National Cas. Co. v. White Mountains Reinsurance Co.

U.S. Court of Appeals No. 11-3158 (7th Cir. 10/30/13)

Words & Phrases

Equitable Contribution

Trial Judge

Judge Harold A. Baker

Appellate Judge

Circuit Judge Flaum

Holding

Where plaintiff insurer defended under a reservation of rights and was ultimately determined not to have a duty to defend, it was entitled to recover under a theory of unjust enrichment the defense costs from defendant insurer that wrongfully failed to defend.

Fact Summary

The Seventh Circuit agreed with the district court that it would be inequitable for White Mountains to benefit from National Casualty’s attempt to do the right thing, especially since White Mountains did not do the right thing in a situation of questionable coverage and contribute to the defense costs under a reservation of rights. White Mountains is liable for the defense costs of McFatridge and Edgar County as found by the district court. National Casualty is not liable for the defense costs under McFatridge I, 604 F.3d at 345. We also note that there appear to be no other parties liable for McFatridge’s and Edgar County’s defense costs. McFatridge had previously claimed that the State of Illinois was also re­sponsible for his defense costs, but as noted earlier, the Illi­nois Supreme Court has recently clarified that the State is not liable for these costs. Madigan, 989 N.E.2d at 173. There­fore, White Mountains alone was unjustly enriched by Na­tional Casualty’s expenditures on McFatridge’s and Edgar County’s defense costs, and White Mountains must reim­burse National Casualty for these expenditures.

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