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Maryland Casualty Co. v. W.R. Grace & Co.

Citation: 30 ELR 20751
No. No. 98-7492 et al., 218 F.3d 204/(2d Cir., 07/05/2000) Allocation of defense costs

The court upholds a magistrate judge decision that later settling insurers are not obligated to contribute to defense costs paid by insurers that settled earlier with an insured manufacturer involved in asbestos litigation. The court first holds that the magistrate judge incorrectly held that later settlements extinguish the right to contribution as a matter of law. The notion that any settlement by which an insurer obtains a release from its insured insulates that insurer from all contribution claims is untenable. The relevant inquiry is whether the settlement was reasonable or equitable, not simply whether there was a settlement. The court then holds that considerations of equity control the right to contribution in this case. The court next holds that the contribution claims at issue fail because of equitable considerations. The later settling insurers paid more than their pro rata shares of defense costs and were not unjustly enriched. There was no enrichment of the insured, nor any collusion between the late settlers and the insured, nor any benefit other than the indemnification and defense of the potentially covered claims. All the insurers gained something and lost something by the timing of their settlements, but it cannot be said that the payments made by all four insurers resulted in any benefit to any of them that should be equitably shared with any other insurers.

[Previous decisions in this litigation are published at 23 ELR 21546 and 24 ELR 20968.]

Counsel for Plaintiff
Laura A. Foggan
Wiley, Rein & Fielding
1776 K St. NW, Washington DC 20006
(202) 719-7000

Counsel for Defendant
Carl J. Pernicone
Wilson, Elser, Moskowitz, Edelman & Dicker
150 E. 42d St., New York NY 10017
(212) 490-3000

Before Newman and Jacobs, JJ.