Lawsuit for Not Paying Share of An Insurance Claim Settlement

In Keystone Shipping Co. v. Home Ins. Co., 840 F.2d 181 (3rd Cir. 1988), a co-insurer, Keystone, sued Home Insurance Company, seeking reimbursement, claiming Home had failed to meet an obligation to pay its share of a reasonable settlement. The district court refused Keystone's claim, stating "Home's refusal to pay [an additional amount above its independent settlement evaluation] was a reasonable business decision based on an honestly held belief that the $ 30 million settlement was too high." 840 F.2d at 182. The Third Circuit affirmed, asserting: "A co-insurer like Home is not obliged to accept other co-insurers' evaluations of litigating prospects so long as its own evaluation is not unreasonably low and it has acted in good faith in advancing and adhering to that evaluation in the absence of a contract which can be construed to impose such an obligation." Keystone Shipping, 840 F.2d at 182-83. The Third Circuit concluded: "Because the district court found that both the $ 30 million settlement and Home's evaluation of the litigating chances at $ 24.8 million were within the bounds of reason, and that Home's $ 24.8 million evaluation was not held and advanced in bad faith, we will affirm." Id. at 183. The Third Circuit agreed with the district court that the co-insurer's obligation was measured by good faith. See id. at 184.