Federal Court Addresses Allocation Of Defense Costs

In National Union Fire Insurance Company of Pittsburgh, Pa. v. Essex Insurance Company, Civil Action No. 13-32, 2013 WL 6328792 (W.D. Pa. Dec. 5, 2013), a federal district court1 applying Pennsylvania law denied motions to dismiss and for joinder that an insurer filed against two other insurers who were seeking recovery of defense costs. In particular, the court denied the motion of defendant Essex Insurance Company (Essex) to dismiss a claim for defense costs that plaintiffs National Union Fire Insurance Company of Pittsburgh, Pa. (National Union) and American Home Assurance Company (American Home) had brought against Essex based on alternative theories of indemnification and contribution. The court also denied Essex's motion to join a fourth insurer, Hartford Fire Insurance Company (Hartford), as a necessary party to the litigation under Rule 19 of the Federal Rules of Civil Procedure.2

The principal policyholder in National Union v. Essex, Earth Support Services, Inc. d/b/a Micon (Micon), manufactured chemicals used in the coal mining industry. 2013 WL 6328792, at **1-2. The plaintiff insurers provided primary liability coverage to Micon for various periods between 1995 and 2004, whereas Essex supplied Micon with coverage for periods before 1995. Hartford provided primary liability coverage to Micon Products International (MPI), a Micon affiliate.

Beginning in 2001, Micon was the target of several lawsuits brought by coal miners who alleged that exposure to Micon chemicals had caused personal injury. Id. National Union and American Home provided the initial defense to these lawsuits, and Essex later joined in the defense. Starting in 2004, the coal miners also began to name MPI as a defendant in certain of these lawsuits, and National Union, American Home, Essex, and Hartford ultimately agreed to a joint defense of Micon and MPI. Thereafter, following settlement of the lawsuits against Micon and MPI, National Union and American Home asserted that they had paid more than their fair share of defense costs and sought recompense from Essex and Hartford. Hartford reached an agreement with National Union and American Home regarding allocation of defense costs, but Essex refused to contribute. Id. at **1-2, 9. Accordingly, National Union and American Home filed a suit against Essex that sought, in part, recovery of defense costs based upon theories of contribution and indemnity. Id. at **1-2. Essex responded with motions that sought dismissal...