Court Opinion

ID: 7866480
Source: CourtListenerOpinion
Date Created: 2022-09-08 19:02:56.790125+00
Date Added: 2024-06-11T15:49:18.317970
License: Public Domain

Filed 9/8/22 Western World Ins. v. Federal Ins. CA2/6
     NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                         DIVISION SIX

WESTERN WORLD                                                  2d Civ. No. B311994
INSURANCE COMPANY,                                         (Super. Ct. No. 17CV01727)
                                                             (Santa Barbara County)
  Plaintiff, Cross-defendant,
and Respondent,

v.

FEDERAL INSURANCE
COMPANY,

  Defendant, Cross-
complainant, and Appellant.

      This is a dispute between two insurers over the priority of
coverage arising from a single incident. We conclude the trial
court properly determined the priority of the coverage. We
affirm.
                               FACTS
                         Underlying Action
      In May 2014, Elliot Roger murdered his two roommates
and their friend at the Capri Apartments (Capri) in Isla Vista,
California. The victims’ heirs brought an action for wrongful
death (Chen v. Hi-Desert Mobile Home Park (Super. Ct. Santa
Barbara County, 2015, No. 15CV04163) (Chen action) against the
owner of the apartments, Hi-Desert Mobile Home Park, LP (Hi-
Desert) and the manager, Asset Campus Housing, Inc. (ACH).
The action alleged that ACH and Hi-Desert had notice of Roger’s
violent propensities, but assigned him to be the victims’
roommate.
                        Insurance Coverage
      Associated Industries Insurance Company (AIIC) provided
general liability coverage for both Hi-Desert and ACH. Federal
Insurance Company (Federal) provided coverage in excess of
AIIC’s coverage for both Hi-Desert and ACH. Western World
Insurance Company (Western) provided excess general liability
coverage for ACH, but not Hi-Desert.
      The insurers did the right thing by their insureds. They
each contributed funds for a settlement of the underlying action,
leaving the question of priority of coverage to separate litigation
among the insurers.
                           Instant Action
      Western filed a complaint against AIIC and Federal
seeking a declaration that Western’s coverage was in excess of
both AIIC and Federal’s coverages. Western’s first amended
complaint added causes of action for equitable subrogation and
equitable indemnity against Federal. Western sought the return

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of all of its contributed funds on the ground that the settlement of
the underlying action was not in excess of Federal’s coverage.
       AIIC filed a cross-complaint seeking a declaration that
Western’s coverage was co-primary for ACH. Federal cross-
complained against Western seeking a declaration that Federal’s
coverage for ACH is in excess of Western’s coverage and granted
Western’s motion for summary judgment.
       Western and Federal also made cross-motions for summary
adjudication and summary judgment. The trial court granted
Western’s motion for summary adjudication and denied Federal’s
motion for summary judgment.
       The trial court found that Western’s coverage of ACH is in
excess of both AIIC’s and Federal’s coverage. The court’s grant of
summary adjudication in favor of Western resolved all claims
against Federal. Federal appeals.
                            DISCUSSION
                                   I.
                          Standard of Review
       Because Western’s motion for summary adjudication
resolved all claims against Federal, it is equivalent to a motion
for summary judgment.
       Summary judgment is properly granted only if all papers
submitted show there is no triable issue as to any material fact
and the moving party is entitled to a judgment as a matter of
law. (Code Civ. Proc., § 437c, subd. (c).)1 The court must draw all
reasonable inferences from the evidence set forth in the papers
except where such references are contradicted by other inferences
or evidence which raise a triable issue of fact. (Ibid.) In

      1All further statutory references are to the Code of Civil
Procedure unless otherwise indicated.

                                 3
examining the supporting and opposing papers, the moving
party’s affidavits or declarations are strictly construed and those
of his opponent liberally construed and doubts as to the propriety
of granting the motion should be resolved in favor of the party
opposing the motion. (Szadolci v. Hollywood Park Operating Co.
(1993) 14 Cal.App.4th 16, 19.)
       The moving party has the initial burden of showing that
one or more elements of a cause of action cannot be established.
(Saelzer v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.)
Where the moving party has carried that burden, the burden
shifts to the opposing party to show a triable issue of material
fact. (Ibid.) Our review of the trial court’s grant of the motion is
de novo. (Id. at p. 767.)
                                  II.
                 Western’s Coverage Is Not Primary
       Federal contends the trial court erred in determining
Western’s coverage was not primary.
       Western’s policy provides two kinds of general liability
coverage. One is for 54 locations specifically designated by their
names and addresses. It is undisputed that this is primary
liability coverage. But Capri is not one of those properties.
       Western’s other coverage is by an endorsement to the policy
under the heading “Real Estate Property Managed-Contingent.”
It provides coverage for property managed but not owned by
ACH. The contingency is that the property owner must maintain
personal injury insurance with limits equal to or greater than $1
million. The endorsement provides:

                                 4
       “4. Other Insurance
       “...
       “b) Excess Insurance
       “With respect to your liability arising out of ‘real estate
property managed – contingent’ for which you are acting as real
estate manager, this insurance is excess over any valid and
collectible insurance available to you, whether such insurance is
primary or excess.”
       The endorsement provides that Western’s coverage is
excess to any other insurance ACH has whether primary or
excess. The language in Western’s endorsement could not be
more clear. Western’s coverage of ACH is not primary.
       Federal argues Western cannot rely on its other insurance
clause because “[a]n ‘other insurance’ dispute can only arise
between carriers on the same level, it cannot arise between
excess and primary insurers.” (Quoting North River Ins. Co. v.
American Home Assurance Co. (1989) 210 Cal.App.3d 108, 114.)
But Federal takes the quote out of context. All the court is
saying is that an insurer whose policy is ab initio primary cannot
use an “other insurance” clause to transform its policy into an
excess policy against another insurer whose policy is ab initio
excess. (Id. at p. 113.)
       Here Western is not using its other insurance clause to
transform its policy from primary to excess. Instead, it is using
the clause to show that its policy is ab initio excess over all other
insurance. That is the bargain Western made with its insured.
The trial court properly relied on the clause to determine the
priority of coverage.
       Federal cites a number of cases for the proposition that its
excess coverage will attach only after all primary coverage is

                                  5
exhausted. (Citing, e.g., Olympic Ins. Co. v. Employers Surplus
Lines Ins. Co. (1981) 126 Cal.App.3d 593, 600.) Federal argues
Western cannot shift its primary coverage liability onto Federal.
But Western has no primary coverage liability.
       Federal argues that its policy is excess level insurance. No
one disputes that. But only AIIC is listed in Federal’s policy
under “Schedule Of Underlying Insurance.” Western is not
mentioned anywhere in Federal’s policy.
       Federal agreed to pay on behalf of ACH “that part of loss to
which this coverage applies, which exceeds the applicable
underlying limits.” The policy defines “underlying limits” as
relevant here, as follows:
       “Underlying Limits means the sum of amounts:
       “A. shown for hazards described in the Schedule Of
Underlying Insurance, consisting of amounts:
       “1. available under applicable underlying insurance; and
       “. . .
       “B. available under any applicable antecedent, renewal or
replacement of underlying insurance.”
       Federal’s policy defines underlying insurance as:
“Underlying insurance means the coverages for hazards described
in the Schedule Of Underlying Insurance and the next renewal or
replacement thereof.”
       The only insurer named in the Schedule of Underlying
Insurance is AIIC with underlying limits of $1 million.
       Thus, as relevant here, the only contingency for Federal’s
liability under its policy is the exhaustion of AIIC’s primary $1
million policy limits. Federal’s liability was not contingent on the
exhaustion of limits under Western’s policy. Instead, Federal
undertook to provide coverage immediately upon exhaustion of

                                 6
AIIC’s policy limits, whereas Western obligated itself to provide
coverage only when the limits of all other available coverage,
both primary and excess, were exceeded. Western’s coverage is in
excess of Federal’s coverage. (See Carmel Development Co. v. RLI
Ins. Co. (2005) 126 Cal.App.4th 502, 510-511 [insurers not on
same level where one insurer undertook to provide coverage
immediately upon exhaustion of named primary insurer’s policy
limits and other insurer obligated itself to provide coverage only
when limits of all other insurance, primary and excess, were
exceeded].)
       Federal relies on the definition of “underlying limits” in its
policy as “the sum of amounts . . . shown for the hazards
described in the Schedule Of Underlying Insurance.” Federal
argues that the “hazards described” include general liability, a
hazard also insured by Western. Federal concludes its insurance
is excess to both AIIC and Western.
       But the definition on which Federal relies is for “underlying
limits,” not “underlying hazards.” “Underlying limits” clearly
refers to the $1 million limit of AIIC’s policy, the only policy listed
in Schedule of Underlying Insurance, the schedule to which the
definition refers.
       Federal’s reliance on paragraph D under the definition of
“underlying limits” is also misplaced. That paragraph provides
underlying limits include: “any reinstatement of limits or
supplemental or other limits available under the insurance
described in paragraphs [A] and B, above.”
       The insurance described in paragraphs A and B is the AIIC
policy and any “applicable antecedent, renewal or replacement” of
the AIIC policy. Western’s policy is not a reinstatement of limits,
or supplemental or other limits “under the insurance described in

                                  7
paragraphs A and B.” Instead, its policy is in excess of the
described insurance.
         Federal is attempting to stitch together an argument
gathered from bits and pieces of its policy. Its needlework has
failed to create even a plausible ambiguity. Any such ambiguity
would be interpreted against Federal in any event. (Gemini Ins.
Co. v. Delos Ins. Co. (2012) 211 Cal.App.4th 719, 722, fn. 1.) Had
Federal intended that its coverage not attach until the
exhaustion of all other insurance, it could have easily said so. It
did not. (See, e.g., Community Redevelopment Agency v. Aetna
Casualty & Surety Co. (1996) 50 Cal.App.4th 329, 335 [coverage
would not attach until exhaustion of limits of named insurance
“plus the applicable limits of any other underlying insurance];
Carmel Development Co. v. RLI Ins. Co., supra, 126 Cal.App.4th
at p. 509 [“whenever the Insured is covered by other primary,
excess or excess-contingent insurance not scheduled on this policy
. . . , this shall apply only in excess of, and will not contribute
with, such other insurance”].) The trial court correctly concluded
that Western’s coverage is in excess of Federal’s coverage.
                                    III.
                  Equitable Subrogation and Indemnity
         Federal contends the trial court erred in granting Western
equitable subrogation and indemnity.
         The answer to Federal’s contention is obvious. Western’s
coverage was in excess of Federal’s coverage in the Chen action.
The insurers pooled their money in contemplation of a
settlement. The settlement did not exhaust the limits of
Federal’s coverage. Therefore, Western is entitled to a return of
its money.

                                 8
       But Federal raises the elements of equitable subrogation
and indemnity.
       The elements of an insurer’s cause of action for equitable
subrogation are: “(a) the insured suffered a loss for which the
defendant is liable, either as the wrongdoer whose act or omission
caused the loss or because the defendant is legally responsible to
the insured for the loss caused by the wrongdoer; (b) the claimed
loss was one for which the insurer was not primary liable; (c) the
insurer has compensated the insured in whole or in part for the
same loss for which the defendant is primarily liable; (d) the
insurer has paid the claim of its insured to protect its own
interest and not as a volunteer; (e) the insured has an existing,
assignable cause of action against the defendant which the
insured could have asserted for its own benefit had it not been
compensated for its loss by the insurer; (f) the insurer has
suffered damages caused by the act or omission upon which the
liability of the defendant depends; (g) justice requires that the
loss be entirely shifted from the insurer to the defendant, whose
equitable position is inferior to that of the insurer; and (h) the
insurer’s damages are in a liquidated sum, generally the amount
paid to the insured.” (Transcontinental Ins. Co. v. Insurance Co.
of the State of Pennsylvania (2007) 148 Cal.App.4th 1296, 1305.)
                        (a) Primary Liability
       Federal argues Western is the only insurer that agreed to
indemnify ACH for liability ACH assumed under an indemnity
agreement.
       Federal cites part of an indemnity agreement contained in
ACH’s management agreement with Hi-Desert. In the part cited
by Federal, ACH agrees to indemnify Hi-Desert for liability

                                9
arising from any of its actions or inactions authorized or required
under the management agreement.
       That seems fairly straight forward until one reads the
entire indemnity agreement contained in the management
contract: “Except for the gross negligence, fraud or willful
misconduct of Agent and/or any employee of Agent, Owner agrees
to indemnify, defend and hold harmless Agent from and against
any and all liabilities, loss, damages, actions, causes of action,
expenses, costs and fees, including, without limitation, court costs
and reasonable attorneys’ fees, arising from any cause either in
and about the Project or elsewhere when Agent is carrying out
the provisions of this Agreement or acting under the express
direction of Owner. Agent agrees to indemnify, defend and hold
harmless Owner as to any matter resulting from any actions or
inaction authorized or required under this agreement or caused
by the negligence, fraud or willful misconduct of Agent or any
employee of Agent.
       In the first sentence of the paragraph, ACH agrees to
indemnify Hi-Desert. In the second sentence, Hi-Desert agrees to
indemnify ACH. The paragraph appears to be nonsense and its
enforceability is highly doubtful.
       More importantly, the case settled. There was no
determination of liability on anyone’s part under any theory. We
cannot presume ACH was liable under an indemnity agreement.
What is certain is that the complaint in the underlying Chen
action alleged ACH was negligent. In that action Western’s
coverage was in excess of Federal’s coverage.
                             (b) Same Loss
       Federal argues that Western did not compensate ACH for
the same loss for which ACH is primarily liable. The argument is

                                10
nothing more than a reiteration of Federal’s argument that
Western had primary coverage in the Chen action against ACH.
We have rejected that argument.
                    (c) Assignable Cause of Action
       Federal argues that ACH did not have an assignable cause
of action against Federal. Federal claims that once the
settlement was made with the insurers’ pooled money, ACH was
released from all liability, and thus had no possible claim for
damages against Federal.
       Prior to the settlement of the Chen action, ACH had an
assignable cause of action against Federal because Federal
refused to acknowledge its duty to indemnify that ACH was
primary to Western’s coverage. It would be absurd to allow
Federal to use Western’s money to settle Federal’s debt to ACH,
and hold the settlement deprived Western of the right to recover
the money from Federal.
                              (d) Damages
       Perhaps the most bizarre of Federal’s arguments is that
Western did not suffer any damages caused by Federal. Federal
is preventing money that rightly belongs to Western from being
returned to it.
                         (e) Equitable Position
       Federal claims that Western is in an inferior equitable
position. Federal’s claim brings us back to where we started.
Western’s coverage is in excess to Federal’s coverage; the
settlement of the Chen action did not exhaust the limits of
Federal’s coverage; therefore, Western is entitled to the return of
its money.

                                11
       Federal argues that Western should be denied relief
because it “surreptitiously” slipped the endorsement into its
policy. Federal points to no evidence to support that claim.
                                 IV.
                        Prejudgment Interest
       Federal contends the trial court erred in awarding Western
prejudgment interest.
       The trial court awarded Western prejudgment interest at
the rate of 10 percent pursuant to Civil Code section 3287,
subdivision (a). Section 3287, subdivision (a) provides, in part: “A
person who is entitled to recover damages certain, or capable of
being made certain by calculation, and the right to recover which
is vested in the person upon a particular day, is entitled also to
recover interest thereon from that day, except when the debtor is
prevented by law, or by the act of the creditor from paying the
debt.” The court has no discretion in awarding interest under
Civil Code section 3287, subdivision (a). (North Oakland Medical
Clinic v. Rogers (1998) 65 Cal.App.4th 824, 828.)
       Federal argues that Western’s request for prejudgment
interest was untimely. No statute or rule of court establishes a
procedure for requesting an award of prejudgment interest, or a
time limit therefore. (North Oakland Medical Clinic v. Rogers,
supra, 65 Cal.App.4th at pp. 829-830.) A general prayer in the
complaint is adequate to support an award of prejudgment
interest. (Id. at p. 829.) Because prejudgment interest is not a
cost, but an element of damages, it should be awarded in the
judgment on the basis of a specific request made prior to entry of
judgment. (Id. at p. 830.)
       Here Western claimed entitlement to prejudgment interest
in its first amended complaint. After the trial court ruled for

                                12
Western, Western presented a form of judgment to Federal’s
counsel. The form contained an award of prejudgment interest.
Federal filed a written objection. The trial court ruled for
Western prior to entry of judgment. Thus, Western’s request for
prejudgment interest is timely.
       Federal’s reliance on St. Paul Mercury Insurance Co. v.
Mountain West Farm Bureau Mutual Insurance Co. (2012) 210
Cal.App.4th 645 is misplaced. There the trial court was required
to apportion the defense and settlement costs between insurers.
The Court of Appeal held the trial court erred in awarding
prejudgment interest because the prevailing party’s share of the
loss was not certain or capable of being made certain until the
trial court determined what method of allocation was most
equitable. (Id. at pp. 665-666.) Here there was no need for
allocation. Western was entitled to all of the money it
contributed to the settlement.
       Federal argues the legal rate of interest is 7 percent, not 10
percent. Ordinarily the legal rate of interest under Civil Code
section 3287 would be 7 percent. (Cal. Const., art. XV, § 1.) But
Western relies on Civil Code section 3289, subdivision (b). That
subdivision provides, “If a contract entered into after January 1,
1986, does not stipulate a legal rate of interest, the obligation
shall bear interest at a rate of 10 percent per annum after a
breach.”
       Federal cites Carmel Development Co., Inc. v. Anderson
(2020) 48 Cal.App.5th 492, 527, for the proposition that Civil
Code section 3287 applies broadly to any cause of action in
contract, whereas Civil Code section 3289, subdivision (b) applies
only to actions for breach of contract. Federal claims there is no
contract here.

                                 13
       Federal is wrong for two reasons: Western is subrogated to
ACH’s breach of contract against Federal, and Western and
Federal entered into a written contract giving each party the
right to litigate priority of coverage in the Chen action and
reimbursement.
                            DISPOSITION
       The judgment is affirmed. Costs are awarded to Western.
       NOT TO BE PUBLISHED.

                                    GILBERT, P. J.

We concur:

      YEGAN, J.

      PERREN, J.*

*Retired Associate Justice of the Court of Appeal, Second
Appellate District, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.

                               14
                    Donna D. Geck, Judge

           Superior Court County of Santa Barbara

               ______________________________

      Tressler and Mohammed S. Mandegary for Defendant,
Cross-complainant and Appellant.
      McFaul, Fitch, Botwinick & Pasternak, James M. McFaul
and Michael C. Pasternak for Plaintiff, Cross-defendant and
Respondent.

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