Insurance Law Principles Held To Require Enforcement Of Subrogation Rights Despite Lack of Resolution Of Non-Insurance Contractual Indemnity Issues
The unpublished case of Great American Insurance Company v. Fidelity and Guaranty Insurance Company, No. A122722 (February 24), arose out a partial collapse of a roof during construction of a commercial warehouse. Two employees of the roofing subcontractor were injured, and a third was killed. Personal injury and wrongful death actions ensued and were then settled, spawning a “hydra-like” series of disputes among the various parties on indemnification, insurance coverage, contribution, and subrogation rights. The dispute before Division Five of the First Appellate District was between two of the insurers, Great American and Fidelity, contesting liability to one another for amounts paid in settlement of the personal injury action. Fidelity insisted that the obligations of the carriers can only be quantified after resolution of disputed issues of material fact as to the proportionate liability of each of insured principals. Great American contended that it was entitled to equitable subrogation against Fidelity under well-established insurance law without regard to any contractual indemnity agreement between their insureds.
The appellate court sided with Great American. It acknowledged that the issues of express indemnification obligations between the insured principals may not have been resolved, but decided, as did the trial court, that Great American was entitled to summary judgment on its complaint for equitable subrogation anyway. Citing JPI Westcoast Construction, L.P. v. RJS & Associates Inc. (2007) 156 Cal. App. 4th 1448 and Reliance National Indemnity Company v. General Star Indemnity Company (1999) 72 Cal. App. 4th 1063, the Court focused on the fact that Great American’s insurance with respect to the mutual insured and settling party was only secondary and excess to that of Fidelity’s; it did not come into play until coverage by Fidelity was exhausted. It was also clear from the evidence that Great American had paid a total of $1.95 million, $1 million of which was allocated to the liability of the mutual insured. There was substantial evidence that insured’s liability was in fact substantially higher. Accordingly, the Court went on, Great American was entitled to recover the entire limits of Fidelity’s $1 million primary policy. At the same time, the Court noted, nothing it held served to abrogate any contractual indemnity agreements among the parties. The Court found nothing in record to indicate that those issues had been resolved and took pains to note that they were not being resolved by its opinion.
February 24, 2010
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