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The Court of Appeal for the First Appellate District affirmed the trial court's rulings on motions for summary judgment finding a subcontractor's excess carrier was not obligated to contribute to the settlement of a wrongful death action until both the subcontractor's and general contractor's primary insurance was exhausted, regardless of an indemnity provision in a subcontract requiring the subcontractor to indemnify the general contractor.
JPI Westcoast Construction, L.P. ("JPI"), a general contractor, entered into a subcontract with RJS & Associates ("RJS") for the construction of concrete podium structures. The subcontract contained an indemnity clause in JPI's favor applying even where JPI was currently negligent. The indemnity provisions did not apply to JPI's sole negligence or willful misconduct. RJS also was required to name JPI and the project's owner as additional insureds on a primary basis.
JPI purchased Commercial General Liability coverage from Transcontinental Insurance Company with a per occurrence limit of $1 million. RJS purchased Commercial General Liability insurance from Underwriters at Lloyds providing aggregate coverage of $2 million, with a per occurrence limit of $1 million. JPI was an additional insured on the RJS policy deemed primary and non-contributory to any similar insurance.
RJS also was the sole named insured on a Commercial Umbrella policy it obtained from Agricultural Excess and Surplus (now Great American Insurance Company) with a general aggregate and per occurrence limit of $9 million. The policy identified the Lloyds policy as underlying insurance, but not the Transcontinental policy. The policy obligated Great American to pay "on behalf of the 'Insured' those sums in excess of the 'Retained Limit' that the 'Insured' becomes legally obligated to pay. (Italics added.) The policy defined "Retained Limit" as: "[T]he greater of: [] 1. the total amounts stated as the applicable limits of the underlying policies listed in the Schedule of Underlying Insurance and the applicable limits of any other insurance providing coverage to the 'Insured' during the Policy Period. … " The Great American policy also contained an "Other Insurance" clause purporting to make it excess to all other insurance.
During RJS' work, a worker was killed in an accident. The worker's family sued JPI, RJS and others for wrongful death. JPI tendered its defense to RJS and Lloyds. Lloyds accepted JPI's defense as an additional insured. JPI's insurer, Transcontinental (previously CNA), contended that "[p]ursuant to the terms of the contracts between the parties, RJS, Lloyds and Great American owe an obligation to indemnify JPI prior to application of the CNA policy. Great American argued all primary coverage must exhaust before its excess coverage was triggered.
The case proceeded to trial. The jury found defendants negligent, apportioning fault 20% to JPI and 70% to RJS. The jury awarded the workers' family $6,853,284. RJS and its insurers, Lloyds and Great American, then settled the action for $4.9 million. Transcontinental refused to contribute. Lloyds paid $1 million, $777,777 on behalf of RJS and $222,222.22 on behalf of JPI. Great American paid the remaining $3.9 million, $3,033.333.33 on behalf of RJS and $866,666.67 on behalf of JPI. Great American reserved its rights against Transcontinental. JPI and Transcontinental agreed Great American's payment should not be deemed voluntary.
JPI then filed a complaint for express contractual indemnity and declaratory relief against RJS and its insurers, Great American and Lloyds, alleging "JPI and RJS clearly intended that RJS would be primarily responsible for fully indemnifying JPI … and JPI's own insurance carriers owe no obligation to pay any of the verdict entered in the underlying action." Great American filed a cross-complaint for equitable subrogation and equitable indemnity against Transcontinental.
JPI and Transcontinental filed a joint motion for summary judgment against RJS and Great American arguing the indemnity in the subcontract was triggered by the jury finding that JPI was not solely negligent. Relying on Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, they further argued the indemnity clause controls the priority of insurance between carriers.
RJS filed a motion for summary judgment against JPI on the latter's claim for express contractual indemnity arguing JPI's claim should be dismissed as moot because any exposure JPI had "evaporated when post-trial settlement was reached and satisfied by Lloyds and Great American." RJS also argued the indemnification clause does not indemnify JPI for its own active negligence.
Great American filed separate motions for summary judgment against JPI and Transcontinental. As to JPI, Great American argued JPI's claim does not present an actual controversy because it paid to settle the underlying judgment against JPI, and the indemnity provision in the subcontract does not trump the rule that, as an excess carrier, Great America's obligation is not triggered until the limits of the Transcontinental policy are exhausted. As to Transcontinental, Great American argued it is entitled to equitable indemnification for its payment on behalf of JPI, relying on Reliance Nat. Indemnity Co. v. General Star Indemnity Co. (1999) 72 Cal.App.4th 1063, 1073-1075.
The trial court granted RJS's and Great American's motions for summary judgment, agreeing JPI'S claim for express contractual indemnity was moot. The trial court rejected JPI's and Transcontinental's reliance on Rossmoor and resolved the coverage issue in favor of Great American, concluding the primary carrier of the indemnitee had to pay before the excess carrier of the indemnitor. Accordingly, the trial court concluded Great American was entitled to equitable contribution from Transcontinental. The appellate court affirmed.
The Court of Appeal found Reliance, not Rossmoor controlled. Reliance also involved an excess carrier seeking equitable contribution against a primary carrier. The court reasoned the policy terms should be enforced whenever possible. Transcontinental contracted to provide primary liability coverage of $1 million per occurrence regardless of the subcontract. California law requires primary policies to exhaust before excess policies must pay.
This opinion is not final. It may be depublished, modified on rehearing, or review could be granted. These events would render this decision unavailable for use as legal authority.
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