The opinion of the court was delivered by: Friend
This matter is before the court on defendants' motion for summary judgment, as well as plaintiff's cross motion for summary judgment. At issue is the liability of a primary insurance carrier when it fails to give adequate notice to the excess carrier of a pending claim against an insured and then fails to settle the case within its insured's policy limits.
American Centennial Insurance Company, (ACIC), the excess insurer, commenced this declaratory judgment action against its insured, Warner-Lambert Company (Warner-Lambert), the primary insurance carrier, Continental Insurance Company (Continental), and Continental's claim handling subsidiary, Underwriters Adjusting Company. ACIC is seeking a determination of its rights and obligations in connection with an excess insurance policy which it issued to Warner-Lambert for the 1979-1980 policy period. ACIC is also seeking an adjudication that it is not responsible or liable to expend any sums or pay any damages under its excess insurance policy as a result of a judgment rendered against Parke-Davis Company, a subsidiary of Warner-Lambert, in connection with the underlying product liability lawsuit. In addition, since ACIC has already made a conditional payment in connection with the underlying products liability action, plaintiff also seeks the refund of that payment, with interest.
For the 1979 policy year, Warner-Lambert insured itself against certain liability claims through a multi-layered program of insurance. Continental provided the primary layer of coverage and this layer of insurance included a combined single limit of liability in the amount of $3 million. ACIC insured $4 million of the $5 million second layer of insurance coverage, thus providing the excess coverage.
Unknown to ACIC, Warner Lambert and Continental had entered into an agreement supplementing the insurance policy whereby Continental relinquished to Warner-Lambert all authority to negotiate and settle product claims. Also pursuant to this agreement, Warner-Lambert fully reimbursed Continental for all costs and expenses paid in connection with product liability claims up to the limits of the Continental policy.
Because of this agreement, it was Warner-Lambert and not Continental that directed the settlement negotiations and litigation of the underlying products liability suit in this matter. This underlying lawsuit involved litigation commenced against Parke-Davis & Company (Parke-Davis), a subsidiary of Warner-Lambert. The matter, entitled Donna Ricci and Thomas Ricci, her husband, v. Parke-Davis & Co., et al., was commenced in April, 1982 in the Circuit Court of 17th Judicial Circuit, Broward County, Florida, and involved a personal injury action brought by Mr. and Mrs. Ricci against Parke-Davis for the negligent manufacturing and distribution of an oral contraceptive. Mrs. Ricci allegedly suffered severe personal injuries as a result of ingesting oral contraceptives manufactured by Parke-Davis.
Following the commencement of the lawsuit in April of 1982, Warner-Lambert provided ACIC with a standardized form indicating that the Riccis had made a claim against Warner-Lambert. This was the only notice provided to ACIC throughout the seven and one half years of litigation and settlement Discussions that followed the filing of the complaint. In actuality, Continental never engaged in any settlement negotiations with the Riccis and Warner-Lambert engaged in few negotiations. The Ricci's attorney testified at deposition that he continually attempted to settle the matter but Warner-Lambert was not receptive to settlement talks. ACIC was never apprised of the settlement demands made by the Riccis even though some put the excess policy at risk. ACIC was also never notified when, in 1986, Continental determined that the primary policy limits were exhausted on an incurred cost basis, thereby placing ACIC directly at risk.
In July 1989, a verdict was rendered in favor of the Riccis and against Parke-Davis in the amount of $2,165,000. On November 3, 1989, ACIC was advised that its policy was at risk for the full amount of the judgment and then, for the first time, ACIC was notified of the litigation surrounding the Ricci matter. ACIC associated in the prosecution of an appeal of the verdict which was unsuccessful. ACIC then issued a Reservation of Rights letter to Warner-Lambert and paid $539,121.92 (incorrectly set forth as $534,861.60 in the parties' briefs) in partial satisfaction of the judgment.
Prior to the summary judgment motion at issue, ACIC settled its claims against Warner-Lambert with that defendant. Thus, Continental and its affiliate, Underwriters Adjusting Company, are the remaining defendants in this lawsuit. Pursuant to the settlement agreement, ACIC paid additional sums to Warner-Lambert. This settlement agreement raises issues pertinent to the summary judgment motion of whether the settlement agreement resolves ACIC's claims against Continental and whether ACIC suffered any damages by way of Continental's conduct.
Continental argues that pursuant to a provision of the settlement agreement, Warner-Lambert is to indemnify ACIC for any damages ACIC may suffer as a result of the handling of the Ricci claim. Thus, ACIC cannot look to Continental to recover any alleged damages. The relevant portion of that provision relied upon by Continental reads *fn1
INSURED hereby agrees to indemnify and defend each of the INSURER RELEASED PERSONS, hold each of them harmless from and against, and pay on their behalf the full amount of any judgment, payment, award, loss, claim, damage, liability or expense incurred (including, but not limited to, fees and expenses incurred in investigating or defending any actions or proceedings and reasonable attorneys' fees) by any of them, arising out of, resulting from or in any way connected with the Policies. . . .
Continental incorrectly narrows its focus on this one paragraph, instead of reading the agreement in its entirety. A subsequent provision specifically answers the query of whether ACIC is to be indemnified by Warner-Lambert in connection with ...