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RSUI Indem. Co. v. Am. States Ins. Co.

United States Court of Appeals, Fifth Circuit

September 25, 2014

RSUI INDEMNITY COMPANY, Plaintiff-Appellant
v.
AMERICAN STATES INSURANCE COMPANY, Defendant-Appellee

Appeal from the United States District Court for the Eastern District of Louisiana.

For RSUI Indemnity Company, Plaintiff - Appellant: Daryl Arthur Higgins, Esq., Ryan Charlton Higgins, Esq., Gaudry, Ranson, Higgins & Gremillion, L.L.C., Gretna, LA.

For American States Insurance Company, Defendant - Appellee: H. Minor Pipes III, Catherine Fornias Giarrusso, Esq., Barrasso, Usdin, Kupperman, Freeman & Sarver, L.L.C., New Orleans, LA.

Before REAVLEY, ELROD, and SOUTHWICK, Circuit Judges.

OPINION

Page 375

REAVLEY, Circuit Judge

This is a dispute between excess and primary insurance carriers with a common insured. The excess insurer seeks to recover from the primary the amount that it paid on the insured's behalf to settle excess claims in an underlying lawsuit after the primary insurer had settled its own liability with the underlying plaintiff by paying its policy limit. The excess insurer sued under a theory of subrogation based on the primary insurer's alleged bad faith failure to defend properly the common insured.

The district court held that the excess insurer could not maintain the suit because there had been no adjudicated excess judgment against the insured in the underlying case. We hold that no excess judgment is required if the primary insurer's alleged bad faith failure to defend exposed the insured to excess liability and caused the excess settlement. We therefore REVERSE the district court's summary judgment in favor of the primary insurer and remand for further proceedings.

I.

In June 2010 Stacia Barrow was in a motor vehicle accident at an intersection in Port Allen, Louisiana, with Lamar Thomas, an employee of Ameraseal, L.L.C. Barrow's vehicle struck the rear of Thomas's vehicle as Thomas made a left turn in front of Barrow, who was allegedly speeding and made no effort to avoid the collision. Ameraseal owned Thomas's vehicle and maintained a primary liability insurance policy with a $1 million policy limit issued by

Page 376

Defendant-Appellee American States Insurance Company (" American" ). It also maintained an excess insurance policy with a $4 million policy limit issued by Plaintiff-Appellant RSUI Indemnity Company (" RSUI" ).[1]

As a result of the accident, Barrow allegedly suffered numerous injuries to her back, lower extremities, hip, neck, and head. In June 2011, she filed suit in Louisiana state court against Thomas, Ameraseal, and American, but not RSUI.[2] Although it undertook defense of the suit, American did not immediately notify RSUI of Barrow's claims.

The state court set an initial discovery deadline of January 11, 2012, with a trial date in March 2012. In August 2011, Barrow's discovery responses indicated that she was claiming brain and spinal injuries. Despite the significant injuries claimed by the plaintiff and the possibility that Barrow's speeding was a contributing cause of the accident, the defense counsel assigned by American did not take depositions of Barrow, her doctors, or a potential witness-passenger of the insured, nor did he attempt to obtain an independent medical examination. Defense counsel also failed to oppose Barrow's motion for summary judgment as to liability, which was granted by the state trial court.[3]

Two weeks before the expiration of the discovery deadline, American notified RSUI of Barrow's suit against their mutual insured. American took the position that the case was worth only between $150,000 and $500,000. In February 2012, however, American retained new defense counsel to review the file. Counsel opined that much more defensive action should have been taken to depose Barrow's doctors and experts, and he believed that the value of the case not only exceeded the $1 million primary policy limit but that a jury verdict could also exceed ...


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