One insurer says a fellow carrier blew up a settlement days before trial - and left it holding a multimillion-dollar bill.
Tokio Marine Specialty Insurance Company has sued Allied World National Assurance Company, alleging that last-minute maneuvering by Allied World derailed a personal injury settlement and forced Tokio Marine to overpay by millions. The complaint was filed June 5, 2026 in federal court in the Central District of California.
The dispute traces back to Bernal v. DJM Capital Partners, a suit over a pedestrian struck by a distracted driver at a shopping center in La Habra, California. According to the complaint, six insurers stacked up in a liability "tower" to cover the center's owner, La Habra Associates. In a tower, each layer pays only after the one below it is used up. Allied World sat third with a $10 million limit; Tokio Marine sat fourth, its money reachable only once Allied World's was exhausted.
That order is central to the case. Tokio Marine alleges the suit could have settled in October or early November 2025 for $16 million to $20 million if Allied World had offered its $10 million limit. Instead, according to the filing, Allied World offered nothing at an October 31 mediation, sending a coverage attorney with no authority to settle while its adjuster left the session citing childcare obligations.
It got worse, the complaint says. On November 12 - five days before trial - Allied World pitched a new plan on an all-carrier call: shift blame to Ross Dress for Less, a defendant already dismissed from the case, by casting the shopping center as dangerous. The filing calls it an attempt to "hijack" the defense. The next day, an Allied World adjuster emailed the carriers laying out the approach: "Right now, the plan is to ask for a continuance, if a continuance is not granted, which I believe it will be given the state of discovery etc, we will revisit whether new counsel will take over the case."
Tokio Marine alleges Allied World then engineered a conflict to remove seasoned trial counsel and install a new attorney, betting the court would delay the trial. According to the complaint, the judge had already signaled there would be no continuance. The continuance motion was vacated and the strategy fell apart. The filing says Allied World offered $1 million - "pointless" by that stage - before putting up its full remaining limit on November 15, "all to no avail."
For claims professionals, the heart of the case is the insurer-against-insurer theory. Tokio Marine brings six causes of action, led by equitable subrogation and "bad faith refusal to settle," arguing it stepped into the insured's shoes after paying out. California law, the filing says, "imposes a duty of utmost good faith and fair dealing on liability insurers who have an opportunity to settle lawsuits against insureds." Tokio Marine wants at least $6 million and up to $10 million in excess settlement money, plus fees under Brandt v. Superior Court, prejudgment interest and punitive damages.
In a November 15 letter quoted in the complaint, Tokio Marine's attorney warned that the strategy "forced a situation where a new attorney will have less than a week to get ready, where the opportunity to depose experts has been lost, and where the plaintiff's attorney now smells blood."
These are allegations only. Allied World has not filed a response, and no court has ruled.
