Friday, November 22, 2013

Owens Corning v. National Union Fire Insurance Co. case brief

Owens Corning v. National Union Fire Insurance Co. case brief summary
257 F.3d 484 (2001)

The United States District Court for the Northern District of Ohio held plaintiff corporation did not have to allocate costs between directors who were covered and corporation who was not covered, on its claim for coverage against defendant insurer for indemnification on a settlement. Insurer appealed, also arguing indemnification was inappropriate, and it was error to enter final judgment and deny amendment to add new claims and defenses.


  • The appellate court found that although settlement allocation was contemplated by the policy, the method of allocation was ambiguous. 
  • The court adopted the larger settlement rule supporting coverage of the settlement except to the extent that uninsured claims had actually increased the insurer's liability. 
  • The directors had been sued on all claims; there were no separate claims attributable solely to employees or to the corporation. 
  • Corporation could accord a rebuttable presumption of good faith to the directors. 
  • Indemnification occurred in relation to a settlement under Del. Code Ann. tit. 8, § 145(a), in which good faith was required. 
  • The presumption was unrebutted. 
  • Thus, it was according to law, and was not in breach of the policy. 
  • As the motion to amend the answer and counterclaim was filed three years after the original answer, denying the motion was not error. 
  • Also, the amendments added little. 
  • Since the defense based on unreasonableness of the underlying settlement was not an issue in the declaratory judgment action, insurer's belated demands for proof of reasonableness did not make it one. 
  • Entry of final judgment was proper.

The judgment of the district court was affirmed.

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