Carter v. Pulte Home Corp.

• Decision Date: 23 July 2020
• Docket Number: A154757
• Citation: 266 Cal.Rptr.3d 447,52 Cal.App.5th 571
• Court: California Court of Appeals Court of Appeals
• Parties: Charles CARTER et al., Plaintiffs, v. PULTE HOME CORPORATION et al., Defendants; Travelers Property Casualty Company of America et al., Interveners and Appellants; Coastal Construction & Lumber Company et al., Interveners and Respondents.

52 Cal.App.5th 571

266 Cal.Rptr.3d 447

Charles CARTER et al., Plaintiffs,

v. PULTE HOME CORPORATION et al., Defendants;Travelers Property Casualty Company of America et al., Interveners and Appellants;Coastal Construction & Lumber Company et al., Interveners and Respondents.

A154757

Court of Appeal, First District, Division 2, California.

Filed July 23, 2020

No Appearance for Plaintiffs.

No Appearance for Defendants.

The Aguilera Law Group, A. Eric Aguilera, Raymond E. Brown, Lindsee B. Falcone, Costa Mesa, for Interveners and Appellants.

Nicolaides Fink Thorpe Michaelides Sullivan, Jodi S. Green, Los Angeles, Jeffrey N. Labovitch, San Diego, Kimberly A. Hartman, Pro Hac Vice, Oles Morrison Rinker & Baker, Kevin P. McCarthy, Oakland, Bryce D. Carroll, Rebecca D. Takacs, for Interveners and Respondents.

Kline, P.J. Travelers Property Casualty Company of America (Travelers) appeals from a judgment denying relief on its complaint for equitable subrogation. Travelers defended the residential developer in a construction defects suit as an additional insured under general liability insurance policies issued to several subcontractors on the project, then sought to recover its costs from respondents, subcontractors that also worked on the project but failed to provide the developer a defense. Travelers contends the trial court erred in finding it failed to establish all the elements of its cause of action and denied it a fair trial by violating its own in limine orders. We affirm.

BACKGROUND

Pulte Home Corporation (Pulte), a residential developer and general contractor, was sued for construction defects by the owners of 38 homes in two housing developments. Many subcontractors worked on the projects, under contracts requiring each subcontractor to indemnify Pulte and to name it as an additional insured on the subcontractor's commercial general liability insurance. These contracts required each subcontractor to indemnify Pulte against "all liability, claims, judgments, suits, or demands for damages to persons or property arising out of, resulting from, or relating to Contractor's performance of work under the Agreement (‘Claims’) unless such Claims have been specifically determined by the trier of fact to be the sole negligence of Pulte ...."

Pulte cross-complained against the subcontractors who worked on some or all of the homes at issue, alleging it was entitled to a defense and indemnity, and tendered its defense of the homeowners’ suit to the subcontractors and their insurers.

Travelers, the insurer for four of the subcontractors,¹ accepted the tender and provided a defense. The "Blanket Additional Insured Endorsements" to Travelers's named insureds’ policies stated that the "person or organization is only an additional insured with respect to liability caused by ‘your work’ for that additional insured."

Respondents are seven subcontractors² who did not respond to the tender of Pulte's defense and whose insurance carriers denied that the additional insured endorsements to their policies required the insurers to provide a defense.

Travelers filed a complaint in intervention against respondents and other subcontractors no longer involved in the litigation.³ Its complaint and first amended complaint alleged causes of action for declaratory relief, equitable subrogation, equitable indemnity and contractual subrogation. Travelers dismissed all the causes of action except equitable subrogation prior to trial.

Pulte eventually settled the homeowners’ claims and its claims against all the subcontractors. Travelers ultimately paid $320,491.82 for Pulte's defense. At trial, it sought to recover $156,091.82 from respondents, having recovered $164,400 from other subcontractors.⁴

Travelers's position at trial was that respondents were each jointly and severally liable for the remainder of its costs for defending Pulte, as each respondent had a contractual obligation to defend Pulte. Travelers filed an in limine motion seeking an order precluding the parties from presenting evidence or argument suggesting its damages should be allocated or apportioned among the subcontractors, which the trial court stated was "in effect" granted after confirming that Travelers's case was "just all or nothing." The court also granted Travelers's in limine motion for an order precluding presentation of evidence or argument concerning whether respondents’ work on the homes was defective or caused damages, which Travelers sought on the basis that the truth of such claims was irrelevant because respondents agreed to defend Pulte against claims of negligence or defective work.

According to the evidence at trial, there was considerable variation in the number of homes each respondent worked on: Two worked on all 38 homes involved in the litigation (Coastal and Dellinger), one worked on 30 (Daggett), two worked on 23 (Concord and Woodland), and another two worked on only six or eight of the homes (Dependable and Dawson, respectively). The homeowners’ complaints did not indicate which subcontractor worked on which home, and no evidence was presented as to whether the work of any subcontractor was defective. For example, while the complaint alleged violations relating to heating, ventilation, and air conditioning (HVAC) systems within the scope of Dependable's work, and there was evidence that Dependable worked on three homes in one of the subject residential developments, Travelers's expert witness could not determine whether the complaint alleged there were HVAC issues in any of the three homes on which Dependable worked. The trial court found that Pulte's tender of defense to the subcontractors was based on "the contractual provision that required each to provide a defense with respect to plaintiffs’ claims related to its scope of work, regardless of whether that work was ultimately proved to be defective."

As will be explained, the trial court analyzed the factors necessary to establish entitlement to equitable subrogation, determined that Travelers had not proven at least three of these factors, and concluded that it "would not be just" to find respondents jointly and severally liable for the fees and costs Travelers sought to recover. Travelers's motion for a new trial was denied, and this appeal followed.

DISCUSSION

Travelers contends the judgment must be reversed because it established each of the elements of its claim for equitable subrogation, the judgment is contrary to public policy in that it incentivizes subcontractors to breach their subcontracts, and the trial court's violation of its own in limine orders deprived Travelers of a fair trial. Travelers argues that respondents are each jointly and severally liable to it for the cost of Pulte's defense (less the amount Travelers has recovered from other parties).⁵ In the event we disagree as to joint and several liability, however, Travelers asks us to remand for the trial court to allocate to each respondent a proportionate share of the defense costs.

I.

"Subrogation is the ‘substitution of another person in place of the creditor or claimant to whose rights he or she succeeds in relation to the debt or claim.’ ( Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1291 .) ‘In the case of insurance, subrogation takes the form of an insurer's right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid. [Citations.]’ ( Id. at pp. 1291–1292 .) ‘The subrogated insurer is said to " ‘stand in the shoes’ " of its insured, because it has no greater rights than the insured and is subject to the same defenses assertable against the insured. Thus, an insurer cannot acquire by subrogation anything to which the insured has no rights, and may claim no rights which the insured does not have.’ ( Id. at p. 1292 .)" ( Interstate Fire & Casualty Ins. Co. v. Cleveland Wrecking Co. (2010) 182 Cal.App.4th 23, 31–32, 105 Cal.Rptr.3d 606 ( Cleveland Wrecking ).)

" ‘ "As now applied [the doctrine of equitable subrogation] is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter." [Citations.]’ ( Caito v. United California Bank (1978) 20 Cal.3d 694, 704 [144 Cal.Rptr. 751, 576 P.2d 466].)" ( Fireman's Fund Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.App.4th at p. 1292, 77 Cal.Rptr.2d 296 ( Fireman's Fund ).)

" ‘The essential elements of an insurer's cause of action for equitable subrogation are as follows: [1] the insured suffered a loss for which the defendant is liable, either as the wrongdoer whose act or omission caused the loss or because the defendant is legally responsible to the insured for the loss caused by the wrongdoer; [2] the claimed loss was one for which the insurer was not primarily liable; [3] the insurer has compensated the insured in whole or in part for the same loss for which the defendant is primarily liable; [4] the insurer has paid the claim of its insured to protect its own interest and not as a volunteer; [5] the insured has an existing, assignable cause of action against the defendant which the insured could have asserted for its own benefit had it not been compensated for its loss by the insurer; [6] the insurer has suffered damages caused by the act or omission upon which the liability of the defendant depends; [7] justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer; and [8] the insurer's damages are in a liquidated sum, generally the amount paid to the insured.’ ( Fireman's Fund [, supra, ] 65 Cal.App.4th at p. 1292 .)" ( Cleveland Wrecking, supra, 182 Cal.App.4th at pp. 33–34, 105 Cal.Rptr.3d 606.)

We review the trial court's decision for abuse of discretion. ( Valley Crest...