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Ninth Circuit Affirms District Court Decision Denying Equitable Contribution to Primary Insurer from Excess Insurer

On August 9, 2016, the United States Court of Appeals for the Ninth Circuit affirmed a decision from the Central District of California in Mitsui Sumitomo Insurance USA, Inc. et. al. v. Tokio Marine & Nichido Fire Insurance Company, Ltd., No. 14-56337, granting summary judgment against one insurance company in a dispute over equitable contribution claims.

Plaintiffs-Appellants Mitsui Sumitomo Insurance USA, Inc. and Mitsui Sumitomo Insurance Company of America (collectively referred to as "Mitsui") brought an action against Defendant-Appellee, Tokio Marine & Nichido Fire Insurance Company ("Tokio"), for equitable contribution, under the assumption that both carriers provided coverage for the same level of risk. Precedent had held that where two (2) or more insurers independently provide primary insurance on the same risk for the insured, the carrier who pays the loss or defends a lawsuit against the insured is entitled to equitable contribution from the other insurer. However, the Court found that Tokio and Mitsui did not share the same level of risk, because Tokio was providing an excess policy, whereas Mitsui was the primary insurer. For that reason, Mitsui's claim failed and the district court granted summary judgment in favor of Defendant-Appellee Tokio.

In addition to the contribution claim, Mitsui filed a bad faith claim for improper venue against Tokio pursuant to F.R.C.P. 12(b)(3). The parties had freely negotiated the forum-selection clause, and ultimately selected Japan as the forum to resolve any disputes and agreed that Japanese law would apply. In its ruling, the Ninth Circuit stated that forum selection clauses are prima facie valid and should not be set aside unless the party challenging enforcement of such a provision can show that the clause is unreasonable under the circumstances. The Ninth Circuit found no such showing by Mitsui and affirmed the district court's dismissal of the bad faith claim. Finally, the Ninth Circuit denied Tokio's request for attorneys' fees, stating that Tokio had provided no statutory authority that entitled it to fees.

Accordingly, the Ninth Circuit held that because Mitsui and Tokio did not share the same risk, Mitsui's claim for equitable contribution must fail, and affirmed the district court's decision.

To read the full opinion of the Ninth Circuit, please click here.

For more information about the Court's decision, please do not hesitate to contact us at info@chaloslaw.com.

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