Client Alert: Expert Testimony in Indemnity Action Not Limited to Opinions Presented in Underlying Matter

In National Union Fire Insurance Co. of Pittsburgh Pa. v. Tokio Marine and Nichido Fire Insurance Co. (filed 2/4/2015, B24899 and B247258), the California Court of Appeal, Second District, held that the insurer of Costco Wholesale Corporation, in a subsequent indemnity action, could offer expert opinions which were not developed by the third-party plaintiff’s experts in an underlying dispute.

Jack Daer filed suit against Costco and Yokohama Tire Corporation, alleging a tire manufactured by Yokohama (and sold by Costco), was defective and caused an accident resulting in Mr. Daer’s injuries. The case proceeded through expert discovery and depositions. On the first day of trial, Costco settled with Daer for $5.5 million, and Yokohama settled for $1.1 million.

National Union Fire Insurance Company of Pittsburgh, Pa (“National Union”) was Costco’s primary insurer, and paid for Costco’s defense and settlement in the underlying dispute. National Union filed this separate action against Yokohama, alleging Yokohama had a duty to indemnify Costco in the underlying action. National Union also sued Tokio Marine & Nichido Fire Insurance Co., Ltd. (“Tokio Marine”), for indemnity and contribution, as Yokohama’s insurer.

Before trial, the court ruled in limine that National Union could not offer independent expert opinions demonstrating a tire defect. The court held National Union could only introduce the opinions developed by Daer’s expert in the underlying case. The matter proceeded to trial, and non-suit was entered for Yokohama and Tokio Marine, as National Union’s expert could not opine, based solely on the opinions of Daer’s expert, that the tire contained a defect in design or manufacture that caused Daer’s injuries.

National Union appealed, and the Second District Court of Appeal reversed. The Court of Appeal determined the trial court erred in excluding relevant and material expert evidence.

On appeal, Yokohama and Tokio Marine argued the evidence was properly excluded because only those defect claims asserted by Daer’s expert in the underlying matter were relevant to National Union’s indemnity claims because only those defect claims could have formed the basis for the parties’ evaluations of liability and settlement. The Court of Appeal rejected this argument, noting Yokohama cited no authority which placed such a limitation on evidence in a subsequent indemnity action. The Court held the evidence sought to be introduced by National Union was relevant to the determination of whether Costco was liable in the underlying matter.

This decision is significant as it will impact the manner in which insurance carriers evaluate indemnity disputes with other insurance carriers. Had the Court of Appeal affirmed the trial court, insurance carriers seeking indemnity from other responsible carriers would be restricted and limited by the expert opinions developed in the underlying dispute. Instead, this decision gives insurance carriers the opportunity to develop new expert testimony.

This document is intended to provide you with information about general liability related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.

February 9, 2015