Potomac Insurance Co. of Illinois ex rel. OneBeacon Insurance Co. v. Pennsylvania Manufacturers' Association Insurance Co.

Summary

The New Jersey Supreme Court held that an insurer that paid defense costs for a common insured may assert a direct contribution claim against a co-insurer for the co-insurer’s allocated share of those costs. Applying the continuous-trigger and equitable-allocation principles of Owens-Illinois and Carter-Wallace, the Court upheld allocation of defense costs among successive insurers. The Court also held that a release executed by the insured and one co-insurer did not extinguish the nonparty insurer’s contribution claim.

Holdings

1. An insurer that pays more than its proportionate share of defense costs for a common insured may assert a direct contribution claim against a co-insurer that had an obligation to defend and indemnify the insured.
2. The release between Aristone and PMA did not bar or limit OneBeacon's independent contribution claim because OneBeacon was neither a party to nor a signatory of the release, and the release did not purport to waive OneBeacon's rights.
3. The trial court properly allocated sixteen percent of the defense costs to PMA under the continuous-trigger and pro rata allocation principles governing the insurers' successive coverage.

Questions Presented

1. Whether an insurer that paid defense costs for a common insured may assert a direct contribution claim against a co-insurer for the co-insurer's proportionate share of those costs.
2. Whether a release executed by the common insured and the co-insurer extinguished the non-signatory insurer's independent contribution claim for defense costs.
3. Whether the trial court properly allocated sixteen percent of the defense costs to PMA under New Jersey's continuous-trigger and pro rata allocation methodology.

Disposition

affirmed