Insurers Suing Other Insurers Should Never Happen

If Anything Insurers Are Experts at Adjustment/Negotiation of Claims

If an insurer has any expertise at all it is, by definition, an expert in resolving claims. This expertise, however, seems to disappear when two insurers have a dispute over who pays what part of a long term situation with multiple insurers on risk for loss.

In National Surety Corporation v. Bedivere Insurance Company, No. 17 C 3455, United States District Court Northern District Of Illinois Eastern Division (July 1, 2019) Plaintiff National Surety Corporation (“National”) entered into a pro rata cost-sharing arrangement with Defendant Bedivere Insurance Company (“Bedivere”) to defend and settle asbestos-related claims against their former mutual client Resinoid Engineering Corporation (“Resinoid”). The parties premised the arrangement on Ohio law and then National decided it would be in its best interest if Illinois law applied.


Resinoid and the Asbestos Lawsuits

Resinoid, an Ohio-based company organized under Illinois law, manufactures phenolic materials used in household appliances and the automotive aftermarket industry. It operates three factories: one in Heath, Ohio, another in Hebron, Ohio, and a third in Skokie, Illinois. From 1972 until approximately 1985 or 1986, Resinoid manufactured material containing asbestos in its Skokie, Illinois factory. It sold that material to one customer: Kirkwood Commutator Corporation (“Kirkwood”), another Ohio-based manufacturing company.

Starting in 2003, hundreds of plaintiffs filed lawsuits against Resinoid for asbestos-related injuries related to its products. Four of Resinoid’s past insurers agreed to fund Resinoid’s defense based upon an informal cost-sharing arrangement.

Resinoid successfully resolved the claims against it without an adverse judgment or paying a settlement with the exception of two cases. The first was for the death of Darren Christian. Resinoid’s insurers agreed to fund the settlement according to the time each policy provided coverage between 1978 and 2000—the expiration date of the last policy that provided coverage for asbestos claims. This was consistent with Ohio law interpreting general liability insurance policies in the context of latent injury claims, such as asbestos. The second case to settle was that of Walter Ciokajlo, which is the underlying case to this action. Prior to the settlement in Ciokajlo’s case, National advised Resinoid that it did not believe that Ciokajlo’s claim triggered coverage under National’s policies.

National continued to defend Resinoid, while reserving its right to deny coverage for indemnity. In May 2017, the insurers, including Bedivere and National, entered into an interim agreement to fund a settlement of Ciokajlo’s claims on a pro rata basis. National paid 32.29% of the settlement and reserved its right to recoup its costs in a subsequent action against the other parties. National subsequently filed this suit against Bedivere, seeking indemnification for the funds National paid toward the Ciokajlo settlement.


Conflict Between Illinois and Ohio Law

The insurance policies National issued to Resinoid do not contain a choice-of-law provision, and the parties disagree whether Illinois or Ohio law applies to this action. The Court must engage in a choice-of-law determination when a difference in law will make a difference in the outcome.

When a state’s highest court has not ruled on a particular issue, federal courts should follow the decisions of intermediate appellate courts unless there is a convincing reason to predict the state’s highest court would disagree. The Ohio Supreme Court endorsed the reasoning of a continuous trigger without explicitly saying so in 2002 explaining that an insured claimant could recover all of its losses from one policy in the context of a continuous environmental pollution injury, and that insurers could then seek contribution from other applicable policies.

Place of Delivery, Payments, and the Last Act Giving Rise to the Contract

The parties agree that National issued two copies of the insurance policy to Resinoid’s broker in Chicago, who kept one copy on file and forwarded the other to Resinoid’s corporate headquarters in Ohio. Given that Resinoid’s corporate headquarters were located in Ohio, the policies were delivered to Resinoid in Ohio, and all insurance-related decisions involving Resinoid came from its Ohio headquarters, the record supports the conclusion that premiums for the National Surety policies were paid from Ohio.

The Court concluded, as a result, that Resinoid’s headquarters in Ohio is the more significant location for determining the place of delivery, place of payment, and the last act giving rise to a valid contract. Therefore, applying Ohio law was appropriate.

Bedivere’s Motion for Summary Judgment

The parties do not dispute that Ciokajlo was first exposed to asbestos from Resinoid’s products when he began working at Kirkwood’s Cleveland facility in 1976. He received a diagnosis of mesothelioma in 2015. Under Ohio law, Ciokajlo’s claim triggered all general liability policies that covered “bodily injury” from 1976 to 2000—the date of the last policy covering asbestos injuries. Resinoid subsequently settled Ciokajlo’s case in 2017.

Under the “all sums” approach, Resinoid was entitled to recover its costs of settlement from any of its insurers during that time period. This includes National’s policies that were issued from 1994 to 2000. If Resinoid had sought indemnification from only one of its insurers, that insurer could seek to recoup some of its losses from other policies.

Here, the insurers already paid the settlement according to a pro rata cost sharing agreement. Accordingly, National is not entitled to recover its costs from Bedivere.


The two insurers agreed from the beginning of Resinoid’s position as a defendant in asbestosis cases to share the costs of defense and indemnity in a pro rata amount only to have one settlement of one asbestos victim result in a federal lawsuit claiming a different choice of law favorable to National and at the expense of Bedivere. The two insurers should have avoided the litigation and settle their disputes professionally as they did for all other claims of asbestos related injury. In so doing they wasted their own time and the time of the District Court.


© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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