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ACE Am. Ins. Co. v. Zurich Am. Ins.
Co.
No. 22-4054, 2024 WL 945246 (6th Cir. Mar. 5, 2024)
The U.S. Court of Appeals for the Sixth Circuit vacated the
federal district court’s grant of summary judgment in favor of
Discover Property & Casualty Insurance Company (Discover) and
Zurich American Insurance Company (Zurich) and against ACE American
Insurance Company (ACE), remanding the case to the district court.
ACE, Discover, and Zurich were primary insurers of Safelite Group,
Inc. (Safelite), a windshield repair company. The issue in the case
was whether ACE was entitled to equitable contribution against
Discover and Zurich for defense costs incurred solely by ACE.
In August 2015, Safelite was sued by other windshield repair
companies for Lanham Act violations, claiming Safelite’s false
advertising harmed them. After Safelite satisfied its deductible,
ACE started paying Safelite’s defense costs. Safelite did not
notify Discover or Zurich about the lawsuit. Discover and Zurich
did not learn about it until August 2019. By that time, ACE had
paid nearly $5 million in defense costs. In October 2019, ACE
informed Discover and Zurich that it intended to seek equitable
contribution for Safelite’s defense costs. The two insurers
agreed to equally share future defense costs with ACE, but they
refused to reimburse ACE for pre-tender defense costs incurred
before the date they received notice of the case.
ACE commenced its lawsuit against the insurers, seeking
equitable contribution for all past and future defense costs that
it paid or will pay on Safelite’s behalf. The parties agreed
that the underlying lawsuit triggered a duty to defend and that the
pre-tender defense costs were reasonable and necessary. The
district court, however, concluded that Discover and Zurich had no
duty to contribute because of the untimely notice and that a
prejudice inquiry was unnecessary.
On appeal, the appellate court vacated the district court’s
judgment holding that the insurers shared a defense obligation, and
instructing the district court to conduct a prejudice analysis to
determine whether the untimely notice constituted a material breach
of the Discover and Zurich insurance policies. For that reason, it
remanded the case to the district court for a prejudice
determination.
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