NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, a Connecticut corporation, Plaintiff

- Appellee,

v. LIBERTY SURPLUS INSURANCE CORPORATION, a Massachusetts corporation, Defendant

- Appellant. No. 18

- 15956
D.C. No. 2:16

- cv - 02752

- WBS

- EFB

MEMORANDUM *

Appeal from the United States District Court for the Eastern District of California William B. Shubb, District Judge, Presiding Argued and Submitted December 6, 2019 San Francisco, California Before: SILER, * * BYBEE, and R. NELSON, Circuit Judges. Liberty Surplus Insurance Company appeals the district court’s grant of

summ ary judgment to Travelers Property Casualty Insurance Company of America

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36

- 3.

** The Honorable Eugene E. Siler, United States Circuit Judge for the U.S. Court of Appeals for the Sixth Circuit, sitting by designation. 

# FILED

MAR 12 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS2 18

- 15956

on the issue of equitable contribution. We affirm. Travelers and Liberty issued consecutive general liability policies to subcontractor Dura Art, Inc. Dura was named as a cross

- defendant in a construction defect suit. But, when the cross

- complaint was filed, Dura was unable to participate in the litigation because Dura’s corporate status had be en suspended under Cal. Rev.
& Tax

. Code § 23301 and Cal. Corp. Code § 2205. See Palm Valley Homeowners Ass’n, Inc. v. Design MTC , 102 Cal. Rptr. 2d 350, 354

- 55 (Cal. Ct. App. 2000)

. T his presented a problem for Dura’s insurers because in California an i nsurer may be liable to a judgment creditor who obtains a default judgment against a suspended corporate insured. See Cal. Ins. Code § 11580(b)(2).
T he parties addressed this legal quandary in different ways. Travelers intervened in the underlying sui t in its own name pursuant to Cal. Civ. Proc. Code § 387 and reached a settlement. Liberty chose not to intervene. Subsequently, Travelers initiated this lawsuit seeking a declaration that Liberty ha d a duty to defend and indemnify Dura and requesting equitable apportionment of fees and costs

. The district court agreed and granted summary judgment in favor of Travelers. We review the district court’s grant of summary judgment d e novo. Protect
Our Cmtys. Found. v. LaCounte , 939 F.3d 1029, 1034 (9th Cir. 2019). I n a diversity action like this one, the substantive law of the forum state applies, and we review the district court’s interpretation of California law de novo. See Conestoga Servs.3 18

- 15956

Corp. v . Exec. Risk Indem., Inc. , 312 F.3d 976, 980

- 81 (9th Cir. 2002).
W e must consider two related questions. First , does California law permit an insurance company to intervene to defend a suspended corporate insured ? And, if
so, did Liberty ha ve a legal o bligation to defend and indemnify Dura in the underlying suit ? First, California law permit s an insurer to intervene in a lawsuit in its own name to defend a suspended corporate insured. California law imposes criminal liability on “[a]ny person who atte mpts or purports to exercise the powers, rights, and privileges of a corporation that has been suspended pursuant to Section 23301 .” Cal. Rev. & Tax

. Code § 19719(a). But the statute contains an important exception: This section shall not apply to any in surer , or to counsel retained by an insurer on behalf of the suspended corporation, who provides a defense for a suspended corporation in a civil action based upon a claim for personal injury, property damage, or economic losses against the suspended corpo ration, and, in conjunction with this defense, prosecutes subrogation, contribution, or indemnity rights against persons or entities in the name of the suspended corporation. Id. § 19719(b) (emphasis added). Indeed, the statute expressly says that “[n]ot hing in this section shall create or limit any obligation upon an insurer to defend a suspended corporation.” Id. § 19719(c) (emphasis added). Thus, the plain text of the statute exempts insurers who provide a defense for a suspended corporation. Plus, t he California Court of Appeal has stated that “[s]ubdivision (b) of section 19719 allows an insurance company to provide a defense for a suspen ded4 18

- 15956

corporation in certain actions and, in connection with this defense, prosecute subrogation, contribution or indemnity rights in the name of the suspended corporation.” Kaufman & Broad C mty s
. , Inc. v. Performance Plastering, Inc. , 39 Cal. Rptr. 3d 33, 38 (Cal. Ct. App. 2006) (emphasis added). Liberty points to language in Kaufman & Broad that suggests an insurer may not defend the interests of a suspended insured. See id. at 38

- 39

. Even so, when reading the decision comprehensively, Kaufman & Broad s eems to interpret section 19719(b) to allow an insurance company to intervene as an interested party in litigation to defend a suspended corporate insured so long as the insurer intervenes in the lawsuit in its

own name. See id. at 36

- 38 ; see also El Esco rial Owners’ Ass’n v. DLC Plastering,
Inc. , 65 Cal. Rptr. 3d 524, 534

- 35 (Cal. Ct. App. 2007) (noting that section 19719(b) created “an exception for insurers ” and citing Kaufman & Broad for the proposition that an insurance company “may defend [a suspende d insured] in its own n ame, but not in the name of the suspended corporation”).
Moreover , Dura’s simultaneous suspension under Cal

. Corp

. Code § 2205 d id not prevent Travelers from intervening to defend Dura

. Of course , like Cal. Rev. &
Tax

. Code § 23301 , § 2205 provides for suspension of “corporate powers, rights, and privileges,” which include the ability to participate in litigation activities. Cal. Corp. Code § 2205 (c) . And, unlike Cal. Rev. & Tax

. Code § 19719(b), § 2205 contains no ex press exception allowing insurers to intervene on behalf of a5 18

- 15956

suspended insured. Even so, § 2205 contains no provi sion that imposes criminal liability on a person or entity that attempts to intervene in a lawsuit on behalf of a suspended corporation. In fact, the statute is silent on whether an insurer may intervene in litigation to defend a suspended corporate insured. Additionally , we are aware of no case that expressly prohibits an insurance company from intervening in a lawsuit to protect an insured suspended under Cal. Corp. Code § 2205. True, in one case the California Court of Appeal upheld the imposition of sanctions on a law firm that participated in discovery and filed motions on behalf of a client that it knew to be suspended under § 2205. S ee Palm Valley Homeowners Ass’n , 102 Cal. Rptr. 2d at
352

- 56

. But Palm Valley did not address the issue of an insurance company’s intervention in a lawsuit in its own name to defend a suspended corporation. Elsewhere, the California courts have noted tha t an insurer’s obligation to defend its insured continues even if the insured is suspended. See El Escorial , 65 Cal. Rptr. 3d at 535 (noting that Cal. Rev. & Tax. Code § 19719 was amended to “protect[] insurers that are obligated to defend suspended corpo rations”); Garamendi v. Golden Eagle Ins. Co. , 10 Cal. Rptr. 3d 724, 740 (Cal. Ct. App. 2004) (noting that, when an insured is suspended, “[t]he insurer not only ha[s] a right to participate in and to control the litigation, it ha[s] a duty to do so”). In light of this authority, we conclude that Cal. Corp. Code § 2205 does not bar an insurer from6 18

- 15956

intervening in a lawsuit in its own name to defend a suspended corporation. Moreover, Liberty ’s conten tion that Travelers may have been able to intervene to defe nd its own interests but that it could not intervene in the lawsuit to defend Dura’s interests presents a distinction without a difference. An i nsurance
compan y ’ s legal interest

— assuming there are no defenses to coverage

— is inextricably tied to the potent ial liability of its insured for a covered loss within the policy limit s . As such, when Travelers intervened in the construction defect suit to defend its own interests , it was also defending or seeking to limit Dura’s liability in the underlying construction defect suit. Second , having determined that California law permits an insurer to intervene in its own name to defend a suspended corporate insured, we must address whether Liberty owes equitable contribution to Travelers. In Califo rnia, a right to equitable contribution arises when two or more insurance companies owe a duty to defend or indemnify the same insured. See, e.g. , Fireman’s Fund Ins. Co. v. Md

. Cas. Co. , 77 Cal. Rptr. 2d 296, 303

- 04 (Cal. Ct. App. 1998). Liberty conten ds that even if it was permitted to intervene it does not owe a duty to defend or indemnify

. Thus, Liberty argues, because it was not required to intervene in the underlying suit , it owed no duty to the insured

. However, Liberty’s duties are defined by th e provision s in its insurance policy. And h ere, Liberty’s insurance policy stated, “We will pay those sums that the insured becomes legally7 18

- 15956

obligated to pay as damages of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages.” (emphasis added). Moreover, in California, “any provision that takes away or limits coverage reasonably expected by an insured must be conspicuous, plain and clear.” Ha ynes v. Farmers Ins. Exch. , 89 P.3d 381, 385 (Cal. 2004) (internal quotation marks omitted)

. H ere, there is no language in the policy that limits or extinguishes Liberty’s coverage obligation in the event of Dura’s suspension.
In sum , Liberty owed a duty to defend and indemnify Dura based on the provisions in its insurance policy. The policy expressly impose d a duty upon Liberty to defend and indemnify Dura for property damage to which the policy applie d. Liberty refused to defend Du ra in the underlying suit even though neither California law nor the insurance policy excused Liberty’s obligation to defend Dura. As a result, Liberty had a duty to defend and indemnify Dura in the underlying construction defect suit and owes equitable c ontribution to Travelers. Third , Travelers ’s decision to settle poses no bar to its recovery of equitable contribution. California law permits a settling coinsurer to recover equitable contribution from a nonparticipating coinsurer if the participating co insurer demonstrates a potential for coverage. See Safeco Ins. Co. of Am. v. Superior Court , 44 Cal. Rptr. 3d 841, 844 (Cal. Ct. App. 2006). To demonstrate a potential for8 18

- 15956

coverage, a participating coinsurer need only make a prima facie showing of potent ial liability triggering a duty to defend. Id. Here, a potential for coverage has been shown since the provisions in Liberty’s insurance policy impose an express duty to defend and indemnify Dura. Finally, Liberty concedes that the no voluntary payments clause in the policy will only preclude a suit to recover on a settlement if Liberty did not previously breach the duty to defend. See Appellant’s Pr. Brief at 31

- 32. Based on the foregoing, Liberty was permitted by California law to intervene in the und erlying suit and failed to intervene even though Liberty had a duty to defend and indemnify based on the plain language of the insurance policy. As a result, the no voluntary payments clause has no effect on Travelers ’s ability to recover equitable contri bution. In conclusion, Liberty owed a duty to defend and indemnify Dura based on the provisions in its insurance policy. Dura’s suspended corporate status did not modify or excuse Liberty’s duty to defend. Thus, Liberty owes equitable contribution for Tr aveler s ’s defense of Dura in the underlying construction defect suit.
AFFIRMED

.