Ninth Circuit Finds Insurer Cannot Impose Joint and Several Liability in Seeking Reimbursement

    Applying California law, the Ninth Circuit determined that the insurer could not seek reimbursement from an insured based upon joint and several liability. United Specialty Ins. Co. v. Banihashemi, 2023 U.S. App. LEXIS 5546 (9th Cir. March 8, 2023).

    The insured appealed the district court’s summary judgment order holding him jointly and severally liable for reimbursement of the costs of settlement that United Specialty reached on behalf of several insureds in a wrongful death action.

    In California, an insurer seeking recovery against the insured for amounts contributed to a settlement when the claims were not covered had to allocate the expenditures among the insureds. The burden of proving the allocation was on the insurer asserting claims for reimbursement.

    Although a finding of joint and several liability could ultimately be appropriate for all defendants, the record before the court reflected the existence of a material issue of fact regarding allocation of the settlement amount among the insureds. Neither the insured’s deposition testimony that he was an officer and owner of the company nor the fact that he acquiesced in United Speciality’s settlement of the underlying actions was sufficient to establish that United Speciality engaged in a detailed analysis of how the indemnity costs were spent, as required by California law. 

    Therefore, the district court’s award of summary judgment in favor of United Specialty was vacated and the case remanded for further proceedings,