Low, Ball & Lynch’s

WEEKLY LAW RESUME

November 18, 2004 Issue   By: Raymond Coates

Duty to Defend - Contribution Among Insurers

Mercury Insurance Company v. Allstate Insurance Company

Court of Appeal, Second District

(November 9, 2025)

In 1995, the Legislature enacted a new law that states where two or more personal policies provide liability coverage for the same motor vehicle involved in an accident, and one is primary and one is excess, each insurer must pay the cost of defense in proportion to the percentage of total damages paid by that insurer.  This case is the first case to interpret that law.

Mercury Insurance Company issued a policy of automobile liability insurance to Alex Tsiboukas insuring four vehicles with limits of $100,000 per person and $300,000 per accident.  Allstate Insurance Company issued a personal umbrella to Alex Tsiboukas with a $1 million per occurrence limit.  Tsiboukas' daughter was involved in an accident wherein four people were seriously injured.  The litigation involving their claims was eventually settled by both carriers paying policy limits of $1.3 million.  Mercury paid the entire defense in the sum of $23,656.59.  Mercury then sued Allstate for contribution for the cost of defense.  Relying on Insurance Code section 11580.9(g), the trial court awarded Mercury $18,197.38.  Allstate appealed.

The Court of Appeal affirmed.  The central argument of Allstate on appeal was that its policy was not an automobile liability policy, and therefore, it was error to require it to contribute to the cost of defense.  The Court disagreed, primarily relying upon the language of Insurance Code section 11580.9(g).  That code section provides that where two or more personal policies provide liability insurance for the same motor vehicle involved in an accident, and one policy, "as defined in subdivision (a) of section 660," is primary, and the other policy, "as defined in section 108," is excess, then the sharing of defense costs in the same percentage as the payment of indemnity applies.

The Court looked to the two code sections referenced.  Section 660 of the Insurance Code defines what is an automobile liability policy.  Section 108 of the Insurance Code defines what is a general liability insurance policy.  The Court felt it was clear that the Legislature was referring to a primary automobile liability policy and an excess general liability insurance policy.  The Court rejected the argument that the section was intended to be limited to excess automobile liability insurance policies.

The Court noted the general rule that an excess carrier is not required to pay defense costs unless the primary policy is exhausted.  It appeared to be the intent of the Legislature to change this rule in this specific situation.  The Court felt the wisdom of the legislation was not for it to question.  However, it did note that the statute might encourage excess carriers to participate earlier in settling a case in order to minimize the cost of defense.

The Court felt there was nothing in the statute that showed it was meant to apply only to the situation where two primary automobile policies apply and one of them is rendered excess by an operation of law.  The Court felt that the Legislature intended to regulate the interaction of various levels of insurance that cover death or injury to persons or property caused by the operation of motor vehicles.  The judgment was affirmed.

COMMENT

This is the first case to interpret Insurance Code section 11580.9(g).  Due to the importance of this issue to personal umbrella carriers, we expect an effort will be made to have the Supreme Court take a look at this case. 

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