Commercial Union Insurance v. Medical Protective Co.

The issue in this case is whether an excess insurer has a cause of action against a primary insurer for the latter’s failure to defend or settle a liability claim in good faith. Courts have recognized such a cause of action under at least two theories: 1) the primary insurer owes a *112duty to act in good faith toward its insured, and the excess insurer is equitably subrogated to the position of the insured, and 2) the primary insurer owes a duty to act with due care and in good faith directly toward the excess insurer. We join many other jurisdictions by adopting the first theory and holding…