Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Mid-Century Ins. Co.

• Decision Date: 14 October 2021
• Docket Number: A156889
• Parties: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff and Respondent, v. MID-CENTURY INSURANCE COMPANY, et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Plaintiff and Respondent, v. MID-CENTURY INSURANCE COMPANY, et al., Defendants and Appellants.

A156889

California Court of Appeals, First District, Fifth Division

October 14, 2021

NOT TO BE PUBLISHED

City & County of San Francisco Super. Ct. No. CGC-14-540942

NEEDHAM, J.

CalPortland Company (CalPortland) has been sued many times over the years by claimants alleging it is legally liable for their asbestos exposure. Since 2012, CalPortland has been defended and indemnified by National Union Fire Insurance Company of Pittsburgh, PA. (National Union). National Union obtained a judgment against Continental Insurance Company (Continental) and Mid-Century Insurance Company (Mid-Century) establishing their obligation to contribute to past and future defense costs and future indemnity. With one adjustment to the allocation of these costs, we affirm.

I. FACTS AND PROCEDURAL HISTORY

CalPortland manufactures and distributes cement products for construction purposes, at least two of which contain asbestos-Colton Gun Plastic Cement^[1] and Arizona Portland Mortar Cement. Since 1983, CalPortland has been named as a defendant in more than 1, 700 asbestos-related lawsuits.

Truck Insurance Exchange (Truck) issued primary insurance policies with aggregate limits of $300, 000 or $100, 000. Mid-Century issued nine umbrella polices during that same period which had either a $200, 000 or $400, 000 limit per occurrence, and which sat directly above the Truck policies, providing coverage for “the excess of loss over $300, 000 [or $100, 000] for each and every accident or series of accidents arising out of one occurrence... up to $200, 000 [or $400 000]....”

National Union provided CalPortland with liability insurance coverage for the five-month period from February 1, 1985-July 1, 1985. The policy had a $500, 000 per occurrence limit but lacked any aggregate limit.

Continental issued a primary policy to CalMat Co. (CalMat) and numerous affiliated companies including CalPortland for the period of July 1, 1985-July 1, 1986.^[2] This policy had indemnity limits of $1, 000, 000 per occurrence and in the aggregate, exclusive of defense costs, and contained an endorsement excluding coverage for bodily injury and property damage arising from the use of a gun plastic product. It also contained an exclusion for claims arising from exposure to asbestos on the premises. The Continental policy had a retrospective premium plan, which allowed Continental to calculate the premium based on losses actually incurred.

Beginning in the 1990s, CalPortland's asbestos-related defense and indemnity costs were paid on a pro-rata time-on-the-risk^[3] basis by four primary insurance carriers: (1) National Union; (2) Truck; (3) OneBeacon Insurance Company, formerly known as Commercial Union Insurance Company (OneBeacon); and (4) Continental. Truck acted as lead primary insurer and assumed CalPortland's defense for several years. Mid-Century began paying a pro-rata share of indemnity as Truck's policies exhausted. OneBeacon declared exhaustion in June 2012. The declarations of exhaustion by Truck and OneBeacon have not been challenged in this case.

In 2012, with the exhaustion of the Truck policies imminent, CalPortland gave notice that it was selecting National Union to provide a defense.^[4] At approximately the same time, Mid-Century stopped contributing to the costs of defense and indemnity, claiming that its umbrella policies were subject to aggregate limits and that those limits had exhausted. Continental also stopped contributing to the costs of defense or indemnity in 2012. It offered to pay a pro rata share (based on its historic percentage of contribution) until it was able to determine in any given case whether the gun plastic exclusion applied, but National Union wanted it to contribute a greater amount and did not accept the offer. From June 2012 to September 2017, National Union paid 100 percent of the defense and indemnity costs on CalPortland's behalf.

National Union brought the current action seeking declaratory judgment, contribution, equitable subrogation and reimbursement against Continental and Mid-Century.^[5] The court held a multi-phase bench trial between 2016 and 2018, and it issued an individual statement of decision after each phase.

In Phase I (Continental) National Union sought a declaration that Continental had a duty to defend and indemnify CalPortland. The court rejected Continental's argument that its policy did not cover CalPortland due to the gun plastic exclusion. It ruled that the underlying claims were potentially covered by the underlying policy and Continental's duty to defend “continues unless and until it is established that the gun plastic product is the exclusive [CalPortland] product that allegedly caused the underlying plaintiff's injury.”

In Phases I (Mid-Century) and II, the court found (1) the Mid-Century policies did not have aggregate limits; (2) exhaustion of the Truck policies triggered the Mid-Century policies, regardless of whether there had been “horizontal” exhaustion of all primary policies; and (3) the statute of limitations did not bar National Union's contribution claims. The court concluded that Mid-Century's policies included a duty to defend, which commenced when the Truck policies exhausted by 2012.

In the Final Phase of the trial, the court addressed the allocation of defense costs and indemnity among the parties and the question of whether National Union was entitled to prejudgment interest. The court adopted a pro-rata “time-on-the-risk” allocation method, with a “slight modification” of past defense costs to be paid by Continental: a 10 percent reduction to reflect that had Continental kept contributing to defense costs, it would likely have been excused from contributing in many cases where its gun plastic exclusion applied. The court calculated the percentages that each carrier would owe for past and future defense costs and future indemnity costs, recognizing that not all the carriers were liable for all of the risks.

The court entered a judgment awarding National Union $823, 968.32 in damages against Continental, plus prejudgment interest of $258, 176.93. It awarded National Union $8, 215, 534.24 against Mid-Century, plus prejudgment interest of $2, 523, 477.16. Continental appealed and Mid-Century filed a cross-appeal

II. DISCUSSION

i. General Principles Applicable to Equitable Contribution

“ ‘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.... The purpose of this rule of equity is to accomplish substantial justice by equalizing the common burden shared by coinsurers, and to prevent one insurer from profiting at the expense of others.' ” (Scottsdale Ins. Co. v. Century Surety Co. (2010) 182 Cal.App.4th 1023, 1031-1032 (Scottsdale II).)

Equitable contribution “assumes the existence of two or more valid contracts of insurance covering the particular risk of loss and the particular casualty in question.” (Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1295.) If one insurer has no duty to defend or indemnify, then it cannot be held liable for equitable contribution. (See, e.g., Community Redevelopment Agency v. Aetna Casualty & Surety Co. (1996) 50 Cal.App.4th 329, 332, 342 [where insurer's duty to defend was never triggered, it had no obligation to contribute to insured's defense costs].)

ii. Continental's Appeal

A. Share of Past Defense Costs

1. Underlying Facts

The trial court concluded in Phase I of the trial that Continental had a duty to contribute to defense costs in an underlying lawsuit unless and until it was established that the sole basis for CalPortland's liability was its production of a gun plastic product that fell within the gun plastic exclusion under Continental's policy. In anticipation of the Final Phase of the trial (allocation), the parties filed a set of stipulated facts in May 2018 that included a list of the dates (between 2009 and 2015) in which gun plastic had been determined to be the only CalPortland product at issue in 100 underlying lawsuits.^[6] Continental argued at trial that the trial court should not require it to contribute defense costs beyond these dates because at that point there was no possibility of coverage and its duty to defend and indemnify had ceased. (See Buss v. Superior Court (1997) 16 Cal.4th 35, 46 (Buss) [insurer does not have duty to defend further when it is shown that no claim can be covered].)

The trial court disagreed, reasoning that Continental had a duty to defend the lawsuits at their outset and “an insurer can properly terminate disputed defense obligations in only one way-institution of declaratory relief proceedings, where the appropriate facts are brought to light so that a court can determine whether the potential for indemnity continues.” Continental had not brought a declaratory relief action on or about the dates that gun plastic was discovered to be the sole CalPortland product at issue, and the court ruled it could not retrospectively rely on the 2018 stipulation as a substitute for that procedure. Continental argues this aspect of the ruling was erroneous, and that it was entitled to a full offset for defense costs incurred after it was...