Stare Decisis Has Its Limits…

Let’s say an insured has two insurance policies from different companies for the same risk (call them Company A and Company B).  Can the insured elect to impose all of the defense and coverage costs on one of the two for whatever reason (say, due to a side-deal with Company B as to on-going premiums for other policies or policy periods)?  Can a court simply order Company B to be equally liable?

Last week, the Minnesota Supreme Court answered the following question:  ”Can a court order primary insurers, who insure the same insured for the same risks, and whose policies are triggered for defense purposes, to be equally liable for the costs of defense where there is otherwise no privity between the insurers?”  In order to answer, “Yes,” the Minnesota Supreme Court had to deal with the rule it established back in 1967:

Where it can be argued, legitimately and in good faith, that either of two insurers has primary coverage for a claim, both insurers have a duty to defend that claim.  If either insurer undertakes the defense, it is responsible for its own defense costs and cannot later seek reimbursement from the other.

“We are ‘extremely reluctant to overrule our precedent under principles of stare decisis’ and ‘require a compelling reason’ before overruling a prior decision,” Minnesota Supreme Court Justice G. Barry Anderson wrote.  And, with that, the Court overcame its extreme reluctance and relegated the rule in Iowa National Mut. Ins. Co. v. Universal Underwriters Ins. Co. to the dustbin.

The Iowa National rule is contrary to principles of equity, is at odds with some of our statements in Jostens and Wooddale that suggest that defense costs should be allocated equally if no insurers defend an insured, and can hardly be said to promote prompt responses from insurers to fulfill their duty to defend…The Iowa National rule arose in the context of a two-car accident and is ill-suited for the complexity of modern mass torts, multiple-party litigation, and disputes involving consecutive liability policies and injuries with long-latency periods.