St. Paul Mercury Ins. v. Frontier Pac. Ins.

• Decision Date: 29 July 2003
• Docket Number: No. D037390.,D037390.
• Citation: 4 Cal.Rptr.3d 416,111 Cal.App.4th 1234
• Court: California Court of Appeals Court of Appeals
• Parties: ST. PAUL MERCURY INSURANCE COMPANY, Plaintiff, Cross-Defendant and Appellant, v. FRONTIER PACIFIC INSURANCE COMPANY et al., Defendants, Cross-Complainants and Appellants; American International Specialty Lines Insurance Company, Defendant and Appellant; Schuff Steel Company, Cross-Defendant and Respondent.

4 Cal.Rptr.3d 416

111 Cal.App.4th 1234

ST. PAUL MERCURY INSURANCE COMPANY, Plaintiff, Cross-Defendant and Appellant, v. FRONTIER PACIFIC INSURANCE COMPANY et al., Defendants, Cross-Complainants and Appellants American International Specialty Lines Insurance Company, Defendant and Appellant Schuff Steel Company, Cross-Defendant and Respondent.

No. D037390.

Court of Appeal, Fourth District, Division 1.

July 29, 2003.

Certified for Partial Publication.^*

As Modified on Denial of Rehearing August 28, 2003.

Review Denied December 17, 2003.

Carol Anne Boyd, Neumeyer & Boyd, Los Angeles, CA, for Plaintiff-Respondent-Cross/Appellant.

Joseph Richard Zamora, Santa Monica, CA, Peter Ambs Botz, Hayes, Simpson, Greene, LLP, San Diego, CA, James Patrick Wagoner, McCormick Barstow et al, Fresno, CA, for Defendant-Appellant-Cross/Respondent.

Gregory Stephan, Royce, Grimm, Vranjes, McCormick & Graham, San Diego, CA, for Cross-Defendant and Respondent.

McCONNELL, J.

This action involves contribution claims among insurers, arising from the settlement of complaints filed after a fatal crane accident. St Paul Mercury Insurance Company (St.Paul) insured Bigge Crane and Rigging Company (Bigge) as an additional insured under the liability policy of Schuff Steel Company (Schuff), which rented the crane from Bigge. Additionally, Frontier Pacific Insurance Company (Frontier) and American International Specialty Lines Insurance Company (AISLIC) covered Bigge under primary and excess policies, respectively.

St. Paul persuasively contends the trial court erred by interpreting ambiguous terms in St. Paul's policy against it to cover Bigge for its own negligence and strict products liability, as Bigge had no objectively reasonable expectation of such coverage. Frontier, AISLIC and Bigge persuasively contend the court erred by refusing to allocate fault for the underlying accident between Schuff and Bigge, since that is the only means of determining whether St. Paul's policy is primary to Frontier's policy for any portion of the settlement. We reverse the November 30, 2000 judgment on St. Paul's complaint against Frontier, AISLIC and Bigge, and Frontier's cross-complaint against St. Paul, insofar as it concerns these findings, and remand the matter with instructions. In all other respects, we affirm the judgment.

This case also involves Frontier's and Bigge's cross-complaint against Schuff for breach of contract and related causes of action, based on Schuff's alleged failure to obtain the amount of primary insurance for Bigge required under the crane lease. Frontier and Bigge contend the court erred by rendering judgment for Schuff. Bigge, however, has not shown it was damaged by any breach of contract, and Frontier has not shown it is an express third party beneficiary under the lease. Accordingly, we affirm the January 18, 2001 judgment for Schuff.

FACTUAL AND PROCEDURAL BACKGROUND

In January 1996 Schuff entered into a Bare Equipment Lease Agreement¹ (the Lease) with Bigge to rent a crane. Schuff was a subcontractor of Robert E. Bayley Construction, Inc. (Bayley), the general contractor on the Fashion Valley Center (Fashion Valley) expansion in San Diego, and needed the crane to place steel beams.

Paragraph 8 of the Lease, titled "HOLD HARMLESS — INSURANCE — LESSEE," required Schuff to indemnify Bigge against claims for injury or death "in any way caused by [Schuff] ... occasioned by the use, maintenance, operation, handling, transportation or storage of the equipment during the rental term." (Italics added.) The provision also required Schuff to obtain $2 million in liability insurance to protect Bigge from "such liability and risk of loss," and to "furnish additional insured endorsements making such coverages primary to all other coverages." (Italics added.)

Schuff was insured under a commercial general liability (CGL) and excess liability policy issued by St. Paul. The policy contained an "Additional Protected Persons Endorsement" (APP endorsement), which provided coverage for injury or damage resulting from Schuff's maintenance, operation or use of the crane. The endorsement excluded coverage for injury or damage "that results from any act or failure to act of [Bigge], other than the general supervision of work performed for [Bigge] by [Schuff]."²

St. Paul also issued a separate "2010 endorsement," which named Bigge as an additional insured and referred to the Fashion Valley project, but stated the policy provided coverage to Bigge "only with respect to liability arising out of [Schuff's] operations performed for [Bigge]." The policy had per occurrence limits of $1 million and aggregate, or "per project," limits of $2 million, and umbrella coverage of $1 million. The policy limit for any additional insured, however, was not greater than the limits of liability required in the indemnity contract.

Schuff provided Bigge with a certificate of insurance showing it was an additional insured under the St. Paul policy "with respect to [Schuff's] rental of [a] crane from" Bigge. The certificate described Schuff's "operations" as the Fashion Valley project.

Bigge was also a named insured under a CGL policy issued by Frontier, with per occurrence and aggregate limits of $1 million, and under an umbrella policy issued by AISLIC, with limits of $9 million. The AISLIC policy identifies the Frontier policy as the underlying liability insurance.

In June 1996 a Schuff employee, Wayne Cvitkovich, was killed when a steel beam fell from the crane and struck him. Cvitkovich's wife and children sued Bigge for negligence, strict products liability and spoliation of evidence. The plaintiffs alleged Bigge negligently inspected and maintained the crane, the crane was defective and "the load line holding the beam failed allowing the beam to descend while still attached to the line." The Cvitkoviches also sued Bayley.

Additionally, Schuff's crane operator, Dwight Bennett, sued Bigge for negligence and intentional and negligent infliction of emotional distress. Bennett alleged the crane malfunctioned and he sustained injuries when he tried to prevent the steel beam from falling and when Schuff employees attacked him after the accident. Bennett also named as defendants Bayley and Schuff, alleging supervisors of those companies "illegally ordered" him to disconnect the horn on the crane, and thus he "was unable to warn ironworkers working below that the steel beam held aloft by the crane was ... rapidly descend[ing] down on them." Bennett's wife joined in the suit and alleged loss of consortium.

Another Schuff employee, James Alvernaz, sued Bigge for negligence and negligent infliction of emotional distress. Alvernaz alleged the crane was unsafe and he was standing near Cvitkovich when the accident occurred and "seriously injured his wrist as he reeled backwards." Alvernaz also named as defendants Bayley and Schuff, alleging their employees ordered Bennett to disconnect the crane's horn "because individuals residing near Fashion Valley were complaining about the noise level at the construction site."

The three cases were consolidated (the underlying litigation). As the plaintiffs' employer, Schuff was dismissed from the action.³

Frontier initially defended Bigge in the underlying litigation. However, Frontier withdrew its defense when St. Paul agreed to participate in Bigge's defense. Frontier and AISLIC refused to participate in settlement negotiations.

St. Paul filed this action against Frontier and Bigge for declaratory relief and contribution, seeking a reallocation of any settlement among the insurers.⁴ St. Paul later added AISLIC as a defendant. Frontier cross-complained against St. Paul for declaratory relief. Additionally, Frontier and Bigge cross-complained against Schuff for breach of contract and related counts, alleging that if it were determined the St. Paul policy did not cover Bigge's exposure for its own negligence or strict products liability, or provide $2 million in primary insurance, Schuff breached its obligations under the Lease.

The court in this case ordered Frontier to attend settlement negotiations in the underlying litigation. The plaintiffs accepted a total of $2,675,000 for their claims against Bigge. Of that amount, St. Paul paid $1,925,000 and Frontier paid $750,000. Additionally, St. Paul paid a total of $55,000 for claims against Bayley, which was an additional insured under Schuff's policy.

In this case, St. Paul moved for summary adjudication, seeking a ruling Frontier shared in the duty to defend Bigge in the underlying litigation. Frontier moved for summary judgment on the complaint and its cross-complaint, arguing St. Paul's policy was primary to Frontier's policy, and thus St. Paul had the sole defense obligation and was required to indemnify Bigge for the first $2 million paid in settlement of the underlying litigation. AISLIC moved for summary judgment on the complaint, arguing that as an excess carrier it had no duty to defend Bigge. Bigge joined in Frontier's and AISLIC's motions.

The court granted St. Paul's motion and denied Frontier's and AISLIC's motions. The court determined the coverage provisions of the St. Paul policy and additional insured endorsements were ambiguous, and construed them against St. Paul "to cover Bigge for the negligence of Schuff or Bigge, plus products liability." However, the court found the indemnity provision in the Lease governed whether St. Paul's policy was primary to Frontier's policy. The court ruled that since the indemnity provision obligated Schuff to indemnify Bigge only for claims arising from Schuff's negligence, "St. Paul's policy was primary [over Frontier's policy] only to the extent the damage was caused by Schuff's negligence."

During a bench trial, the court allowed St. Paul to amend its complaint to seek contribution from Frontier and AISLIC for the settlement of the underlying litigation. The court initially intended to allow evidence...