Cal. Capital Ins. Co. v. Emp'rs Comp. Ins. Co.

• Docket Number: G060532
• Decision Date: 03 March 2023
• Citation: 89 Cal.App.5th 638,305 Cal.Rptr.3d 686
• Parties: CALIFORNIA CAPITAL INSURANCE COMPANY, Plaintiff and Respondent, v. EMPLOYERS COMPENSATION INSURANCE COMPANY, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

89 Cal.App.5th 638

305 Cal.Rptr.3d 686

CALIFORNIA CAPITAL INSURANCE COMPANY, Plaintiff and Respondent,

v.EMPLOYERS COMPENSATION INSURANCE COMPANY, Defendant and Appellant.

G060532

Court of Appeal, Fourth District, Division 3, California.

Filed March 3, 2023

Lewis Brisbois Bisgaard & Smith, Jordon E. Harriman, Los Angeles, and Jeffry A. Miller, San Diego, for Defendant and Appellant.

Ellen Sims Langille, San Francisco, for California Workers’ Compensation Institute as Amicus Curiae on behalf of Defendant and Appellant.

Berger Khan and David B. Ezra, Irvine, for American Property Casualty Insurance Association as Amicus Curiae on behalf of Defendant and Appellant.

Grant, Genovese & Baratta and Lance D. Orloff, Irvine, for Plaintiff and Respondent.

OPINION

GOETHALS, J.

* * * This appeal arises from one insurer's equitable contribution claim against another insurer related to the defense and settlement of an underlying personal injury lawsuit against their common insured. The insured's general liability insurer defended under a reservation of rights and paid out its $2 million policy limits to settle the lawsuit. The insured's workers’ compensation and employers’ liability insurer denied coverage and did not participate in the defense or settlement.

This lawsuit followed, with the general liability insurer suing the workers’ compensation and employers’ liability insurer for equitable contribution. Following a bench trial, the trial court entered judgment for the general liability insurer, awarding roughly half the cost of defense and indemnity.

We reverse. It is well settled that an equitable contribution claim only lies if the two insurers share the same level of liability on the same risk as to the same insured. In this case, the general liability insurer is not entitled to equitable contribution because it did not insure the same risk as the workers’ compensation and employers’ liability insurer. To the contrary, as observed by the trial judge, the two policies are mutually exclusive: the general liability policy covers bodily injury claims unless the claimant is an employee injured in the course and scope of his or her employment, whereas the workers’ compensation and employers’ liability policy covers bodily injury claims only if the claimant is an employee injured in the course and scope of his or her employment. Further, the workers’ compensation and employers’ liability policy did not potentially cover the underlying lawsuit, so that carrier had no duty to defend or indemnify its insured against the claims in question. The judgment must therefore be reversed and remanded.

FACTS

Byron Remeyer and Asia Torres both worked for the La Sirena Grill (La Sirena) at its South Laguna location. One night in August 2013, they had drinks together at La Sirena and then left around 10:00 p.m. to go to a party. Shortly before midnight, Torres, who was intoxicated, drove his vehicle into a tree in Laguna Niguel. Remeyer, his passenger, suffered traumatic, life-altering brain injuries as a result.

Remeyer filed a complaint against La Sirena and Torres for negligence and negligence per se (the Remeyer lawsuit). He alleged that Torres was employed as a cook for La Sirena and "got drunk on the job" on the night of the accident, that drinking on the job was a common occurrence at La Sirena, that La Sirena provided the alcohol that Torres drank on the night of the accident, that La Sirena's management was well aware of Torres's intoxicated state when Torres and Remeyer left for the party, and yet management did nothing to prevent Torres from driving. Remeyer also alleged that Torres was acting within the course and scope of his employment for La Sirena at the time of the accident, and was driving a vehicle that La Sirena had entrusted to him for performing his job duties. The complaint did not mention that Remeyer was also an employee of La Sirena.

At the time of the accident, La Sirena was insured by two different insurers. The first insurer, respondent California Capital Insurance Company (California Capital), issued La Sirena a commercial general liability (CGL) policy with bodily injury limits of $2 million per occurrence; this policy generally covered bodily injury claims, but excluded coverage for workers’ compensation claims and for bodily injuries arising out of and in the course of a claimant's employment with La Sirena.

The second insurer, appellant Employers Compensation Insurance Company (ECIC), issued La Sirena a workers’ compensation and employers’ liability policy. Part One of this policy covered workers’ compensation claims, and Part Two covered bodily injury claims by employees arising out of and in the course of their employment with La Sirena if not otherwise covered by workers’ compensation.

La Sirena tendered the Remeyer lawsuit to its CGL insurer, California Capital. California Capital agreed to defend La Sirena under a reservation of rights citing, among other provisions, its employer's liability exclusion for bodily injuries arising out of and in the course of a claimant's employment with La Sirena.

During discovery, it came to light that Remeyer had been an employee of La Sirena at the time of the accident, that both Remeyer and Torres had worked at La Sirena earlier in the day, but that both had been off the clock for several hours by the time the accident occurred. Whether Remeyer was acting within the course and scope of his employment at La Sirena at the time of the accident (a question relevant to the applicability of California Capital's employer's liability exclusion) remained contested.

In May 2014, Remeyer's counsel made a settlement demand of $2 million, the California Capital policy limit. California Capital advised La Sirena that if it agreed to pay the settlement demand, it would do so under a reservation of its right to seek reimbursement from La Sirena pursuant to Blue Ridge Ins. Co. v. Jacobsen (2001) 25 Cal.4th 489, 106 Cal.Rptr.2d 535, 22 P.3d 313 ( Blue Ridge ).

California Capital notified La Sirena's workers’ compensation and employer liability insurer, ECIC, of the settlement demand, explained that Remeyer was an employee injured within the course and scope of his employment so as to trigger coverage under the ECIC policy, and asked ECIC to participate in the settlement. ECIC denied coverage, asserting there was no potential for coverage under either part of its policy.

In the months that followed, California Capital incurred roughly $88,000 in attorney fees defending the claims against La Sirena. Then, in June 2015, California Capital settled the Remeyer lawsuit on La Sirena's behalf for its policy limits of $2 million, without any participation from ECIC. California Capital also settled its Blue Ridge reimbursement claim against La Sirena, and as part of that settlement, La Sirena assigned California Capital its rights against ECIC.

California Capital then filed the subject lawsuit against ECIC for equitable contribution.¹ ECIC moved for summary judgment, asserting neither part of its policy covered the allegations in the Remeyer lawsuit; the trial court denied that motion without explanation.

The trial court conducted a bench trial on stipulated facts in December 2020. After taking the matter under submission, the court found the ECIC policy potentially covered the Remeyer lawsuit and California Capital was equitably entitled to half of what it expended in defense and settlement of that lawsuit. The court then entered judgment for California Capital, awarding it $44,182.42 in equitable contribution for the cost of defending La Sirena, $1 million in equitable contribution for indemnifying La Sirena, and interest of $501,299.37.

ECIC moved to set aside the judgment; the trial court denied that motion. In its minute order, the court acknowledged that the two policies are "mutually exclusive" and that ECIC generally has no duty to cover civil suits under its workers’ compensation policy, but reasoned that this "general rule must give way where its uncritical application would work a hardship."

ECIC filed a notice of appeal from the judgment and the order denying its motion to set aside the judgment.

DISCUSSION

The issue on appeal is straightforward: is California Capital entitled to equitable contribution from ECIC for the cost of defending and indemnifying their common insured, La Sirena? This is a question of law we review de novo. ( Certain Underwriters at Lloyds, London v. Arch Specialty Ins. Co. (2016) 246 Cal.App.4th 418, 429, 200 Cal.Rptr.3d 786 ; Carmel Development Co. v. RLI Ins. Co. (2005) 126 Cal.App.4th 502, 507, 24 Cal.Rptr.3d 588.)

Equitable contribution (not to be confused with equitable subrogation or equitable indemnity) is a loss sharing procedure by which an insurer that defended and settled a claim against its insured may seek to apportion those costs among coinsurers who refused to settle or defend the claim. ( Maryland Casualty Co. v. Nationwide Mutual Ins. Co. (2000) 81 Cal.App.4th 1082, 1089, 97 Cal.Rptr.2d 374 ; see also Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2022) ¶ 8:65.1, pp. 8-26 [discussing differences between equitable contribution, equitable indemnity, and equitable subrogation, and noting "it is important for an insurer seeking reimbursement from other insurers to select the appropriate remedy"].)

"In the insurance context, the right to contribution arises when several insurers are obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action without any participation by the others. Where multiple insurance carriers insure the same insured and cover the same risk, each insurer has independent standing to assert a cause of action against its coinsurers for equitable contribution when it has undertaken the defense or indemnification of the common insured. Equitable contribution permits reimbursement to the insurer that paid on the loss for the excess it paid...