The Sixth Circuit, in order to promote the finality of settlements, ruled against a non-settling insurer’s claim for equitable contribution against a settling insurer. Yesterday, the Sixth Circuit released its opinion in OneBeacon America Insurance Co. v. American Motorists Insurance Co. OneBeacon and AMICO were both insurers of B.F. Goodrich and, along with other insurers, were liable for environmental cleanup at one of Goodrich’s plants. AMICO was a primary layer insurer while OneBeacon had provided excess coverage. AMICO previously settled its coverage obligations with Goodrich, but OneBeacon’s predecessor, Commercial Union Insurance Company, took the claims to trial and was held jointly and severally liable for $42 million in compensatory damages. OneBeacon sought to receive settlement credits based on the settlements received by Goodrich from other insurers. The trial court, however, found that the amounts paid by AMICO and other settling insurers were not solely paid to settle the Goodrich plant pollution claim. The court also noted that a finding of bad faith against OneBeacon precluded an award of settlement credits.
After OneBeacon was denied settlement credits in its original suit, it sought declaratory relief from AMICO for equitable contribution. The district court found that OneBeacon’s declaratory action “serves as nothing more than an effort to evade the original trial court’s determination that settlement credits were inappropriate.” The district court also adopted the trial court’s substantive analysis precluding OneBeacon from obtaining contribution from AMICO.
After reviewing both Ohio state law and federal cases analyzing the issue, the Sixth Circuit held that “settlement can exhaust a settling insurer’s policy, and that such exhaustion precludes a non-settling insurer from seeking equitable contribution from the settling insurers.” The Sixth Circuit noted that allowing OneBeacon to receive equitable contribution would not only remove incentives to settlement, “it would actively discourage such settlements.” The court did not analyze whether OneBeacon should have received settlement credits at the trial court level because the issue was not before the court.