Source: http://cabfinancial.com/articles/category/cases-from-bits/volume-21-cases-2018/volume-21-edition-5-cases/
Timestamp: 2019-04-26 15:37:27+00:00

Document:
*1 Jeffrey Baker (Claimant) petitions for review of the July 27, 2017 order of the Workers’ Compensation Appeal Board (Board), which affirmed the order of a Workers’ Compensation Judge (WCJ) denying Claimant’s claim petition and petition for penalties. We affirm.
On July 23, 2014, the day prior to his surgery, Claimant was involved in an argument with a customer and another employee and was terminated. Later that day, Gallagher Bassett informed Claimant that his claim was denied but stated that all of his medical expenses would be paid up to July 23, 2014. Claimant did not have the surgery done the following day.
In December 2014, Claimant filed a claim petition and a penalty petition,1 and the matter was submitted to a workers’ compensation judge (WCJ), who held multiple hearings.
In a workers’ compensation proceeding, the WCJ is the ultimate fact finder and is the sole authority for determining the weight and credibility of evidence. Lombardo v. Workers’ Compensation Appeal Board (Topps Company, Inc.), 698 A.2d 1378, 1381 (Pa. Cmwlth. 1997). “As such, the WCJ is free to accept or reject the testimony of any witness, including medical witnesses, in whole or in part.” Id. The WCJ’s findings will not be disturbed on appeal when they are supported by substantial, competent evidence. Greenwich Collieries v. Workmen’s Compensation Appeal Board (Buck), 664 A.2d 703, 706 (Pa. Cmwlth. 1995). “Substantial evidence is such relevant evidence which a reasonable mind might accept as adequate to support a finding.” Berardelli v. Workmen’s Compensation Appeal Board (Bureau of Personnel, State Workmen’s Insurance Fund), 578 A.2d 1016, 1018 (Pa. Cmwlth. 1990).
Moreover, where both parties present evidence, it is irrelevant that the record contains evidence which supports a finding contrary to that made by the WCJ; rather, the pertinent inquiry is whether evidence exists that supports the WCJ’s findings. Hoffmaster v. Workers’ Compensation Appeal Board (Senco Products, Inc.), 721 A.2d 1152, 1155 (Pa. Cmwlth. 1998).
Additionally, on appeal, all inferences drawn from the evidence shall be taken in favor of the party prevailing before the WCJ. Krumins Roofing & Siding v. Workmen’s Compensation Appeal Board (Libby), 575 A.2d 656, 659 (Pa. Cmwlth. 1990).
Before this Court, Claimant raises three issues. In his first and second related issues, he argues that the Board erred by failing to award Claimant benefits where Employer failed to comply with the prompt-determination requirements of 77 P.S § 717.15 and 34 Pa. Code § 121.13,6 after being notified that Claimant had sustained an alleged work-related injury. Claimant argues that Employer induced him into believing that his injury was going to be treated as a workers’ compensation injury for approximately three months by failing to timely deny his claim, “only then to abruptly fire him the day before that surgery, [and] direct[ ] that the surgery be cancelled.” (Claimant’s brief at 10.) Claimant cites to Mosgo v. Workmens’ Compensation Appeal Board (Tri-Area Beverage, Inc.), 480 A.2d 1285 (Pa. Cmwlth. 1984), and Kelly v. Workmen’s Compensation Appeal Board (DePalma Roofing), 669 A.2d 1023 (Pa. Cmwlth. 1995), arguing that Employer’s voluntary payment of Claimant’s medical bills up to the date of his termination makes its challenge to liability per se unreasonable because, if Employer had denied his claim sooner, he would have still been able to use his health insurance through Employer to pay for the surgery. Thus, Claimant asserts that Employer’s “inappropriate conduct” left him without workers’ compensation benefits as well as without health insurance (due to his termination) and thus without the ability to pay for the surgery. (Claimant’s brief at 10.) Claimant requests that this Court reverse the Board on the basis of equitable estoppel arising from Employer’s alleged misconduct and remand to the WCJ for calculation of appropriate counsel fees.
*6 In response, citing Bailey v. Workers’ Compensation Appeal Board (ABEX Corp.), 717 A.2d 17 (Pa. Cmwlth. 1998), Employer notes that an employer’s voluntary payment of an employee’s medical bills is not an admission of liability. Employer also distinguishes Mosgo and Kelly, stating that those cases stand for the proposition that employers who make voluntary payments to employees while reserving the right to deny a workers’ compensation claim in the future are estopped from denying the compensability of the claim since reservation of rights is null and void under the Act.
We agree. As in Bailey, here, Employer’s payment of Claimant’s medical expenses up to July 23, 2014, did not constitute an admission of liability for an unaccepted injury. 77 A.2d at 19 (“[W]hen an employer voluntarily pays a claimant’s medical bills, it should not be considered an ‘admission’ of liability on behalf of the employer.”). As such, Claimant’s argument that Employer is estopped from contesting the work-related injury fails.
Further, in Lemansky v. Workers’ Compensation Appeal Board (Hagan Ice Cream Company), 738 A.2d 498 (Pa. Cmwlth. 1999), this Court held that a claimant was entitled to attorney’s fees where there was no dispute as to the compensability of the work-related injury and the employer “attempted to evade entering into an agreement recognizing the injury as required by § 406.1 of the Act on the basis that the claimant did not suffer a loss of earnings. 77 P.S. § 717.1.” Id. at 503.
In response, Employer argues that the driver logs were not relevant, and even if they were, they were not destroyed by Employer in bad faith. Specifically, Employer states that the WCJ did not need to address the issue of the driver logs during the time that Claimant worked for Employer because WCJ did not require them in order to determine that taking the truck home when Claimant was neither a supervisor, nor the owner of the truck, was not within the scope of his employment.
Employer also argues that the log books were only reviewed to determine driver compliance with federal Department of Transportation records, and that Mr. Meiborg’s testimony demonstrated that it was Employer’s policy to only keep the records for six months, after which they were automatically destroyed. Thus, Employer asserts that if driver logs were missing at the time of litigation, it was solely because of Employer’s general policy of destroying them and not as a result of the bad faith of Employer.
When determining the proper penalty for the alteration or destruction of evidence, relevant factors for the court to consider include: “(1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party, and (3) the availability of a lesser sanction that will protect the opposing party’s rights and deter future similar conduct.” Schroeder v. Department of Transportation, 710 A.2d 23, 27 (Pa. 1998).
In this case, it does not appear the destruction of the log books was done in bad faith. During his testimony, Mr. Meiborg emphasized that he was not experienced with the workers’ compensation matters, was “new to the PA trucking market, [ ] absolutely new to the work comp. market, and [was] just unaware of how things are done.” (R.R. 327a.) Additionally, as Employer notes, Mr. Meiborg stated that Employer had a policy for destruction of physical log books, which was followed with regard to the records here, where an employee in the log audit department would handle the weekly shredding and discarding the log books older than six months. (R.R. at 322a.) As to electronic log books, which Employer began using in some vehicles in 2014, Mr. Meiborg stated that they were “just automatically disposed of through our vendor.” (R.R. at 323a-24a.) Thus, Employer followed its usual policy regarding destruction of books here. Critically, Employer did not selectively destroy specific logs, nor did it destroy the books before the six month point. As such, we conclude that their destruction was done in accordance with a bona fide company policy and there is no evidence to suggest that Employer destroyed the records in bad faith or with the intent of discarding inculpatory evidence.
Additionally, we fail to see how Claimant was prejudiced, as Claimant was able to present other evidence in support of his argument that drivers who took their trucks home would have documented it in the log books, which Employer had the opportunity to review. Specifically, Claimant testified to his belief that he was able to take his truck home at will and that Employer was aware that he did so. (R.R. at 77a-79a.) Claimant also presented the testimony of Mr. Santos, who also testified that he frequently took his truck home and documented it in his log book. (R.R. at 273a-74a.) Further, two of Employer’s witnesses, Mr. Hilegass and Mr. Van Dusen, testified that, if and when they took their trucks home, they would indicate it in their log books, which were submitted to Employer for review. (R.R. at 268a, 287a-88a.) Thus, presentation of the log books would have been duplicative of the testimony of the numerous witnesses.
Notwithstanding Mr. Meiborg’s acknowledgement that Employer had the opportunity to review the log books but did not direct the employee who did so to review whether drivers were abiding by its policies, the WCJ still found that Employer had a policy against drivers taking their vehicles home. As such, Claimant’s attempt to show that employees who took their trucks home, including those who did so frequently in violation of Employer’s policy, documented it in the log books that Employer had the ability to review, was not hindered by his inability to present the physical books.
Furthermore, even if Claimant had been able to use the log books to prove that Employer did not have, or did not enforce, a policy regarding taking vehicles home, Claimant’s argument nonetheless fails because that evidence would not have addressed or disputed the WCJ’s findings that Claimant was otherwise outside the scope of his employment when he was injured because he was violating one of Employer’s two other policies against allowing drivers to wash or perform maintenance on their trucks. As such, Claimant’s argument regarding the spoliation of evidence fails. See Nevin Trucking v. Workmen’s Compensation Appeal Board (Murdock), 667 A.2d 262, 268 (Pa. Cmwlth. 1995) (holding that a truck driver who was injured while changing a tire in direct violation of a positive order was not within the scope of his employment).
In conclusion, Claimant’s argument that Employer was estopped from contesting the claim petition fails because Employer’s payment of Claimant’s medical bills did not constitute an admission of liability for an unaccepted injury. Further, Claimant is not entitled to attorney’s fees since Employer’s contest was reasonable as Claimant was outside the scope of his employment when injured. Finally, we do not agree that Employer’s destruction of the log books was done in bad faith or that Claimant was prejudiced as a result.
Accordingly, we affirm the order of the Board.
AND NOW, this 30th day of April, 2018, the July 27, 2017 order of the Board is hereby affirmed.
Claimant submitted a petition seeking reinstatement of benefits as well as penalties; however, the WCJ clarified that Claimant was in fact seeking workers’ compensation benefits and therefore would treat his petition as a claim petition.
Our scope of review is limited to determining whether findings of fact are supported by substantial evidence, whether an error of law has been committed, or whether constitutional rights have been violated. Section 704 of the Administrative Agency Law, 2 Pa.C.S. § 704; Meadow Lakes Apartments v. Workers’ Compensation Appeal Board (Spencer), 894 A.2d 214, 216 n.3 (Pa. Cmwlth. 2006).
Section 406.1 of the Workers’ Compensation Act (Act), added by the Act of February 8, 1972, P.L. 25, as amended, 77 P.S. § 717.1, requires prompt payment of compensation or further notice of the decision within 21 days after the employer becomes aware of the injury.
If compensation is controverted, a Notice of Workers’ Compensation Denial, Form LIBC-496, shall be sent to the employee or dependent and filed with the Bureau, fully stating the grounds upon which the right to compensation is controverted, within 21 days after notice or knowledge to the employer of the employee’s disability or death.
Claimant is likewise not entitled to payment for Employer’s failure to issue a notice of denial within 21 days under section 406.1 of the Act. Section 406.1 states that the first installment of compensation is due no later than 21 days after the employer has notice or knowledge of the employee’s disability and provides for the accrual of 10% interest on “all due and unpaid compensation at the rate of [10%] per annum.” 77 P.S. § 717.1(a).
In this case, however, Claimant cannot receive interest on payments to which he is not entitled. As we noted in Brutico v. Workers’ Compensation Appeal Board (U.S. Airways, Inc.), 866 A.2d 1152 (Pa. Cmwlth. 2004), “Because there was a violation of the Act, penalties would have been awardable. However, the claim petition had to be granted as well as some ‘measure’ against which the WCJ could use to award penalties. Because Claimant’s petition was denied, no penalties [can] be awarded.” Id. at 1156 (internal citations omitted). See also Coyne v. Workers’ Compensation Appeal Board(Villanova University), 942 A.2d 939, 951 (Pa. Cmwlth. 2008) (“We are not aware of any authority permitting an award of benefits to a claimant who would not otherwise be entitled to them based upon an employer’s failure to comply with the Act.”); Palmer v. Workers’ Compensation Appeal Board (City of Philadelphia), 850 A.2d 72, 77 (Pa. Cmwlth. 2004) (“[W]e will not award penalties based upon unknown numbers ….”) (internal quotation marks omitted).
Cal. Capital Ins. Co. v. Scottsdale Indem. Ins. Co.
CALIFORNIA CAPITAL INSURANCE COMPANY, Plaintiff and Appellant, v. SCOTTSDALE INDEMNITY INSURANCE COMPANY, Defendant and Appellant.
Prior History: [*1] APPEAL from a judgment of the Superior Court of Stanislaus County, No. 673872, William A. Mayhew, Judge.
California Capital Insurance Company (California Capital) defended its insureds in a personal injury action filed against them. It rejected the personal injury plaintiff’s settlement demands. The judgment entered against the insureds far exceeded policy limits. California Capital entered into a postjudgment settlement with the claimant and made the agreed payment to satisfy the judgment against the insureds. California Capital then sued Scottsdale Indemnity Company (Scottsdale), alleging Scottsdale’s insurance policy, issued to another defendant in the underlying personal injury action, also covered California Capital’s insureds as additional insureds. California Capital sought to recover all or a portion of the amounts it paid to defend and indemnify its insureds in the underlying action.
The trial court found California Capital could not pursue the causes [*2] of action for breach of contract and breach of the covenant of good faith and fair dealing that had been assigned to it by the insureds, because the insureds sustained no damage as a result of those alleged breaches. It found Scottsdale had a duty to defend the insureds, and apportioned the costs of defense between the two insurers on a theory of equitable contribution. It also found Scottsdale had a duty to indemnify the insureds, but it denied California Capital recovery based on its finding that Scottsdale had established defenses of unclean hands and failure to mitigate damages. California Capital appeals, challenging the rejection of the assigned contractual claims, the apportionment of defense costs, and the failure to apportion indemnity costs. Scottsdale cross-appeals, challenging the finding that it had a duty to defend and indemnify California Capital’s insureds in the underlying action.
We conclude the trial court correctly determined California Capital could not pursue the assigned causes of action because the insureds suffered no actionable damages. No error has been established in the trial court’s determination that Scottsdale owed the insureds a duty to defend and indemnify [*3] them in the underlying action. The trial court did not abuse its discretion in apportioning defense costs, but it applied improper considerations in denying apportionment of the costs of indemnifying the insureds. Accordingly, we will reverse and remand for a redetermination of the proper allocation of indemnity costs between the two insurers.
On December 28, 2004, Matthew Cole, through his guardian ad litem, filed a complaint against Loretta E. Wend Family Limited Partnership, Loretta E. Wend Revocable Trust, Loretta E. Wend, Trustee (the Wend defendants), John Vink, Vink Custom Farming (the Vink defendants), Wend-Tyler Winery, Joe’s Trucking, and others (Matthew T. Cole v. John Vink, et al. (Super. Ct. Stanislaus County, 2014, No. 352861; hereafter, the Cole action). The complaint alleged that, on September 10, 2004, at 4:50 a.m., Cole was a passenger in a pickup driven by his brother, traveling westbound on Shoemake Avenue, a public highway with one lane in each direction. The Cole defendants were in the process of harvesting grapes in the vineyards alongside the road. An employee of the Vink defendants used a tractor to tow a grape gondola full of [*4] grapes onto Shoemake Avenue, where it negligently stopped in the middle of the westbound lane to unload the grapes into semi-truck trailers, which were negligently parked on the dirt shoulder beside the road. Although it was night, the trailers were parked facing the opposite direction, with no cab present and no lights being displayed to passing vehicles. The grape gondola was also unlighted or had insufficient lighting. Additionally, the tractor and grape gondola, and another tractor and grape gondola operating in the dirt vineyard, stirred up dust, which impaired visibility of the tractor and grape gondola in the roadway. The pickup in which Cole was a passenger collided with the grape gondola in the westbound lane of Shoemake Avenue, seriously injuring Cole.
The Cole pleadings alleged the Wend defendants owned the real property on which the vineyard was located, the Vink defendants owned the tractor and grape gondola, and Joe’s Trucking owned the two trailers parked by the road. Further, the Wend defendants hired Joe’s Trucking to haul the grapes, and their ranch manager directed Joe’s Trucking where to park the trailers.
The Wend defendants tendered defense of the Cole action to [*5] their insurer, California Capital. California Capital accepted the defense without a reservation of rights, under the farm owner’s policy issued to Loretta Wend (Wend). The policy provided liability coverage for the Wend defendants’ premises with policy limits of $500,000 per occurrence.
Joe’s Trucking was insured by defendant Scottsdale Indemnity Company (Scottsdale), under a trucker’s policy that covered the trailers. The Scottsdale policy provided liability limits of $1 million per accident or loss. Scottsdale assumed the defense of Joe’s Trucking; in April 2006, it settled the action on behalf of Joe’s Trucking and the owner of the trailers (which were leased to Joe’s Trucking) for $765,000.
All of the defendants in the Cole action except the Wend defendants settled with Cole prior to trial. Beginning in November 2006, Cole made a series of settlement offers to the Wend defendants, offering to settle for amounts within the California Capital policy limits. The offers were rejected. In 2007 and 2008, Wend wrote to California Capital to request that it settle the Cole action within the policy limits; she advised that, if the judgment exceeded the policy limits, she would expect California [*6] Capital to pay the entire judgment, and she asked for written confirmation that it would. In response, California Capital agreed in writing that it would hold Wend harmless from any excess judgment, with the exception of any punitive damages award.
On April 21, 2008, California Capital tendered defense and indemnity of the Wend defendants in the Cole action to Scottsdale, asserting the Wend defendants were insureds under the Scottsdale policy, based on the allegations and contentions being made in the Cole action. Scottsdale declined the tender, asserting the Wend defendants were not insureds under the policy it issued to Joe’s Trucking. In August 2008, California Capital renewed its tender, based in part on the allegations in Cole’s July 24, 2008, settlement demand letter to the Wend defendants, which California Capital provided to Scottsdale. Scottsdale again denied its policy covered the Wend defendants.
Trial proceeded against the Wend defendants. The jury found the Vink defendants, Joe’s Trucking, and the Wend defendants were negligent, and their negligence was a substantial factor in causing Cole’s injuries. It awarded Cole damages of $10,651,423.13 and apportioned them 95 percent [*7] to the Wend defendants, 4 percent to the Vink defendants, and 1 percent to Joe’s Trucking. With the addition of prejudgment interest and costs, the judgment totaled over $14 million. Cole and the Wend defendants subsequently entered into a settlement and release agreement, pursuant to which California Capital paid Cole $10.4 million to settle the matter in full. Satisfaction of judgment was entered.
The Wend defendants assigned to California Capital all their rights, interests and claims arising under the policy Scottsdale issued to Joe’s Trucking. California Capital then filed this action to recover some or all of the amount it paid in defense and indemnity of the Wend defendants in the Cole action. It alleged the Wend defendants were co-insureds under the Scottsdale policy issued to Joe’s Trucking. The complaint included direct causes of action by California Capital for equitable contribution, indemnity, and declaratory relief; it also alleged causes of action for breach of contract and breach of the covenant of good faith and fair dealing, pursuant to the assignment of the rights of the Wend defendants.
Scottsdale filed a cross-complaint alleging, among other things, that its insured, [*8] Joe’s Trucking, was also an insured under the California Capital policy, and Scottsdale was therefore entitled to recover a portion of what it paid for the defense and settlement of the claims against Joe’s Trucking in the Cole case, on a theory of equitable contribution or equitable subrogation.
The matter was tried to the court. The trial court issued its decision, finding that Scottsdale had a duty to defend and indemnify the Wend defendants in the Cole action. On the cross-complaint, it found the California Capital policy did not insure Joe’s Trucking. The trial court found that the Wend defendants suffered no damages as a result of Scottsdale’s failure to defend or indemnify them, because California Capital provided full defense and indemnification; consequently, it did not award any damages to California Capital on the assigned causes of action for breach of contract and breach of the covenant of good faith and fair dealing. On the cause of action for equitable contribution, the trial court apportioned the Wend defendants’ defense costs in proportion to the respective policy limits remaining at the time Scottsdale’s duty to defend arose, which it determined to be April 21, 2008, [*9] when California Capital first tendered defense and indemnity of the Wend defendants to Scottsdale. The trial court awarded California Capital $186,013.08 in defense costs.
After considering Scottsdale’s defenses of unclean hands and failure to mitigate damages, which were based on California Capital’s multiple refusals to settle within its policy limits prior to trial, the trial court exercised its equitable powers and found that California Capital had not paid more than its fair share of the loss, so it should remain solely liable for its settlement of the Cole action. The trial court therefore awarded nothing to California Capital as a result of Scottsdale’s failure to indemnify the Wend defendants.
California Capital appeals from the judgment. Scottsdale cross-appeals, contending its policy did not cover the Wend defendants’ liability and, if it did, the trial court erred in failing to apply Insurance Code section 11580.9, subdivision (c),1 under which Scottsdale asserts there is a conclusive presumption that, if the Wend defendants were insured by its policy, its policy coverage was excess over the coverage provided by the California Capital policy.
California Capital’s complaint included causes of action for breach of contract and breach of the covenant of good faith and fair dealing. It alleged that the Wend defendants expressly assigned to California Capital all of the Wend defendants’ rights under the Scottsdale insurance policy. Scottsdale allegedly breached its policy by refusing to provide its insureds, the Wend defendants, the benefits due under the policy. It also allegedly breached its obligation of good faith by a number of actions, [*11] including failing to defend and indemnify the Wend defendants when it knew they were entitled to coverage under the Scottsdale policy, withholding payments under the policy when Scottsdale knew Cole’s claim was valid, failing to properly investigate the Wend defendants’ requests for policy benefits, and failing to provide a reasonable explanation of the factual basis for denial of the Wend defendants’ claim for policy benefits. California Capital sought compensatory damages (costs of defense and indemnity in the Cole action) and attorney fees incurred in bringing this action to recover policy benefits.
The trial court concluded California Capital had no cause of action for breach of contract or breach of the covenant of good faith and fair dealing, because the insureds from whom it obtained its assignment of rights sustained no damage as a result of Scottsdale’s failure to defend and indemnify them, or to settle the claim within Scottsdale’s policy limits. The Wend defendants’ defense costs and the post-judgment settlement were fully paid by California Capital. Therefore, an essential element of California Capital’s causes of action was missing. Case law supports the trial court’s conclusion.
Here, California Capital had no direct cause of action for breach of contract or breach of the covenant of good faith and fair dealing against Scottsdale. California Capital was not a party to [*18] the Scottsdale insurance policy issued to Joe’s Trucking. California Capital pursued its causes of action for breach of contract and breach of the covenant of good faith and fair dealing as assignee of the Wend defendants’ claims against Scottsdale under the Scottsdale policy issued to Joe’s Trucking. It was undisputed that California Capital paid all of the costs of the Wend defendants’ defense and satisfied the judgment against them through a postjudgment settlement. Consequently, because their causes of action for breach of contract and breach of the covenant of good faith and fair dealing lacked the essential element of damages, the Wend defendants had no viable claim under those theories to assign to California Capital.
California Capital argues that this conclusion is wrong, because “[t]he Wends themselves were not suing Scottsdale for breach of contract. Instead, the Wends assigned their breach-of-contract claim to California Capital, who sustained the damages caused by Scottsdale’s breaches of its contract.” As discussed above, however, the assignee of a claim stands in the shoes of the assignor; it holds no greater rights than the assignor would have held in the absence of the assignment. [*19] (Johnson, supra, 111 Cal.App.4th at p. 1096.) Thus, because the Wend defendants lacked an essential element (damages) of the cause of action they attempted to assign, California Capital also lacked that element in the assigned causes of action.
California Capital attempts to distinguish Emerald Bay on the ground the plaintiff there, who attempted to recover damages for breach of contract, was the insured, not the insurer who paid the defense and indemnity costs. But California Capital misses the point of the Emerald Bay decision: the insured who did not pay the costs of defense and indemnity had no damages to claim against the insurer who failed to participate in the insured’s defense and indemnity. Likewise, the Wend defendants, who did not pay the costs of defense and indemnity in the Cole action, had no damages to claim against Scottsdale, the nonparticipating insurer. Consequently, the Wend defendants had no viable breach of contract or breach of the covenant claim against Scottsdale to assign to California Capital. As assignee, California Capital held no greater rights than its assignor.
California Capital also argues it was entitled to recover from Scottsdale based on equitable subrogation, which it asserts is the same [*20] as an assignment. As Scottsdale points out, the complaint in this action did not expressly allege a cause of action for equitable subrogation. It did, however, allege a cause of action labeled “indemnity,” in which it sought recovery of all “costs and expenses of investigating and defending the Cole lawsuit, . . . or, alternatively, apportionment based on relative culpability or other equitable considerations.” Even if we were to interpret the complaint to include a claim for equitable subrogation, it would not support reversal of the judgment.
In American States Ins. Co. v. National Fire Ins. Co. (2011) 202 Cal.App.4th 692 (National Fire), two insurers covered the same insureds for the same type of losses, but for different time periods. (Id. at pp. 696-697.) American States Insurance Company (ASIC) settled an action against the insureds; National did not participate. ASIC then sued National, alleging some of the damages on which the settlement was based occurred during National’s policy period. (Ibid.) It attempted to allege a cause of action for equitable subrogation, based on a written assignment from the insureds of their rights against National. (Id. at pp. 697-698.) The trial court sustained National’s demurrer without leave to amend, finding ASIC could not allege the elements of a subrogation claim and the statute of limitations had run on any claim for equitable contribution. (Id. at p. 698 [*23] .) The reviewing court affirmed.
The court explained the difference between equitable subrogation and equitable contribution.
Similarly, here, the trial court found multiple insurance policies covered the Wend defendants for the same loss. California Capital did not dispute that its policy provided coverage to the Wend defendants in the Cole [*26] action. It has not demonstrated that it was not primarily liable for the defense and indemnification of the Wend defendants, or that only Scottsdale was primarily liable. As in National Fire, the trial court here found both insurers provided primary coverage of the loss. Consequently, neither equitable subrogation nor assignment of the insureds’ contract claims against Scottsdale supports California Capital’s claim for reimbursement of the amounts it expended for defense and indemnification in the Cole action.
In this case, there was no subcontractor with an express contractual indemnity provision in its subcontract. The parties are both insurers, who provided liability insurance for the Wend defendants as participants in the activity that caused Cole’s injury. Neither insurer participated in that activity or caused the loss (i.e., the injury to Cole). Neither was a participant who specifically agreed to indemnify another participant for injuries arising out of the activity. Both insurers simply provided liability insurance policies that covered the Wend defendants for the activities involved. Consequently, we are faced with the situation that was addressed in National Fire, not the situation presented in Interstate or Valley Crest. Neither insurer was in a position superior to the other for purposes of equitable subrogation.
The trial court correctly determined California Capital did not have an actionable assigned claim for breach of contract or breach of the covenant of good faith and fair dealing. To the extent a claim of equitable subrogation was encompassed within the complaint, the trial [*30] court did not abuse its discretion by denying California Capital recovery on that claim.
To establish a claim for equitable contribution, there must be two insurers that provide primary insurance to the same insured for the same loss. It is undisputed California Capital issued a policy of liability insurance to the Wend defendants that required it to defend and indemnify them in the Cole action. The question here is whether the Scottsdale policy also provided primary liability insurance to the Wend defendants for the same loss. We consider separately whether the Scottsdale policy afforded the Wend defendants coverage for the defense of the Cole action and whether it obligated Scottsdale to indemnify the Wend defendants for sums paid to satisfy the judgment.
The trial court analyzed the allegations of the original and first amended complaints in the Cole action. It concluded the pleadings alone, without extrinsic evidence, did not trigger a potential for liability of the Wends within the Scottsdale policy coverage, so they did not give rise to a duty to defend.
The trial court then discussed extrinsic matters known to Scottsdale [*34] about the Cole action at the time of tender, “through the discovery process and the tender letters.” It found that “the pleadings, tender letters and discovery known as of the time of the April 21, 2008 tender letter triggered a duty to defend due to the potential for actual coverage.” Cole’s July 24, 2008, policy limits demand letter to California Capital, which coverage counsel for California Capital provided to Scottsdale’s coverage counsel, “set forth a theory of liability based upon the special risk doctrine and made it clear [Cole] would pursue such theory against the Wends seeking a finding based upon vicarious liability.” The trial court concluded Scottsdale had a duty to defend the Wend defendants effective April 21, 2008. It awarded California Capital a percentage of the defense costs it incurred beginning on that date.
California Capital contends the trial court should have required Scottsdale to pay a portion of the defense costs incurred beginning in June 2005, when Scottsdale received notice of the Cole lawsuit and undertook the defense of Joe’s Trucking. California Capital cites OneBeacon America Ins. Co. v. Fireman’s Fund Ins. Co. (2009) 175 Cal.App.4th 183 (OneBeacon) for the proposition that an insurer’s obligation [*35] to make an equitable contribution to the defense costs commences when the insurer has reasonable notice of the lawsuit, not necessarily when the lawsuit is formally tendered to the insurer for defense and indemnity.
The crucial question for the trial court in this case was whether the original or first amended complaint gave constructive notice to Scottsdale of a potential for liability of the Wend defendants that fell within the coverage of the Scottsdale policy. The trial court considered whether a duty to defend arose prior to the formal tender in 2008. It addressed whether and when the facts alleged in the Cole complaints, with or without any additional extrinsic facts known to Scottsdale, gave rise to a duty of Scottsdale to defend the Wend defendants. [*37] The trial court concluded the allegations of the complaint and first amended complaint did not give rise to such a duty, but those allegations combined with additional extrinsic facts known at the time of formal tender did establish that duty.
California Capital does not challenge the sufficiency of the evidence supporting the trial court’s findings. It does not point to any allegations of the complaint or first amended complaint it contends gave rise to a duty to defend at the outset of the Cole action. Rather, it argues that, because the trial court found Scottsdale had a duty to indemnify the Wend defendants for the judgment in the Cole action, and the judgment in the Cole action was entered on the first amended complaint, that finding “conclusively establishes” that the first amended complaint presented a potential for a covered liability under the Scottsdale policy. Therefore, California Capital concludes, Scottsdale had a duty to defend when it had notice of the first amended complaint.
The duty to defend is not determined in hindsight, however. “[T]he existence of a duty to defend turns not upon the ultimate adjudication of coverage under its policy of insurance, but upon those facts [*38] known by the insurer at the inception of a third party lawsuit” (Montrose Chemical Corp v. Superior Court (1993) 6 Cal.4th 287, 295) or developed thereafter (American States, supra, 180 Cal.App.4th at p. 26). California Capital has not demonstrated that facts alleged or known prior to April 21, 2008, gave rise to a duty to defend.4 Thus, it has not demonstrated any error in the trial court’s finding that Scottsdale’s duty to defend arose on April 21, 2008.
In its cross-appeal, Scottsdale argues it had no duty to defend the Wend defendants in the Cole action because, if its policy covered the Wend defendants at all, its coverage was excess over that of the California Capital policy. It asserts that, pursuant to section 11580.9, subdivision (c), its coverage, if any, was conclusively presumed to be excess over the California Capital policy.
“The Legislature declares it to be the public policy of this state to avoid so far as possible conflicts and litigation, with resulting court congestion, between and among injured parties, insureds, and insurers concerning which, among various policies of liability insurance and the various coverages therein, are responsible as primary, excess, or sole coverage, and to what extent, under the circumstances of any given event involving [*39] death or injury to persons or property caused by the operation or use of a motor vehicle.
Regarding Scottsdale’s claim its policy coverage was excess over that of California Capital pursuant to section 11580.9, subdivision (c), the trial court’s decision states: “California Insurance Code section 11580.9(c) provides that when two or more policies potentially cover the same loss arising out of loading or unloading of a motor vehicle the policy insuring the premises owner should be primary and the other policy excess. However, the court having found the exclusion of the California Capital policy for loading and unloading excludes coverage to Joe’s Trucking section 11580.9(c) does not apply.” Scottsdale contends the trial court’s statement was legally erroneous because the issue was whether the Wend defendants were covered by two policies, and the trial court’s statement addressed whether Joe’s Trucking was covered by two policies.
Scottsdale contends the trial court found that both the California Capital policy and the Scottsdale policy covered the Wend defendants for the same loss, that the accident occurred while the Wend [*41] defendants were loading the Joe’s Trucking trailers during the grape harvesting, and that the Wend defendants owned the property to the midpoint of Shoemake Avenue. From this they conclude the prerequisites to application of section 11580.9, subdivision (c) were met, giving rise to a conclusive presumption the California Capital policy’s coverage was primary and Scottsdale’s was excess. Scottsdale’s argument, however, ignores the findings the trial court made in determining the California Capital policy did not cover Joe’s Trucking’s liability in the Cole action.
Scottsdale seems to assert that, because California Capital contended the Scottsdale policy covered the Wend defendants’ liability under its coverage for loading or unloading a motor vehicle, the Wend defendants’ loss for purposes of section 11580.9, subdivision (c) must have arisen out of loading or unloading a motor vehicle; therefore, by assuming defense and indemnity of the Wend defendants in the Cole action, California Capital admitted its policy covered the loading or unloading of the trailers supplied by Joe’s Trucking. That conclusion does not follow.
California Capital’s assumption of the defense of the Wend defendants in the Cole action is not inconsistent with its policy’s exclusion of liability for bodily injury arising out of loading or unloading a motor vehicle. Its assumption of the defense acknowledged the potential for coverage of the Wend defendants’ liability for bodily injury arising out of the conduct of their harvesting operation on their property and the adjacent street. It was not an admission of coverage for loading and unloading of motor vehicles. Thus, California Capital’s assumption of the defense did not conclusively establish that its policy was “applicable to the same loss arising out of the loading or unloading of a motor vehicle” as the Scottsdale policy, as Scottsdale contends. Scottsdale has not demonstrated any error in the trial court’s conclusion that section 11580.9, subdivision (c) is inapplicable in this case. The same policy exclusion in the California Capital policy that applied to exclude coverage of the liability of Joe’s Trucking for loading and unloading of the trailers also applied to the Wend defendants’ liability for the same activity. The statute’s requirement that there be [*44] “two . . . policies applicable to the same loss arising out of the loading or unloading of a motor vehicle” was not met.
The trial court reviewed the Cole pleadings, the extrinsic evidence revealed during discovery, and the contentions made by Cole’s attorney at or around the time the defense of the Wend defendants was first tendered to Scottsdale. The trial court concluded that, while the Cole pleadings alone did not raise a potential for a liability covered by the Scottsdale policy, those pleadings, combined with the extrinsic evidence, created a potential for a covered liability as of April 21, 2008, under the omnibus clause.
The omnibus clause of the Scottsdale policy defined the term “insured” to include “Anyone liable for the conduct of an ‘insured’ described above but only to the extent of that liability.” “[A]n ‘insured’ described above” included the named insured, Joe’s Trucking. Accordingly, the Wend defendants would be “insureds” entitled to a defense in the Cole lawsuit if they were potentially vicariously liable for the alleged negligence of Joe’s Trucking. The trial court found that the settlement [*46] demand letter from Cole’s attorney, dated July 24, 2008, set forth a theory of liability based on the special or peculiar risk doctrine, and indicated Cole would pursue a judgment against the Wend defendants based on vicarious liability for the conduct of their independent contractors.
The trial court’s finding of a duty to defend was based not just on the allegations of the Cole complaints, but also on discovery in the Cole action. The trial court summarized deposition evidence, which indicated the Joe’s Trucking driver delivered the trailers, parked them where Tyler, the Wend defendants’ foreman, directed, unhooked them, and left them. He parked the trailers with the front facing oncoming westbound traffic. He did not place any cautionary signs or warning equipment toward westbound traffic; the only reflectors on the trailers were to the rear. Wend testified in deposition that it was standard practice to have the grapes loaded onto trailers by having a tractor and gondola use Shoemake Avenue, and do the [*49] dumping off that street. The trial court also noted counsel for Joe’s Trucking provided deposition summaries and interrogatory responses to Scottsdale while Joe’s Trucking was involved in the Cole action.
Counsel for California Capital also exchanged letters with coverage counsel for Scottsdale, in which counsel for California Capital argued that the Scottsdale policy provided coverage for defense and indemnity of the Wend defendants for the Cole accident. California Capital provided counsel for Scottsdale with a July 24, 2008, letter from Cole’s attorney, demanding a policy limits settlement and explaining Cole’s theories of liability. While the letter did not expressly assert that the Wend defendants could be held vicariously liable for the negligence of Joe’s Trucking, it argued the Wend defendants directed the Vink defendants to unload the grape gondolas from Shoemake Avenue, and “one who directs an independent contractor to perform the work in a negligent manner is responsible for any injury caused therefrom.” Cole’s counsel noted there was deposition testimony that Tyler was Wend’s foreman, he directed Joe’s Trucking where to park the trailers, and he directed the Vink defendants [*50] to unload the gondola in the street. Cole’s counsel also asserted there were violations of the Vehicle Code, regarding warning reflectors required when a vehicle is parked at night within ten feet of the road.
Under the peculiar risk doctrine, one who employs an independent contractor may be held liable for the contractor’s negligence, if (1) the contractor’s work involves a risk peculiar to that work because of the location of the work, (2) a reasonable person would recognize the necessity of taking special precautions to avoid the risk, and (3) the contractor negligently fails to take reasonable precautions. (Bowman, supra, 186 Cal.App.4th at p. 306.) On the facts set forth in his counsel’s July 24, 2008, letter, Cole could easily have amended his complaint to allege a peculiar risk claim against the Wend defendants, based on the allegations that Joe’s Trucking parked the trailers where the reflectors on the rear of the trailers were not facing westbound traffic, and failed to place appropriate lights, reflectors or other warnings facing westbound traffic on Shoemake Avenue to warn oncoming vehicles of the presence of the trailers and associated loading equipment. Scottsdale has not negated all potential for a covered liability, [*51] and therefore has not demonstrated error by the trial court in its conclusion that Scottsdale owed the Wend defendants a duty to defend under the policy it issued to Joe’s Trucking, as of the date of the tender of their defense to Scottsdale.
We find no error in the trial court’s conclusion that Scottsdale had a duty to defend the Wend defendants in the Cole action.
California Capital contends the trial court erred in apportioning defense costs between it and Scottsdale based on a ratio using its full policy limits ($500,000) and the amount of the Scottsdale policy limits remaining after its settlement on behalf of Joe’s Trucking and the owner of the trailers ($235,000). The trial court awarded damages to California Capital for Scottsdale’s breach of the duty to defend based on equitable contribution. It used a ratio of Scottsdale’s remaining policy limits to the available policy limits of both insurers (i.e., $235,000/$735,000 or 32 percent) and applied it to the defense costs incurred beginning April 21, 2008 ($581,590.90).
It awarded California Capital $186,013.08 in defense costs. California Capital contends the trial court abused [*57] its discretion by not awarding it 50 percent of its defense costs, based on equal sharing, or 66.6 percent, based on a ratio of Scottsdale’s full policy limits to the total limits of both insurers ($1 million/$1.5 million).
The trial court determined the defense costs incurred by California Capital from and after April 21, 2008, the date on which Scottsdale’s duty to defend arose, should be allocated in proportion to the policy limits remaining on the insurers’ respective policies at that time. Thus, it used a ratio based on Scottsdale’s remaining policy limits, [*61] after its settlement on behalf of Joe’s Trucking and the owner of the trailers, and the total available limits, which included that amount plus California Capital’s entire policy limits.
Apportionment based upon the relative policy limits of each primary policy is an accepted method of allocating costs of defense. (Centennial, supra, 88 Cal.App.4th at p. 112.) The trial court adjusted that method to the circumstances of the Cole case. Scottsdale’s duty to defend the Wend defendants did not arise until April 21, 2008. By that time, Scottsdale had already settled the liability of its other insureds, reducing the policy limits remaining to $235,000. At the time of its settlement on behalf of the other defendants, Scottsdale owed no duty to defend or indemnify the Wend defendants, so the settlement on behalf of other defendants was not wrongful or in derogation of the Wend defendants’ rights. Under the circumstances of this case, we conclude the trial court’s exercise of its discretion in allocating defense costs did not exceed the bounds of reason. Therefore, we find no abuse of the trial court’s discretion.
The Scottsdale policy provided: “We will pay all sums an ‘insured’ legally must pay as damages [*63] because of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.'” Scottsdale contends it was not liable to indemnify the Wend defendants for the judgment in the Cole action, because they were not “insureds” under any definition of that term in the policy. The trial court found the Wend defendants were insureds under the permissive use provision of the policy; they were permissive users of the Joe’s Trucking trailers, which were vehicles covered by the Scottsdale policy.
The definition of “using” a vehicle includes loading or unloading the vehicle. (§ 11580.06, subd. (g); Argonaut Ins. Co. v. Transport Indem. Co. (1972) 6 Cal.3d 496, 506.) Scottsdale contends, however, that the Cole vehicle collided with the grape gondola, not the trailers provided by Joe’s Trucking, and therefore the use of the trailers was too remote from the injury to qualify as a covered “use” of the trailers. The cases Scottsdale cites do not support this contention.
The Cole case did not present a situation in which the trailers were merely used to transport a tortfeasor to the site of the tort, and were not involved in the commission of the tort. The Grisham court recognized [*66] that the requisite causal connection may exist when “[s]omething involving the vehicle’s . . . loading or unloading” contributed to the cause of the injury. (Grisham, supra, 122 Cal.App.4th at p. 567.) Cole’s injury occurred while the trailers were actively being loaded; the jury found his injury was caused by the loading operation. Cole’s injury was not remote from the use of the trailers.
IBM considered the liability of the shipper, i.e., “the originator of the shipment in cases of injuries during the loading process, and . . . the receiver of the shipment in cases of injuries during unloading” (IBM, supra, 2 Cal.3d at p. 1029, fn. 2), whose employees were not involved in loading the truck. The court recognized [*68] that the shipper uses the vehicle when its employees load the vehicle or supervise the loading operation. (Id. at pp. 1029-1030.) The Cole jury found the Wend defendants negligently directed the harvesting work (which included actively loading the trailers at the time of the injury); it found the negligence of both the Wend defendants and Joe’s Trucking contributed to Cole’s injuries. We conclude that, unlike the situation in IBM, the Wend defendants were using the trailers at the time of Cole’s injury, and that use was found to be a substantial factor in causing Cole’s injury. The use of the trailers was not too remote from the injury to qualify the Wend defendants as insureds under the Scottsdale policy.
Unlike the Dillon case, in the Cole action, the plaintiff alleged the insured vehicles (the trailers) contributed to the cause of the accident. He alleged violations of various Vehicle Code sections in parking the trailers close to the street and failing to use warning devices that would have alerted drivers to their presence. The Cole jury found that the conduct of the Vink defendants “and/or” Joe’s Trucking was a substantial factor in causing Cole’s injuries. Its verdict included an apportionment of liability (albeit a small percentage) to Joe’s Trucking, whose only basis for liability was the trailers and their role in the [*71] grape loading operation. Thus, the jury found that the trailers, which were being loaded during the harvesting operation, contributed to the accident in which Cole was injured.
In King, King drove his employer’s truck and trailer to a terminal to deliver and pick up cargo. (King, supra, 34 Cal.3d at pp. 806-807.) There, he hired an independent forklift operator, Martin, to load the trailer. In the process, Martin dislodged some crates in the trailer, and they fell on King and injured him. The trial court found Martin was an insured under King’s employer’s policy covering the truck, because he was a “borrower” of the truck while he was loading it. (Id. at p. 809.) The reviewing court disagreed.
The trial court found the Wend defendants hired Joe’s Trucking to haul their grapes to wineries. The scope of the work of Joe’s Trucking included delivering empty trailers [*76] to be loaded, and returning after they were loaded to pick up the trailers and deliver the grapes to the wineries. In contrast to Allianz, where the trucker did not relinquish control of the truck to the city, the trial court found Joe’s Trucking left the trailers on the side of Shoemake Avenue to be loaded, leaving them in the possession and control of Tyler, the Wend defendants’ agent, to accomplish the loading. The trial court expressly found “Joe’s Trucking had relinquished control over its trailers giving possession of the trailers, albeit temporarily, to Tyler to accomplish the task of loading and unloading.” Therefore, it concluded, the Wend defendants were permissive users of the trailers. The trial court could only have reached that conclusion by finding, as it did, that the Wend defendants were in possession and control of the trailers, and therefore met the definition of “borrower” set out in King and Allianz.
Read literally, this statement appears to conflict with the trial court’s express factual findings and conclusions. The trial court itself, however, noted that this statement was not necessary to its decision. We read the statement narrowly, as a recognition that the Wend defendants were not permissive users of the trailers for all purposes, but only for the purpose of loading them on site. In its decision, the court noted that, prior to Cole’s accident, Tyler had “‘bumped’ or ‘moved'” the trailers with a forklift, without contacting Joe’s Trucking; he did so at the request of the California Highway Patrol, because of another accident that had occurred on the preceding day. The court noted it “may have reached a different result [on the issue of permissive [*78] use] if, for example, Tyler had hooked up the trailers and moved them to an entirely different location.” Consequently, we interpret the trial court’s statement as a recognition that the Wend defendants were borrowers, and therefore permissive users, of the trailers only for the limited purpose of loading them at the location where they were parked by Joe’s Trucking. Because Cole’s injury occurred during the loading of the trailers at that site, it occurred within the scope of the permissive use granted by Joe’s Trucking. Therefore, the court’s statement regarding the limited nature of the borrowing was, as it said, unnecessary to the decision.
We conclude the trial court did not err in finding the Wend defendants were insureds under the Scottsdale policy, as permissive users of the trailers supplied by Joe’s Trucking.
The Scottsdale policy promised to “pay all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’ . . . to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.'” Scottsdale seems to contend Cole’s injuries did not result from “use of a covered ‘auto,'” i.e., [*79] the trailers, because the Cole vehicle did not collide with the trailers. The trial court stated that the lack of impact with the trailers did not defeat a finding that the trailers were a cause of the accident; it was merely a factor to be considered in making that determination. The trial court noted cases holding that “use” of a vehicle included loading and unloading it. It quoted Grisham’s statement that “‘[s]omething involving the vehicle’s operation, movement, or maintenance, or its loading or unloading must be a contributing cause.'” The trial court concluded that, “[i]n the Cole matter the accident did occur during the loading and unloading and the trailers are in close proximity to the gondola” with which the Cole vehicle collided. It concluded the Wend defendants were “using” the trailers at the time of the accident.
The Cole jury found the Vink defendants “and/or” Joe’s Trucking failed to use reasonable care to take safety measures to avoid the risk of unloading the grape gondola from the street, and this failure was a cause of Cole’s harm. It also found the Wend defendants were negligent in directing the harvesting work, and their negligence was also a substantial factor in causing Cole’s [*80] harm. Thus, the Wend defendants were found liable for the harvesting operation, including the loading of the trailers. The Cole jury apportioned the bulk of the liability to the Wend defendants, but also apportioned four percent of the liability to the Vink defendants and one percent to Joe’s Trucking. Consequently, the Cole jury found that, although the Cole vehicle collided with the grape gondola, the trailers, and their part in the loading operation, also contributed to the accident.
We conclude the trial court did not err in finding that the Wend defendants’ use of the trailers was a cause of Cole’s injury, and therefore Scottsdale owed the Wend defendants a duty to indemnify them for the judgment in the Cole action.
After concluding Scottsdale owed the Wend defendants a duty to indemnify them in the Cole action, the trial court considered whether Scottsdale was required to equitably contribute to the payment that satisfied the judgment. It discussed the unclean hands and mitigation of damages defenses raised by Scottsdale, and considered California Capital’s conduct in the Cole litigation. Both defenses were based on Scottsdale’s assertion that California [*81] Capital should have settled the Cole action within its policy limits rather than taking the case to trial and incurring the resulting judgment, which was far in excess of either insurer’s policy limits. The trial court opined that “[t]he refusal of Scottsdale to accept the defense or indemnify did not absolve California Capital of its obligation to put the interests of its insured above its own.” The trial court concluded that, because California Capital could have, but did not, settle the Cole action within its policy limits, it “put its own interests before the interests of the insured.” Further, California Capital failed to show it paid more than its fair share of the loss, it was “solely responsible for the decisions it made,” and it was not entitled to recover any of the amount it paid to satisfy the Cole judgment.
We review for abuse of discretion the trial court’s equitable determination in allocating the indemnity amount entirely to California Capital. (St. Paul, supra, 210 Cal.App.4th at p. 662.) A trial court abuses its discretion when its ruling exceeds the bounds of reason or when it misunderstands or misapplies the applicable legal standard. (Ibid.; Hernandez v. Amcord, Inc. (2013) 215 Cal.App.4th 659, 680.) We conclude the trial court misinterpreted or misapplied the applicable [*82] law when it failed to apportion the amount paid to satisfy the Cole judgment between the two insurers. It therefore abused its discretion.
“[W]here two or more insurers independently provide primary insurance on the same risk for which they are both liable for any loss to the same insured, the insurance carrier who pays the loss or defends a lawsuit against the insured is entitled to equitable contribution from the other insurer or insurers, without regard to principles of equitable subrogation.” (Fireman’s Fund, supra, 65 Cal.App.4th at p. 1289, italics added.) “Whereas subrogation requires that the party to be charged be in an ‘equitable position . . . inferior to that of the insurer’ such that justice requires the entire loss be shifted from the insurer to the party to be charged [citation], contribution permits liability for the loss to be allocated among the various insurers without regard to questions of comparative fault or the relative equities between the insurers.” (Id. at p. 1296, italics added.) “Questions as to whether the nonparticipating insurer breached the duty of good faith and fair dealing toward its insured or otherwise acted tortiously are not at issue in an equitable contribution action. [Citation.] Equitable contribution does not [*83] depend on fault; it is based on an equitable apportionment of contractual undertakings.” (Century, supra, 182 Cal.App.4th at p. 1033.) Likewise, we conclude questions regarding whether the insurer who provided a defense and indemnity breached the duty of good faith and fair dealing to the insured also are not a consideration in an equitable contribution action.
Although the trial court expressly found that equitable subrogation did not apply, and purported to apply only principles of equitable contribution in apportioning the loss, it nevertheless considered concepts of bad faith and the equities of California Capital’s litigation conduct. In doing so, it one-sidedly considered only California Capital’s refusal to settle, then allocated the loss entirely to California Capital, despite the fact it also found Scottsdale breached its contractual obligations to the Wend defendants by refusing the tender of defense and indemnity in the Cole action.
In Continental Casualty Co. v. Zurich Ins. Co. (1961) 57 Cal.2d 27 (Continental), the insurer who defended the insured in the third party action sued two other insurers, whose policies provided coverage for the third party’s injury, for declaratory relief and recovery of defense and indemnity costs. Although the plaintiff insurer had defended the insured and the others had not, the court did not shift the entire cost of defense to the insurers who had breached their obligation of defense. Instead, it stated: “all obligated carriers who have refused to defend should be required to share in costs of the insured’s defense, whether such costs were originally paid by the insured himself or by fewer than all of the carriers.” (Id. at p. 37, italics added.) The court upheld the trial court’s apportionment of the judgment [*85] and defense costs among all three insurers. (Id. at pp. 31, 38.) Thus, an insurer who fails to perform its contractual obligations to its insured is not thereby required to incur the entire expense of defense and indemnity, nor are other insurers thereby excused from performing their own contractual obligations to the insured.
Although the trial court found both California Capital and Scottsdale were primary insurers of the Wend defendants, it failed to apportion the loss between the two insurers, who were both contractually obligated to pay it. “[N]o insurer which deliberately breaches its obligation to the insured should be permitted thereby to profit, whether at the expense of the insured, or of an insurer which faithfully discharges its obligation.” (Continental, supra, 57 Cal.2d at p. 38.) Scottsdale, which did not defend or indemnify the Wend defendants, or settle the Cole action, was permitted to profit from its conduct by shifting the entire cost of indemnifying the Wend defendants for the judgment to California Capital.
California Capital’s failure to settle the Cole action did not cause Scottsdale to have a contractual obligation to defend or indemnify the Wend defendants in that action. Scottsdale’s contractual obligations toward the Wend defendants existed independent of any conduct of California Capital. California Capital’s failure to settle the Cole action did not render it inequitable to hold Scottsdale to its independent contractual [*87] obligations in apportioning the costs of indemnity between the insurers.
For the same reasons, we conclude Scottsdale’s defense of failure to mitigate damages, based on California Capital’s refusal to settle the underlying action prior to trial, is not an appropriate basis on which to deny equitable contribution. It also injects concepts of fault and the relative equities of the insurers’ conduct in the underlying action into an apportionment that should be based on the insurers’ relative contractual obligations to the insured. Such considerations do not apply to an equitable contribution cause of action.
In determining whether Scottsdale must contribute an equitable share of the excess judgment, the trial court must decide whether Scottsdale breached its duty to the Wend defendants to accept a reasonable settlement offer. The trial court found Scottsdale had a duty to defend and indemnify the Wend defendants. Nonetheless, it denied coverage. Scottsdale concedes the liability of the Wends to Cole was never seriously in dispute. There was evidence California Capital forwarded to Scottsdale the July 24, 2008, letter from Cole’s counsel making a $500,000 settlement demand, along with California Capital’s request that Scottsdale participate in the defense and indemnity of the Wend defendants. The letter from Cole’s [*91] counsel asserted Cole’s special damages at that time exceeded $8 million. Scottsdale admittedly had $235,000 remaining of its policy limits after its settlement on behalf of Joe’s Trucking and the owner of the trailers. A representative of California Capital testified at trial that, if Scottsdale had expressed interest in contributing to the settlement or had contributed its remaining limits, California Capital would have contributed also, and the Cole case might have settled. Thus, there was evidence Scottsdale may have had an opportunity to settle, or contribute to settling, the underlying litigation. Under the circumstances, in order to determine whether Scottsdale is required to contribute to payment of the excess judgment, the trial court must determine whether Scottsdale had an opportunity to enter into a reasonable settlement, whether it failed to do so, whether its failure to do so, if any, constituted a breach of Scottsdale’s duty to accept a reasonable settlement offer on behalf of its insureds, and whether its failure to do so was a proximate cause of the excess judgment. On remand, the trial court must determine these issues.
In this case, the factors to consider in apportioning the loss would include the nature of the two policies providing coverage for the loss, the scope of the risks they were intended to cover, and the facts surrounding the loss. The two insurers issued different types of policies, covering different risks. One was an automobile policy, covering use of the trailers. The other policy covered losses occurring on or near the insureds’ premises in the course of its farming [*93] operations, which included the loss arising out of the grape harvesting operation. The trial court may consider how each policy applied to the loss, in light of the particular facts of the accident. The trial court may also consider the policy limits of both policies, and any other relevant factors related to the policies and their coverages.
Because the trial court considered inappropriate factors in determining the allocation of the loss between the two insurers, and failed to consider relevant factors, we conclude it abused its discretion in allocating the entire loss to California Capital. We must reverse and remand the matter to [*94] the trial court for a redetermination of that issue.
The judgment is reversed and the matter is remanded to the trial court for a redetermination of the allocation between the insurers of the amount paid by California Capital to satisfy the judgment in the Cole action. The trial court is to exercise its discretion, applying principles of equitable contribution in accordance with this opinion. In all other respects, the judgment is affirmed. California Capital is entitled to its costs on appeal.

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