Cases

Federal Insurance Company and GMSR client Truck Insurance Exchange were liability insurers for the same insured.  In a previous lawsuit, Federal sued Truck for reimbursement on the premise that Federal’s duty to defend under the insured’s excess policy depended on the exhaustion of the primary policies, and therefore that Truck, as unexhausted primary insurer, was responsible for Federal’s defense costs.  Truck paid Federal $5 million to settle the case.  Truck paid Federal $5 million to settle the case.  But then, in a second previous lawsuit, Truck lost its claim for reimbursement against Federal—because Federal now disclosed that it did not have a duty to defend under the excess policy.

Based on Federal’s about-face, Truck sued Federal for fraud in obtaining the $5 million settlement.  The trial court entered judgment for Federal.  The Court of Appeal reversed and ordered a new trial on Truck’s fraudulent concealment claim.  It adopted GMSR’s argument that Federal’s fraud was extrinsic—Truck did not unreasonably neglect to discover the fraud in the first lawsuit—and held that the litigation privilege therefore did not bar Truck’s claim.

To read the Court of Appeal Opinion, click HERE.