Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02099/USCOURTS-caed-2_05-cv-02099-2/pdf.json

Parties Involved:
Amco Insurance Company
Defendant
Financial Pacific Insurance
Plaintiff

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28 * This matter was determined to be suitable for decision without

oral argument. L.R. 78-230(h).

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

FINANCIAL PACIFIC INSURANCE )

COMPANY, )

) 2:05-cv-2099-GEB-CMK

Plaintiff, )

)

v. ) ORDER*

)

AMCO INSURANCE COMPANY, )

)

Defendant. )

)

Pending are cross motions for summary judgment on all

claims. The claims concern insurance coverage responsibility for an

accident which occurred on a construction site.

BACKGROUND

On August 1, 2002, Scott Brister fell and injured himself

while working on the Skyline Building A project for Medtronic AVE. 

(Def.’s Response to Pl.’s Undisputed Facts (“DRUF”) ¶¶ 7, 22.) 

Brister testified he thought he tripped on ceiling wires and that is

what caused him to fall. (Id. ¶ 23.) He also testified the bundle of

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1 The letter was addressed to “Allied Insurance.” Defendant

AMCO Insurance is one of the “Allied Group” insurance companies and

Plaintiff mistakenly referred to AMCO as “Allied Insurance.” (Def.’s

Opp’n at 5 n.2; DRUF ¶ 45.)

2

wires where he tripped was six to eight inches in diameter. (Id.

¶ 25.) 

Stan Walker & Associates (“Walker”) was the general

contractor for the Skyline Building A project. Walker was insured by

Defendant. (Id. ¶ 1.) Walker subcontracted J.R. Garrison &

Associates (“Garrison”) to install new ceilings and repair existing

ceilings. (Id. ¶ 3.) Garrison brought three twelve-foot long bundles

of ceiling wires to the job site. (Id.) The bundles were an inch and

a quarter in diameter. (Id.) Garrison was insured by Plaintiff. 

(Id. ¶ 2.) Garrison named Walker as an additional insured, to the

extent Walker was held liable for Garrison’s acts or omissions, on

Garrison’s insurance policy with Plaintiff. (Pl.’s Statement of

Undisputed Facts (“PSUF”) ¶ 2.) 

Brister filed an action against Walker alleging premises

liability and general negligence. (DRUF ¶ 30.) Defendant tendered

the “defense and indemnity” of Walker to Plaintiff, but Plaintiff

declined the tender. (Id. ¶¶ 35, 36.) Defendant hired an attorney

and filed a cross-complaint against Garrison seeking indemnification,

apportionment of fault, declaratory relief, and breach of contract. 

(Id. ¶ 38.)

On October 27, 2003, Plaintiff sent a letter (“October 27

letter”) to Defendant1 agreeing to defend Walker “subject to a full

and complete reservation of rights.” (Def.’s Statement of Undisputed

Facts (“DSUF”) ¶ 16.) On November 14, 2003, Plaintiff sent a letter

(“November 14 letter”) to Defendant stating “that the Reservation of

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Rights letter dated 10/27/03 is hereby withdrawn[, and that Plaintiff]

further agrees to defend and indemnify your insured in this action.” 

(Id. ¶ 18.) The letter further stated “In light of the withdrawal of

the Reservation of Rights we request your cooperation . . . with a

dismissal of the cross complaint so that we may proceed to defend the

allegations in the original complaint.” (Id.) On December 9, 2003,

the cross complaint was dismissed. (DRUF ¶ 49.) On May 5, 2005,

Plaintiff sent Defendant a letter stating Plaintiff believed

Defendant’s coverage was primary and Plaintiff would not seek

contribution toward the defense if Defendant agreed to contribute

toward a settlement. (DSUF ¶ 59.) 

At trial the jury found Brister was 85% at fault, Medtronic

was 10% at fault, and Walker was 5% at fault. (DRUF ¶ 63.) After the

trial, Plaintiff negotiated a settlement with Brister for $215,000. 

(Id. ¶ 67.) Defendant refused to contribute to the $215,000

settlement. (Id. ¶ 69.) In addition, Plaintiff incurred $198,782.27

in legal fees for the defense of the Brister action. (Id. ¶ 70.) 

DISCUSSION

I. Defense Fees and Costs

Plaintiff argues it is entitled to summary judgment on its

claim for defense fees and costs because Defendant must equitably

contribute to the defense Plaintiff provided Walker. (Pl.’s Mot. at

9.) Plaintiff asserts that both insurance companies had a duty to

defend and therefore, Defendant has a duty to contribute to the costs

incurred in defending Walker. (Id. at 10, 12.) Plaintiff further

asserts that at least after it sent Defendant a letter on May 5, 2005

demanding contribution, Defendant had a duty to contribute to the

defense costs. (Id. at 12.) Defendant counters it is entitled to

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summary judgment because Plaintiff “has no right to contribution for

defense fees and costs from [Defendant] because [Defendant’s] policy

provided excess coverage for [Walker] and [Plaintiff’s] policy

provided primary defense coverage, making [Plaintiff] completely

responsible for [Walker’s] defense fees and costs.” (Def.’s Opp’n at

10.) Plaintiff rejoins that the “other insurance” clauses do not

establish Defendant’s coverage was excess. (Pl.’s Reply at 14.)

Plaintiff reasons that Defendant’s coverage is not excess

under California law relying on a statement by the California Supreme

Court that “the modern trend is to require equitable contributions on

a pro rata basis from all primary insurers regardless of the type of

‘other insurance’ clause in their policies.” Dart Indus., Inc. v.

Commercial Union Ins. Co., 28 Cal. 4th 1059, 1080 (2002). However,

the court in Dart did not decide the question of whether “other

insurance” clauses control in disputes between two insurers. Id.

(indicating it was not reaching the issue of whether or not the rule

Plaintiff quotes is universally applicable). 

Both insurance policies contain an “other insurance” clause. 

Plaintiff’s policy specifies when there are two or more primary

insurance policies, Plaintiff will contribute in equal shares or in

pro rata shares, depending on the language of the other primary

insurance policy. (PSUF ¶ 2.) Defendant’s policy provides it is

excess over “any other primary insurance available to [insured]

covering liability for damages arising out of the premises or

operations for which you have been added as an additional insured by

attachment of an endorsement.” (Id.) 

“Contractual terms of insurance coverage are honored

whenever possible. The courts will therefore generally honor the

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language of excess ‘other insurance’ clauses when no prejudice to the

interests of the insured will ensue.” Fireman’s Fund Ins. Co. v.

Maryland Cas. Co., 65 Cal. App. 4th 1279, 1304 (1998). Defendant’s

policy in this case contains a “narrow exception[] to [its] operation

as primary insurance.” Hartford Cas. Ins. Co. v. Travelers Indem.

Co., 110 Cal. App. 4th 710, 726 (2003). Defendant’s policy declares

coverage is excess only “in the situation where the parties and the

insurers are most likely to intend that result-when the insured is

covered as an additional insured on another party’s policy for some

specific event or situation.” Id. 

Equity should not be employed to override the

terms of the insurance policies in this case . . .

[Defendant’s] policy is primary except in the

specific instance that does apply in this

case-when the insured is named as an additional

insured under another policy, which makes the

[Defendant’s] policy excess by definition. Because

the policy terms, as they apply in this case, do

not conflict or offend public policy and do not

infringe on any rights of the insured, there is no

reason to disregard the express terms of both

policies.

 Id. at 727.

Since the “other insurance” clauses in the insurance

policies do not conflict, both will be given effect. By its terms,

Defendant’s insurance coverage was excess to Plaintiff’s coverage in

the limited situation where Walker was covered as an additional

insured under Plaintiff’s policy. Whether Walker was covered as an

additional insured under Plaintiff’s policy turns on whether Walker

was held liable for the acts or omissions of Garrison. (PSUF ¶ 2.)

Whether the 5% fault apportioned to Walker by the jury in

the Brister action is attributable to the acts or omissions of

Garrison raises disputed factual issues. Brister testified he fell

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when he tripped over ceiling wires on the job site. (DRUF ¶ 23.) 

Mechanical and electrical subcontractors, as well as Walker, Medtronic

and Garrison used ceiling wires at the job site. (Id. ¶ 17.) Since

there are disputed factual issues regarding whether Garrison was at

fault for Brister’s fall, summary judgment is denied on the claim of

contribution for defense fees and costs.

II. Settlement

Plaintiff further seeks summary judgment on its claim for

the settlement amount because it is entitled to recover the entire

amount of settlement from Defendant based on the principle of

equitable indemnity. (Pl.’s Mot. at 18.) Defendant rejoins summary

judgment should be granted denying settlement costs because it has

established the affirmative defenses of waiver and estoppel and

therefore, has no duty to contribute. (Def.’s Opp’n at 10.) 

A. Waiver

Plaintiff argues Defendant cannot establish the defense of

waiver because there is no evidence Plaintiff intended to relinquish a

known right. (Pl.’s Mot. at 23.) Defendant rejoins that waiver can

also be established by conduct and that Plaintiff’s conduct amounted

to waiver of the right to contribution. (Def.’s Opp’n at 12.) 

“[W]aiver is the intentional relinquishment of a known right

after knowledge of the facts.” Waller v. Truck Ins. Exchange, Inc.,

11 Cal. 4th 1, 31 (1995). “The waiver may be either express, based on

the words of the waiving party, or implied, based on conduct

indicating an intent to relinquish the right.” Id. 

Defendant argues that Plaintiff’s withdrawal of its

reservation of rights in the November 14 letter constituted an implied

waiver of the right to contribution. (Def.’s Opp’n at 12.) Plaintiff

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rejoins that “[n]either the reservation of rights letter from

[Plaintiff], nor the letter withdrawing the reservation of rights,

refer to contribution or the rights of the insurers against each

other[; therefore, Plaintiff] waived the right to deny coverage to

Walker, but nothing else.” (Pl.’s Mot. at 23.) 

Plaintiff’s October 27 letter states “No payment by

[Plaintiff] of settlements and/or judgments and defense costs shall

constitute a waiver of [Plaintiff’s] right to seek later allocation

and reimbursement of such settlements and/or judgments and defense

costs on the grounds that there is no duty to defend or indemnify all

or a portion of the instant action.” (DSUF ¶ 16.) Plaintiff’s

November 14 letter states that the October 27 letter is withdrawn and

that Plaintiff “further agrees to defend and indemnify your insured in

this action.” (Id. ¶ 18.) 

Neither letter references equitable contribution or

indemnity between the insurance companies. Therefore, conflicting

“ultimate inferences” can be drawn from the letters that prevent

granting summary judgment. Miller v. Glenn Miller Prods., Inc., 454

F.3d 975, 988 (9th Cir. 2006) (“where divergent ultimate inferences

may reasonably be drawn from the undisputed facts, summary judgment is

improper.”). Therefore, summary judgment is denied on Defendant’s

affirmative defense of waiver.

B. Estoppel

Defendant asserts Plaintiff is estopped from pursuing

contribution because Plaintiff induced Defendant to rely on the

November 14 letter and Defendant relied on that letter to its

detriment. (Def.’s Opp’n at 16.) Plaintiff contends it “did not have

all the facts when it retracted its reservation of rights” and that a

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“reservation of rights, or lack thereof, does not affect contribution

rights, and there was no basis for either party to assume otherwise.” 

(Pl.’s Mot. at 24.) 

“The elements of [estoppel] are that (1) the party to be

estopped must be apprised of the facts; (2) he must intend that his

conduct shall be acted upon, or must so act that the party asserting

the estoppel has a right to believe it was so intended; (3) the other

party must be ignorant of the true state of facts; and (4) he must

rely upon the conduct to his injury.” Strong v. County of Santa Cruz,

15 Cal. 3d 720, 725 (1975). “Whether equitable estoppel applies is

normally a question of fact.” Sofranek v. Merced County, 146 Cal.

App. 4th 1238, 1251 (2007). “The doctrine of equitable estoppel is

founded on concepts of equity and fair dealing. It provides that a

person may not deny the existence of a state of facts if he

intentionally led another to believe a particular circumstance to be

true and to rely upon such belief to his detriment.” Oakland Raiders

v. Oakland-Alameda County Coliseum, Inc., 144 Cal. App. 4th 1175, 1189

(2006). “This form of estoppel is, for practical purposes,

indistinguishable from the doctrine of implied waiver through

conduct.” Id. at 1190. 

Since the question of whether Plaintiff’s conduct amounted

to an implied waiver of its right to contribution depends on

resolution of factual disputes, Defendant’s summary judgment motion on

its affirmative defense of estoppel is denied.

C. Equitable Indemnity

Plaintiff contends Defendant should be required to pay the

entire settlement amount because the jury did not apportion any fault

to Garrison and therefore, only Defendant’s insurance policy covered

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Walker. (Pl.’s Mot. at 18-19.) Defendant counters this is only

because Plaintiff “was allowed to shape the defense” during the

Brister action. (Def.’s Opp’n at 18.) 

Whether Walker was held liable based on the acts or

omissions of Garrison requires the resolution of disputed factual

issues. Therefore, summary judgment on Plaintiff’s claim of equitable

indemnity is denied.

CONCLUSION

Summary judgment is denied on Plaintiff’s claims for

equitable contribution for the defense fees and costs and equitable

indemnity for the settlement amount. Summary judgment is also denied

on Defendant’s affirmative defenses of waiver and estoppel.

IT IS SO ORDERED.

Dated: March 5, 2007

 

GARLAND E. BURRELL, JR.

United States District Judge

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