Additional Insured's Action Against Non-Defending Insurer Barred When Defense is Being Provided by Another Insurer - Summary Judgment Granted

April 1, 2002

On May 2, 2002 summary judgment was granted in San Luis Obispo Superior Court in favor of an insurer that had not participated with other insurers in the defense of an additional insured general contractor. VCL, an additional insured filed suit against non-defending insurers alleging that although another insurer was providing VCL's defense, because that defense was provided under reservation of rights, VCL was potentially obligated to reimburse the defending insurer. In addition, VCL sought damages because the defending insurer's payment to defense counsel, made under Civil Code section 2860, was at a rate lower than VCL had agreed to pay its attorneys (i.e., the hourly rate was approximately $185 per hour and the defending insurer was paying $135 per hour). The defense contended VCL had suffered no damages because VCL was receiving a full and complete defense from the defending insurer and that VCL was not entitled to any rate differential. The court agreed, finding that VCL had no viable claim for breach of ontract or bad faith, granting summary full summary judgment in favor of the insurer. Any potential claim for recovery would belong to the defending insurer in a contribution action. The matter was handled by Jean M. Lawler, James S. Williams and Daniel G. Pezold.