Insurer Seeking Equitable Contribution From Another Insurer Must First Establish That It Has Paid More Than Its Fair Share
In the partially published case of Scottsdale Insurance Company v. Century Surety Company, No. B204521 (March 10), Division Three of the Second Appellate District considered three different allocation issues. When multiple insurers share the same defense obligation, the costs of same are to be allocated equally. Thus, when an insurance company refuses to defend, those insurers which do contribute to the defense may seek contribution. Here Scottsdale sued Century, seeking contribution after Century declined to participate in the defense of seventeen common insureds in hundreds of actions in which Scottsdale, along with at least one other insurer, was participating in the defense. Scottsdale also sought equitable contribution for settlement amounts it had paid.
Century raised three principal defenses. In the unpublished portion of its opinion, the appellate court upheld the trial court’s decisions as to two. The Court concluded that Century’s prior work exclusion was not clear and declined to enforce it in order to defeat coverage . The exclusion was identified as an “Exclusion of Specific Work or Location,” not a general exclusion of all “prior work.” Only by reading the exclusion in detail could one infer that it attempted to exclude all prior completed work from coverage. The Court compared that language unfavorably with a subsequent “Past Liabilities Exclusion” Century ultimately adopted. The Court also held that a tolling agreement into which Scottsdale and Century allegedly entered into with respect to the actions before it did not apply — that in fact it applied only to a prior contribution action Scottsdale had pursued against Century in Orange County. Therefore, the Court went on, the statute of limitations barred Scottsdale’s right to recover with respect to many of the underlying actions before it.
The published portion of the opinion concerns what Century could be ordered to pay on the actions for which it shared responsibility.  Century argued that it should be ordered to pay Scottsdale the difference between the equal share Scottsdale paid without Century’s participation and the equal share it would have paid had Century participated. The trial court awarded Scottsdale half of all defense and indemnity payments it made with the respect to the claims for which it was entitled to recover equitable contribution. The Court of Appeal disagreed. It applied the general rules recognized in non-insurance cases that, in order to be entitled to equitable contribution, a party must first have paid more than its share of the loss and that a party seeking contribution bears the burden of proving such circumstance. Moreover, the Court went on, Scottsdale cannot recover from Century any amount that would result in Scottsdale paying less than its fair share even if that means Century will end up paying nothing.
March 10, 2010
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