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Back in 2011, special effects worker John Franco sued Warner Bros. after a truck rolled over on the set of Green Lantern. The accident caused debris to go flying, and Franco suffered a pelvic crush, a broken hip, fractures to both femurs, injuries to his knees, a punctured lung and more.
The litigation quickly turned to who was responsible for such alleged negligence. Was it Warner Bros. or Big Moose LLC, the production company? “There is a reason they call it the ‘movie business’ — it’s all about illusion,” said Franco’s attorney at the time. A judge wouldn’t let Warner Bros. escape the lawsuit.
Then, the case went away. Well, sort of. Franco got a settlement, but two insurance companies continued to war with each over who was picking up the tab for a settlement payment worth millions.
Warner Bros. had a primary insurance policy with Fireman’s Fund worth $2 million and an umbrella insurance policy with a $3 million limit. As a result, Fireman’s Fund defended Warner Bros. in the Franco lawsuit and came to the decision to settle the litigation.
The settlement apparently was worth more than $3 million because later, Fireman’s Fund looked for a contribution from Ace American Insurance Company, which provided Warner Bros. an excess insurance policy with a $50 million limit.
So Ace American sued Fireman’s Fund for equitable subrogation and breach of the covenant of good faith and fair dealing. The plaintiff alleged that Franco had early on made reasonable settlement demands within the limits of the Fireman’s Fund policy, but Fireman’s Fund chose not to settle. Once Franco got closer to trial, the situation changed, and Fireman’s Fund saw the wisdom in settling, but Franco’s price had gone up. Ace American’s theory was that Fireman’s Fund was liable for the extra money because of its wrongful conduct in failing to settle the case at the early stage.
Fireman’s Fund moved to dismiss the claim with the argument that an excess insurer could only sue for equitable subrogation if there has been a judgment against the insured that exceeds the limits of the primary policy. Because of the settlement, the case never got to judgment.
A trial court agreed with Fireman’s Fund’s contention, but on Friday, after reviewing conflicting past decisions on the subject, a California appellate court reversed.
Rejecting an argument that such a decision could prompt more lawsuits from excess insurers against primary insurers and discourage settlements, California appeals court judge Audrey Collins writes that “primary insurers already have a duty to accept reasonable settlement offers within policy limits, and liability for resulting damages when they breach that duty.”
The published opinion comes to the conclusion that a judgment isn’t a necessary element for an equitable subrogation claim and “where the insured or excess insurer has actually contributed to an excess settlement, the plaintiff may allege that the primary insurer’s breach of the duty to accept reasonable settlement offers resulted in damages in the form of the excess settlement.”
The case is remanded for further proceedings where the insurance companies will now battle over the multi-million dollar Green Lantern worker injury settlement.
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