Settling Insurer Seeking Contribution Is Entitled To Present All Relevant Evidence, Including Post-Settlement Expert Testimony

Settling Insurer Seeking Contribution Is Entitled To Present All Relevant Evidence, Including Post-Settlement Expert Testimony

03.03.2015

In 2003, Jack Daer was driving his Ford Explorer on Yokohama tires purchased and serviced at Costco.  The left rear tire failed, causing a rollover accident that left Mr. Daer a quadriplegic.  He sued Yokohama for manufacturing an allegedly defective tire and Costco for negligence in selecting and servicing the tire.  Costco tendered its defense to Yokohama based on the contractual indemnity provision in its supplier agreement with Yokohama and to Tokio Marine, as an additional insured.  Both refused to defend Costco in the suit. 

On the first day of trial, Costco and Yokohama reached separate settlements with Mr. Daer.  Costco agreed to pay $5.5 million.  National Union, Costco’s excess insurer, funded $4.3 million of the settlement and, as subrogee of Costco, sued Yokohama and Tokio Marine to recover the amounts paid in settlement and defense of Mr. Daer’s suit.

The trial court bifurcated National Union’s contractual indemnity claim for trial, reasoning that the resolution of all other issues would ultimately turn on whether the accident was caused by a defective Yokohama tire or Costco’s alleged negligence.  National Union was prepared to present extensive expert testimony concerning the defective tire, which went far beyond and conflicted with the deposition testimony of Mr. Daer’s tire expert in the underlying suit. 

In pretrial in limine motions, Yokohama and Tokio Marine cried foul, arguing the only relevant expert testimony was that which was known to the parties at the time the underlying suit settled.  Different or subsequent analysis, they claimed, had no bearing on the underlying settlement or the value of the settlement and should not be permitted at trial.  The trial judge was convinced and granted motions precluding National Union’s expert from testifying to anything new or different from Mr. Daer’s expert in the underlying suit.  The trial court said:  “Look, the claim stops when the Daer case settled.  Right there, indemnity is set. . . .  That’s the be all and end all of what the knowledge was. . . .  [National Union’s expert can’t] come up with new theories that weren’t raised by Daer at the time of the settlement.”  The decision lead to a non-suit against National Union and a judgment against it for more than $800,000 in attorneys’ fees and costs.

In National Union Fire Insurance Company of Pittsburgh, PA. v. Tokio Marine and Nichido Fire Insurance Company, 183 Cal.Rptr.3d 472 (Feb. 4, 2015), the Court of Appeal reversed without fanfare, noting simply there was no legal authority for the trial court’s refusal to allow National Union’s qualified expert to testify to theories and analysis new or different from that offered prior to the underlying settlement.  To so find was “undoubtedly prejudicial” because the testimony was relevant to the central issue identified by the court.  

According to the Court, National Union was entitled to present all relevant evidence to support its claim, including expert testimony of a defective tire, regardless of whether the analysis was complete and known to the parties at the time of the settlement of the underlying suit. 

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