May 17: In the U.S. Court of Appeals, Sixth Circuit, Case No. 10-4530. Appealed from Northern District of Ohio at Akron. OneBeacon American Insurance Company (OneBeacon) and American Motorists Insurance Company (AMICO) were insurers of the B.F. Goodrich Corporation (Goodrich) and, among others, were liable for environmental cleanup at the Goodrich plant in Calvert City, Kentucky. AMICO settled with Goodrich, but OneBeacon's predecessor, Commercial Union Insurance Company (hereinafter OneBeacon), refused to settle and went to trial. A State court jury found for Goodrich, and OneBeacon was ordered to pay $42 million in compensatory damages and $12 million in attorney fees. The State court also denied OneBeacon's request for settlement credits to reflect amounts paid by other insurers, such as AMICO, through settlements with Goodrich. OneBeacon then brought this action for equitable contribution in State court, which AMICO removed to Federal court. The district court adopted the rationale reflected in the State court's settlement-credit decision and granted AMICO's motion for summary judgment. The Appeals Court affirmed the judgment of the district court.
The Appeals Court said further, "Based on decisions by the Ohio courts and the logic expressed in GenCorp, Bondex, and Koppers, we agree 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. Such a position best comports with the Ohio Supreme Court's proposition. . . Our conclusion also receives support elsewhere in Ohio law. See Ohio Rev. Code § 2307.28(B) ('The release or covenant discharges the person to whom it is given from all liability for contribution to any other tortfeasor.'). A decision allowing OneBeacon to pursue equitable contribution from AMICO would not only fail to encourage settlements, it would actively discourage such settlements. An insurer would have no incentive to settle with a policyholder if it knew that it would be liable to another insurer down the road. And an insurer considering going to trial would be economically rational in doing so if the expected value of prevailing at all exceeds the expected cost of defending the lawsuit."
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