Maryland Casualty Co. v. Nationwide Ins. Co.
Decision Date | 24 June 1998 |
Docket Number | No. D026693,D026693 |
Citation | 76 Cal.Rptr.2d 113,65 Cal.App.4th 21 |
Court | California Court of Appeals Court of Appeals |
Parties | , 98 Cal. Daily Op. Serv. 4996, 98 Daily Journal D.A.R. 7115 MARYLAND CASUALTY COMPANY et al., Cross-Complainants and Appellants, v. NATIONWIDE INSURANCE COMPANY, Cross-Defendant and Respondent. |
Lewis, D'Amato, Brisbois & Brisgaard, Robert V. Closson, Terrell A. Quealy, Branson, Fitzgerald & Howard, Harry A. Griffith, Redwood City, and John H. Podesta, Foster City, for Cross-complainants and Appellants.
Daniels, Baratta & Fine, James M. Baratta, Mark R. Israel and Craig A. Laidig, Los Angeles, for Cross-defendant and Respondent.
A general contractor is added to a subcontractor's commercial general liability insurance policy as an additional named insured. The additional insured endorsement states the insurance "applies only to the extent" the contractor is "held liable" for the subcontractor's acts or omissions. Under this endorsement, does the insurer have a duty to defend the general contractor for a potentially covered claim? Based on the policy language and the principles governing insurance policy interpretation, we conclude the policy imposes a duty to defend and reject the argument the endorsement eliminates this defense obligation.
This is an appeal from a summary judgment entered in favor of Nationwide Insurance Company (Nationwide). The trial court found National Union Fire Insurance Company of Pittsburgh, American International Surplus Lines Insurance Company, and Maryland Casualty Company 1 were not entitled to contribution from Nationwide for defense costs expended in an underlying construction defect action. The court agreed with Nationwide's contention that its policy language was unambiguous and did not impose a duty to defend. Appellants dispute Nationwide's interpretation of the policy and assert a duty to defend existed. We agree and reverse.
Nielsen Construction Company (Nielsen) served as the general contractor on a construction project. Nielsen was a named insured under general liability policies issued by appellants. Nielsen hired numerous subcontractors to construct portions of the project, including West Coast Sheet Metal, Inc. (West Coast) and R.W. Strang Mechanical, Inc. (Strang). The subcontract agreements required West Coast and Strang to name Nielsen "as Additional Named Insured and ... provide specifically that such policies are primary and non-contributing with any other insurance carried or available to said Additional Named Insured."
West Coast and Strang were named insureds under commercial general liability policies issued by Nationwide. As required by the terms of the subcontract agreements, West Coast and Strang purchased "additional insured" endorsements (the endorsements) naming Nielsen an additional insured on the Nationwide policies.
In an underlying action, Nielsen was sued for construction defects at the project. Nielsen tendered defense of the underlying action to its own insurers (including appellants), as well as to Nationwide under the terms of the endorsements. Nationwide refused to provide a defense to Nielsen. Nielsen filed this action against Nationwide for failure to defend the underlying action.
Appellants, after being brought into this action by other parties, filed separate cross-complaints against Nationwide for declaratory relief, equitable subrogation and contribution/apportionment. Appellants sought reimbursement of costs expended for Nielsen's defense in the underlying action.
Nationwide moved for summary judgment against Nielsen on the ground it had no duty to defend Nielsen under the terms of the endorsements. The court granted the motion, finding the "plain unambiguous" language of the endorsements established no defense duty existed. The court found the endorsements were "indemnity agreement[s]" with coverage for liability and defense costs conditioned on Nielsen first being "held liable" in the underlying action. Because the underlying action was still pending, the court concluded "the condition precedent has not occurred and no duty to indemnify has yet arisen."
Nationwide then moved for summary judgment on the cross-complaints filed against it by appellants. The court granted the motion finding the cross-complaints barred by the collateral estoppel doctrine because the claims arose from issues between Nationwide and Nielsen already adjudicated in Nationwide's favor.
Appellants sought reimbursement of costs expended for Nielsen's defense on alternate theories of equitable subrogation and equitable contribution. Focusing on the equitable subrogation theory, Nationwide contends appellants have no standing because an insurer's right to bring a subrogation claim requires that the insured had "an existing, assignable cause of action against the party to be charged...." (Patent Scaffolding Co. v. William Simpson Constr. Co. (1967) 256 Cal.App.2d 506, 509, 64 Cal.Rptr. 187.) Nationwide says Nielsen no longer had an existing assignable claim because it "released" the claim when it failed to appeal the summary judgment granted in Nationwide's favor.
We disagree. Appellants' right to subrogation arose when they made defense payments on behalf of Nielsen. (See Smith v. Parks Manor (1987) 197 Cal.App.3d 872, 878-879, 243 Cal.Rptr. 256.) Nationwide knew of appellants' rights--as evidenced by these parties' cross-complaints--when the judgment was entered against Nielsen. Under these circumstances, Nielsen's subsequent failure to appeal the judgment did not impair appellants' potential right to equitable subrogation. (Griffin v. Calistro (1991) 229 Cal.App.3d 193, 196, 280 Cal.Rptr. 30.)
Moreover, even if the elements of equitable subrogation are not satisfied, appellants have standing to seek reimbursement based on an equitable contribution theory.
Contribution among insurers is permitted where one insurer pays a loss or defends a claim for which another insurer shares responsibility. (Golden Eagle Ins. Co. v. Foremost Ins. Co. (1993) 20 Cal.App.4th 1372, 1390, 25 Cal.Rptr.2d 242; Maryland Casualty Co. v. National American Ins. Co. (1996) 48 Cal.App.4th 1822, 1828-1829, 56 Cal.Rptr.2d 498.) Where several insurers insure the same risk and are liable for any loss, the action between them is one for equitable contribution. (Pylon, Inc. v. Olympic Ins. Co. (1969) 271 Cal.App.2d 643, 648-649, 77 Cal.Rptr. 72.) An insurer seeking equitable contribution need only demonstrate another insurer covered the same risk and failed to pay its share of the loss. (See United Pacific Ins. Co. v. Hanover Ins. Co. (1990) 217 Cal.App.3d 925, 936, 266 Cal.Rptr. 231.)
Under these principles, appellants have standing to seek equitable contribution from Nationwide. Nielsen's failure to appeal does not preclude the equitable contribution claim. (See, e.g., Maryland Casualty Co. v. National American Ins. Co., supra, 48 Cal.App.4th at pp. 1828-1829, 56 Cal.Rptr.2d 498 [ ].)
Appellants seek contribution for costs expended in defending Nielsen against claims potentially covered under Nationwide's policy. To recover on this claim, appellants must show Nationwide owed a duty to defend Nielsen. The court granted summary judgment, finding (1) Nationwide's policy did not impose a duty to defend Nielsen; and (2) although the policy may have imposed an obligation to reimburse Nielsen for defense costs, the obligation did not arise because it
was subject to Nielsen being "held liable" for covered claims (a circumstance that had not yet occurred because the underlying action was still pending). Because we determine the policy imposed a duty to defend, we conclude summary judgment was improper.
Nationwide issued commercial general liability insurance policies to West Coast and Strang. Section I of the policies lists the "coverages" provided and sets forth the insuring agreement. The insuring agreement for Coverage A, "Bodily Injury and Property Damage Liability," states in part:
The Insuring Agreement defined the word "insured" as meaning:
" ... any person or organization qualifying as such under WHO IS AN INSURED (SECTION II)."
The additional insured endorsements to the West Coast and Strang policies stated:
Insurance policies are contracts to which ordinary rules of contractual interpretation apply. (Buss v. Superior Court (1997) 16 Cal.4th 35, 44, 65 Cal.Rptr.2d 366, 939 P.2d 766; AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822, 274 Cal.Rptr. 820, 799 P.2d 1253 (AIU ).) The goal of contract interpretation is to give effect to the mutual intent of the parties. (Civ.Code, § 1636.) If contract language is clear and explicit, we ascertain this intent from the written provisions and go no further. (AIU, supra, 51 Cal.3d at p. 822, 274 Cal.Rptr. 820, 799...
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