Fire Ins. Exchange v. American States Ins. Co., B082759

• Decision Date: 25 October 1995
• Docket Number: No. B082759,B082759
• Citation: 46 Cal.Rptr.2d 135,39 Cal.App.4th 653
• Court: California Court of Appeals Court of Appeals
• Parties: , 95 Cal. Daily Op. Serv. 8194, 95 Cal. Daily Op. Serv. 8349, 95 Daily Journal D.A.R. 14,381 FIRE INSURANCE EXCHANGE et al., Plaintiffs and Respondents, v. AMERICAN STATES INSURANCE COMPANY, Defendant and Appellant. Civ.

Page 135

46 Cal.Rptr.2d 135

39 Cal.App.4th 653, 95 Cal. Daily Op. Serv. 8194,

95 Cal. Daily Op. Serv. 8349,

95 Daily Journal D.A.R. 14,381

FIRE INSURANCE EXCHANGE et al., Plaintiffs and Respondents, v. AMERICAN STATES INSURANCE COMPANY, Defendant and Appellant.

Civ. No. B082759.

Court of Appeal, Second District, Division 6, California.

Oct. 25, 1995.

As Modified on Denial of Rehearing Nov. 16, 1995.

[39 Cal.App.4th 656] Richards, Watson & Gershon, a Professional Corporation; Erwin E. Adler, Robert C. Ceccon and Kayser O. Sume, Los Angeles, for American States Insurance Company, appellant.

Carter & Chuang; Jeffrey J. Leist and Craig H. Bell, Los Angeles, for Fires Insurance Exchange and Truck Insurance Exchange, respondents.

ON REHEARING

YEGAN, Associate Justice.

American States Insurance Company (American States) appeals from a judgment ordering it to pay $487,500 on an action for equitable contribution. The trial court ruled that American States and another excess carrier, Truck Insurance Exchange (Truck), were coinsurers and share equally in the excess cost of settling a personal injury action brought against their insureds. We affirm. Substantial evidence supports the trial court's finding that the cost of settlement should be equally prorated because the excess policies provided overlapping coverage and insured against the same risk.

Facts

In 1986 Azam Sher and his wife, Cynthia Yelvington, wanted to construct a home at 34 Appaloosa Lane in Bell Canyon. Alam Sher, Azam's father, a licensed general contractor in Oregon, moved to California, lived with Azam and Yelvington, and supervised construction of the new home.

On June 9, 1988, Russell Gebhardt was seriously injured when a wood scaffold collapsed at the job site. The scaffold, which was 12 feet high, had no handrails and was too narrow. Deitrick & Quin, Gebhardt's employer, built the scaffold with wood purchased by Alam. Alam hired Deitrick & Quin to do the framing work and had it sign a subcontract providing that it would furnish "all necessary scaffolding." Deitrick & Quin employees allegedly asked Alam to supply metal scaffolding but Alam ordered them to build the scaffold from wood at the job site.

Underlying Settlement

Gebhardt filed suit against Alam, Azam, and Yelvington. (Russell Gebhardt et al., v. Al Sher et al., Ventura County Super.Ct. No. 103355.) The complaint alleged causes of action against all defendants for peculiar risk, negligent maintenance and ownership, supervisory negligence and negligence.

Alam, Azam, and Yelvington tendered the complaint to their insurer carriers. Azam and Yelvington had a Fire Insurance Exchange (Fire) policy that provided $300,000 personal liability coverage and a $1 million umbrella policy issued by Truck.

Alam had a $300,000 dwelling fire insurance policy issued by Safeco Insurance Company of America (Safeco) and a $1 million umbrella policy with American States. Safeco denied coverage because its policy only provided premises liability coverage for Alam's house in Oregon. American States claimed that it had no obligation to defend or indemnify until the Fire and Truck policies were exhausted.

Fire and Truck defended Azam, Yelvington, and Alam subject to a reservation of the right to seek contribution from American States and Safeco. American States attended the underlying settlement conferences but did not contribute thereto. Fire and Truck settled the Gebhardt action for $1.275 million and filed suit against Safeco and American States for declaratory relief and equitable subrogation.

Declaratory Relief Action

A 16 day court trial ensued. Fire and Truck presented expert testimony that the settlement was fair and reasonable. James Wesely, a liability claims examiner with over 35 years' experience, testified that Gebhardt had a strong case against Alam and Azam for negligence. Wesley opined that Alam was one hundred percent liable and the peculiar risk cause of action did not play a paramount role in the decision to settle. Christopher Carder, the Truck claims representative who participated in the settlement, agreed with Wesely and stated that Gebhardt's peculiar risk claim was not the primary theory of liability.

The parties stipulated that Azam and Yelvington were named insureds on the Truck policy and that "Alam Sher is also insured under the Truck policy, by definition, because the policy covers relatives residing in the household of the named insured." It was also stipulated that Azam and Yelvington were not insureds under the American States policy.

The trial court found that "Safeco had no duty to defend or indemnify Alam Sher in the Gebhardt case based on the dwelling fire policy as it was written. [p] 2. Alam Sher was an insured under the Fire policy. The Fire condo owners policy satisfied the requirement in the American States umbrella policy for [$300,000] underlying personal liability insurance or comprehensive personal liability insurance."

The trial court further found that "[t]he Truck and the American States policies are both umbrella policies. Both cover personal liability. Both provide worldwide coverage. Each has similar 'other insurance' clauses which cannot both be given effect. Both must be ignored as mutually repugnant. Both umbrella policies admittedly apply to provide coverage for the Gebhardt claim with respect to the type of injury claimed, the claimed bases of liability, and the location of the occurrence. Neither umbrella policy is 'specific insurance for a specific risk' different from the other such that it would be rendered primary to the other umbrella policy.... [p] 5. In stacking order, both umbrella policies are excess to the primary Fire policy, and both apply after the Fire policy."

The trial court concluded that Fire was the primary insurer and had to pay the first $300,000 of the settlement. Truck and American States were ordered to each contribute one-half of the $975,000 excess judgment, i.e., $487,500. Judgment was entered against American States for $487,500 plus prejudgment interest and costs.

Standard of Review

On review the judgment is presumed correct and all intendments and presumptions are indulged in favor of its correctness. "[T]he judgment must be upheld if it was supported by any substantial evidence, even if this is against the weight of other contradictory evidence. [Citations.] ... Where evidence is undisputed, but different inferences may be drawn therefrom, we are not at liberty to make our own inferences and decide the case accordingly; the conclusion of the trial court must be accepted, since it is for the trier of fact to resolve such conflicting inferences in the absence of a rule of law specifying the inference to be drawn. [Citations.]" (CNA Casualty of California v. Seaboard Surety Co. (1986) 176 Cal.App.3d 598, 615-616, 222 Cal.Rptr. 276.)

Equitable Contribution Based On Policy Limits

American States erroneously contends that the trial court erred by not prorating the policies based on the comparative fault of each insured. At trial, counsel for American States conceded that there was no controlling California authority and "[a]t some point the Court has to make an allocation--what it believes is a fair allocation among the defendants." Counsel argued that "there are various ways you can stack the policies. There is no right or wrong answer...." Notwithstanding this concession, American States now claims that the trial court's allocation was erroneous.

The trial court found that American States and Truck were coinsurers because the umbrella policies insured against the same risk. We agree. Although each policy contained an "other insurance" clause, the clauses canceled one another out. ¹ (Olympic Ins. Co. v. Employers Surplus Lines Ins. Co. (1981) 126 Cal.App.3d 593, 599, 178 Cal.Rptr. 908.) "When two 'excess-only' other insurance clauses collide, the courts will force both carriers to prorate, in derogation of the policy language. [Citations.] This rule is based, in large measure, on the fact that if both other-insurance clauses were given effect according to their terms, the insured would have no coverage." (CSE Ins. Group v. Northbrook Property & Casualty Co. (1994) 23 Cal.App.4th 1839, 1842-1843, 29 Cal.Rptr.2d 120.)

"[T]he application of 'other insurance' clauses requires, as a foundational element, that there exist multiple policies applicable to the same loss." (Pines of La Jolla Homeowners Assn. v. Industrial Indemnity (1992) 5 Cal.App.4th 714, 723, 7 Cal.Rptr.2d 53.) Where, as here, two insurance companies insure the same risk and one company pays the loss (i.e., Truck), it may seek contribution from the other (i.e., American States). (Pylon, Inc. v. Olympic Ins. Co. (1969) 271 Cal.App.2d 643, 648-649, 77 Cal.Rptr. 72.)

American States contends that the doctrine of equitable contribution between coinsurers does not apply because the policies cover different "risks" and different insureds. The American States policy insured Alam but not Azam or Yelvington. American States asserts that it was not a coinsurer because Azam and Yelvington owed a nondelegable duty as landowners to provide Gebhardt a safe work place.

We disagree with American States' analysis. It erroneously assumes that Alam had no potential liability on the cause of action for peculiar risk. The complaint alleged such liability against Alam, which is permitted by our Supreme Court. (Privette v. Superior Court (1993) 5 Cal.4th 689, 701, 21 Cal.Rptr.2d 72, 854 P.2d 721.) American States further assumes that every personal injury involving scaffolding is a peculiar risk case rendering the landowner 100 percent liable. We disagree. Under American States' construction of the law, a landowner's insurer could never seek contribution from someone functioning as a general contractor who created the special risk. The law is not that black and white.

In Privette v. Superior Court, supra, 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721, our ...