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Tig Insurance v. General Star Indemnity Co.
Citation: 42 F. App'x 913Docket: No. 01-56541; D.C. No. CV-99-07333-FMC
Court: Court of Appeals for the Ninth Circuit; July 31, 2002; Federal Appellate Court
General Star Indemnity Company appeals a district court judgment favoring TIG Insurance Company, which is affirmed. The case originated from a 1995 industrial accident in which worker Luis Diaz suffered burns and subsequently sued Irwin Industries. Irwin's insurance contract with General Star included a Self-Insurance Retention Endorsement, assigning Irwin responsibility for the first $200,000 in expenses, while General Star was liable for the next $1 million, with TIG covering amounts beyond that. During mediation, Diaz reduced his settlement demand from $1.5 million to $1.1 million, but General Star refused an offer to settle for $650,000, leading to a jury awarding Diaz $1.8 million. The parties later settled for $1.7 million during appeal, resulting in a liability of $338,000 for TIG. TIG then initiated a suit against General Star, claiming breach of good faith and fair dealing for not settling within the policy limit, thus exposing TIG to excess liability. The district court, having jurisdiction under 18 U.S.C. 1332, found in favor of TIG after a bench trial, awarding $338,000 plus fees and interest. General Star's appeal raises four main arguments: (i) it had no duty to manage the settlement until Irwin exhausted its retention amount; (ii) no liability arises as Irwin did not demand a settlement; (iii) its actions were reasonable based on counsel’s advice; and (iv) there was no evidence linking its actions to TIG's damages. The court determined that although General Star had no duty to take control of the litigation, it effectively did so during mediation when it refused to increase its settlement offer. This triggered an obligation to act in good faith. The concept of equitable subrogation under California law allows TIG to stand in Irwin's shoes, and the court found that Irwin's attorney's request constituted a settlement demand. General Star's reliance on counsel was deemed insufficient to avoid liability since it disregarded that advice. Finally, the court found sufficient evidence to establish proximate causation for TIG's damages, supporting the district court's findings. The judgment of the district court is thus affirmed, with the disposition not suitable for publication under Ninth Circuit Rule 36-3.