Topa Ins. Co. v. Fireman's Fund Ins. Companies

• Decision Date: 02 November 1995
• Docket Number: No. H013194,H013194
• Court: California Court of Appeals Court of Appeals
• Parties: , 95 Cal. Daily Op. Serv. 8564, 95 Daily Journal D.A.R. 14,789 TOPA INSURANCE COMPANY, Cross-complainant and Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES, Cross-defendant and Respondent.

Page 516

46 Cal.Rptr.2d 516

39 Cal.App.4th 1331, 95 Cal. Daily Op. Serv. 8564,

95 Daily Journal D.A.R. 14,789

TOPA INSURANCE COMPANY, Cross-complainant and Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES, Cross-defendant and Respondent.

No. H013194.

Court of Appeal, Sixth District, California.

Nov. 2, 1995.

John Lees, James M. Marzan, Peter A. Urhausen, and Gibbons, Lees & Conley, Walnut Creek, for appellants.

D. Douglas Shureen, Rebecca Berman Phelps, and Rivkin, Radler & Kremer, Santa Rosa, for respondents.

BAMATTRE-MANOUKIAN, Associate Justice.

Will a good faith settlement between the issuer of a blanket excess liability policy of insurance and its insureds, with respect to an occurrence assertedly covered by the policy, bar the claim of the issuer of a second excess liability policy, which assertedly covers the same occurrence, against the first insurer, for contribution of a proportionate share of amounts the second insurer is obliged to pay under its policy? The trial court concluded that the settlement would bar the second insurer's claim; the second insurer appeals. We disagree with the trial court's conclusion and shall reverse its order dismissing the second insurer's cross-complaint against the first insurer.

The record the parties have chosen to place before us does not provide all the factual details we might consider relevant, but for purposes of decision we take the following facts to be true.

The insureds, to whom we shall refer collectively as "Lohrey Enterprises," were the owners and operators of a dry cleaning business. In the course of its operation Lohrey Enterprises accidentally released a chemical solvent known as perchlorethelene (or perc or PCE) into an unpaved alley behind its place of business. The PCE, which is classified as a hazardous substance under federal and state laws, caused contamination of the property of a neighboring landowner, Stanton Road Associates (Stanton). Stanton sued Lohrey Enterprises in federal district court, seeking (among other relief) cleanup costs under the applicable federal statute and damages under state law.

There is an ongoing dispute as to the exact nature and scope of Lohrey Enterprises' insurance coverages, but it appears that Lohrey Enterprises owned six policies of insurance affording liability coverages arguably applicable to Stanton's claims: Three primary policies each affording liability coverage to relevant limits of $500,000, and three policies which afforded coverage to specified limits for liabilities in excess of the limits of enumerated primary liability policies. Respondent Fireman's Fund Insurance Companies had issued one of the primary policies and also an excess umbrella policy with a policy limit of $1 million. Appellant Topa Insurance Company (Topa) had assumed the rights and obligations of another insurer under a second excess policy with a policy limit of $1 million. Another insurer provided both primary coverage and excess (to a limit of $2 million) coverage, and yet another provided the remaining primary policy.

Stanton's federal lawsuit went to trial in April 1991; the three primary insurers provided a defense subject to reservations of rights.

During trial the three primary insurers, including Fireman's Fund, agreed to contribute specified amounts to indemnify Lohrey Enterprises: Fireman's Fund and one other insurer each contributed the $500,000 limits of their primary policies, and the third insurer agreed to a structured settlement which it subsequently cashed out for $270,000.

Only Fireman's Fund's settlement with Lohrey Enterprises is documented in the record: By the terms of a written settlement agreement the parties agreed that Lohrey Enterprises would be entitled to submit a further claim for insurance coverage against Fireman's Fund, under Fireman's Fund's excess policy, only "in the event that total remedial costs and expenses as defined herein exceed $1,500,000...." "Remedial costs and expenses" were narrowly defined, and Fireman's Fund reserved its rights to deny, contest or limit coverage under its excess policy.

Stanton recovered a $1.8 million judgment against Lohrey Enterprises. After an appeal (Stanton Road Associates v. Lohrey Enterprises (9th Cir.1993) 984 F.2d 1015) Stanton and Lohrey Enterprises agreed to a settlement which required Lohrey Enterprises to pay slightly less than $1.5 million on the judgment as entered. Although the record does not make the point clear, it appears that Lohrey Enterprises remains potentially liable for additional cleanup costs in future. The parties to this appeal agree that Lohrey Enterprises has not yet claimed a right to be reimbursed for remedial costs or expenses, as defined in the Fireman's Fund settlement agreement, in excess of that agreement's $1.5 million floor.

In August 1992 Lohrey Enterprises sued Topa and the third excess insurer, seeking a declaration of Lohrey Enterprises' rights under the two excess liability policies as well as damages attributable to the two insurers' alleged denials of liability under the excess policies. Topa filed a cross-complaint against Fireman's Fund and other insurers which, as amended, prayed for a declaration that Topa, if found liable to Lohrey Enterprises, would be entitled to contribution from Fireman's Fund and the other insurers and for recovery from Fireman's Fund and the third excess insurer of their proportional shares of the amount for which Topa might be found liable.

In its answer to Topa's cross-complaint Fireman's Fund alleged its settlement with Lohrey Enterprises as an affirmative defense. Fireman's Fund then moved, under Code of Civil Procedure sections 877 and 877.6, for a determination that its settlement with Lohrey Enterprises was made in good faith and for an order dismissing Topa's cross-complaint against Fireman's Fund and barring Topa from asserting further claims against Fireman's Fund. Topa opposed the motion.

The trial court granted Fireman's Fund's motion, "both on the basis of [Code Civ.Proc., §§ ] 877 and 877.6 (see Diamond Heights Homeowners [Assn.] v. National American Ins. Co. [ (1991) ] 227 Cal.App.3d 563, 582, 277 Cal.Rptr. 906), and on the basis of the Court's inherent equitable power. (See, Western Steel [ & ] Ship Repair, Inc. v. RMI, Inc. (1986) 176 Cal.App.3d 1108, 1116-1117, 222 Cal.Rptr. 556.)" The court entered a formal order barring further claims against Fireman's Fund by "parties to this action" unless and until "Lohrey's total remedial costs and expenses as described in the Fireman's Fund-Lohrey Settlement Agreement exceed $1,500,000 and Lohrey submits a further claim for insurance coverage to Fireman's Fund under [the excess policy]," and dismissing the third amended complaint, as to Fireman's Fund, "without prejudice."

Topa appeals from this order.

As a general rule an involuntary dismissal effected by written order of the court is appealable. (Cal.Civil Appellate Practice (Cont.Ed.Bar, 2d ed. 1985) § 2.10, p. 29; 9 Witkin, Cal.Procedure (3d ed. 1985) Appeal, § 75, p. 99; cf. Code Civ.Proc., § 581d.) We take the trial court's determination that the involuntary dismissal should be without prejudice to mean no more than that if, at some indeterminate future time, Lohrey Enterprises should incur defined remedial costs and expenses in excess of $1.5 million and submit a further claim to Fireman's Fund, Topa would then be at liberty to file a new action against Fireman's Fund based on those new facts. We are satisfied that the order represents a final judicial determination of Topa's rights against Fireman's Fund in this action and therefore is appealable in accordance with the general rule.

Although appealable, the trial court's order did not purport to bar any potential claim by Topa against Fireman's Fund absolutely: In essence the trial court undertook simply to make any such claim subject to the same limitations applicable to a future claim by Lohrey Enterprises against Fireman's Fund under their settlement agreement. Neither party has addressed the question whether this distinction between an absolute bar and a limitation is or should be relevant to the issues the parties raise, and we perceive no need to address the issue sua sponte. Upon the essentially undisputed facts we conclude (1) that under Code of Civil Procedure sections 877 and 877.6 Fireman's Fund's settlement neither barred nor limited Topa's claim against Fireman's Fund for equitable proration of excess coverages, and (2) that the trial court's order also exceeded the scope of the inherent judicial powers referred to in cases such as Western Steel.

1. Code of Civil Procedure Sections 877 and 877.6

Code of Civil Procedure section 877 provides in pertinent part that "Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort, or to one or more other co-obligors mutually subject to contribution rights, ... [p] (a) It shall not discharge any other such party from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is the greater[; and] [p] (b) It shall discharge the party to whom it is given from all liability for any contribution to any other parties. [p] ... [p] (d) This section shall not apply to a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment given to a co-obligor on an alleged contract debt where the contract was made prior to January 1, 1988."

Code of Civil Procedure section 877.6 provides in pertinent part that "(a)(1) Any party to an action wherein it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the issue of...