In Evanston Ins. Co. v. Western Community Ins. Co., 2016 WL 1555706 (D. Nev. 2016), the U.S. District Court for the District of Nevada allocated defense fees and costs among primary insurers according to “time on the risk,” finding it to be most equitable and to “accomplish substantial justice” between the primary carriers.
The District Court recognized that Nevada had no law to determine allocation so it chose to look to California law. The District Court stated that under California law, there was “no fixed rule for allocating defense costs among primary insurers covering the same loss.” Rather, the District Court recognized that California courts consider “the varying equitable considerations which may arise…and which depend on the particular policies of insurance, the nature of the claim made, and the relation of the insured to the insurers.” In addition, the District Court stated that “the exact allocation is a decision that ultimately rests in the discretion of the Court.”
Given the specific facts of the case, the District Court applied a “time on the risk” approach to allocating defense fees and costs because the court found it to be the “most equitable” and will “‘accomplish substantial justice’ among the parties.” The court also determined that the “time on the risk” calculation began when the construction of the property was completed. Therefore, the District Court found that Evanston Insurance Company (Evanston) was only on the risk for 59 days, while Western Community Insurance Company (Western) was on the risk for 1460 days, therefore allocating 3.9% of the defense fees and costs to Evanston and 96.1% to Western.
Tressler Comments
As no Nevada courts have addressed the issue of allocation among primary carriers, as it appears that Nevada courts will likely follow California law on this issue and apply equitable principles in determining allocation among carriers. Also significant is the fact that the court determined, for purposes of calculating allocation based upon time on the risk, that one should look to when the construction was completed to begin calculations.