Great American Insurance says it learned about a serious auto accident lawsuit more than three years after the crash - and just six days before trial.
Now it wants its money back.
In a complaint filed May 8, 2026 in the US District Court for the Central District of California, Great American is suing its insured, Peterson-Chase General Engineering Construction, along with the two carriers sitting below it on the insurance tower - Starr Indemnity & Liability and Homesite Insurance. The case grows out of an August 2, 2022 crash involving a Peterson-Chase employee driving a company vehicle and a vascular surgeon, Dr. Farshad Malekmehr.
The underlying lawsuit was filed in Los Angeles Superior Court on June 21, 2023. According to the complaint, Peterson-Chase reported the accident to its insurance broker on or about August 4, 2022, and Starr and Homesite were notified around the same time. Great American was not.
The first time Great American heard about any of it, the complaint says, was November 25, 2025 - the Tuesday before Thanksgiving. Trial was set to start the following Monday.
The tower matters. Starr sat at the bottom with a $2 million primary auto policy. Homesite came next with $5 million in excess of Starr. Great American was the second-layer excess at $10 million, above the combined $7 million underneath it. Above Great American sat Certain Underwriters at Lloyd's, London, with $5 million in excess of the $17 million below.
Great American's policy requires notice "as soon as practicable." It promises to "pay on behalf of the Insured 'loss' in excess of the Underlying Limits of Insurance." Great American has no duty to defend, but it does have the right to step into the defense and investigation of any claim that could hit its layer. That right, Great American alleges, was wiped out by the delay.
By the time the call came, the runway was gone. A mediation had already happened in early June 2025. Starr and Homesite were there; Great American says it had no idea it was happening. At that mediation, the plaintiffs demanded "substantially more" than the underlying $7 million. They later came back with a lower demand that, per the complaint, would have resolved the case within the Starr and Homesite limits. Peterson-Chase, Starr, and Homesite turned it down, the filing says.
A court-ordered settlement conference followed in mid-November 2025. The complaint alleges the underlying parties again declined to settle within limits, "refusing to even consider a mediator's proposal" that on information and belief would have been well within the underlying tower.
Then came the late notice - and, the day after, a fast-collapsing defense. On November 26, 2025, Peterson-Chase filed a Joint Stipulation Regarding Liability admitting it was "liable for the Subject Collision due to the negligence of its employee[]" and that "no fault is attributed to Plaintiff Dr. Farshad Malekmehr in the Subject Collision." Peterson-Chase had also chosen not to designate an economic expert for trial, even though Dr. Malekmehr, alleged in the complaint to be a vascular surgeon earning several million dollars a year, was claiming he would have to retire approximately a decade earlier than he otherwise would.
Great American sent a reservation-of-rights letter on December 3, 2025 flagging late notice as a coverage defense. It then pushed Starr and Homesite to settle within their limits. Starr eventually agreed to an approach that addressed $71,874 in alleged erosion of its policy, with Great American offering to contribute the difference so the full $7 million underlying could be put on the table. Homesite, the complaint says, "rejected it and refused to extend a 'firm money' offer."
Trial began on December 1, 2025. On December 9, with the jury already deliberating, the parties settled within the combined Starr, Homesite, and Great American limits. The jury then returned a verdict of $17,321,897 for the plaintiffs - above the combined limits of the three policies.
Great American paid into the settlement under reservation of rights and now wants the money back. The complaint alleges Peterson-Chase breached the policy's notice conditions; that Peterson-Chase was unjustly enriched by Great American's settlement payment under the framework in Blue Ridge Ins. Co. v. Jacobsen, 25 Cal. 4th 489 (2001); and that Starr and Homesite breached their duty of good faith and fair dealing by refusing reasonable within-limits demands when, per the complaint, defense counsel's own assessment in the underlying case indicated "a substantial likelihood of a verdict being entered in excess of the Starr and Homesite limits."
Great American is asking the court to declare it owes nothing under its policy, to order reimbursement from Peterson-Chase, and in the alternative to order Starr and Homesite to pay back what Great American contributed - plus interest, fees, and costs.
The allegations have not been tested in court. The defendants have not yet filed a response, and no court has ruled.
