2.2.5 Contribution for Defense Costs

JurisdictionArizona

Where more than one insurance company has the duty to defend an insured, the insurance company actually defending the insured has a right to contribution from the other insurance company for the cost of defending the insured. The Arizona Supreme Court, in National Indemnity Co. v. St. Paul Insurance Co.,[430] held that contribution was appropriate through the application of the equitable subrogation rule. The court reasoned:

When an insurer has a duty to defend the insured, there should be no reward to the insurer for breaching that duty. A breach of the obligation to defend should not be encouraged, but the rule which allows an insurer to avoid the costs of defense tends to encourage an avoidance of the insurer's responsibilities.

Under the principle of equitable subrogation, the insurer which has performed the duty to provide a defense to its insured should be able to compel contribution for a share of the cost of defense from another insurer who had a similar obligation to the same insured but failed to perform it.[431]

In some circumstances, defense costs incurred by an...

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