The court was faced with issues surrounding the defense obligations under numerous policies issued to a general contractor. St. Paul Fire & Marine Ins. Co. v. Lexington Ins. Co., 2014 U.S. Dist. LEXIS 113635 (D. Ariz. Aug 15, 2014).
Del Webb Home Construction, Inc. was sued by hundreds of homeowners for alleged construction defects. Three insurers that were defending Del Webb in the underlying actions, St. Paul, Zurich and AIG, filed this suit against 13 other insurers who insured one or more subcontractors and/or Del Webb at various times, but refused to contribute or contributed less than their share of defense costs.
Three types of CGL policies insured Del Webb. First were CGL policies issued directly to Del Webb by St. Paul, Zurich and American Guarantee Liability Insurance Company (AGLIC). The second were CGL policies designating Del Webb as an additional insured and issued by St. Paul, Charter Oak, Travelers, Zurich, American Safety Indemnity Company, AIG and others. Finally, there were CGL policies that provided excess coverage. AGLIC was the only insurer issuing this type of policy to one subcontractor, Atrium. Del Webb was an additional insured on this policy.
St. Paul, Zurich, and AIG argued they were entitled to reimbursement from defendant insurers for defending Del Webb. The court agreed that all the other insurers shared a duty to defend Del Webb under their respective policies.
Next, the court determined each party's proportionate share of defense costs. Arizona law favored the policy limits' approach in which each policy's pro rata share was equal to the quotient obtained by dividing the policy's limit by the sum of all applicable policy limits. The pro rata approach was suitable here where several insurance carriers issued multiple policies insuring a single entity that was served with a complaint alleging facts that triggered the defense duties under all the policies.
Finally, determining the right to reimbursement was premature at this point. The current status of the case was a snapshot of what the remaining parties owed or were owed, yet additional costs of defense (and indemnity) were inevitably forthcoming.