Ericksen Arbuthnot Partner Lois Lindstrom recently prevailed in an appeal on insurance contribution issues.

This equitable contribution action involved three insurers whose insurance policies covered an employee who negligently caused injuries to another person while driving his car in connection with business for his employer. The policies of Ms. Lindstrom’s client only covered the driver’s employer, who was only vicariously liable for the actions of its employee. The plaintiff insurance company settled the underlying action, exhausting its primary and umbrella policies.

Thereafter, the plaintiff prevailed in a Motion for Summary Judgment, resulting in an order requiring contribution in the amount of $600,000 from the umbrella policy of Ms. Lindstrom’s client. This was based upon an alleged overpayment by plaintiff based upon its pro rata share of coverage. Ms. Lindstrom appealed, asserting (successfully) that because her client’s umbrella policy covered a party that was only vicariously liable, it should not share pro rata with plaintiff’s umbrella policy that directly covered the employee tortfeasor.

The appellate court decided that the trial court erred in awarding plaintiff equitable contribution in the amount of $600,000 from our client’s umbrella policy. The appellate court reasoned that an employer is only vicariously liable for the actions of the tortfeasor employee, and therefore all of the insurance policies covering the tortfeasor employee, primary and excess, must be exhausted before the umbrella policy of an insurer that covered only the employer must make a contribution.

Lois Lindstrom is a partner in the Oakland office. She can be reached at 510.832.7770 orllindstrom@ericksenarbuthnot.com.