Potential of Future Lawsuit Not Compulsion for Voluntary Payments

The U.S. Court of Appeals for the Fifth Circuit certified two questions to the Mississippi Supreme Court dealing with voluntary payment of an insurance company. An explosion at Omega Protein Corporation’s Moss Point, Mississippi location resulted in the death of an employee of Accu-Fab & Construction, Inc. Omega had insurance coverage from ACE American Insurance Company and First Specialty Insurance Corporation. Accu-Fab was insured by a policy issued through Colony, which contained an “Additional Insured” provision. Omega sought protection from a wrongful action under Colony’s policy as an “additional insured”. Colony provided a defense for Omega and ultimately settled the suit against Omega although it claimed Omega was not their insured and they did not owe any coverage. Following the suit’s settlement, Colony demanded reimbursement from Omega’s excess liability policy with First Specialty. The Fifth Circuit ruled Colony made voluntary payments which cannot be recovered. Mississippi’s Supreme Court found Colony did not act under “compulsion” which makes their defense of Omega voluntary and unrecoverable. Read the full Mississippi Supreme Court case here.