJDAR 7962 (6/26/06)

The Burden of Proof in Equitable Contribution Actions

By Kyle Kring

Equitable contribution is the apportionment of costs among insurers who are obligated to indemnify or defend the same loss or claim,  when one insurer has paid more than its share of a loss or defended an action without any participation by the other carrier. The purpose of equitable contribution is to accomplish justice by equalizing the common burden shared by coinsurers and to prevent one insurer from profiting at the expense of others. 

The Safeco Insurance Co. of America case was an action for equitable contribution, by a settling insurer (Safeco) against a non-participating insurer (Century). The parties agreed that a settling insurer seeking equitable contribution from a non-participating coinsurer need only establish a potential for coverage under the recalcitrant coinsurer’s policy in order to obtain contribution for the costs of defense, but they disagreed about the showing necessary to obtain contribution for a settlement. The Court held that the burden of proof is shifted to the nonparticipating insurer to prove the absence of actual coverage once the settling insurer has met its burden of proof by making a prima facie showing of coverage under the nonparticipating insurer’s policy.  The Court stated that the settling insurer only has the burden of proving a potential of coverage by nonparticipating insurer.  Once that showing has been met, it is the nonparticipating insurer’s responsibility to prove the absence of actual coverage under the non-participating insurance carrier’s policy.

Further, the Court held that the nonparticipating insurer’s refusal to participate in the settlement acts as a constructive waiver of the right to challenge the reasonableness of defense costs and amounts paid in settlement.

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This article was prepared by Kyle Kring. Mr. Kring is the managing partner of Kring & Chung, LLP.

You can contact Mr. Kring at (949) 261-7700.

** The information contained herein is for informational purposes only and should not be relied upon in reaching a conclusion in a particular area. The legal principles discussed herein were accurate at the time this article was authored but are subject to change with time. Applicability of these same legal principles may differ substantially in individual situations. Please consult an attorney before making a decision in a particular area using only the information provided in this article.