Continental Casualty Company v. National Union Fire Insurance Company of Pittsburgh, PA

Filing 276

MEMORANDUM OPINION AND ORDER Continental's request for contribution from National Union in an amount of $80,520.77 plus interest recoverable thereon in an amount to be determined is GRANTED.(Written Opinion). Signed by Judge John R. Tunheim on September 12, 2014. (DML)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
CONTINENTAL CASUALTY
COMPANY,

Civil No. 09-287 (JRT/JJG)

Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,

MEMORANDUM OPINION
AND ORDER

Defendant,
and
THE VALSPAR CORPORATION,
Intervenor-Defendant.

Karen H. Ventrell, COLLIAU CARLUCCIO KEENER MORROW
PETERSON & PARSONS, 2020 K Street NW, Suite 505, Washington,
DC 20006; and Jeanne H. Unger and Susan E. Gustad, BASSFORD
REMELE, PA, 33 South Sixth Street, Suite 3800, Minneapolis, MN
55402, for plaintiff.
Dale O. Thornsjo and Mark R. Azman, O’MEARA LEER WAGNER &
KOHL, PA, 7401 Metro Boulevard, Suite 600, Minneapolis, MN 55439,
for defendant.
Andrew J. Detherage and John P. Fischer, BARNES & THORNBURG
LLP, 11 South Meridian Street, Suite 1313, Indianapolis, IN 46204; and
Annamarie A. Daley, BARNES & THORNBURG LLP, 225 South Sixth
Street, Suite 2800, Minneapolis, MN 55402, for intervenor-defendant.
Plaintiff Continental Casualty Company (“Continental”) and Defendant National
Union Fire Insurance Company of Pittsburgh, PA (“National Union”) each provided

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commercial general liability insurance to the Valspar Corporation (“Valspar”) at different
times between the period from 1971 through 2004. Beginning in 2006, Continental
incurred costs in defending Valspar against four toxic tort lawsuits (“the underlying
lawsuits”), which alleged damages resulting from long-term exposure to products
manufactured or sold by Valspar. The underlying lawsuits implicated the insurance
policies of all of Valspar’s historical insurers – including Continental and National Union
– as they alleged exposure to and injury from Valspar’s products beginning, at the latest,
in 1966, and extending through at least May 1990.
Continental brought the present declaratory judgment action against National
Union seeking contribution from National Union to the costs Continental incurred in
defending Valspar against the underlying lawsuits, based on the theory that National
Union owed Valspar a duty to defend against the underlying lawsuits, and therefore has
an equitable obligation to contribute to defense costs incurred by another insurer in
connection with those lawsuits.

On March 29, 2013, the Court granted in part

Continental’s motion for summary judgment, finding that National Union had a duty to
defend Valspar and therefore has a duty to contribute to defense costs incurred by
Continental.

The Court’s order left open the question of the dollar amount of

contribution that National Union was required to make to Continental, pending the
receipt of further information from the parties regarding the defense costs incurred with
respect to the underlying lawsuits and the amount, if any, that National Union had already
contributed. The parties have now submitted two sets of supplemental briefs regarding
the amount of contribution owed by National Union. Because Continental Casualty has
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presented undisputed evidence that it incurred $563,645.36 in defending the underlying
lawsuits, and National Union is responsible for a one-seventh share of those costs, the
Court will order contribution in the amount of $80,520.77 plus interest recoverable
thereon in an amount to be determined.
BACKGROUND1
I.

VALSPAR’S INSURERS
Continental issued five commercial general liability insurance policies to Valspar,

providing coverage from January 1, 1971, through January 1, 1976. (Compl. ¶ 9, Feb. 9,
2009, Docket No. 1.) Under these policies, Continental had “the right and duty to defend
any suit against” Valspar seeking damages for bodily injury or property damage to which
the insurance applied. (Id. ¶ 10, Ex. A at 7.)2
From 1990 through 2004 Valspar and National Union entered into annual
agreements which together formed an insurance program (“the Program”) and provided
general commercial liability insurance to Valspar. Each Program year consisted of a
general commercial liability policy in addition to other documents such as indemnity
agreements, promissory notes, funding schedules, and deductible liability insurance
endorsements, which further defined the financial and other obligations of Valspar and

1

The Court recites the background here only to the extent necessary to rule on the issues
presently before it. A more complete explanation of the insurance policies and the facts
surrounding Continental’s defense of the underlying lawsuits can be found in the Court’s
previous order. See Cont’l Cas. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 940
F. Supp. 2d 898 (D. Minn. 2013).
2

All references to page numbers refer to the CMECF pagination.

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National Union with respect to the insurance provided by the Program. (See Second Aff.
of Kristen Quast, Exs. 1-42, May 31, 2012, Docket No. 187.) In particular, under various
Program years, Valspar was either required to reimburse National Union for costs
incurred in defending Valspar under the Program up to the deductible limit of the
Program year (see, e.g., Second Quast Aff., Ex. 31 at 1612, Ex. 36 at 1676), reimburse
National Union for defense costs without limitation (see id., Ex. 39 at 1863, Ex. 41 at
1967), or assume direct responsibility for paying defense costs under the Program
policies (see id., Ex. 35 at 1631).

II.

THE UNDERLYING LAWSUITS
The underlying lawsuits were filed in 2005 and 2006, and alleged harm caused by

long-term exposure to benzene contained in products manufactured or sold by Valspar.
(Compl. ¶¶ 15, 18, 21, 24; Second Decl. of Karen Ventrell, Ex. A at 1, 6, Ex. B at 42, 45,
Ex. C at 1, 4, Ex. D at 28, 36-38, Jan. 25, 2010, Docket Nos. 110-11.) Because of the
length of exposure and timing of the injuries alleged, the underlying lawsuits triggered
coverage years of Continental, National Union, and other insurance companies that
provided insurance to Valspar between 1976 and 1990. (Second Ventrell Decl., Ex. A at
6, Ex. B at 45, Ex. C at 4, Ex. D at 36-38.)
Valspar tendered defense of the underlying lawsuits to Continental, National
Union, and its other historical insurers, after which Continental determined it had a duty
to defend Valspar. (Second Quast Aff. ¶ 3; Supplemental Aff. of Kristen Quast, Exs. AD, July 12, 2012, Docket No. 213.) Subject to a reservation of rights, Continental

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allowed Valspar to retain its own independent counsel and agreed to reimburse Valspar
for its defense payments reasonably incurred in defending against the underlying actions.
(First Decl. of Karen Ventrell, Ex. 1 at 2, Sept. 15, 2009, Docket No. 35; Supplemental
Quast Aff., Exs. A-D.) Continental requested contribution to Valspar’s defense from
National Union, which National Union declined to provide on the basis that Valspar had
not exhausted certain deductible amounts under the Program and therefore National
Union’s defense obligations under the Program years were not implicated. (Compl.,
Ex. K3; Second Quast Aff., Ex. 43 at 5592.)
Continental reimbursed Valspar for over $500,000 in costs Valspar incurred
defending against the underlying lawsuits. (Decl. of Wayne Binkowski, Ex. A, July 12,
2012, Docket No. 215.) On February 9, 2009, Continental brought the present action
against National Union, seeking contribution to those costs. In its complaint, Continental
sought “a judicial declaration that National Union has a duty to defend Valspar” and “a
judicial declaration that Continental has a right of contribution and is entitled to
contribution from National Union for defense expenses advanced by Continental to or on
behalf of Valspar in connection with the Underlying Actions in an amount to be
determined at trial.” (Compl. at 10.)
Valspar moved to intervene as of right pursuant to Fed. R. Civ. P. 24(a)(2),
arguing that intervention was necessary to protect its interest because any contribution
obligation of National Union would ultimately be borne by Valspar pursuant to the
Program. (Mot. to Intervene, July 21, 2009, Docket No. 20; Valspar’s Mem. in Supp. of
3

Exhibits B through L to the complaint were filed at Docket Number 2.

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Mot. to Intervene, July 21, 2009, Docket No. 22.)

The Magistrate Judge granted

Valspar’s motion. (Order, Sept. 1, 2009, Docket No. 30.)

III.

SUMMARY JUDGMENT ORDER
In May 2012, both Valspar and Continental moved for summary judgment.

(Valspar’s Mot. for Summ. J., May 31, 2012, Docket No. 184; Continental’s Mot. for
Summ. J., May 31, 2012, Docket No. 191.) National Union also requested judgment
independent of the motion. (National Union’s Mem. of Law in Resp. to Mots. for Summ.
J. at 1-2, July 5, 2012, Docket No. 205.) In support of its motion for summary judgment,
Continental relied upon Minnesota law which provides that “[a] primary insurer that has
a duty to defend, and whose policy is triggered for defense purposes, has an equitable
right to seek contribution for defense costs from any other insurer who also has a duty to
defend the insured, and whose policy has been triggered for defense purposes,” Cargill,
Inc. v. Ace Am. Ins. Co., 784 N.W.2d 341, 354 (Minn. 2010), to argue that either National
Union or Valspar had a duty to contribute to defense costs Continental incurred in
defending Valspar against the underlying lawsuits that triggered coverage during the
Program years. Valspar argued that because it was ultimately responsible for paying its
own defense costs under some of the Program years, National Union did not owe a duty
to defend Valspar against the underlying lawsuits, and therefore could not be compelled
to contribute to defense costs incurred by Continental. (Valspar’s Mem. in Supp. of Mot.
for Summ. J. at 23-24, May 31, 2012, Docket No. 186.) Valspar also argued that it was
essentially self-insured during the Program years, and because of its status as an insured

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it was “not obligated to pay for, or contribute to its defense” incurred by Continental in
defending the underlying lawsuits. (Id. at 2, 13-14.)
On March 29, 2013, the Court issued an order granting in part and denying in part
the motions for summary judgment, concluding that National Union, but not Valspar
owed a duty to defend and an accompanying duty to contribute to costs incurred by
Continental in defense of the underlying lawsuits. Cont’l Cas. Co. v. Nat’l Union Fire
Ins. Co. of Pittsburgh, PA, 940 F. Supp. 2d 898, 930 (D. Minn. 2013). The Court began
by determining that, despite Valspar’s obligation to reimburse or front certain defense
costs under the Program years, National Union had a duty to defend Valspar during all of
the Program years. Id. at 920-26. The Court went on to conclude that, pursuant to the
rule enunciated in Cargill, National Union – as a primary insurer with a duty to defend
whose policies had been triggered for defense purposes – had a duty to contribute to
defense costs incurred by Continental in defending Valspar against the underlying
lawsuits. Id. at 926-30.
In determining the amount that National Union was required to contribute to
defense costs the Court analyzed how many of Valspar’s historical insurers had a duty to
defend that was triggered by the underlying lawsuits. Id. at 930. This analysis was
required because “[u]nder Cargill’s duty to contribute, each insurer ‘shall be responsible
in equal shares for the cost of defense’ of the claims at issue.” Id. at 930 (quoting
Cargill, 784 N.W.2d at 354). The Court found that there were seven insurers whose duty
to defend Valspar was triggered by the underlying lawsuits, and therefore held that

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National Union was required to contribute one-seventh of the defense costs incurred by
Continental. Id. at 930.4

IV.

AMOUNT OF CONTRIBUTION
The Court’s March 2013 Order left open the question of the dollar amount of

contribution that National Union was required to make to Continental due to
Continental’s conflicting representations regarding the amount it had expended in
defending the underlying lawsuits. Id. at 930. Specifically, in support of its motion for
summary judgment, Continental alleged that it had paid a total of $538,920.94 in defense
costs. (Continental’s Mem. in Supp. of Summ. J. at 16, May 31, 2012, Docket No. 192.)
But in its reply memorandum, Continental indicated that it had incurred $551,060.21 in
defense expenses related to the underlying lawsuits. (Continental’s Reply at 10, July 12,
2012, Docket No. 214.) In light of these, and other discrepancies in the record regarding
the appropriate amount of contribution, the Court “require[d] the parties to submit
information to the Court clarifying the amount of defense expenses incurred by

4

Continental later brought a motion for reconsideration of the Court’s order on the
motions for summary judgment seeking “an amended order stating that there are only six
primary insurers and requiring National Union to contribute one-sixth of defense costs incurred
by Continental in defending the underlying lawsuits.” Cont’l Cas. Co., 940 F. Supp. 2d at 934
(emphasis in original). In ruling on the motion for reconsideration, the Court acknowledged that
it had erroneously characterized an umbrella insurer as a primary insurer, and filed an amended
order correcting that error. Id. But the Court concluded that this mischaracterization did not
alter its “ultimate finding that National Union owes Continental a one-seventh share of defense
costs Continental incurred in the underlying lawsuit” because, according to the record evidence
before the Court, that umbrella insurer owed a duty to defend and its policy was triggered by the
underlying lawsuits, and it could therefore be included in the number of insurers required to
contribute an equal share to defense costs. Id. at 934-35.

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Continental in defending Valspar against the underlying lawsuits.” Cont’l Cas. Co., 940
F. Supp. 2d at 930.
Pursuant to the Court’s order, Continental submitted a supplemental brief
indicating that it had, in fact, paid a total of $563,645.36 on behalf of Valspar in defense
of the underlying lawsuits. (Continental’s Br. in Supp. of Amount of Contribution at 5,
Ex. 1, Apr. 19, 2013, Docket No. 226.)

Continental explained that the difference

between the two amounts provided to the Court at the time of summary judgment and its
new requested amount were due to the “inadvertent omission of invoices,” decimal point
errors, and other discrepancies which it could not explain. (Id. at 2 & n.2.) Valspar did
not contest that Continental paid $563,645.36 in defense costs with respect to the
underlying lawsuits, but argued that in ascertaining the amount of National Union’s
contribution, the Court should also consider costs that Valspar contributed towards its
own defense of the underlying lawsuits. (Valspar’s Resp. & Objection to Continental’s
Br. in Supp. of Amount of Contribution, May 3, 2013, Docket No. 234.) Specifically,
Valspar argued that it contributed $15,823.94 to the defense of the Rush and Leforce
underlying lawsuits and $51,802.55 in defense of the Diorio underlying lawsuit, which
total of $67,626.49 should be credited against any contribution award entered in
Continental’s favor, as to National Union’s contribution obligation.
During a telephone conference, the Court requested that Valspar provide the Court
with proof of payment of the defense costs it claimed to have expended on its behalf and
explain the legal basis for its contention that those costs should be included in the Court’s

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equitable contribution analysis. (Minute Entry, Oct. 4, 2013, Docket No. 264.) The
parties have since filed additional briefs in accordance with this directive.
The Court notes that this long and tortured quest to ascertain the appropriate
amount of contribution, although largely not discussed by the parties at the time, began at
the summary judgment stage with what appeared to be a simple discrepancy between
Continental’s opening and reply briefs. Now, eight supplemental briefs and one motion
for reconsideration later, the question before the Court is still whether any genuine issue
of material fact remains regarding the amount of contribution to which Continental is
entitled to receive from National Union.

ANALYSIS
I.

STANDARD OF REVIEW
Summary judgment is appropriate where there are no genuine issues of material

fact and the moving party can demonstrate that it is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the suit,
and a dispute is genuine if the evidence is such that it could lead a reasonable jury to
return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A court considering a motion for summary judgment must view the facts in the
light most favorable to the non-moving party and give that party the benefit of all
reasonable inferences to be drawn from those facts. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986).

Summary judgment is appropriate if the

nonmoving party “fails to make a showing sufficient to establish the existence of an

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element essential to that party’s case, and on which that party will bear the burden of
proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “To defeat a motion
for summary judgment, a party may not rest upon allegations, but must produce probative
evidence sufficient to demonstrate a genuine issue [of material fact] for trial.” Davenport
v. Univ. of Ark. Bd. of Trs., 553 F.3d 1110, 1113 (8th Cir. 2009) (citing Anderson, 477
U.S. at 247-49).

II.

AMOUNT OF CONTRIBUTION
The parties do not dispute that Continental incurred costs in the amount of

$563,645.36 in defending Valspar against the underlying lawsuits.

(Valspar’s

Supplemental Br. in Supp. of Amount of Contribution at 1-2, Oct. 25, 2013, Docket
No. 265; Continental’s Resp. to Valspar’s Supplemental Br. in Supp. of Amount of
Contribution at 1, Nov. 8, 2013, Docket No. 269; National Union’s Resp. to Valspar’s
Supplemental Br. in Supp. of Amount of Contribution at 3, Nov. 8, 2013, Docket
No. 270.) Instead, the focus of the parties’ dispute in the briefs filed after the Court’s
ruling on their summary judgment motions is whether the amount Continental actually
incurred in defending Valspar is the appropriate amount to use when determining
National Union’s obligation to contribute a one-seventh share. If the Court determines
that the appropriate amount to consider in ascertaining equitable contribution is
$563,645.36, based on the Court’s previous rulings, National Union owes a one-seventh

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share of that cost, or $80,520.77.5 But Valspar argues that the Court must consider the
total costs of defending the underlying lawsuits – adding the $67,626.49 Valspar incurred
in defending itself against the underlying lawsuits to the $563,645.36 expended by
Continental – to arrive at $631,271.85 in total defense costs, with National Union being
liable for a one-seventh equitable contribution share of $90,181.69. Valspar argues that
the Court must then subtract the $67,626.49 expended by Valspar from National Union’s
share, and therefore require contribution from National Union in the amount of only
$22,555.20. (Valspar’s Supplemental Br. in Supp. of Amount of Contribution at 11-12.)
In order to determine the appropriate starting point for its equitable contribution analysis,
the Court begins with the basic principles underpinning equitable contribution between

5

National Union argues that a dispute remains regarding the ultimate issue of “who is
obligated to pay Continental” as between Valspar and National Union. (National Union’s Resp.
to Valspar’s Supplemental Br. in Supp. of Amount of Contribution at 1.) Specifically, National
Union argues that the Court has not yet “impose[d]” the one-seventh share of defense costs from
the Program years “on either National Union or Valspar.” (Id. at 2.) But this argument reflects a
misunderstanding of the Court’s previous order. Contrary to National Union’s argument, the
Court has already concluded that National Union, because of its duty to defend Valspar, is liable
to Continental for the contribution. See Cont’l Cas. Co., 940 F. Supp. 2d at 930 (“Therefore,
Continental may recover from National Union a one-seventh share of the costs it expended in
defending Valspar.” (emphasis added)); see also id. at 926 (“Under Cargill, the Court finds that
Continental has a clear right to seek contribution from National Union.” (emphasis added)).
The order from the Court seeking supplemental briefing as to the amount of contribution did not
provide the parties with the occasion to reargue or seek reconsideration of this conclusion. The
only issue presently properly before the Court is the amount of contribution that Continental is
entitled to recover from National Union, consistent with the Court’s legal conclusions in its
summary judgment order. Accordingly, to the extent National Union’s argument can be
construed as seeking such reconsideration, the Court will not consider the argument, as it is
procedurally improper. Furthermore, as noted in the Court’s summary judgment order, whether
National Union can compel Valspar to pay the amount of contribution on National Union’s
behalf or reimburse National Union for any contribution payment made to Continental is an issue
addressed in the cross claims between those parties which remain pending in this litigation. Id.
at 914 n.23. But this issue is between those two parties and does not affect Continental’s right to
obtain contribution from National Union, and also does not prevent the Court from determining,
in this Order, the amount of contribution to which Continental is entitled.

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insurers before examining the specific facts of this case and the arguments made by the
parties.

A.

Equitable Contribution

Contribution is “an equitable doctrine” which generally “requires only that persons
under a common burden share that burden equitably.” Peterson v. Little-Giant Glenco
Portable Elevator Div. of Dynamics Corp. of Am., 366 N.W.2d 111, 116 (Minn. 1985)
(internal quotation marks omitted). “‘The essential elements of a contribution claim are
(1) common liability of two or more actors to the injured party; and (2) the payment by
one of the actors of more than its fair share of that common liability.’” A.P.I., Inc. v.
Home Ins. Co., 706 F. Supp. 2d 926, 946 (D. Minn. 2010) (quoting Nuessmeier Elec.,
Inc. v. Weiss Mfg. Co., 632 N.W.2d 248, 251 (Minn. Ct. App. 2001)). The Minnesota
Supreme Court has explained that “what constitutes ‘common liability’ is not susceptible
of a single precise definition,” and because the concept is “an element of the equitable
remedy of contribution” it has been “accorded some elasticity.” Horton ex rel. Horton v.
Orbeth, Inc., 342 N.W.2d 112, 114 (Minn. 1984). But the court has “uniformly declined
to allow contribution where there has been a valid determination on the merits that
common liability (however flexible its definition) could never have existed.” Id.
With respect to equitable contribution in the insurance context specifically, the
Minnesota Supreme Court has explained that equitable contribution is the right of one
insurer “to seek contribution for defense costs from any other insurer who also has a duty
to defend the insured, and whose policy has been triggered for defense purposes.”

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Cargill, Inc., 784 N.W.2d at 354; see also id. 352 n.11. Equitable contribution is allowed
between insurers because, where more than one insurer “covers the same risk,” but only
one of the insurers supplies a defense, it has “discharge[d] a common obligation also
belonging to another insurer.” Id. at 353; see also Nat’l Indem. Co. v. St. Paul Ins. Cos.,
724 P.2d 544, 545 (Ariz. 1986) (“Under the principle of equitable [contribution], the
insurer which has performed the duty to provide a defense to its insured should be able to
compel contribution for a share of the cost of defense from another insurer who had a
similar obligation to the same insured but failed to perform it.”); Fireman’s Fund Ins. Co.
v. Md. Cas. Co., 77 Cal. Rptr. 2d 296, 303-04 (Cal. Ct. App. 1998) (explaining that the
purpose of equitable contribution “is to accomplish substantial justice by equalizing the
common burden shared by coinsurers, and to prevent one insurer from profiting at the
expense of others”).

B.

Amount of Contribution

The Minnesota Supreme Court has explained that the result of equitable
contribution between insurers is that each insurer is ultimately responsible for “[a]n equal
share for costs of defense.”

Cargill, Inc., 784 N.W.2d at 354; see also Wooddale

Builders, Inc. v. Md. Cas. Co., 722 N.W.2d 283, 304 (Minn. 2006) (“[D]efense costs are
apportioned equally among insurers whose policies are triggered.”). Because the right to
equitable contribution “arises when one of two or more insurers is obligated to indemnify
or defend the same loss or claim and one of those insurers has paid more than its share of
the loss,” the Court must determine what that loss is before ascertaining the shares of the

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various insurers. See Golden Eagle Ins. Co. v. Ins. Co. of the W., 121 Cal. Rptr. 2d 682,
692 (Cal. Ct. App. 2002) (emphasis and internal quotation marks omitted). To determine
the loss, the Court must consider all defense costs paid by insurers with common liability.
See MGA Entm’t, Inc. v. Hartford Ins. Grp., 869 F. Supp. 2d 1117, 1123 (C.D. Cal. 2012)
(considering payments made by all insurers in the relevant time period with respect to
defense costs to determine each insurer’s fair share).
For example, if four insurers had a common duty to defend against the underlying
lawsuits, Continental had expended $150,000 in defense of the underlying lawsuits, and
another of the insurers had expended $50,000, the total loss occasioned by the insurers’
common liability would be $200,000. Each insurer’s fair share would therefore be
$50,000, and Continental would be able to recover contribution only from the two
insurers that had not paid anything, as the other historical insurer that contributed
$50,000 to the defense had already paid its fair share. With these principles in mind, the
Court turns to Valspar’s specific arguments.

C.

Valspar’s Payment of $15,823.94

Valspar argues that two different types of payments it made should be added to the
total cost of defending the underlying lawsuits before determining National Union’s oneseventh share, and that Valspar’s payments should then be subtracted from the amount of
contribution National Union owes.
First, Valspar contends that it expended $15,823.94 in defending against the
underlying lawsuits for which Continental refused to reimburse Valspar. Valspar argues

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that these were costs incurred in defending against the underlying lawsuits and therefore
should be added to the $563,645.36 claimed by Continental to arrive at the total amount
of defense costs expended. But Valspar’s argument is misplaced for at least two reasons.
First, the Court already rejected a variation of this argument in its summary judgment
order.

In its motion for summary judgment Valspar argued that although Valspar

incurred at least $184,000 in defending against one of the underlying lawsuits,
Continental had breached its duty to defend by failing to reimburse Valspar for
$15,823.94 of those expenses. Cont’l Cas. Co., 940 F. Supp. 2d at 914. The Court noted
that in certain circumstances an insurer’s breach of its duty to defend its insured would
preclude the insurer from seeking equitable contribution, because such conduct is
inequitable. Id. at 929 (citing Land O’Lakes, Inc. v. Emp’rs Mut. Liability Ins. Co. of
Wis., 846 F. Supp. 2d 1007, 1043-44 (D. Minn. 2012). But the Court concluded that,
“under the facts of this case, any breach by Continental [in failing to reimburse Valspar
for the $15,823.94] was insufficient to bar its right to seek contribution from other
insurers.” Id. The Court therefore concluded that this unpaid amount had no bearing on
Continental’s ability to seek contribution or the amount of contribution that Continental
could seek. Accordingly, the Court’s summary judgment order foreclosed Valspar’s
attempt to insert this $15,823.94 into the total amount of defense costs for purposes of
determining National Union’s fair share of those costs.
Second, Valspar’s argument conflates the nature of the relationship between two
insurers – which gives rise to a right of equitable contribution – and the relationship
between an insured and its insurer – which is one defined by the insurance policy
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contract. See MGA Entm’t, Inc., 869 F. Supp. 2d at 1124 (“[A]n insurer’s duty to defend
its insured is governed by the contract of insurance between those parties, whereas an
insurer’s right to equitable contribution from other insurers is based in equitable
principles, not contract.” (alteration and internal quotation marks omitted)). For example,
an “insured has a contract right to have actions against him defended by the insurer, at
its expense.” Chicago Title Ins. Co. v. F.D.I.C., 172 F.3d 601, 605 (8th Cir. 1999)
(emphasis added) (internal quotation marks omitted) (explaining that breach of the duty
to defend claims arise out of breaches of the insurance contract). Therefore, if Valspar
wanted to contest Continental’s refusal to pay the $15,823.94 incurred in connection with
the underlying lawsuits for which Continental was providing a defense, it should have
brought a breach of contract action against Continental. See Nucor Corp. v. Emp’rs Ins.
Co. of Wausau, 296 P.3d 74, 86 (Ariz. Ct. App. 2012) (“Unlike the relationship among
multiple insurers, the insured and each insurer have an insurance contract that governs
their relationship. Here, Wausau was contractually obligated to provide Nucor with a
complete defense. If Wausau provided more coverage than bargained for under its
insurance contract with Nucor, contractual remedies, not equitable contribution, were
appropriate.”).
But Valspar’s payment of $15,823.94 has no bearing on Continental’s right to
recover equitable contribution against National Union because Valspar – as an insured –
did not share with Continental and the other historical insurers a common duty to defend
and the common liability to contribute to payment of defense costs that accompanies that
duty. Valspar argues, however, that “[a] ‘fair allocation’ of defense costs necessarily
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requires that all defense costs paid by all parties be considered, regardless of the source
of the payment.” (Valspar’s Supplemental Br. in Supp. of Amount of Contribution at 6
(emphasis added).) Valspar has not cited, and the Court has not found any authority for
the proposition that any amount expended from any source in connection with a lawsuit
becomes the responsibility of the insurers that had a duty to defend that lawsuit. Instead,
equitable contribution, as explained above, is a form of relief that sounds in common
liability or obligation. An insured who is being defended by one of its insurers shares no
common liability for defense costs with a different insurer that also owes the insured a
duty to defend. The common liability – and therefore the relevant amount to consider for
purposes of determining the total amount of loss subject to equitable contribution – is
between the insurers that are discharging common obligations to defend the insured. See
Cargill, Inc., 784 N.W.2d at 353. Accordingly, the Court concludes that Valspar’s
payment of $15,823.94 is not part of the total amount of defense costs for purposes of
determining equitable contribution.

D.

Valspar’s Payment of $51,802.55

Valspar also argues that $51,802.55 it spent in defense costs on the underlying
lawsuits, for which it apparently did not seek reimbursement from Continental, must be
added to the total amount of defense costs and deducted from the fair share for which
National Union is responsible. The Court’s analysis from above largely applies with
equal force to the $51,802.55 claimed by Valspar to be part of the total defense costs.
But Valspar’s argument with respect to this money also raises an additional wrinkle. In

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the summary judgment order, the Court concluded that National Union had a duty to
defend Valspar during the Program years, regardless of whether Valspar had an
obligation under the Program to reimburse National Union or front money for the
payment of those funds. See, e.g., Cont’l Cas. Co., 940 F. Supp. 2d at 920 (“Simply
because National Union will ultimately be reimbursed for certain costs it expends in
defending Valspar does not indicate that it does not have a duty to defend Valspar.”).
Valspar argues that because of this holding “defense payments made by Valspar or [a
third-party administrator] also should be credited to National Union in any equitable
contribution analysis.” (Valspar’s Supplemental Br. in Supp. of Amount of Contribution
at 3 n.2.)
As explained above, payments made by an insured during a period of time in
which the insured is being defended by an insurer are not included in an equitable
contribution analysis, because an insured does not share common liability with its
insurers. Cf. Aerojet-Gen. Corp. v. Transp. Indem. Co., 948 P.2d 909, 930 (Cal. 1997)
(“Although insurers may be required to make an equitable contribution to defense costs
among themselves, that is all: An insured is not required to make such a contribution
together with insurers. Equitable contribution applies only between insurers and only
in the absence of contract. It therefore has no place between insurer and insured, which
have contracted the one with the other.” (emphasis in original) (citations omitted)).
Therefore, in order to demonstrate that the $51,802.55 belongs in the total amount of
defense costs incurred by insurers with a duty to defend, Valspar must demonstrate that
those payments are attributable to National Union’s duty to defend that was triggered
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under the Program years. In other words, Valspar cannot simply incur any defense
expenses it wishes to, and then after the fact claim that those expenses should be applied
to National Union’s obligation to contribute defense costs for the Program years. Instead,
Valspar must provide evidence that those payments were linked to the National Union
Program years, for example, by showing that the payments were applied to the relevant
deductibles under the Program years or were otherwise documented as being expenses
paid pursuant to those years.

But Valspar has presented no evidence of any kind

indicating such a connection. Indeed, in opposing Continental’s motion for summary
judgment, Valspar specifically contended that “[m]ore importantly, in the four Suits
actually at issue here, the evidence is undisputed that neither Valspar nor National
Union . . . participated in the defense of those Suits pursuant to the Program.”
(Valspar’s Mem. in Opp’n to Continental’s Mot. for Summ. J. at 19-20, July 5, 2012,
Docket No. 200 (emphasis added).) Therefore, by Valspar’s own admission there is no
connection between the $51,802.55 and the National Union Program years. Because the
undisputed facts in the record show that the expenditures are not attributable to National
Union – an entity that does share common liability with Continental – they are not
properly considered as part of the equitable contribution analysis. Therefore, the Court
will not add the $51,802.55 to the total amount of defense costs for purposes of
determining National Union’s contribution share.
Accordingly, the Court finds that Continental is entitled to contribution based on
defense expenses it incurred in the amount of $563,645.36. National Union is liable for a

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one-seventh share of those expenses, or $80,520.77, as well as interest recoverable
thereon in an amount to be determined.

ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that pursuant to the issues raised in the parties’ supplemental
briefs, Continental’s request for contribution from National Union in an amount of
$80,520.77 plus interest recoverable thereon in an amount to be determined is
GRANTED.
DATED: September 12, 2014
at Minneapolis, Minnesota.

____s/
____
JOHN R. TUNHEIM
United States District Judge

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