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The Fifth District Court of Appeal affirmed the trial court and held an indemnity agreement between co-defendants in a personal injury action did not bar contribution action between the defendants' insurers.
A personal injury action was filed after a child fell off the roof of a storage shed located adjacent to the child's apartment complex, owned by Lin Kwock ("Kwock"). Kwock employed Edmondson Property Management ("Edmondson") to manage the apartment complex. Both were named as a defendant in the personal injury action. Kwock was insured by Capital Insurance Company ("Capital"). Edmondson was an additional insured under the Capital policy and also insured by Farmers under a general business liability policy.
The personal injury action settled, with Capital paying $550,000. $50,000 of the settlement was apportioned to Kwock's negligence and $500,000 was apportioned to Edmondson's negligence. Farmers refused to contribute to the settlement, claiming that the indemnity provision of the property management agreement between Kwock and Edmondson rendered its coverage excess to that of Capital. Capital thereafter filed a contribution action and Farmers was ordered to pay 50% of the settlement.
The issue presented on appeal was whether the indemnity provision found in the property management contract precludes Capital from seeking contribution from Farmers for the settlement paid. The appellate court noted the general rule is that when multiple insurance carriers insure the same insured and cover the same risk, each insurer may assert a claim against a coinsurer for equitable contribution when it has undertaken the defense or paid liability on behalf of the insured. An exception to this rule exists when an indemnity clause renders one of two primary insurance policies excess to the other. This is a function of both the contractual language and the intent of the insureds. Farmers argued that although its policy was written as a primary policy, the contract between Kwock and Edmondson defeats an equitable claim for contribution.
The appellate court examined the indemnity agreement to determine what conduct the parties intended to protect the indemnitee against and whether the parties intended to make the insurance obtained by the indemnitor primary to any obtained by the indemnitee. If the conduct alleged falls within the protected categories, and the intent was to make the insurance obtained by the indemnitor primary, then the agreement would be enforced and contribution denied. If either of these prongs is missing, the general policy supporting equitable contribution trumps.
According to the court, the indemnity agreement did not expressly address whether Kwock would fully indemnify Edmondson against third-party claims resulting from Edmondson's own negligence. An indemnity agreement must expressly state indemnification is provided for an indemnitee's own negligence. The trial court, after reviewing the evidence before it, concluded Edmondson was actively negligent while Kwock was passively negligent. The appellate court agreed with this finding. Therefore, the court held that Kwock was not required to indemnify Edmondson for damages resulting from Edmondson's active negligence. Accordingly, Capital was entitled to contribution from Farmers.
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