United States District Court, D. New Mexico
AMERICAN AUTOMOBILE INSURANCE COMPANY, Plaintiff/Counterdefendant,
FIRST MERCURY FNSURANCE COMPANY, Defendant/Counterclaimant, and XL FNSURANCE COMPANY LIMITED and HCC INTERNATIONAL FNSURANCE COMPANY PLC, Joined Plaintiffs on Counterclaim.
MEMORANDUM OPINION AND ORDER
matter comes before the Court upon "American Automobile
Insurance Company's Motion for Summary Judgment as to
First Mercury's Counterclaim for Equitable
Indemnity" (Motion for Summary Judgment), filed July 13,
2018. (Doc. 200). Defendant/Counterclaimant First Mercury
Insurance Company (First Mercury) filed a response on August
7, 2018,  and Plaintiff/Counterdefendant American
Automobile Insurance Company (AAIC) filed a reply on
September 10, 2018. (Docs. 205 and 208). Having considered
the Motion for Summary Judgment, the accompanying briefing,
and the undisputed material facts, the Court grants the
Motion for Summary Judgment.
Summary of Material Facts
case involves an insurance dispute arising from a traffic
accident in which Monte Lyons, a Standard E&S, LLC
(Standard) truck driver, caused the death of Kevin Udy. (Doc.
162) at 2. Lyons was driving a truck and trailer leased to
Standard from Zia Transport, Inc. (Zia). Id.
Bergstein Enterprises, Ltd. (Bergstein) operated both
Standard and Zia. Id.
The Insurance Policies
had an AAIC insurance policy (Standard Policy) which included
Lyons, Zia, and Bergstein as additional insureds under its
omnibus clause. (Doc. 4) at ¶ 7. That insurance policy
had "primary liability coverage up to $1 million"
per accident. (Doc. 162) at 3. This policy also covered
addition to the Standard Policy, Standard had an excess
insurance policy (Standard Excess Policy) issued by First
Mercury with a policy limit of $4 million. Id. at 5.
The Standard Policy served as the underlying policy for the
Standard Excess Policy. Id.
also issued Bergstein an insurance policy (Bergstein Policy)
with a $1 million policy limit. Id.
The Underlying State Lawsuit
March 2011, the Estate of Kevin Udy and Udy family members
(collectively, the Udys) sued Standard, Zia, Bergstein, and
Lyons in state court for wrongful death, loss of consortium,
personal injury, and punitive damages. (Doc. 117-1). AAIC
provided a defense to all four defendants in that case while
"First Mercury took the lead in settlement negotiations
with the Udy plaintiffs." (Doc. 4) at ¶ 15; (Doc.
162) at 6.
the pretrial settlement negotiations, First Mercury offered
$2, 250, 000 to settle the case. (Doc. 116-3) at 22. First
Mercury specifically offered the $1 million policy limit
under the AAIC Standard Policy and then, presumably, offered
$1, 250, 000 under its Standard Excess Policy. (Doc. 162) at
6. No. funds from the Bergstein Policy were offered during
the pretrial settlement negotiations. Id. In fact,
First Mercury contends that it did not know about the
Bergstein Policy at that time. (Doc. 13) at 9, ¶ 18.
Udys countered by offering to settle the case for $3.5
million, well within the limits of the combined Standard
Policy and the Standard Excess Policy. (Doc. 116-3) at 20-23.
First Mercury apparently did not respond to that
counteroffer, so the Udys withdrew the counteroffer and
terminated settlement negotiations. Id. at 22-23.
March 2013, the case was tried before a jury and
"judgment was entered against Standard, Zia, and
Bergstein for a total of $58 million...." (Doc. 162) at
7. The case subsequently settled for $43 million, which was
paid as follows: $1 million under the Standard Policy; $4
million under the Standard Excess Policy; $1 million under
the Bergstein Policy; $4 million under an excess policy to
the Bergstein Policy, which is not at issue here; and $33
million by First Mercury and its liability insurers.
filed this lawsuit against First Mercury and others in May
2013 and filed a first amended complaint in July 2013. (Docs.
1 and 4). In October 2013, First Mercury filed counterclaims
against AAIC. (Doc. 13). In February 2014, Standard, Zia,
Bergstein, and Pieter Bergstein assigned to First Mercury all
rights and claims they may have against AAIC. (Doc. 175-2) at
alleges in its first amended complaint that
[d]espite multiple opportunities to settle within the
underlying $1 million policy limit plus First Mercury's
$4 million excess policy limit, and despite the warnings of
the likelihood of an excess verdict, Defendant First Mercury
failed to settle the claims of the Udy Estate and ...