While the Ninth Circuit Court of Appeals, reviewing the North River case, noted that Nevada generally recognizes equitable subrogation, the court also pointed out an unresolved issue: whether an excess insurer can recover from a primary insurer when a case settles within the combined policy limits of both insurers.
Case Background
The case stems from a settlement in which North River, the excess insurer, paid $4 million of a $5 million settlement to resolve a wrongful death suit. The case, filed in 2019, involved a murder at a Las Vegas apartment complex. James River, the primary insurer, had defended the lawsuit but had rejected settlement offers at or below its $1 million policy limit. However, after a second lawsuit involving a similar incident led to an $11 million settlement, the primary insurer decided to settle the wrongful death case for $5 million. James River contributed its $1 million policy limit, while North River paid the remaining $4 million.
North River then filed suit, claiming that it was entitled to recover its payment under the theory of equitable subrogation, arguing that the primary insurer’s failure to settle at or below its policy limit caused it harm. The excess insurer claimed it should be able to step into the insured’s shoes and seek damages for the primary insurer’s failure to act in good faith.