The following facts are undisputed. [Compare Doc. 117, ¶¶ 1-9 (asserting these facts) with Doc. 127, ¶¶ 1-9 (not disputing these facts)] In March, 2010, Kevin Udy was killed in an accident in which his pickup truck collided with a trailer being hauled by a tractor driven by Monte Lyons. Lyons was an employee of Standard E & S, LLC (Standard) and the tractor and trailer were owned by Zia Transport, Inc. (Zia). A year later, the personal representative of Udy's estate, along with Udy's wife and eight children, filed a wrongful death action against Lyons, Standard, and Zia (the Udy Action). The plaintiffs also named Defendant Bergstein Enterprises, Ltd (Bergstein), the management company for Standard and Zia, as a defendant in the Udy Action. [Doc. 117-1 (Udy Action Complaint)] An amended complaint was later filed. [Doc. 117-4]
In the First Amended Udy Complaint, the plaintiffs alleged that "[a]t the time of the crash, Bergstein operated defendants Standard . . . and Zia, and is liable to plaintiffs under the doctrines of respondeat superior and agency." [Doc. 117, ¶ 8 (asserting this fact); Doc. 127, ¶ 8 (not disputing this fact); First Amended Udy Complaint, Doc. 117-4, ¶ 41; see also Doc. 116, ¶¶ 1-3; Doc. 131, ¶¶ 1-3] They also alleged that
45. In addition to failing to properly train, supervise, and manage defendant Lyons and other drivers, defendants Bergstein, Standard . . ., and Zia acted intentionally, recklessly, willfully and/or with wanton disregard for the safety of others because they allowed, and on information and belief encouraged, a pattern and practice of overworking their employees, failing to train, inspect and maintain their vehicles, and failing to comply with State and Federal safety standards and regulations.
46. Among other things, these Defendants knew and allowed the following:
a. Numerous violations of drivers lacking the knowledge of Federal Motor Carrier Safety Regulations;
b. Numerous violations of drivers for failing to comply with traffic control devices;
c. Numerous violations of the Federal Motor Carrier Safety Regulations;
d. Continuously operating their vehicles without required inspections;
e. Continuously operating their vehicles without proper registrations;
f. Continuously operating their vehicle without proper repair and maintenance;
g. Otherwise operating their vehicles in a dangerous condition.
47. Among others, these intentional, reckless and/or willful acts and omissions of the above defendants, either singularly or in combination, were a proximate cause of the Plaintiffs' injuries and damages. Accordingly, defendants are liable for punitive damages.
[Doc. 117, ¶ 9 (asserting this fact); Doc. 127, ¶ 9 (not disputing this fact); First Amended Udy Complaint, Doc. 117-4, ¶¶ 45-47]
B. The Insurance Policies Three different insurance policies are at issue. Two were issued by AAIC and one by First Mercury.
i. AAIC's Standard Policy
The tractor and trailer driven by Lyons were listed as covered autos on an insurance policy issued by AAIC to Standard (the AAIC Standard Policy). [Doc. 116, ¶ 7 (asserting this fact); Doc. 131, ¶ 7 (not disputing this fact); Doc. 116-4, Exh. 58, pg. 7-8] The AAIC Standard Policy provided primary liability coverage up to $1 million. [Doc. 116, ¶ 8 (asserting this fact); Doc. 131, ¶ 8 (not disputing this fact); Doc. 116-4,Exh. 58, pg. 5] Standard was the Named Insured on the AAIC Standard Policy. [Id.] In addition, Section II.A.1.b of the AAIC Standard Policy provided that
[t]he following are insured:
a. You for any covered auto.
b. Anyone else while using with your permission a covered auto you own, hire or borrow except . . .
c. Anyone liable for the conduct of an insured described above but only to the extent of that liability.
[Doc. 116, ¶ 9 (asserting this fact); Doc. 131, ¶ 9 (not disputing this fact); Doc. 116-4, Exh. 58, pg. 20-21] The AAIC Standard Policy also contained the following "other insurance" provision.
a. For any covered auto you own, this Coverage Form provides primary insurance. For any covered auto you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance. However, while a covered auto which is a trailer is connected to another vehicle, the Liability Coverage this Coverage Form provides for the trailer is:
(1) Excess while it is connected to a motor vehicle you do not own.
(2) Primary while it is connected to a covered vehicle you own.
[Doc. 116, ¶ 10 (asserting this fact); Doc. 131, ¶ 10 (not disputing this fact); Doc. 116-4, Exh. 58, pg. 28]
ii. First Mercury's Standard Policy
First Mercury also issued an insurance policy to Standard (the First Mercury Standard Policy). [Doc. 116, ¶ 11 (asserting this fact); Doc. 131, ¶ 11 (not disputing this fact); Doc. 116-6, Exh. 67, pg. 3] The First Mercury Standard Policy was titled "COMMERCIAL EXCESS LIABILITY DECLARATIONS" and named the AAIC Standard Policy as the "Underlying Insurance." [Doc. 116, ¶ 12 (asserting this fact); Doc. 131, ¶ 12 (not disputing this fact); Doc. 116-6, Exh. 67, pgs. 3, 5] The First Mercury Standard Policy provided that
The Company shall provide the Named Insured with insurance excess of the Underlying Insurance scheduled in the declaration page of this policy. Except as specifically set forth in the terms, conditions or endorsements of this policy, coverage hereunder shall apply in conformance with the terms, conditions and endorsements of the Underlying Insurance. Coverage hereunder shall attach only after all Underlying Insurance has been exhausted by actual payment of claims or losses hereunder.
. . .
In the event of exhaustion of the Underlying Limit in any Underlying Insurance, this policy shall continue in force as primary insurance, subject to the terms, conditions and endorsements of this policy. . . .
[Doc. 116, ¶ 12 (asserting this fact); Doc. 131, ¶ 12 (not disputing this fact); Doc. 116-6, Exh. 67, pg. 8] The limit for this policy was $4 million. [Doc. 116, ¶ 12 (asserting this fact); Doc. 131, ¶ 12 (not disputing this fact); Doc. 116-6, Exh. 67, pg. 3]
iii. AAIC's Bergstein Policy
Finally, AAIC issued a policy to Bergstein as a Named Insured with a $1 million limit (the AAIC Bergstein Policy). [Doc. 116, ¶ 14 (asserting this fact); Doc. 131, ¶ 14 (not disputing this fact); Doc. 116-5, Exh. 60, pg. 1] Neither the tractor nor the trailer was listed on the AAIC Bergstein Policy. [Doc. 116, ¶ 15 (asserting this fact); Doc. 131, ¶ 15 (not disputing this fact); Doc. 116-5, Exh. 60, pg. 7] The AAIC Bergstein Policy included an "other insurance" clause that provided that
[f]or any covered auto you own, this Coverage Form provides primary insurance. For any covered auto you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance.
However, while a covered auto which is a trailer is connected to another vehicle, the Liability Coverage this Coverage Form provides for the trailer is:
(1) Excess while it is connected to a motor vehicle you do not own.
(2) Primary while it is connected to a covered vehicle you own.
[Doc. 116, ¶ 16 (asserting this fact); Doc. 131, ¶ 16 (not disputing this fact); Doc. 116-5, Exh. 60, pg. 17]
C. The Settlement Negotiations and Trial Verdict Although the parties disagree as to whether AAIC properly tendered the policy limits on the AAIC Standard Policy to First Mercury, they agree that First Mercury took the lead in settlement negotiations with the Udy plaintiffs. [Doc. 116, ¶¶ 18-19, 21 (asserting that AAIC tendered its limits on the AAIC Standard Policy to First Mercury and that First Mercury "took control" of the negotiations); Doc. 131, ¶¶ 18-21 (disputing that AAIC properly tendered its limits but agreeing that First Mercury "took over the primary role" in negotiations); Doc. 116-2, Exh. H & I, pgs. 25-27] During the negotiations, First Mercury offered the Udy plaintiffs the $1 million available under the AAIC Standard Policy, but did not offer the entire $4 million available under the First Mercury Standard Policy. [Doc. 116, ¶ 27 (asserting these facts); Doc. 131, ¶ 27 (not disputing these facts); Doc. 116-2, Exh. J, pg. 29; Doc. 116-6, Exh. 133, pg. 20] No funds from the AAIC Bergstein Policy were offered during negotiations. [Doc. 131, pg. 11, ¶ Y (stating that AAIC offered the Bergstein Policy limit after the verdict); Doc. 138, pg. 6, ¶ Y (not disputing this assertion); Doc. 131-9] After a jury trial, judgment was entered against Standard, Zia, and Bergstein for a total of $58 million, including $30,300,000 against Standard and $22,050,000 against Bergstein. [Doc. 116, ¶ 29 (asserting these facts); Doc. 131, ¶ 29 (not disputing these facts); Doc. 116-3, Exhs. 1-2] The case was then settled for $43 million, which was paid as follows: $1 million by AAIC pursuant to the AAIC Standard Policy; $4 million by First Mercury pursuant to the First Mercury Standard Policy; $1 million by AAIC pursuant to the AAIC Bergstein Policy; $4 million by Commerce and Industry pursuant to an excess policy to the AAIC Bergstein Policy, which is not at issue here; and $33 million...
