Truck Ins Exchange v. Cty. of Los Angeles

• Citation: 95 Cal.App.4th 13,115 Cal.Rptr.2d 179
• Decision Date: 09 January 2002
• Docket Number: No. B134182.,B134182.
• Parties: TRUCK INSURANCE EXCHANGE, Plaintiff and Appellant, v. COUNTY OF LOS ANGELES, Defendant and Respondent.
• Court: California Court of Appeals

115 Cal.Rptr.2d 179

95 Cal.App.4th 13

TRUCK INSURANCE EXCHANGE, Plaintiff and Appellant, v. COUNTY OF LOS ANGELES, Defendant and Respondent.

No. B134182.

Court of Appeal, Second District, Division 3.

January 9, 2002.

As Modified on Denial of Rehearing February 6, 2002.

Review Denied April 10, 2002.^*

Barger & Wolen, Irvine, Stephen C. Klein and Michael J. Rothman, Los Angeles, for Plaintiff and Appellant.

Lloyd W. Pellman, County Counsel, Ada Gardiner, Principal Deputy County Counsel; Pollak, Vida & Fisher, Girard Fisher and Daniel P. Barer, Los Angeles, for Defendant and Respondent.

KITCHING, J.

Truck Insurance Exchange (Truck) sued County of Los Angeles (County) to recover costs that Truck incurred to defend its insured Santa Marta Hospital (Santa Marta) in a medical malpractice action. Truck sought reimbursement of those defense costs from County based on the doctrine of equitable subrogation, seeking to enforce Santa Marta's rights against County under an indemnity agreement. Truck and County both moved for summary judgment. The trial court determined that Truck was not entitled to subrogation against County because County was an additional insured under the policy that Truck had issued to Santa Marta, and granted summary judgment to County.

Truck appeals the judgment in favor of County. Truck contends County equitably should bear all of Santa Marta's defense costs because County caused Santa Marta to incur the defense costs. Truck also argues that County's status as an additional insured under the Truck policy does not defeat Truck's right to equitable subrogation because County's liability for Santa Marta's defense costs is not a liability within County's coverage. We agree that County's status as an additional insured does not prevent subrogation because the policy does not cover County's liability arising from its own negligence. We conclude that Truck is entitled to equitable subrogation because County's negligence caused Santa Marta to incur the defense costs and County equitably should bear all of the defense costs. We therefore reverse the summary judgment.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Hospital and Medical Care Agreement

County and Santa Marta entered into a Hospital and Medical Care Agreement (the Agreement) in November 1990, under which Santa Marta agreed to provide obstetrical services for patients referred by County. County agreed to refer only patients who presented a low risk of medical complications. County agreed to indemnify Santa Marta against any claim for damages arising out of the provision of professional services under the Agreement. County also agreed to indemnify Santa Marta against any claim for damages "arising from or connected with services performed by County pursuant to this Agreement."

Santa Marta agreed to indemnify County against any claim for damages "arising from or connected with [Santa Marta's] operations or its services hereunder," but only if the claim was not covered by County's indemnity for professional services and only for County's "vicarious or other indirect liability .. . resulting from the acts or omissions of [Santa Marta]." Santa Marta also agreed to maintain liability insurance with County named as an additional insured.

2. The Insurance Policy

Truck had issued a comprehensive hospital liability insurance policy to Santa Marta in September 1990, agreeing to indemnify and defend any claim against Santa Marta alleging its liability arising out of the rendering of or failure to render medical services.

Truck later named County as an additional insured on the policy, effective as of November 1990. The additional insured endorsement stated that it extended coverage to County, "but only for legal liability arising out of the acts or omissions of the named insured [Santa Marta], as respects the agreement to provide Obstetrical & Newborn Care [the Agreement]," and that it did "not extend coverage to the acts or omissions of County of Los Angeles [or its] agents, officers, and employees."

3. The Panduro Action

Rosa Panduro received prenatal care at a County medical clinic in 1992. County referred her to Santa Marta for the delivery, although she was a high risk patient. She and her newborn child sustained injuries during the breech birth at Santa Marta in 1992.

Rosa and Jocelyn Panduro sued Santa Marta, County, and others in October 1994 for medical malpractice relating to the prenatal care, delivery, and postnatal care (the Panduro action). County initially retained counsel who filed an answer on Santa Marta's behalf, but County then declined to provide a further defense based on its contention that it had not referred Panduro to Santa Marta and therefore had no duty to indemnify or defend Santa Marta under the Agreement. Santa Marta then tendered its defense to Truck under the policy. Truck accepted the tender and provided a defense. During the Panduro action, Truck sought reimbursement from County for Santa Marta's defense costs but County refused. County paid its own defense costs in Panduro and did not tender its defense to Truck under the policy at any time before the entry of judgment.

The jury found that County and an individual doctor were negligent and that they bore, respectively, 90 percent and 10 percent of the responsibility for the Panduros' injuries, and that Santa Marta was not negligent and bore no responsibility for the injuries. The court awarded judgment against County and the doctor in the total amount of over $7 million in October 1997. County appealed the judgment.

County tendered its defense and indemnification in Panduro to Truck in September 1998, for the first time. Truck rejected the tender.

County and the Panduros entered into a settlement in January 1999 and jointly requested that we reverse the judgment in the Panduro action. We requested briefing and then declined the request in a nonpublished opinion. (Panduro v. County of Los Angeles (Aug. 23, 2000, B118305).) The parties later stipulated to dismiss the appeal, and we did so in November 2000.

4. The Present Action

Truck sued County in December 1997 alleging that County was contractually obligated to indemnify and defend Santa Marta in the Panduro action and that Truck was entitled to reimbursement of those defense costs under the doctrine of equitable subrogation. County cross-complained against Truck, Santa Marta, and Santa Marta's counsel in Panduro, alleging various causes of action related to an alleged conflict of interest due to the counsel's representation of County in other matters. The trial court sustained demurrers to the cross-complaint and entered judgment on the cross-complaint in favor of Truck, Santa Marta, and Santa Marta's counsel in August 1998. We later reversed the judgment in a nonpublished opinion. (Truck Insurance Exchange v. County of Los Angeles, et al. (Mar. 16, 2000, B125001).)

County and Truck subsequently both moved for summary judgment on the complaint. County moved, inter alia, on the grounds that it was an additional insured under the policy and that Truck was not entitled to subrogation against its own insured. County argued that the policy potentially covered its liability in Panduro, that Truck therefore had a duty to defend County in Panduro, and that Truck was not entitled to reimbursement from County of Santa Marta's defense costs in the same action. According to County, for Truck to obtain reimbursement from County for the defense costs of another insured in the same action would be inequitable. County maintained that the fact that it did not tender its defense to Truck before the entry of judgment in Panduro did not alter its status as Truck's insured or negate Truck's duty to defend County.

Truck moved for summary judgment on the grounds that it had paid $444,137.60 for Santa Marta's defense costs in Panduro, that County was primarily liable for Santa Marta's defense costs as indemnitor under the Agreement and as the wrongdoer with respect to the Panduros, and that County's status as an additional insured did not defeat Truck's right to subrogation. Truck argued that the Panduro jury had found that County was directly liable to the Panduros for its own negligence and that Santa Marta was not negligent, County's negligence had caused Santa Marta to incur defense costs in Panduro, the additional insured endorsement did not extend coverage to County's liability for its own negligence, and County's status-as an additional insured did not defeat its right to subrogation because County's liability for Santa Marta's defense costs was not a liability within County's coverage. It argued further that the duty to defend does not arise until a tender is made, and that at the time that County tendered its defense to Truck there was no potential for coverage because the Panduro jury had found that County was directly liable and not vicariously liable. Since a duty to defend or indemnify County never arose, Truck argued, it owed no duty to County in connection with Panduro and therefore was entitled to subrogation against County.

The trial court determined that the plaintiffs' allegations in the Panduro action were within the scope of County's coverage under the Truck policy. It stated that Truck would have had the duty to defend County if County had tendered its defense during the Panduro action, that County therefore "had the status of an `additional insured' .... regardless of the ultimate result at trial," and that "Truck may not sue its own insured for subrogation. (St Paul Fire & Marine Ins. Co. v. Murray Plumbing & Heating Co. (1976) 65 Cal.App.3d 66, 75 .)" Accordingly, the court granted summary judgment for County, denied Truck's summary judgment motion, and entered judgment in favor of County. Truck appeals.

CONTENTIONS

Truck contends County is liable for Santa Marta's defense costs under the Agreement and equitably should bear all of those defense costs because County caused Santa Marta to incur...