Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. 37-2007-00064374- CU-IC-CTL, Jeffrey B. Barton, Judge.
BENKE, Acting P. J.
A real estate developer and a grading subcontractor entered into an agreement under which the subcontractor agreed to grade a hillside for construction. Pursuant to the contract, the subcontractor agreed to indemnify the developer against liability associated with the subcontractor's work. The grading performed by the subcontractor removed adjacent support from neighboring houses, causing substantial property damage. The neighbors sued the developer and the subcontractor, along with the geological consultants who planned the grading. The neighbors also sued the landowner. The defendants filed cross-complaints against one another. Thereafter the defendants reached a settlement with the plaintiffs which was found to be made in good faith.
In the litigation initiated by the neighboring property owners, the subcontractor's insurer paid the developer's legal fees as an "additional insured" under the subcontractor's policy. Following the settlement, the subcontractor's insurer requested equitable contribution for defense costs from the developer's insurer. The developer's insurer declined, arguing the indemnity clause in the contract between the developer and the subcontractor shielded the developer from any liability to the subcontractor. The insurers filed cross-motions for summary judgment which the trial court resolved in favor of the developer's insurer. The subcontractor's insurer filed a timely notice of appeal.
We agree with the developer's insurer insofar as it argues that if it is able to establish the subcontractor's negligence contributed to the loss suffered by the neighboring property owners, it is free of any liability to the subcontractor's insurer. The indemnity clause in the contract between the developer and the subcontractor was a so-called "Type I" indemnity agreement under which the developer was entitled to indemnity for its own negligence so long as any loss was also caused by the subcontractor's negligence. Importantly, the developer's insurer was entitled to the benefit of that indemnity provision.
However, contrary to the developer's insurer's argument, it did not establish the subcontractor's negligence as a matter of law. Rather, as we set out more fully below, the record shows the subcontractor's insurer submitted evidence which would support a reasonable inference the subcontractor was in fact not responsible for the underlying loss. In short, the subcontractor's insurer produced evidence which was sufficient to defeat the developer's motion for summary judgment.
Accordingly, we reverse the trial court's judgment.
FACTUAL AND PROCEDURAL BACKGROUND
1. Grading Contract and Slope Failure
Between the late 1990's and 2002, Zephyr Newhall, LP, and its partner Zephyr Partners, LLC (collectively Zephyr), worked with developer D. R. Horton, Inc. (Horton), to build housing on a tract of land in Santa Clarita which Zephyr owned. Horton hired Ebensteiner Co. (Ebensteiner) to grade the tract pursuant to plans created by Leighton and Associates, Inc. (Leighton), a geological engineering firm. As part of their grading contract, Ebensteiner agreed to indemnify Horton against liability for any loss attributable to Ebensteiner's breach of duty even if Horton's conduct also contributed to the loss.
The grading began in February 2002, but was not without incident. On or about March 11, 2002, a backcut slope failure occurred as a direct result of the grading, creating a 140- by 100-foot landslide and tension cracks that visibly extended to within 50 feet of existing upslope homes. Another similar backcut slope failure, resulting in a 70- by 200-foot slide, occurred April 4, 2002.
On or about April 15, 2002, several adjacent homeowners noticed physical damage to their property caused by the slides. On January 23, 2003, the homeowners sued Horton, Ebensteiner, Zephyr and Leighton, among others (hereafter Fessler lawsuit).
2. Insurance Coverage and Litigation
At the time of the work, Horton was insured by defendant and respondent Admiral Insurance Company (Admiral), while Ebensteiner was insured by plaintiff and appellant American Safety Indemnity Co (ASIC). The respective policies limited coverage to $1 million per occurrence. The Admiral policy contained a provision which designated it "excess" over the ASIC coverage; the ASIC policy contained a similar excess insurance disclaimer for those instances where the ASIC policy was not primary. The ASIC policy also covered Horton as an "additional insured."
Horton tendered its defense of the Fessler claims to ASIC, which initially declined the tender. Horton then filed a bad-faith lawsuit against ASIC. On May 6, 2004, Horton and ASIC settled the bad-faith lawsuit. Under the terms of the settlement, ASIC agreed to pay Horton's defense costs and to not thereafter dispute its duty to defend Horton.
The Fessler lawsuit itself was settled on October 1, 2007. Ebensteiner agreed to pay the Fessler plaintiffs $2.52 million, Horton agreed to pay plaintiffs $1.75 million, and Leighton agreed to pay plaintiffs $630,000, for a total sum of $4.9 million. Pursuant to the agreement, Horton and Ebensteiner dismissed with prejudice their cross-claims against one another, with the exception of claims either of their insurers had against the other's insurer. ASIC and Admiral each contributed their respective policy limits of $1 million to the settlement.
While the Fessler lawsuit was pending, ASIC asked Admiral to contribute to the defense costs ASIC incurred on behalf of Horton. Admiral refused and ASIC filed the complaint which gives rise to this appeal. ASIC alleged Admiral was obligated to reimburse ASIC a pro rata share of the $2 million ASIC spent on Horton's defense. As we have indicated, ASIC and Admiral filed cross-motions for summary judgment.
Among other matters, in opposing Admiral's motion, ASIC relied on expert and percipient witness deposition testimony that had been developed in the Fessler lawsuit. In particular, ASIC relied on two experts retained by the Fessler plaintiffs who concluded the slope failure was caused by defects in Leighton's grading plans and not by any deficiency in the grading performed by Ebensteiner. ASIC also relied on a geologist employed by Leighton who testified that, as far as he knew, Ebensteiner performed the grading according to Leighton's plans.
The trial court initially denied both motions for summary judgment. Admiral then moved to reconsider. While Admiral's motion to reconsider was pending, it moved to amend its complaint. On the motion to reconsider, the trial court found Admiral was entitled to the protection the grading subcontract provided its insured, Horton. The trial court further found the record established as a matter of law that Ebensteiner was responsible, at least in part, for the slope failure and that in light of that fact Horton and its insurer Admiral were free from any liability to Ebensteiner or its insurer, ASIC. Accordingly, the trial court granted Admiral's motion to reconsider and its motion for summary judgment. Judgment in favor of Admiral was entered and ASIC filed a timely notice of appeal.
DISCUSSION
I
"[Summary judgment] motions are to expedite litigation and eliminate needless trials. [Citation.] They are granted 'if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' [Citations.]" (PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 590, disapproved on another ground Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159.)
A defendant meets this burden upon such a motion by negating an essential element of the plaintiff's case, or by establishing a complete defense, or by demonstrating the absence of evidence to support the plaintiff's case. Once the moving defendant has met this initial burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists. (PMC, Inc. v. Saban Entertainment, Inc., supra, 45 Cal.App.4th at p. 590.)
It is axiomatic that " 'the trial court's stated reasons for its ruling do not bind us. We review the ruling, not its rationale. [Citation.]' [Citation.] After 'examining the facts before the trial judge on a summary judgment motion, we independently determine their effect as a matter of law. [Citation.]' " (Rubenstein v. Rubenstein (2000) 81 Cal.App.4th 1131, 1143.) Accordingly, we must determine de novo whether, on this record, Admiral was entitled to summary judgment as a matter of law. (Ibid.)
II
As we have indicated, the trial court found the express indemnity clause in the grading subcontract was a complete defense to Horton's liability, and in turn a complete defense to Admiral's liability to ASIC. In its principal argument on appeal, ASIC challenges the trial court's interpretation of the indemnity provisions of the subcontract. ASIC argues the indemnity clause could not apply as a matter of law because it "[did] not include the 'specific, unequivocal' wording necessary to indemnify Horton for its own conduct." Rather, ASIC argues the indemnity clause indemnifies Horton only from those damages caused by Ebensteiner's negligence. As we explain more fully below, ASIC interprets the indemnity provisions of the subcontract too narrowly.
A. Rossmoor and Hartford
Disposition of ASIC's claims on appeal are largely controlled by the holdings in Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628-635 (Rossmoor) and Hartford Casualty Ins. Co. v. Mt. Hawley Ins. Co. (2004) 123 Cal.App.4th 278, 290-291 (Hartford).) In Rossmoor a property owner hired a contractor to install a sewage pump and sewer lines. The contract between the property owner and contractor required that the contractor indemnify and hold harmless the owner with respect to all claims arising out of the work. In addition, the property owner was an additional insured under the contractor's liability policy. Both the property owner and the contractor had insurance policies which contained "other insurance" provisions which required apportionment if the insured had other insurance.
Two of the contractor's employees were killed while working on the job and they sued the property owner. The property owner's insurer paid the workers approximately $267,000. The owner then sued the contractor and its insurer to recover the amount paid in the action brought on behalf of the deceased workers. The contractor's insurer filed a cross-compliant against the owner's insurer which alleged that liability for the loss should be apportioned between the two insurers. The trial court entered judgment in favor of the owner and its insurer. The trial court found that responsibility for the loss was governed by the terms of the contract between the owner and the contractor and that under those provisions the contractor and its insurer were responsible for the entire loss. The Supreme Court affirmed:
" '[T]he question whether an indemnity agreement covers a given case turns primarily on contractual interpretation, and it is the intent of the parties as expressed in the agreement that should control. When the parties knowingly bargain for the protection at issue, the protection should be afforded. This requires an inquiry into the circumstances of the damage or injury and the language of the contract; of necessity, each case will turn on its own facts.
"Under the indemnity agreement in the present case, [the owner] is not to be held accountable for any loss or injury to any person occurring during construction undertaken by [the contractor], and [the contractor] has agreed to indemnify [the owner] for all claims arising out of its execution of the work. It is a reasonable and practical conclusion that the parties bargained for the protection here at issue, given the language of the contract and the facts, as found by the trial court, that the accident resulted from [the contractor's] inadequate execution of the work, not from any active negligence by [the owner]. Since the accident may be seen as one of the risks against which [the owner] sought to be covered, [the owner] is entitled to the protection it seeks under the agreement.
"Generally, an insurer on paying a loss is subrogated in a corresponding amount to the insured's right of action against any person responsible for the loss.... [Citation.] California law is in accord that insurance companies may be subrogated to the rights of their insureds.... [Citation.].... It would appear, therefore, that the trial court could properly find that [the owner's insurer] was subrogated to [the owner's] right of indemnification since [the owner's insurer] paid the... judgment for [the owner] and since [the owner] has a right of indemnity against [the contractor].
"[The contractor and its insurer], however, cite [case law] for the proposition that the terms of the insurance contracts requiring proration in case of other insurance should control, rather than the right to indemnification that exists between the parties insured by the contracts. Under the circumstances of the present case, we cannot agree.... The case at bar concerns a contractual indemnity agreement, not theoretical noncontractual rights of indemnification between insureds....
"It appears that both [of the insurers] calculated and accepted premiums with knowledge that they might be called upon to satisfy a full judgment. There is no evidence that either company knew there was or would be other insurance when they issued the policies. The fact that there is other insurance is a mere fortuitous circumstance. We view one factor as compelling, however: to apportion the loss in this case pursuant to the other insurance clauses would effectively negate the indemnity agreement and impose liability on [the owner's insurer] when [the owner] bargained with [the contractor] to avoid that very result as part of the consideration for the construction agreement. We therefore conclude that the rights of indemnity and subrogation must control, and are persuaded the trial court was correct in finding that because the [contractor's] policy was part of the consideration for the construction job, it must be viewed as primary insurance under the facts of this case and that [the owner's insurer] was subrogated to the rights of [the owner]." (Rossmoor, supra, 13 Cal.3d at pp. 633-635.)
In Hartford a general contractor (PCS) entered into a subcontract with a sheet metal supplier (Valley Metal). The subcontract required that the sheet metal supplier obtain a liability policy under which the general contractor was an additional insured and further that the sheet metal supplier would indemnify the general contractor from liability for any claims growing out of Valley Metal's work, other than claims arising out of the general contractor's sole negligence or willful misconduct. A Valley Metal worker was severely injured while delivering materials on the job site and made claims against PCS. Valley Metal's insurer Hartford Casualty Ins. Co. (Hartford) accepted defense of the claim and eventually paid the worker a total of $240,000. Hartford then brought a contribution action against PCS's insurer, Mt. Hawley Ins. Co. (Mt. Hawley), in which Hartford alleged the indemnification provisions of the subcontract did not apply because the injury was caused by the sole negligence of PCS and that the loss should be apportioned between the two insurers. On cross-motions for summary judgment, the trial court agreed with Hartford and entered judgment in its favor for approximately one-half of what Hartford had incurred in defense costs and settlement payments.
Relying on Rossmoor, the Court of Appeal reversed. First, upon consideration of information in Hartford's claims file, the court determined the record established as a matter of law the injury was caused neither by PCS's sole negligence nor its willful misconduct. (Hartford, supra, 123 Cal.App.4th at pp. 291-292.) Thus the indemnity provisions of the subcontract applied to the loss and relieved PCS of responsibility. (Ibid.) In finding those provisions controlled disposition of the insurer's respective claims, the court, relying on Rossmoor, stated: "Just as Valley Metal has no right of recovery against PCS, so Valley Metal's insurer, Hartford, has no right to recover from PCS's insurer, Mt. Hawley. It would be unjust to 'impose liability on [Mt. Hawley] when [PCS] bargained with [Valley Metal] to avoid that very result as part of the consideration for the construction agreement.' [Citation.]" (Hartford, supra, 123 Cal.App.4th at p. 292.)
In Hartford, the court noted: "Rossmoor does not stand alone. Other courts have concluded that indemnity agreements, not policy provisions, may determine the right to contribution." (Hartford, supra, 123 Cal.App.4th at p. 293.) However, the court in Hartford was careful to also recognize that an indemnity agreement between insureds will not always prevail over the provisions of an insurance policy. (Id. at p. 298.) For instance, in cases such as Reliance Nat. Indemnity Co. v. General Star Indemnity Co. (1999) 72 Cal.App.4th 1063, 1081-1083, where one insurer was an excess insurer and the other was a primary insurer, the holding in Rossmoor was not controlling: "[T]he Supreme Court's decision in Rossmoor did not establish that in all cases where a contract for indemnification exists an insurer is entitled to bring a subrogation action on the agreement.... Rossmoor did not purport to establish a general rule that a contractual indemnification agreement between an insured and a third party takes precedence over well-established general rules of primary and excess coverage in an action between insurers repeatedly articulated by California appellate courts.... [¶]... [¶]
See Continental Cas. Co. v. Auto-owners Ins. Co. (8th Cir. 2000) 238 F.3d 941, 945; Wal-Mart Stores, Inc. v. RLI Ins. Co. (8th Cir. 2002) 292 F.3d 583, 587; American Indemn. Lloyds v. Travelers Property (5th Cir. 2003) 335 F.3d 429, 436-438; St. Paul Fire Ins. v. Am. Intern. Spec. Lines (4th Cir. 2004) 365 F.3d 263, 270-272; Chubb Ins. Co. of Canada v. Mid-Continent Cas. Co. (S.D.Miss. 1997) 982 F.Supp. 435, 437.
"[Appellant's] primary contention is that Rossmoor supports the theory that in all cases an indemnification agreement allows an insurer to be subrogated to the rights of its insured, even against an insurance company providing excess coverage. It is undisputed that the parties to the indemnity agreement are not present and this is an action between primary and excess carriers as identified by their policies. The risks involved in providing primary coverage are different from those involved in issuing an excess policy. These differences are reflected in part by the premium costs.... This is not a case between two primary carriers which have each received premiums for bearing the loss which ultimately occurred; rather, this is an action between an excess and a primary carrier.... Under the circumstances, Rossmoor, a case involving a subrogation and indemnity dispute between two primary carriers and their insured is not controlling in the present case." (Id. at pp. 1081-1083.)
In Hartford the court also recognized that even when a dispute arises between two primary insurers and an indemnity agreement might relieve one of the insurers of any obligation under Rossmoor, the principles set forth in Rossmoor are not controlling in the absence of proof the conditions which trigger contractual indemnity have arisen. (Hartford, supra, 123 Cal.App.4th at pp. 299-305.) Thus the court in Hartford did not disagree with result reached in Travelers Casualty & Surety Co. v. American Equity Ins. Co. (2001) 93 Cal.App.4th 1142, 1156-1158 (Travelers), where nothing in the record established that either insured was entitled to indemnity under their contractual agreement and the court held that the loss should therefore be equitably apportioned between the insurers. (See Travelers, supra, 93 Cal.App.4th at pp. 1157-1158.) The court in Hartford found that in contrast the record it was considering did permit the trial court to determine PCS was not solely negligent and hence entitled to indemnity. (Hartford, supra, 123 Cal.App.4th at pp. 302-303.) In particular, relying on St. Paul Fire Ins. v. Am. Intern. Spec. Lines, supra, 365 F.3d at pages 273-274, the court noted that the right to indemnity could be established as a matter of law based upon the manner in which the liability of the respective insureds was settled in collateral litigation. (Hartford, supra, 123 Cal.App.4th at pp. 302-303.) "[T]he trial court in this case could determine fault under the indemnity provision—specifically whether PCS was solely negligent—based on the summary judgment papers, notwithstanding that the underlying litigation had settled." (Id. at p. 303.)
B. Admiral's Rights Under Rossmoor and Hartford
1. For Purposes of This Appeal Both the ASIC and Admiral Policies are Primary and Subject to Rossmoor and Hartford
ASIC concedes, as it must, that with respect to the slope failure it provided primary coverage. ASIC also asserts that Admiral provided primary coverage. Thus, ASIC concedes that this is not a case, such as Reliance Nat. Indemnity Co. v. General Star Indemnity Co., supra, 72 Cal.App.4th at pages 1081-1083, where one policy provides only excess coverage and the holding in Rossmoor has no application.
As ASIC notes, both its policy and Admiral's contain mutually exclusive "other insurance" clauses which render each policy excess to any other primary policy which covers the loss. In the absence of a contractual indemnity provision between their insureds, the law is fairly well established that under these circumstances, as a matter of equity and practicality, the express provisions of the insurance policies must be ignored and the insurers are each responsible for a pro rata portion of the loss. (See Dart Industries, Inc. v. Commercial Union Ins. Co. (2002) 28 Cal.4th 1059, 1079-1080; Commerce & Industry Ins. Co. v. Chubb Custom Ins. Co. (1999) 75 Cal.App.4th 739, 745; Travelers Casualty & Surety Co. v. Century Surety Co. (2004) 118 Cal.App.4th 1156, 1160.) However, here we do in fact have a contractual indemnity provision between the insureds, Horton and Ebensteiner. Under Rossmoor and Hartford, that contractual indemnity provision supplants the rule of equitable contribution which would otherwise apply. (Rossmoor, supra, 13 Cal.3d at pp. 628-635; Hartford, supra, 123 Cal.App.4th at pp. 292-293.)
2. Type I, Type II and Type III Indemnity Provisions
California law recognizes three types of contractual indemnification provisions: Type I, Type II and Type III. (See MacDonald & Kruse, Inc. v. San Jose Steel Co. (1972) 29 Cal.App.3d 413, 419-421.) Type I is the broadest, covering all damages not caused by the sole negligence of the indemnitee. (Ibid.) Type II shields the indemnitee from all acts of the indemnitor plus its own passive negligence, or nonfeasance, while eliminating protection for the indemnitee's active negligence or misfeasance. (Ibid.) Type III is the most restrictive, limiting indemnity to liability arising from the indemnitor's acts only. (Ibid.) Contrary to ASIC's argument on appeal, the Horton-Ebensteiner indemnity clause is a Type I provision.
In a series of additions and amendments to Civil Code section 2782, the Legislature has made Type I indemnification clauses unenforceable in residential construction contracts entered into after January 1, 2006. (See Civ. Code, § 2782, subds. (c), (d), (e); Stats. 2005, ch. 394, § 1; Stats.2007, ch. 32, § 1; Stats.2008, ch. 467, § 1.) The Horton-Ebensteiner grading subcontract predates these changes, which were expressly made prospective only.
Type I provisions feature express language shielding the indemnitee against acts of its own negligence. (MacDonald & Kruse, Inc. v. San Jose Steel Co., supra, 29 Cal.App.3d at pp. 419-421.) ASIC contends the Horton-Ebensteiner agreement lacks this language and thus provides only Type III indemnity. However, by its terms the grading subcontract requires that Ebensteiner indemnify Horton against "all actual and exemplary claims, damages, losses, and expenses, including but not limited to, attorney's fees... caused in whole or in part by any negligent act or omission of Subcontractor... regardless of whether or not it is caused in part by a party indemnified hereunder." The last phrase expressly shields Horton from its own acts of negligence. Horton is the "party indemnified hereunder," and the phrase removes any exception to indemnification for any causal link between damages and Horton's acts or omissions, including negligent ones. The intent of the signatory parties, which is controlling, clearly provides that Ebensteiner will hold Horton harmless even for damages caused by and expenses incurred as a result of Horton's conduct. (See Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th 1265, 1277, Rossmoor Sanitation, Inc. v. Pylon, Inc., supra, 13 Cal.3d at p. 633.) Thus the trigger for Admiral's right to indemnity is proof Ebensteiner's negligence was, in whole or in part, the cause of the damage the Fessler plaintiffs suffered.
ASIC contends the indemnity provision in this contract is "substantively the same" as those found in Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th 1265, and Hernandez v. Badger Construction Equipment Co. (1994) 28 Cal.App.4th 1791. These cases featured "general indemnity" clauses and were held not to cover the indemnitees' own negligence. Those clauses, however, lacked a specific phrase referring to the indemnitees' conduct, and are therefore distinguishable.
3. Ebensteiner's Liability was Disputed
As we have noted, the clear weight of authority permits an insurer to establish its insured's right to indemnification by reference to the terms under which collateral litigation was settled. (St. Paul Fire Ins. Co. v. Am. Intern. Spec. Lines, supra, 365 F.3d at pp. 273-274; see also Hartford Casualty Ins. Co. v. Mt. Hawley Ins. Co., supra, 123 Cal.App.4th at p. 302.) Here, the settlement in the Fessler case required Ebensteiner to pay 51.4 percent of the plaintiffs' damages. In addition, we note ASIC paid its policy limits on the claim. In light of these settlement terms, the settlement raises an undeniable inference that Ebensteiner bears some responsibility for the loss, and that the damage is not due to Horton's sole negligence. (See Hartford, supra, 123 Cal.App.4th at p. 302.) Because the indemnification clause is activated by any negligent act or omission of Ebensteiner which "in whole or in part" caused damages, any comparative responsibility of Ebensteiner would be sufficient to shield Horton from liability. As we have discussed, this right of indemnity would supersede any right to equitable contribution and make ASIC solely responsible for the cost of defending Horton in the Fessler litigation. (See Hartford, supra, 123 Cal.App.4th at p. 291.)
However, although the settlement would support an inference of Ebensteiner's negligence, as we noted ASIC attempted to rebut that inference by submitting the deposition testimony of two experts retained by the Fessler plaintiffs and one geologist employed by Leighton. Together, their testimony, if believed by a trier of fact, would support the inference the slope failure was the result of defects in Leighton's plans and Ebensteiner was not negligent in grading the slope. Thus on this record, the trial court erred in concluding as a matter of law that Ebensteiner's indemnity obligation had been triggered.
As alternative grounds for affirming the trial court judgment, Admiral contends its coverage was excess to ASIC's policy and that in any event the "Self-Insured Retention" (SIR) requirements of its policy were not met and hence no duty to contribute defense costs ever arose. Although Admiral may assert those grounds on remand, on this record they do not relieve it of liability to ASIC as a matter of law. As we noted, the "other insurance" provisions of the Admiral policy, considered alongside similar provisions in ASIC's policy, have been held to require the very sort of equitable sharing of costs ASIC is seeking. (See Dart Industries, Inc. v. Commercial Union Ins. Co., supra, 28 Cal.4th at pp. 1079-1080; Commerce & Industry Ins. Co. v. Chubb Custom Ins. Co., supra, 75 Cal.App.4th at p. 745; Travelers Cas. & Surety Co. v. Century Surety Co., supra, 118 Cal.App.4th at p. 1160.) Admittedly, equitable sharing by insurers is not appropriate where the underlying insureds have made different contractual arrangements, including as here provisions with respect to whether an indemnitor's insurance will be primary to the indemnitee's insurance. (See Rossmoor, supra, 13 Cal.3d at pp. 628-635; Hartford, supra, 123 Cal.App.4th at pp. 292-293; Reliance Nat. Indemnity Co. v. General Star Indemnity Co., supra, 72 Cal.App.4th at p. 1081-1085.) However, as we have seen, here in at least one important respect, application of those contractual arrangements cannot be determined as a matter of law.
Although we must reverse the trial court's order, we emphasize that under the terms of the Type I indemnity provision in the subcontract, Admiral need only convince a trier of fact Ebensteiner bore some responsibility for the slope failure. Even if a trier of fact believes that the negligence of Leighton and Horton were the predominant causes of the loss, Admiral will still be entitled to indemnity if the trier of fact nonetheless determines Ebensteiner's errors contributed to the loss. In this regard we note that although the record contains evidence Ebensteiner was free from fault, it also contains testimony from experts who concluded that Ebensteiner acted below the applicable standard of care.
We note ASIC asserts that because, on this record, Ebensteiner's negligence has not been established as a matter of law, Admiral therefore had a duty to defend Horton as a matter of law. ASIC asserts that Admiral's breach of that duty gives it the right contribution from Admiral. We do not accept this contention. In the absence of an assignment of an insured's claim against its insurer, we are not aware of any authority which permits a stranger to an insurance policy to be compensated for insurer's breach of its duty to defend.
III
In addition to its substantive arguments with respect to Admiral's right to indemnity, ASIC argues that the judgment is defective on a number of procedural grounds. For the benefit of the parties and trial court on remand, we consider those procedural contentions.
A. Pleadings
ASIC argues that Admiral is foreclosed from using the express indemnity provision as an affirmative defense due to its failure to include it as such in its initial pleadings. We find no merit in this contention.
Admiral's pleadings contain an affirmative defense that can be interpreted as raising the indemnity issue: "[T]o the extent any defense might be owed, allocations must be done in conjunction with indemnity obligations owed in the underlying action." Additionally, Admiral alleged "plaintiff's claims are barred... to the extent that they seek coverage for loss from or in connection with damage to work performed by the named insured... for which damage is excluded." Although these affirmative defenses do not explicitly allege the Horton-Ebensteiner indemnity provision, they directly track its logical and practical effect. Because pleadings should be "liberally construed, with a view to substantial justice," Admiral's pleadings can be interpreted to raise the indemnity clause as an affirmative defense. (Code Civ. Proc. § 452.)
Moreover, ASIC does not claim to have been surprised or prejudiced in any way by Admiral's use of the indemnity as an affirmative defense. It follows that any error the trial court may have made in allowing Admiral to rely upon the contractual indemnity was not prejudicial.
B. Estoppel
ASIC also contends Admiral is estopped from asserting an indemnity defense by Horton's dismissal with prejudice of its underlying cross claims against Ebensteiner. ASIC argues that because Horton can no longer bring an indemnity claim against Ebensteiner, Admiral is also barred from asserting indemnity as a defense in this action. The record however does not support this theory.
The settlement agreement between Horton, Ebensteiner and the other underlying parties in Fessler, which ASIC relies upon, may have dismissed all cross-claims with prejudice between the parties themselves, but specifically exempted their insurers from seeking compensation from one another. The relevant portion of the settlement reads: "This release shall not apply to any claims... by any insurer for any party or parties against any other insurer for any party or parties." In short, the parties expressly preserved both ASIC's right to bring this action and necessarily Admiral's right to use the indemnity provisions as a defense.
C. Amended Pleadings
Finally, ASIC contends the trial court erred in declining to allow it to amend its complaint to allege that in addition to providing a defense to Horton in the Fessler litigation, it provided a defense to Horton-related entities who were not parties to the Horton-Ebensteiner agreement but were insured's under Admiral's policy. ASIC alleged that as to costs it incurred in defending this related entities, its claim to reimbursement was not subject to the indemnity provisions of the Horton-Ebensteiner agreement.
The principal difficulty with ASIC's motion to amend is that it was filed while Admiral's motion for reconsideration of the trial court's initial ruling on the motions for summary judgment was pending. Our rules of civil procedure may liberally allow amendment to pleadings to reach decisions on the merits, but they stop short of permitting litigants leave to amend merely to avoid dismissal. (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) Here, where the case had been fully litigated for more than year and in fact ASIC itself had moved for summary judgment, the trial court was fully warranted in concluding that the attempt to add a theory of liability on the eve of the motion to reconsider was not made in good faith but was asserted only as a means of delaying the trial court's ruling on the merits. This conclusion is supported by evidence in the record that in fact ASIC paid only costs incurred by Horton and not costs incurred by any of the related entities. In sum the trial court did not abuse its discretion in denying, as untimely, ASIC's motion to amend.
DISPOSITION
Although we agree with Admiral that it is entitled to the benefits of the indemnity provisions of the subcontract, and that the contract provides for Type I indemnity, as we have explained, this record does not establish Admiral's right to indemnity as a matter of law. On remand Admiral must establish that in fact Ebensteiner was partially at fault and that Ebensteiner's errors contributed the underlying loss. Thus the judgment in favor of Admiral must be reversed.
Reversed with directions.
ASIC to recover its costs of appeal.
Because Admiral is not the prevailing party on appeal, we need not and do not consider its request that it recover the attorney fees it incurred on appeal.
WE CONCUR: HALLER, J., McINTYRE, J.
With respect to whether Horton contributed the amount an insurer is required to advance under the SIR provisions of the Admiral policy, we note ASIC contends the $2 million in defense costs fully satisfied the requirements of the policy. (See Vons Companies, Inc. v. United States Fire Ins. Co. (2000) 78 Cal.App.4th 52, 63-64.) Because it is not clear from the record when ASIC made the payments and how they were apportioned between Ebensteiner and Horton, the impact, if any, of the amounts ASIC paid on the SIR presents a factual matter we cannot resolve on appeal.