In Advent v. National Union Fire Ins. Co., etc. (No. H041934 filed 12/6/16), a California appeals court refused to order a subcontractor’s excess insurer to contribute to a general contractor’s excess insurer because the general contractor did not qualify as an additional insured of the subcontractor’s insurer, and the policy wording made the subcontractor’s excess insurer second level excess above the general contractor’s own excess insurance.
Advent was the general contractor on a housing development and Johnson was a sub-subcontractor providing concrete on perimeter walls. A Johnson employee dispatched to retrieve plywood dumped between some of the buildings somehow fell down an open stairwell inside one of the unfinished buildings and suffered serious injury. He sued Advent and others for negligence, but could not remember how he fell.
Advent had $1 million in primary coverage with Landmark, and $5 million in excess coverage with Topa. The Topa excess policy promised to “indemnify the insured for the amount of loss which is in excess of the applicable limits of liability, whether collectible or not, of the Underlying Insurance,” which was listed as the Landmark policy. “Loss” was defined as “the sum paid in settlement of losses for which the insured is liable after making deduction for all recoveries, salvages or other insurance….”
Johnson had $1 million in primary coverage and $15 million in excess coverage with National Union. The National Union policies included others as additional insureds “where required by written contract,” “with respect to liability for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by … Your [Johnson’s] acts or omissions.” Further, the excess policy stated that National Union “will not make any payment under [the excess] policy unless and until … the total applicable limits of Scheduled Underlying Insurance have been exhausted by the payment of Loss to which this policy applies and any applicable, Other Insurance have been exhausted by the payment of Loss….” “Other Insurance” was defined as “a valid and collectible policy of insurance providing coverage for damages covered in whole or in part by this policy.”
The case was settled for $10 million, with Landmark and Topa each paying their limits of $1 million and $5 million, respectively. National Union paid $1 million and the rest was funded by others. Part of the deal involved Advent suing National Union for a declaration that Advent was an additional insured under the National Union excess policy, with Topa intervening for equitable contribution to part of its $5 million payment.
The trial court granted summary judgment to National Union, finding that it owed nothing because Advent did not qualify as an additional insured of National Union, and equitable contribution failed because the policy wording made National Union a second level excess insurer above Topa rather than sharing the same level of liability.
The appeals court affirmed. First, the court engaged in a lengthy discussion of burdens of proof, explaining how the burden shifting for equitable contribution announced in Safeco Ins. Co. of America v. Superior Court (2006) 140 Cal.App.4th 874, operates in a manner similar to the burden shifting for summary judgment motions. The Advent court ruled that National Union had met its burden of demonstrating that coverage could not be established, and that Topa had not shown a triable issue of fact to suggest otherwise.
Specifically, the court noted that under the National Union policies issued to Johnson, coverage for additional insureds extended only “with respect to liability for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by … Your [Johnson’s] acts or omissions; or … The acts or omissions of those acting on your [Johnson’s] behalf … in the performance of your [Johnson’s] ongoing operations for the additional insured(s).” The issue thus being whether the employee’s injuries were caused, in whole or in part, by National Union’s named insured Johnson or someone acting on behalf of Johnson. Since there was no evidence of a connection between the unexplained fall of a worker inside a building and Johnson’s work on perimeter walls being performed outside, the Advent court agreed that there was no causal connection and, therefore, Advent did not qualify as an additional insured under the National Union excess policy.
The Advent court further agreed that Topa had not met its shifted burden of showing a triable issue of fact, but was only speculating about the cause of the injuries. The court rejected an argument that mere presence at a jobsite was sufficient to find that an accident or injury arose from the subcontractor’s actions, citing St. Paul Fire & Marine Ins. Co. v. American Dynasty Surplus Lines Ins. Co. (2002) 101 Cal.App.4th 1038.
The Advent court went on to rule that even if Advent were an additional insured of National Union, the policy wording made National Union second level excess above Topa’s excess policy, which had to be exhausted first. The Advent court cited Carmel Development Co. v. RLI Ins. Co. (2005) 126 Cal.App.4th 502, for the proposition that policy wording may prevail over the general rule that when multiple policies share the same risk but have inconsistent “other insurance” clauses the courts will prorate according to each policy’s limits:
“Here … the National Union policy provided that National Union would be obligated only after ‘Other Insurance has been exhausted by the payment of Loss….’ The National Union policy specifically defined ‘Other Insurance’ as ‘a valid and collectible policy of insurance providing coverage for damages covered in whole or in part by this policy.’ And the Topa … excess policy agreed to ‘indemnify the insured for the amount of loss which is in excess of the applicable limits of liability, whether collectible or not, of the Underlying [Landmark] Insurance.”
The Advent court rejected an argument that Topa’s definition of “Loss” constituted a countervailing other insurance clause and concluded that it was clear from the language of the National Union policy that it offered a different level of coverage compared with Topa: “National Union’s excess policy expressly states that coverage will not apply until ‘the total applicable limits of Scheduled Underlying Insurance have been exhausted by the payment of Loss to which this policy applies and any applicable, Other Insurance have been exhausted by the payment of Loss.’ Based on the foregoing, we also do not find the court erred when it entered summary judgment in favor of National Union. Topa cannot demonstrate that its policy was the same level excess policy as National Union’s.” Consequently, National Union had no obligation to contribute to Topa’s settlement payment.
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