{"id":2488,"date":"2014-01-03T06:45:05","date_gmt":"2014-01-03T13:45:05","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=2488"},"modified":"2013-12-30T16:45:34","modified_gmt":"2013-12-30T23:45:34","slug":"settlement-payment-may-preclude-finding-policy-exhaustion-scottsdale-v-national-union","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/settlement-payment-may-preclude-finding-policy-exhaustion-scottsdale-v-national-union\/","title":{"rendered":"Settlement Payment May Preclude Finding of Policy Exhaustion: Scottsdale v. National Union"},"content":{"rendered":"<p>Heather Anderson &#8211; December 11, 2013<\/p>\n<p>In the last year, the U.S. District Court for the District of Colorado found that a settlement payment from an excess insurance carrier to another primary insurance carrier precluded a finding of vertical exhaustion sufficient to trigger the primary carrier\u2019s duty to indemnify.\u00a0 See Scottsdale Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, 2012 WL 6004087 (D. Colo. 2012).\u00a0 The Scottsdale case arose out of the construction of a 507-unit apartment complex in Arapahoe County, Colorado in which a number of defects became apparent during construction.\u00a0 As a result, the owner of the project sued the general contractor and\/or the construction manager, seeking to recover more than $22 million for various construction deficiencies.\u00a0 Id. at *1.<\/p>\n<p>The general contractor was insured under policies issued by several carriers.\u00a0 Scottsdale Insurance Co. (\u201cScottsdale\u201d) and National Union Fire Ins. Co. (\u201cNational Union) provided umbrella coverage, and CNA and American Zurich Ins. Co. (\u201cZurich\u201d) provided primary insurance under commercial general liability policies.\u00a0 About five years later, the construction defect case settled for $8.5 million dollars.\u00a0 The settlement was funded by CNA, Scottsdale, and Zurich.\u00a0 CNA contributed $4 million, Scottsdale contributed $4,350,000, Zurich contributed $75,000, and the insured contributed $75,000.\u00a0 National Union did not contribute to the settlement.\u00a0 In a related agreement, Scottsdale agreed to pay CNA $500,000 to facilitate the resolution of related coverage disputes involving CNA.<\/p>\n<p>Subsequently, Scottsdale commenced a declaratory judgment action against National Union seeking reimbursement for at least $2,283,911 of the funds Scottsdale paid to settle the construction defect action.\u00a0 Scottsdale asserted four claims for relief, including equitable contribution and contractual subrogation.\u00a0 National Union answered, denied liability, and eventually moved for summary judgment.\u00a0 According to National Union, Scottsdale could not show that the primary insurance policies underlying the National Union umbrella policies had been fully exhausted.\u00a0 Id. at *2.\u00a0 National Union argued that Scottsdale payment of $500,000 precluded Scottsdale from showing that the policy limits under a certain CNA policy had been fully exhausted.\u00a0 National Union characterized Scottsdale\u2019s $500,000 payment as replenishment of policy limits under the CNA policy limits.\u00a0 Although Scottsdale attempted to argue that the $500,000 payment applied to only one CNA policy, the court disagreed.<\/p>\n<p>In commenting on testimony offered by a Scottsdale representative limiting that payment to a certain CNA policy, the court stated \u201c[t]his evidence does not satisfy Scottsdale\u2019s evidentiary burden with respect to the exhaustion requirement.\u201d\u00a0\u00a0 Id. at *3.\u00a0 Notably, the court indicated that the relevant factual inquiry is how CNA allocated the $500,000, and that Scottsdale had not presented any evidence on that subject.\u00a0 As a result, the court found that Scottsdale\u2019s response lacked the requisite evidentiary support to preclude summary judgment on the question of vertical exhaustion.\u00a0 The court granted National Union\u2019s motion for summary judgment, dismissed all of Scottsdale\u2019s claims, and awarded National Union its costs.\u00a0 The takeaway from this case is to be extremely cautious when considering the possibility of settlement with one of several potential carriers who may be liable for defense and\/or indemnity.\u00a0 You may be impairing and\/or precluding coverage.<\/p>\n<p>via <a href=\"http:\/\/www.coloradoconstructionlitigation.com\/2013\/12\/settlement-payment-may-preclude-finding.html\">Colorado Construction Litigation: Settlement Payment May Preclude Finding of Policy Exhaustion: Scottsdale v. National Union<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Heather Anderson &#8211; December 11, 2013 In the last year, the U.S. District Court for the District of Colorado found that a settlement payment from an excess insurance carrier to another primary insurance carrier precluded a finding of vertical exhaustion sufficient to trigger the primary carrier\u2019s duty to indemnify.\u00a0 See Scottsdale Ins. Co. v. National&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/settlement-payment-may-preclude-finding-policy-exhaustion-scottsdale-v-national-union\/\">Continue reading <span class=\"screen-reader-text\">Settlement Payment May Preclude Finding of Policy Exhaustion: Scottsdale v. National Union<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14,4,3],"tags":[12,19,478,3],"class_list":["post-2488","post","type-post","status-publish","format-standard","hentry","category-construction-2","category-construction-defects","category-insurance-claims","tag-construction","tag-construction-defects-2","tag-duty-to-indemnify","tag-insurance-claims","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Settlement Payment May Preclude Finding of Policy Exhaustion: Scottsdale v. 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