Allstate Ins. Co. v. United Services Auto. Ass'n, 940300

• Decision Date: 13 January 1995
• Docket Number: No. 940300,940300
• Citation: 249 Va. 9,452 S.E.2d 859
• Parties: ALLSTATE INSURANCE COMPANY v. UNITED SERVICES AUTOMOBILE ASSOCIATION. Record
• Court: Virginia Supreme Court

Page 859

452 S.E.2d 859

249 Va. 9

ALLSTATE INSURANCE COMPANY v. UNITED SERVICES AUTOMOBILE ASSOCIATION.

Record No. 940300.

Supreme Court of Virginia.

Jan. 13, 1995.

Allan S. Reynolds, Sr., Norfolk (Reynolds, Smith & Winters, on briefs), for appellant.

Timothy M. Richardson, Virginia Beach (Glen A. Huff, Huff, Poole & Mahoney, on brief), for appellee.

Present: All the Justices.

CARRICO, Chief Justice.

The question for decision in this case is whether the trial court erred in holding that United Services Automobile Association (USAA) was entitled to contribution from Allstate Insurance Company (Allstate) as a result of USAA's settlement of a claim for wrongful death brought against an insured under policies issued by both USAA and Allstate. Finding that the trial court erred in its holding, we will reverse.

The case was tried below upon a stipulation of facts. The stipulation shows that on July 22, 1988, a vehicle operated by Nelda McGowan and owned by Paul B. Engel struck and killed five-year-old Kyle Whitley. The personal representative of Kyle's estate brought an action for his death against McGowan, seeking $10 million in damages.

At the time of the accident, Allstate had in force a personal umbrella insurance policy issued to McGowan providing "only excess insurance" up to $1 million "subject to primary coverage or self-retention limits of $100,000." USAA had in force a family automobile insurance policy issued to Engel providing primary liability coverage of $300,000 for each person. USAA also had in force a personal umbrella insurance policy issued to Engel providing excess liability coverage up to $1 million after the exhaustion of all primary coverage. Because McGowan was using Engel's vehicle with his permission at the time the accident in question occurred, both USAA policies applied to McGowan's liability arising out of such use.

As the primary insurer for the first $300,000 of applicable coverage, USAA undertook the defense of the action brought by Kyle's personal representative. Allstate did not participate in the defense, but retained counsel and assigned one of its employees to monitor the litigation and attend trial.

Three jury trials were conducted. The first resulted in a verdict against McGowan in the amount of $5 million. The trial court set this verdict aside and ordered a new trial on the issue of damages alone. A second trial resulted in a mistrial. During the course of this trial, USAA's senior claims attorney advised Allstate's representative that USAA would attempt to settle the case and asked that Allstate contribute to the settlement; the Allstate representative stated she had no settlement authority.

A third trial was held. Allstate's representative and its counsel attended the trial but had no settlement authority. On the second day of trial, USAA settled the case for $590,000. USAA then called upon Allstate to contribute one-half of that portion of the settlement above $300,000, the limit of USAA's primary coverage. When Allstate refused to contribute, USAA instituted the present litigation. After considering the stipulation of facts and hearing argument of counsel, the trial court entered judgment against Allstate for $173,343.93. We awarded Allstate this appeal.

The parties agree that Midwest Mutual Insurance Co. v. Aetna Casualty & Surety Co., 216 Va. 926, 223 S.E.2d 901 (1976), states the applicable law relating to the doctrine of contribution:

"The right to contribution as such does not arise out of any express contract or agreement between the parties to indemnify each other, but is based on the broad principles of equity that where two or more persons are subject to a common burden it shall be borne equally, since the law implies a contract between them to contribute ratably towards the discharge of the obligation. But in order to enforce contribution the payment must have been made by one obligated to pay the whole, as between himself and the payee, but only bound to pay a proportionate part as between himself and his co-obligors."

Id. at 929, 223 S.E.2d at 904 (quoting Wiley N. Jackson Co. v. City of Norfolk, 197 Va. 62, 66, 87 S.E.2d 781, 784 (1955)).

Allstate argues "there was no common obligation" between it and USAA and, hence, no basis for requiring contribution, because Allstate's "contractual conditions for attachment of such obligations had not been met." Allstate cites this provision of its policy, set forth in a section entitled "Conditions":

[Allstate] will not begin to make payment for any occurrence covered by this policy until [its] liability has been determined by:

1. agreement between the insured, the claimant and [Allstate]; or

2. a final judgment against an insured, resulting from an actual trial.

Allstate says, and USAA does not dissent, that "[t]here is no stipulation or contention that there was an agreement entered into by [the insured, the claimant, and Allstate]" and "there never was a final judgment resulting from an actual trial fixing the amount of McGowan's liability."

On the other hand, citing Erie Insurance Group v. Hughes, 240 Va. 165, 393 S.E.2d 210 (1990), USAA maintains that "Allstate's argument overlooks the fact that, regardless of contrary language in an insurance contract, the law imposes a duty upon each insurer to exercise good faith in the determination whether to settle." USAA says Allstate could avoid the effect of its failure to perform this duty only by ...