Co-Insurance Contribution

Timely notice is a prerequisite to obtaining co-insurance contribution.

In Truck Insurance Exchange v. Uniguard Insurance Co. (2000) 79 Cal.App.4th 966, 94 Cal.Rptr.2d 516, plaintiff insurer brought an action against seven other carriers seeking contribution toward the amounts spent handling and settling five construction defect cases against the insured. The trial court found that one carrier, who had not been asked to participate in the litigation, was liable for fifty-percent of the defense costs, and indemnity in four of the five cases. That co-insurer appealed.

The Second District held that, although the insurer did not have to tender the defense of its insured in the underlying to the co-insurer, notification should have been given of the possible contribution claim at the inception, providing the co-insurer with the option to join in the defense. In failing to do so, the insurer deprived the co-insurer of the right to participate in decisions effecting costs, amounts paid, etc. Under such circumstances, co-insurance contribution would be inequitable.