Opinion
A112817
4-30-2007
GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, Plaintiff and Appellant, v. FIDELITY AND GUARANTY INSURANCE COMPANY, Defendant and Respondent.
NOT TO BE PUBLISHED
Plaintiff and appellant Great American Insurance Company of New York (Great American) appeals a summary judgment in favor of defendant and respondent Fidelity and Guaranty Insurance Company (Fidelity) in Great Americans action for equitable subrogation. Great American contends the trial court erred in concluding that an indemnity agreement between the parties insureds precluded Great American from recovering settlement monies it paid on behalf of Fidelitys insured.
BACKGROUND
1. Insurance Policies
At all relevant times, Roof Structures, Inc. (RSI), a roofing contractor, was insured under a $1 million primary general liability policy issued by St. Paul Fire and Marine Insurance Co. (St. Paul). It was insured with a $10 million excess general liability policy issued by Great American. The excess policy provided that Great American agreed to "pay those sums in excess of `underlying insurance or the retained limit that the `Insured becomes legally obligated to pay as damages because of `injury caused by an `occurrence to which this policy applies." The "Other Insurance" provision of the excess policy states: "The insurance afforded by this policy is excess over any other valid and collectible insurance available to the `Insured, whether or not described in the schedule of underlying policies. . . ."
Hunter/Storm/Durham & 680 LLC (Hunter Storm), a limited liability company, was owner of a commercial warehouse construction project. It was insured with a $1 million primary general liability policy issued by Fidelity. The policy also afforded excess coverage of $10 million. The "Coverages" section of the policy provided, under Coverage A, that Fidelity would pay those sums that Hunter Storm became legally obligated to pay as damages because of bodily injury. The policys "Other Insurance" provision states: "If other valid and collectible insurance is available to [Hunter Storm] for a loss [Fidelity] cover[s] under Coverage[] A. . . . our obligations are limited as follows: a. Primary Insurance[:] This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then we will share with all that other insurance by the method [of sharing] described in c. below."
Subsection "b" describes the circumstances under which the primary insurance is considered excess over any of the other insurance. It is inapplicable to this case.
South Bay Construction Company (South Bay), a general construction contractor, was insured with a $1 million primary general liability policy issued by Commercial Underwriters Insurance Company and a $25 million excess general liability policy issued by Firemans Fund.
2. The Construction Contracts
Hunter Storm contracted with South Bay to build a commercial warehouse on property owned by members of the Hunter Storm partnership. The contract contained an indemnity clause which states: "To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner . . . from and against claims, damages,
For convenience, Hunter Storm shall be referred to as the property or project owner.
losses and expenses, including but not limited to attorneys fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, . . . but only to the extent caused in whole or in part by negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them, or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder." The contract required South Bay to name Hunter Storm as an additional insured under South Bays liability insurance policy.
South Bay subcontracted with RSI to build the warehouse roof. The subcontract states, in pertinent part:
"THE SUBCONTRACTOR AGREES:
"(A) WORKMANSHIP & MATERIALS. To be bound to the Contractor by the terms of this agreement, and the general contract documents, and to assume toward Contractor all the obligations and responsibilities that it, by the general contract documents, . . . assumes toward the Owner, and in general to perform said work and each and every part and detail thereof in the best and workmanlike manner by qualified, careful and efficient workers and to use materials that are satisfactory for which they are applied. [¶] . . . [¶] (I) LIABILITY FOR INJURY & DAMAGE. To indemnify, save harmless and defend Owner and Contractor and each of them from and against any and all suits, actions, legal proceedings, claims, demands, damages, liabilities, cost[s] and expenses of whatsoever kind or nature (including attorneys fees) in any manner caused or occasioned or claimed to be caused or occasioned through any occurrence, omission, fault or negligence of Subcontractor, or anyone acting under its direction and control or on its behalf, in connection with or incident to the performance of the work and, without limiting the generality of the foregoing, the same shall include injury or death to any person or persons and damage to any property including that of Owner and Contractor.
. . ."
The subcontract also required RSI to name South Bay and Hunter Storm as additional insureds on RSIs primary and excess liability policies, and that RSIs insurance be primary.
3. The Underlying Personal Injury Action
During construction of the warehouse three RSI employees fell through the roof. Employees Current and Low were seriously injured and employee Ramos was killed. Current and Low brought personal injury actions against South Bay and Hunter Storm. In a cause of action based on premises liability, they alleged, inter alia, that Hunter Storm designed or ordered the design of a roof that could not support the weight of workers and their equipment, required plaintiffs Current and Low to work on a roof that contained concealed areas that were not structurally sound, and failed to warn of this dangerous condition.
The Ramos family brought a wrongful death action against South Bay and Hunter Storm. The action settled for $ 1.9 million. RSIs primary insurer, St. Paul, and South Bays primary insurer, Commercial Underwriters, each funded half the settlement amount. The Ramos action and settlement are not at issue in this appeal.
As articulated more specifically in their opposition to Hunter Storms motion for summary judgment in the underlying personal injury action, Current and Low asserted that Hunter Storm required RSI, against RSIs recommendation, to use a lesser grade material for the roof sheathing; that Hunter Storm, pursuant to "owner revisions," removed steel trusses from the roof structure at the accident site in order to save money; and that RSI followed the specifications and design conditions required of it by Hunter Storm. Hunter Storms motion for summary judgment on the Current/Low action was denied because Hunter Storm failed to meet its initial burden of showing it was entitled to judgment on all theories asserted by plaintiffs, "most notably, the theory that Hunter Storm is liable for its affirmative acts in connection with the roof construction as encompassed in the allegations in the [Current/Low] complaint."
Thereafter, the Current/Low personal injury action settled for $4 million at the final mandatory settlement conference. Subject to a reservation of rights, and without any admission as to which parties and/or their insurers were ultimately liable or responsible for the settlement sums under the various indemnity provisions as among South Bay, Hunter Storm and RSI and their respective insurers, RSIs excess insurer, Great American, agreed to fund $1,952,500 of the settlement, $ 1 million of which it agreed to fund on behalf of Hunter Storm. Great American made the latter payment because it had determined, based on the earlier denial of Hunter Storms motion for summary judgment, that Hunter Storm was potentially liable for the Current and Low injuries. RSIs primary insurer, St. Paul, funded $45,000 of the settlement, South Bays primary insurer, Commercial Underwriters, funded $50,000, and South Bays excess insurer, Firemans Fund, funded $1,952,500.
4. The Present Action
Following the Current/Low settlement, Great American filed the present action against Fidelity, Firemans Fund and St. Paul. It alleged generally that $1 million of its payment toward the Current/Low settlement was being allocated as the reasonable settlement value of Current and Lows claims against Hunter Storm; that all settlement amounts were being paid subject to each insurer reserving all their rights against all other contributing and noncontributing insurers; that Fidelity, which had issued a $1 million primary policy to Hunter Storm, refused to contribute any amount to the Current/Low settlement to extinguish Hunter Storms potential liability for the Current/Low action, "despite conceding that the [Current/Low action] against Hunter Storm [is] covered by [the Fidelity] policy;" that Great American was paying $1,952,500 toward the Current/Low settlement to protect its insureds interests and its own interest, including avoiding a judgment against Hunter Storm above the limits of Hunter Storms primary policy; that Great American had demanded payment from Fidelity for its respective share of the indemnity costs to resolve the underlying personal injury actions and to reimburse it for all amounts expended to resolve those actions; and that, pursuant to its excess policy and as a matter of equity, it had no liability for the Current/Low settlement payments.
The first and second causes of action were against all three defendants for declaratory relief and equitable contribution. Both causes of action alleged that any obligation or liability Great American had under its excess policy was subject to the limitations of that policy; that Fidelity refused to pay any of its share of the settlement of the underlying personal injury action; and that Firemans Fund and St. Pauls had paid less than their fair share of the settlement. Great American sought a judgment declaring that the three insurers were obligated to pay their respective obligations and fair and reasonable shares of the settlement, and that it was entitled under equitable principles of contribution to reimbursement of its payment of the Current/Low settlement.
The third cause of action for equitable subrogation was against Fidelity only. Great American reiterated the allegation that Fidelity refused to pay any amount of the Current/Low settlement and alleged that it was entitled under equitable principles of subrogation to reimbursement of its payment of the settlement.
The fourth and final cause of action was against St. Paul for equitable subrogation. Neither Firemans Fund nor St. Paul are parties to this appeal.
Great American subsequently moved for summary judgment, or alternatively, summary adjudication, as to its claim for equitable subrogation against Fidelity. It asserted: the Current/Low claims against Hunter Storm were covered by Hunter Storms $1 million primary policy issued by Fidelity. Hunter Storms defense attorney repeatedly requested Fidelity to settle the Current/Low claims because of the potential of a verdict against Hunter Storm that would exceed the policy limit. Fidelity refused, thereby breaching its duty to its insured, Hunter Storm, to effectuate a reasonable settlement. To protect Hunter Storm, the common insured of Great American and Fidelity, Great American agreed to pay $1 million to settle the Current/Low claims against Hunter Storm. As an excess carrier who paid a claim that should have been paid by Fidelity as Hunter Storms primary carrier, Great American was equitably subrogated to Hunter Storms remedies against Fidelity.
Fidelity brought a cross-motion for summary judgment in which it asserted that its insured, Hunter Storm, was relieved by the indemnity provisions of South Bay/RSI subcontract and South Bay/Hunter Storm contract from any legal liability for the Current/Low personal injury action.
Great American opposed Fidelitys motion on the grounds the terms of the insurance policies, not the indemnity provision of the subcontract, should govern the dispute of the insurers.
Orders
The trial court denied Great Americans motion for "summary adjudication," which it characterized as "rest[ing] on a fundamentally flawed interpretation of the applicable law." It recited that Great American asserted it was entitled to equitable subrogation "based solely on the language contained in the respective insurance policies between Great American and its insureds and Fidelity and its insured," without consideration of the indemnity provisions in the South Bay/Hunter Storm and South Bay/RSI contracts, whereas Fidelity asserted that, because RSI owed Hunter Storm a duty of indemnification under the subject contracts, Great American was required to fund the underlying settlements on RSIs behalf. "While final determination of the impact and reach of the indemnity provisions is not before the Court in the context of Great Americans motion, Fidelity is correct that Great Americans equitable subrogation claim may not be adjudicated in Great Americans favor without such a determination." The court observed that the cases on which Great American relied "were based solely on the insurance policy language in large part because [] the courts below [had not] made any determinations regarding the indemnity provisions in the contracts between the insureds. Here, in contrast, the issue has been raised, and is appropriate for the trial courts consideration and determination. [Citations.] Accordingly, Great American has failed to meet its burden under Code of Civil Procedure section 437c, [subdivision] (p)(1) and its motion is DENIED."
The trial court granted Fidelitys motion for summary judgment on the following rationale: "RSIs subcontract with [South Bay] required that RSI maintain insurance in specified amounts, and that [South Bay] and Hunter [Storm] be named as additional insureds. This contract also included an indemnification provision whereby RSI agreed to indemnify [South Bay] and Hunter [Storm], and agreed to assume towards [South Bay] all the obligations and responsibilities that [South Bay] assume[d] towards Hunter Storm. [] The indemnification provision in the subcontract applies to claims and liabilities `in any manner caused or occasioned through any occurrence, omission, fault or negligence of [RSI], or anyone acting under its direction and control or on its behalf, in connection with or incident to the performance of the work. . . . [South Bays] contract with Hunter [Storm] also includes an indemnification provision. [] That provision applies to claims `arising out of or resulting from performance of the Work. . .but only to the extent caused in whole or in part by negligent acts or omissions of [South Bay], a Subcontractor, or anyone directly or indirectly employed by them, or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, or loss or expense is caused in part by a party indemnified hereunder.
"The evidence submitted by Fidelity demonstrates that the accident and injuries sustained by the plaintiffs in the underlying actions were caused, at least in part, by the negligence of RSI. [] To the extent that Great American has submitted evidence that demonstrates negligence on the part of Hunter [Storm, such showing does not overcome the contractual duties of RSI and [South Bay] to indemnify Hunter [Storm.] [Citation.] Accordingly, since Great American was the insurer of both RSI and [South Bay] as well as Hunter [Storm], it has failed to demonstrate that the claimed loss was one for which Fidelity, as Hunter [Storms] insurer, is liable."
Fidelity supported its motion for summary judgment with, inter alia, the declaration of a civil engineer, Joel Wolf, who performed an extensive investigation and accident reconstruction. He declared that an RSI employee was pushing a welding machine on an RSI custom-made wheeled cart across the field of a partially completed roof structure that had been assembled and erected by RSI. The welding machine and wheeled cart together weighed approximately 600 pounds. The "welder" became stuck near a "field joint between an 8 panel and a 22" panel, that made up a 102" wide bay," and the RSI employee could not move the welding cart. When two other RSI employees came to the cart to assist, the roof section supporting the welder and three men, which measured 102" long and 8 wide, fell to the building floor. Enumerating his reasons, Wolf opined that RSIs means and methods of construction were a significant, if not the only significant, and substantial factor in causing the accident.
Great American submitted evidence regarding Hunter Storms decisions to remove support trusses and use thinner building materials.
The court therefore entered judgment for Fidelity against Great American.
DISCUSSION
Great American contends the trial court erred in concluding the indemnity provision in the South Bay/RSI subcontract precluded it from recovering the $1 million it paid to settle Hunter Storms liability in the Current/Low personal injury action because the provision does not alter the relationship between it, as an excess insurer, and Fidelity, as a primary insurer.
Standard of Review
Summary judgment is properly granted if all the papers submitted show there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A defendant moving for summary judgment bears the burden of establishing a complete defense to the plaintiffs action or the absence of an essential element of the plaintiffs case. (American Casualty Co. v. General Star Indemnity Co. (2005) 125 Cal.App.4th 1510, 1520.) After examining the documents supporting and opposing a motion for summary judgment, the appellate court independently determines their effect as a matter of law. (Ibid.; see also Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) Given the judgment in this case, the question on appeal is whether, as a matter of law, Fidelity demonstrated that Great American had no right to recover from Fidelity any of the money Great American paid on behalf of Hunter Storm to fund the Current/Low settlement.
Equitable Subrogation
Equitable subrogation is defined as, inter alia, "The principle under which an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy." (Blacks Law Dict. (8th ed. 1999) p. 1467, col. 2.) Stated more colloquially, it is the insurers right to be put in the shoes of the insured in order to recover from third parties who are legally responsible to the insured for the loss paid for by the insurer. (See Employers Mutual Liability Ins. Co. v. Tutor-Saliba Corp. (1998) 17 Cal.4th 632, 639; Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 272.) "Equitable subrogation allows an insurer that paid coverage or defense costs to be placed in the insureds position to pursue a full recovery from another insurer who was primarily responsible for the loss." (Travelers Casualty & Surety Co. v. American Equity Ins. Co. (2001) 93 Cal.App.4th 1142, 1151-1152 (Travelers Casualty).)
The right of subrogation is purely derivative. The subrogated insurer has no greater rights than the insured and is subject to the same defenses assertable against the insured. The "insurer cannot acquire anything by subrogation to which the insured has no right and can claim no right the insured does not have." (RLI Ins. Co. v. CNA Casualty of California (2006) 141 Cal.App.4th 75, 80; Travelers Casualty, supra, 93 Cal.App.4th at p. 1151.)
The basic elements of an insurers cause of action for subrogation are: (1) the insured has suffered a loss for which the defendant is liable, either because the defendant is the wrongdoer whose act or omission caused the loss or because he is legally responsible to the insured for the loss caused by the wrongdoer; (2) the claimed loss was one for which the plaintiff insurer was not primarily liable; (3) the plaintiff insurer compensated the insured in whole or in part for the same loss for which the defendant is primarily liable; (4) the plaintiff insurer has paid the claim of its insured to protect its own interest and not as a volunteer; (5) 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 plaintiff insurer; (6) the plaintiff insurer has suffered damages caused by the act or omission upon which the liability of the defendant depends; (7) justice requires that the loss be entirely shifted from the plaintiff insurer to the defendant, whose equitable position is inferior to that of the plaintiff insurer; and (8) the plaintiff insurers damages are in a liquidated sum, generally the amount paid to the insured. (Firemans Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1292; Troost v. Estate of DeBoer (1984) 155 Cal.App.3d 289, 294.)
Application of Insureds Policies to Current/Low Action
Under the terms of its insurance policy with Hunter Storm, Fidelity agreed to pay sums that Hunter Storm became legally obligated to pay as damages because of bodily injury and to defend Hunter Storm against any suit seeking such damages. The insurance applied to bodily injury only if caused by an occurrence. The policy defined "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions" and "bodily injury" as injury "sustained by a person." The policy limited insurance to $1 million per occurrence. There has been no dispute in the summary judgment proceedings that the allegations in the Current/Low action against Hunter Storm, standing alone, would constitute a covered claim under the Fidelity policy, so that the policy would obligate Fidelity to defend Hunter Storm in the Current/Low action. Nor was there a dispute that, had subsequently-discovered facts established a covered claim, the policy, standing alone, would obligate Fidelity to indemnify Hunter Storm up to the limits of the policy. In fact, although St. Paul, RSIs primary insurer, initially accepted defense of the action, Fidelity accepted Hunter Storms defense after the Ramos action settled and continued to defend Hunter Storm through settlement of the Current/Low action.
It was also not disputed that, based on the language of the Fidelity and Great American policies, standing alone, Great American would have no liability under its excess policy until exhaustion of the primary Fidelity policy. Primary coverage is insurance where, under the terms of the policy, "`liability attaches immediately upon the happening of the occurrence that gives rise to liability." (American Casualty Co. v. General Star Indemnity Co., supra, 125 Cal.App.4th at p. 1521, italics in original.) Excess coverage is insurance where, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted. (Ibid.) The Fidelity policy specified that if other valid and collectable insurance was available to Hunter Storm for a loss covered by Fidelity, the insurance provided by Fidelity was "primary." The Great American policy specified that it was "excess" over any other valid and collectible insurance available to the insureds, whether or not that other insurance was described in the schedule of underlying policies.
Thus, when Hunter Storm became engaged in negotiations for the settlement of the Current/Low action, it would be expected to look to Fidelity for indemnification of a settlement or adverse judgment in that action up to the $1 million maximum of its policy limit. And Great American, as excess carrier, was not primarily liable for any loss sustained by Hunter Storm as a result of the settlement.
When Great American compensated Hunter Storm for the loss for which Fidelity would have been primarily responsible under the terms of the policies and the Current/Low allegations, Great American was placed in Hunter Storms position to pursue a full recovery from Fidelity. Under this factual predicate, it would be subrogated to Hunter Storms right to have Fidelity fund the settlement up to the policy limits of the primary Fidelity policy. Because Great American paid the policy limits on Hunter Storms behalf instead of Fidelity, it would now be entitled to repayment of that $1 million sum.
Indemnity Under the Construction Contracts
To prevail in its motion for summary judgment, Fidelity had to demonstrate that, notwithstanding the language of the two insurance policies, Great American had no right to recover from Fidelity the losses incurred by Hunter Storm for which, by the terms of the insurance policies, Fidelity was primarily liable. Relying principally on Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622 (Rossmoor) and Hartford Casualty Ins. Co. v. Mt. Hawley Ins. Co. (2004) 123 Cal.App.4th 278 (Mt. Hawley), Fidelity asserts that it had no responsibility for the loss because of the indemnity clauses in South Bay/Hunter Storm and South Bay/RSI construction contracts. We turn then to the issue of whether the indemnity provision of the insureds construction contracts abrogate or supplant the indemnification obligations of Fidelity under its insurance policy.
Rossmoor
In Rossmoor, property owner Rossmoor entered into an agreement with contractor Pylon to build a sewage pump station and sewer lines. (Rossmoor, supra, 13 Cal.3d supra, at p. 625.) Pursuant to a requirement of the construction contract, Pylon obtained a general liability policy from United States Fire Insurance (U.S. Fire) that included Rossmoor as an "added insured." Rossmoor had its own general liability policy issued by Insurance Company of North America (INA). (Ibid.) The INA and the U.S. Fire policies contained "other insurance" clauses that provided that an apportionment would be made if the insured had other insurance against loss covered by the policy. (Ibid.) The construction contract also contained an indemnity clause whereby Pylon agreed to indemnify Rossmoor against personal injury damages arising out of the work. (Ibid.)
The indemnity clause of the construction contract was in a section entitled "LEGAL RELATIONS AND RESPONSIBILITY . . . G. RESPONSIBILITY FOR DAMAGES" and stated, in pertinent part: "The Owner [Rossmoor], the Engineer, or their authorized assistants shall not be answerable or accountable in any manner for any loss or damage that may happen to the work or any part thereof, or for any material or equipment used in performing the work, or for injury or damage to any person or persons, either workmen or the public, or for damage to adjoining property from any cause whatsoever during the progress of the work, or any time before final acceptance of the work.
"Contractor [Pylon] shall indemnify and save Owner, the Engineer or other authorized assistants harmless against all claims for damages to persons or property arising out of Contractors execution of the work covered by this contract and any and all costs, expenses, attorneys fees and liability incurred by Owner, the Engineer or said assistants, in defending against such claims, whether the same proceed to judgment or not and Contractor at his own expense agrees upon written request by Owner, to defend any such suit or action brought against Owner, said Engineer or assistants. In the prosecution of any successful claim or suit by Owner for the enforcement of this Contract, or any of the monetary or other obligations of Contractor hereunder, Contractor agrees to pay to Owner any reasonable attorneys fees and any costs of suit incurred by Owner." (Rossmoor, supra, 13 Cal.3d at p. 626, fn. 1.)
One Pylon employee was killed and another injured during construction. (Rossmoor, supra, 13 Cal. 3d at p. 627.) Tort actions against Rossmoor ensued, and the plaintiffs recovered a judgment of approximately $267,000. (Ibid.) The judgment and attendant legal fees and costs were satisfied by Rossmoor through its insurer, INA. (Ibid.)
Rossmoor then brought an action for declaratory relief against Pylon and U.S. Fire, seeking indemnity for the judgment, fees, and costs. (Rossmoor, supra, 13 Cal.3d at p. 627.) U.S. Fire cross-complained against INA, seeking an apportionment of sums under the "other insurance" clause of the policies. (Ibid.)
The Supreme Court first construed the contractual indemnity clause. It observed that Pylon agreed to indemnify Rossmoor against "all claims for damages," and that Rossmoor was not to be held accountable "for any loss or injury to any person." Because the agreement did not state what effect Rossmoors negligence would have on Pylons obligation to indemnify, the Supreme Court characterized the clause as a "`general" indemnity provision, and, under existing law, Rossmoor could not benefit from the agreement if it was deemed actively negligent. (Rossmoor, supra, 13 Cal.3d at p. 629.) It then observed that the trial court had found Rossmoor to be, at most, passively negligent, and that the finding was supported by substantial evidence. (Id. at pp. 629-631.) It affirmed its previous holdings that passively negligent indemnitees may recover under an indemnity agreement. (Id. at p. 631.) "[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. . . . [¶] It is a reasonable and practical conclusion that the parties bargained for the protection here at issue, given the contract and the facts. . . .[This] accident may be seen as one of the risks against which Rossmoor should be covered. . . ." (Id. at p. 634.)
Rossmoor then concluded that, because INA had paid the judgment for its insured, Rossmoor, INA was subrogated to Rossmoors right of indemnification against Pylon. (Rossmoor, supra, 13 Cal.3d at p. 634.) "Under the circumstances of the present case, we cannot agree" with Pylon and U.S. Fires proposition that the terms of the insurance policies requiring apportionment of losses controlled over the contractual right to indemnification. "It appears that both INA and U.S. Fire 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 INA when Rossmoor bargained with Pylon 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. . . .[B]ecause the U.S. Fire policy was part of the consideration for the construction job, it must be viewed as primary insurance under the facts of this case and [] INA was subrogated to the rights of Rossmoor." (Id. at pp. 634-635.)
Subsequent decisions have discussed the application of Rossmoor to the interplay of indemnity agreements between insureds and insurance allocation among their insurers.
Reliance
In Reliance Nat. Indemnity Co. v. General Star Indemnity Co. (1999) 72 Cal.App.4th 1063 (Reliance), a music producer, Lollapalooza, agreed with Don Law, Inc., to sponsor a music festival. The agreement required Don Law to indemnify Lollapalooza against personal injury losses in connection to the festival. (Id. at p. 1068.) Pursuant to the agreement, Don Law obtained a $1 million primary liability insurance policy from Gulf Insurance Company and a $10 million excess policy from General Star, both of which included Lollapalooza as an additional insured. (Ibid.) Lollapalooza also had its own $1 million primary policy and an excess policy, both issued by Reliance. (Id. at p. 1069.)
An audience member was injured during the festival and sued Lollapalooza and Don Law. (Reliance, supra, 72 Cal.App.4th at p. 1070.) The personal injury action settled for $2,142,858. On behalf of Lollapalooza, Reliance contributed the primary policy limit of $1 million, plus $71,429 from the excess policy. (Id. at p. 1071.) On behalf of Don Law, Gulf contributed the primary policy limit of $1 million and General Star contributed $71,429 from the excess policy. (Ibid.)
Reliance then brought an action against General Star, alleging it was subrogated to the contractual indemnification rights of its insured, Lollapalooza; that Lollapaloozas coverage under Don Laws Gulf and General Star policies should be primary to the Reliance policies, and that Reliance had no duty to indemnify Lollapalooza until General Star and Gulf paid their combined policy limits of $11 million. (Reliance, supra, 72 Cal.App.4th at p. 1071.) It relied primarily on Rossmoor as authority for its action against General Star. (Ibid.)
General Star cross-complained, alleging its duty to indemnify the injured audience member did not arise until Lollapalooza and Don Laws primary policies were exhausted. (Reliance, supra, 72 Cal.App.4th at p. 1068.) It argued that the indemnity agreement did not supersede the explicit language of the relevant policies, which provided that Reliance would be a primary insurer and General Stars coverage would be excess to all other insurance. (Id. at pp. 1075, 1076.)
Reliance affirmed the grant of summary judgment to General Star, concluding that Rossmoor was not controlling. (Reliance, supra, 72 Cal.App.4th at pp. 1067, 1068.) It first recited the insurance principles governing primary and excess coverage. (See pp. 14, 15, ante.) It then observed that, under equitable principles, the duty to contribute applies to insurers that share the same level of obligation on the risk as to the same insured; consequently there is generally no contribution between a primary and excess carrier. (Id. at pp. 1080, 1081.) Therefore, it concluded, because primary insurer Reliance and excess insurer General Star did not share the same level of coverage, "General Star had no obligation for any part of the loss, damage, or defense covered by the other primary insurance. This is a materially distinguishing characteristic between the present litigation and Rossmoor. [Citation.]" (Id. at p. 1081.)
In further distinguishing Rossmoor, Reliance observed that 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. . . ." (Reliance, supra, 72 Cal.App.4th at p. 1081.)
Reliance then observed: "The test as to whether the party has the right to maintain the action for subrogation `involves a consideration of, and must necessarily depend upon the respective equities of the parties. [Citations.] . . . [I]t is a matter of applying the equities of the parties to the facts of the case to determine the superior and inferior positions of the parties." (Reliance, supra, 72 Cal.App.4th at p. 1081.) It concluded that under the undisputed circumstances of the case, the equities did not permit Reliance to recover. (Id. at p. 1082.) "[T]he 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. . . . [A]n excess insurer [unlike a primary insurer] does not accept premiums with the knowledge that it will be called upon to satisfy a full judgment. . . . If we were to accept the arguments of Reliance [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], the basic rules construing primary and excess policies would be altered. A primary insurer would be allowed to charge a higher premium for insuring a greater risk; however, then the primary insurer would be allowed to shift the loss to an excess carrier which charged a lower premium. . . . While the loss at issue must be borne by Reliance, it is nothing more than what is bargained for, particularly given the absence of any evidence that it calculated its premium with an understanding that an indemnity agreement would exist between its insured [Lollapalooza] and Don Law. 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. 1082-1083.)
Maryland Casualty
In Maryland Casualty Co. v. Nationwide Mutual Ins. Co. (2000) 81 Cal.App.4th 81 Cal.App.4th 1082 (Maryland Casualty), a general contractor hired numerous subcontractors to build a residential development. (Id. at p. 1086.) The subcontracts required the subcontractors to name the general contractor as an additional insured in their general liability policies and that their policies be primary and noncontributing with any other insurance carried by the general contractor. (Ibid.) After the general contractors insurers paid for the general contractors defense in an action by homeowners for construction defects, the general contractors insurers brought a claim against a subcontractors insurer, asserting the subcontractors insurer was primarily responsible for the general contractors defense under the additional insured endorsements. (Id. at p. 1087.) The trial court granted their motion for summary judgment on the basis of equitable subrogation, concluding they were entitled to recover all defense costs, including the amounts pertaining only to the general contractors own negligence, from the subcontractors insurer. (Id. at p. 1088.)
The appellate court reversed because the equitable contribution doctrine, not the equitable subrogation doctrine, applied. (Maryland Casualty, supra, 81 Cal.App.4th at p. 1086.) In so doing it deemed the general contractors insurers reliance on Rossmoor misplaced. (Id. at p. 1092.) "[Rossmoor] did not hold an indemnitees policy will always be excess. The court instead made clear it was reaching its conclusion based on the particular circumstances of the case. [Citation.] The court said the `one factor it found `compelling was that the parties had specifically bargained for the contractor to bear the entire costs resulting from its negligent conduct and for the owner to be relieved of any liability where it was not actively negligent. [Citation.] [¶] In this case, there was no evidence showing that [the general contractor and the subcontractor] would be responsible for costs that did not pertain to their work. . . . While the factual circumstances in Rossmoor may have created a relationship between the indemnity contract and the insurance allocation issues, there was no similar basis for the relationship in this case." (Id. at p. 1092, fn. omitted.).
For a comprehensive discussion on the differences between these two doctrines, which are sometimes misused in insurance allocation cases, see Maryland Casualty, supra, 65 Cal.App.4th at pp. 1288-1301.) In a nutshell, equitable subrogation, as noted, is purely derivative; it is the right of the insurer that paid the loss on behalf of its insured to recover from the party primarily liable for the loss. (Id. at pp. 1292-1293.) Equitable contribution is the right of one insurer who has paid an entire loss to recover a portion of its payment from other insurers who are obligated to indemnify or defend the same loss or claim. Unlike subrogation, the right to equitable contribution exists independently of the rights of the insured. (American Casualty Co. v. General Star Indemnity Co., supra, 125 Cal.App.4th at pp. 1522-1523.)
Travelers Casualty
In Travelers Casualty, supra, 93 Cal.App.4th 1142, Preferred Capital, the property manager of Lakeview Towers, an apartment building, was the named insured of a general liability policy issued by American Equity. It was also an additional insured under a general liability policy issued to Lakeview by Travelers Casualty. The two policies contained virtually identical "other insurance" provisions and each stated it was primary, except it was excess over other valid, collectible insurance. (Id. at p. 1147.) Under the terms of the property management agreement, Lakeview agreed to indemnify property manager Preferred Capital against all expenses, claims, liabilities, etc., which Preferred Capital might incur as a result of personal injury when Preferred Capital was carrying out the provisions of the management agreement or acting under the express or implied directions of Lakeview. (Id. at p. 1147.)
The agreement was actually between Preferred Capital and a receiver appointed by the court in connection with a foreclosure action on Lakeview. (Travelers Casualty, supra, 93 Cal.App.4th at p. 1146.)
A tenant brought a personal injury action against Preferred Capital. Travelers Casualty accepted the tender of defense and indemnity of the action. (Travelers Casualty, supra, 93 Cal.App.4th at p. 1147.) After settling the action on behalf of Preferred Capital, it brought an action against American Equity, Preferred Capitals insurer, for equitable contribution. (Id. at p. 1148.)
In cross-motions for summary judgment, the parties stipulated that both policies covered the liability loss, that American Equity did not defend or indemnify Preferred Capitol, and that the "other insurance" provisions of both policies were applicable. (Travelers Casualty, supra, 93 Cal.App.4th at p. 1148.) The trial court granted summary judgment in favor of Travelers Casualty. It concluded that both policies provided coverage at the same level, the conflicting "other insurance" provisions would therefore be ignored, and Travelers Casualty was entitled to pro rata contribution. (Id., at p. 1148.)
American Equity, relying on Rossmoor, argued on appeal that the indemnity provision of the property management agreement resulted in its coverage being excess to Travelers Casualtys primary coverage. (Travelers Casualty, supra, 93 Cal.App.4th at pp. 1148, 1152.)
Travelers Casualty affirmed the summary judgment. It observed that neither Reliance nor Rossmoor was directly on point. Reliance was distinguishable because it involved insurance coverages at different levels, a true primary and a true excess policy, and primary insurers were generally not entitled to indemnification from a third partys
excess insurer because the risks involved in the two kinds of coverage were different. (Travelers Casualty, supra, 93 Cal.App.4th at p. 1156.) Rossmoor was distinguishable because it was an action primarily between two insureds on their own contract of indemnity. (Id. at p. 1157.)
Travelers Casualty first concluded that the action resembled a typical dispute between insurance carriers and should therefore "be governed by general principles governing the interpretation and enforcement of `other insurance clauses between insurers. . . . [¶] More importantly, subrogation of the insurer to the rights of the insured presupposes the insured, Preferred Capital, has a right to indemnity from. . . Lakeview under the indemnity agreement. This determination was never made below and [the parties to the indemnity agreement] are not parties to this action. Were Preferred Capital to seek indemnity directly from [Lakeview] under the agreement, it might be shown that Preferred Capital was not entitled to indemnity on the grounds that it was actively or intentionally negligent in causing the victims injury. To require Travelers [Casualty] to prove that its own insured (Preferred Capital as an additional insured under the [Lakeview] policy) was actively or intentionally negligent in order to succeed in recovering equitable contribution from American Equity would be bad public policy and clearly inconsistent with equitable considerations." (Travelers Casualty, supra, 93 Cal.App.4th at p. 1157.)
As in Rossmoor, "both insurers were prepared to satisfy a full judgment, although both also agreed to apportion loss in case of other insurance at the same level. However, because it has not been established and we cannot say with certainty under the circumstances that Preferred Capital is entitled to indemnity from [Lakeview] under the property management agreement, we never reach the equitable consideration that Rossmoor found controlling. Indeed, in these circumstances, the equitable considerations favor apportionment. Concern that the indemnity agreement between Preferred Capital and [Lakeview] would be negated by prorating the loss presupposes the determination that [Lakeview] would be liable to indemnify Preferred Capital under that agreement. That determination has never been made." (Travelers Casualty, supra, 93 Cal.App.4th at at p. 1158, fn. omitted.)
Mt. Hawley
In Mt. Hawley, supra, 123 Cal.App.4th 278, a general contractor (PCS) entered into a subcontract with a sheet metal company (Valley Metal). Pursuant to the agreement, Valley Metal made PCS an "added insured" to its general liability insurance, issued by Hartford Casualty. (Id. at p. 282.) PCS had its own independent liability insurance policy issued by Mt. Hawley. (Id. at p. 282.)
The construction agreement also contained an indemnity clause which required that insurance maintained by Valley Metal insure its indemnification obligations, but nothing in the insurance was to limit in any way the indemnification provided for in the agreement. Valley Metal agreed to indemnify PCS from any personal injury claims, liabilities, etc., of every kind, including those of Valley Metal and its agents, arising out of the performance of the work under the subcontract, by act or omission whether performed by Valley Metal or any other subcontractor whether resulting from or contributed to by passive or active negligence, except the sole negligence or willful misconduct of PCS. (Mt. Hawley, supra, 123 Cal.App.4th at p. 282.)
An injured Valley Metal employee brought a personal injury action against PCS. (Mt. Hawley, supra, 123 Cal.App.4th at p. 283.) Hartford, Valley Metals insurer, accepted the defense. It agreed to indemnify PCS fully in the pending action pursuant to the indemnity provision of the construction contract, except for PCSs sole negligence or willful conduct. (Id. at p. 283.) Following protracted proceedings that also involved the workers compensation insurance carrier, Hartford settled the personal injury action and funded the entire settlement.
Hartford then brought an action against Mt. Hawley for declaratory relief, contribution, and indemnity. It alleged that the employees injuries were caused solely by PCSs negligence. (Mt. Hawley, supra, 123 Cal.App.4th at p. 285.) The insurers brought cross-motions for summary judgment. Hartford argued Mt Hawley was liable for half the defense and settlement expenses under a theory of equitable contribution. Mt. Hawley argued that because PCS was not solely negligent for the employees injuries, the indemnity clause obligated Valley Metal to indemnify PCS, and therefore Valley Metals insurer, Hartford, could not obtain contribution from PCSs insurer, Mt. Hawley. (Id. at pp. 285-286.) Summary judgment was granted in favor of Hartford. (Id. at p. 286.)
Mt. Hawley reversed. (Mt. Hawley, supra, 123 Cal.App.4th at p. 282.) It concluded that under the terms of the indemnity clause, subcontractor Valley Metal agreed to indemnify general contractor PCS absent PCSs sole negligence or willful misconduct, and PCS had no contractual duty to indemnify Valley Metal. It also observed that Hartfords correspondence, and its allegation in the present action that PCS was solely negligent for the injuries, showed it was aware of the indemnity provision throughout the underlying litigation. (Id. at p. 289.) Mt. Hawley further observed that, like the indemnity provision in Rossmoor, the subcontract provided that PCS would not be liable for any claim, etc., unless caused by its sole negligence or willful misconduct. Hartford never alleged PCS engaged in willful misconduct. Mt Hawley concluded the indemnity provision precluded any recovery by Valley Metal against PCS, because Mt. Hawley established as an undisputed fact on summary judgment that PCS was not solely negligent, because Valley Metal added PCS as an additional insured under its Hartford policy as part of the consideration for the construction job, and because both insurers knew they might have to satisfy a full judgment. (Id. at p. 291.)
"To require Mt. Hawley to pay Hartford [the settlement sum and attendant costs] when Mt. Hawleys insured, PCS, is not liable for anything due to the indemnity provision, is inconsistent with" equitable principles and does not further the goal that each insurer pay its fair share. "Hartford acknowledged in the underlying case that its defense and indemnity obligations to PCS were dictated by the subcontract. But in this case, Hartford attempts to invoke principles of equity to negate the subcontract and collect from Mt. Hawley. [¶] Just as Valley Metal has no right of recovery against PCS, so Valley Metals insurer, Hartford, has no right to recover from PCSs 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. [Rossmoor, supra, 13 Cal.3d at p. 634]. Hartford does not point to any language in the subcontract or the insurance policies suggesting otherwise." (Mt. Hawley, supra, 123 Cal.App.4th at p. 292.)
Mt. Hawley found further support in a well-known insurance treatise and a number of federal court decisions that had concluded that an indemnity agreement between the insureds can shift an entire loss to one insurer, notwithstanding an "other insurance" clause in the insureds insurance policy. (Mt. Hawley, supra, 123 Cal.App.4th at pp. 292-298.) However, citing Reliance, supra, 72 Cal.App.4th at pages 1081-1083, Mt. Hawley also recognized that Rossmoor does not stand for the rule that an indemnity agreement "always prevails over provisions in an insurance policy, as for example where there are two levels of insurance coverage, primary and excess." (123 Cal.App.4th at p. 298.) It reiterated Rossmoors teaching that each case would necessarily turn on its own facts and require an inquiry into the circumstances of the damages or injury and the language of the indemnity contract. (Id. at p. 299.)
Mt. Hawley concluded that Travelers Casualty was not dispositive, enumerating the reasons Travelers Casualty did not aid Hartford. First, unlike Travelers Casualty, the issue of liability under the indemnity provision was raised by Mt. Hawley in its motion for summary judgment, namely, whether Hartfords insured, Valley Metal, was obligated to indemnify Mt. Hawleys insured, PCS, and it was established as a matter of law that PCS was not the sole cause of the underlying injuries. "As a consequence, the determination that was not made in Travelers [Casualty] — whether one insured was liable to another insured under an indemnity provision — was made in this case," a matter the parties in Travelers Casualty chose not to adjudicate. (Mt. Hawley, supra, 123 Cal.App.4th at p. 301.) "We can think of no reason why in an action between insurers . . . an insurer in Mt. Hawleys position should be precluded from resolving the indemnity issue at the summary judgment stage. If anything, it will prevent a subsequent suit by one insured against another insured to determine the indemnity issue in order to obtain contribution." (Id. at pp. 301-302.)
Mt. Hawley also concluded that it did not matter that the present suit was between the insurers rather than the insureds. "[I]nsureds do not always have to be parties to a contribution action by their insurers." (Mt. Hawley, supra, 123 Cal.App.4th at p. 303.)
Finally, Mt. Hawley concluded that the policy concern expressed in Travelers Casualty that an insurer should not be required to prove its additional insured was actively or intentionally negligent to recover equitable contribution from that insureds own insurer, was not present. "[W]here a construction contract requires the subcontractor to indemnify the general contractor unless the general contractor is solely negligent, the subcontractor should be permitted to make such a showing of sole negligence in order to avoid having to pay indemnity. Otherwise, the subcontractor is left holding the bag even though it is entirely blameless. That is not equitable." (Mt. Hawley, supra, 123 Cal.App.4th at p. 304.)
Application
The lesson we glean from these cases is that when a claim is made under the doctrine of either contribution or subrogation that an indemnity agreement between insureds, not the language of their insurance policies, determines the right of insurance allocation, courts must first determine the precise intent of the parties to the indemnity agreement. A court must then determine whether the indemnity agreement has been triggered under undisputed facts. Finally, a court must weigh the equities.
RSI/SouthBay Subcontract Indemnity Provision
Well-settled rules govern contract interpretation. The contract must be interpreted so as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as is ascertainable and lawful. (Civ. Code, § 1636.) The intent of the parties is first ascertained by the language of the agreement. (Civ. Code, §§ 1638, 1639.) "The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity." (Civ. Code, § 1638.) "When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible . . . ." (Civ. Code, § 1639.) Parol evidence is properly admitted to construe a written instrument where its language is ambiguous. (Pacific Gas & E. Co. v. G.W. Thomas Drayage Etc. Co. (1968) 69 Cal.2d 33, 38-39.) When, as here, no competent extrinsic evidence has been introduced, the interpretation of the contract derives solely from the terms of the instrument, and appellate courts make an independent determination of the contracts meaning. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 866.)
As recited earlier, the "Liability for Injury & Damage" provision of the RSI/South Bay contract states that RSI agrees "to indemnify . . . Owner and Contractor . . . from . . . any and all suits, actions, legal proceedings, claims [etc.]. . . . in any manner caused or occasioned. . . through any occurrence, omission, fault or negligence of Subcontractor . . . in connection with or incident to the performance of the work and. . .the same shall include injury or death to any person or persons. . . ." (See p. 3, ante.)
Words of a contract are to be understood in their ordinary and popular sense, unless the parties use them in a technical sense or the words have been given a special meaning by usage. (Civ. Code, § 1644.) The parties supporting documents in the motions for summary judgment do not include references to any technical or special meaning given in the construction industry to the words of this indemnity provision. Reasonably read, this indemnity clause provides that RSI will indemnify Hunter Storm and South Bay for any damages RSI caused. Neverthless, it is appropriate to consider the circumstances surrounding a contracts making. "A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates." (Civ. Code, § 1647.) Considering the indemnity provision in the construction trade context in which the provision arises, the language manifests the intent of RSI and South Bay that RSI will indemnify Hunter Storm and/or South Bay for job site injuries "to any person" when subcontractor RSI was "in any manner" a cause of the injury. Said slightly differently, the clause reflects a mutual understanding that RSI will indemnify Hunter Storm and South Bay only to the extent of RSIs negligence, not for injuries caused by South Bay or Hunter Storms neglience. "Indemnity provisions are to be strictly construed against the indemnitee, and had the parties intended to include an indemnity provision that would apply regardless of the subcontractors negligence, they would have had to use specific, unequivocal contractual language to that effect. [Citations.]" (Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th 1265, 1278.)
While the indemnity clause manifests an intent that RSI indemnify Hunter Storm for RSIs negligence but not for Hunter Storm or South Bays own negligence, the critical fact in the subrogation of an insurer to the rights of its insured, as Travelers Casualty emphasizes, is the presupposition that the insured in fact has a right to indemnity under the indemnity agreement. (Travelers Casualty, supra, 93 Cal.App.4th at p. 1157.) Here, the courts order states that, in contrast to Reliance and Travelers Casualty, the issue of the indemnity provisions in the contracts between the insureds "has been raised, and is appropriate for the trial courts consideration and determination." It then concluded that the indemnity provision was triggered because Hunter Storm submitted evidence that the Current/Low injuries were partially caused by RSIs negligence, and that even though Great Americans evidence demonstrated Hunter Storms negligence, Great Americans evidence did not overcome RSIs contractual duty to indemnify.
We conclude the trial courts analysis is incomplete. The fact that the evidence is in conflict as to whether RSI or Hunter Storm or both were negligent leaves unresolved the question of the application of the Hunter Storm/South Bay general contracts indemnity agreement to the question of subrogation. While the trial courts order recites the language of Paragraph A of the South Bay/RSI subcontract, entitled "Workmanship & Materials," and language of the Hunter Storm/South Bay contract in support of its conclusion, it does not further analyze whether the cited language, considered together with the whole of the South Bay/RSI subcontract, clearly expresses an intent to fully absolve Hunter Storm of all liability. Indeed, Hunter Storm is not entitled to indemnity if it was solely negligent, and certainly not if it was actively or intentionally negligent in causing the Current/Low injuries. (See Travelers Casualty, supra, 93 Cal.App.4th at p. 1157; see also Rossmoor, supra, 13 Cal.3d at p. 629.)
Subcontract Workmanship and Materials Provision
As previously recited, the Workmanship and Materials provision of the subcontract provides that RSI agreed "[t]o be bound to [South Bay] by the terms of [the subcontract], and the general contract documents, and to assume toward [South Bay] all the obligations and responsibilities that [South Bay], by the general contract documents, assumes toward [Hunter Storm], and in general to perform said work and each and every part and detail thereof in the best workmanlike manner by qualified, careful and efficient workers and to use materials that are satisfactory for which they are applied." Relying on this language, Fidelity argues that by agreeing to assume toward South Bay all the obligations South Bay assumed toward Hunter Storm, RSI owed to Hunter Storm any indemnity obligation South Bay owed to Hunter Storm.
This language does not readily reflect a mutual understanding that RSI would assume the identical indemnity obligations that South Bay had taken on in the general contract. "The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." (Civ. Code, § 1641.) When a contract has several provisions or particulars, the court must adopt a construction of the contract that will, if possible, give effect to all provisions. (Code Civ. Proc., § 1858.) A court should not interpret a contract in a manner that makes some provisions nugatory, inoperative, or meaningless. (Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App.4th 595, 602.)
The overarching purpose of the subcontract is set forth in Paragraph 2, entitled "Subcontract Work:" RSI agreed to furnish all labor and supplies as provided for in the contract between South Bay and Hunter Storm, "and shall do everything in strict conformance with this agreement, the general conditions for the contract between [Hunter Storm] and [South Bay], and in strict accordance with the drawings, specifications and other contract documents, all of which general conditions, drawings, specifications and other contract documents are familiar to [RSI], form a part of this [sub]contract and will be hereinafter called the `General Contract Documents." By its plain language, this provision sets forth and emphasizes RSIs obligation to perform its work in exacting compliance with the Hunter Storms plans for the warehouse. It does not set forth an obligation by RSI to indemnify Hunter Storm.
Paragraph 4 of the subcontract, entitled "General Conditions," identifies the above-quoted Paragraph 2 as a "special condition," and states that subsequent paragraphs A through W of the subcontract are "general conditions" and are fully incorporated by reference into the subcontract. Paragraph A is the above-quoted "Workmanship & Materials" provision. Paragraph A complements Paragraph 2. It expresses the intent of South Bay and RSI that, in performing its obligation to do its work in strict conformance with the drawings and specifications, as set forth in Paragraph 2, RSI will do so with qualified workers and appropriate materials. It also expresses the parties intent that RSI is obligated to perform its work for South Bay by the same workmanlike standards to which South Bay is obligated to perform its work for Hunter Storm. The focus of Paragraph A, in short, is the manner in which the parties have promised to perform the work that is the purpose of their contracts.
Indemnity obligations, on the other hand, are addressed in paragraph I, a wholly separate paragraph, entitled "Liability for Injury and Damage." If Paragraph A were construed, as Fidelity asserts, as an indemnity provision, Paragraph I would be rendered surplusage, which is contrary to the general rules of contract interpretation. (Code Civ. Proc., § 1858; Ratcliff Architects, supra, 88 Cal.App.4th at p. 602.) Moreover, these two paragraphs are separated from each other by seven other alphabetically identified paragraphs that cover subjects unrelated to either workmanship and materials or to indemnity, e.g., application for payment, permits, cleanup. The parties use of discrete paragraphs to address different topics reflects their intent that the obligations set forth in each paragraph were distinct; they were not synonymous or overlapping. Such an interpretation comports with the rule of construction that each provision of a contract is to be given effect.
Furthermore, had the parties intended that RSI would stand in relation to Hunter Storm as South Bay stood in relation to Hunter Storm in all matters, there would have been no need for Paragraph I. The inclusion of a paragraph that specifically articulated RSIs indemnity obligations to South Bay and Hunter Storm reflects the parties intention that RSIs indemnity duties were to be defined and governed by this paragraph, not by the more broadly generic language in Paragraph 2 that refers to RSI "doing everything in strict conformance with. . .the general conditions for the contract between" South Bay and Hunter Storm. (See MacDonald & Kruse, Inc. v. San Jose Steel Co. (1972) 29 Cal.App.3d 413, 421: to the extent a general and particular provision of a written instrument are inconsistent, the particular controls.)
The language of the South Bay/RSI subcontract, reasonably read as a whole, does not impart to RSI South Bays indemnity obligations to Hunter Storm under their general contract. Whatever indemnity obligations South Bay and RSI intended RSI to assume toward Hunter Storm derive solely from Paragraph I of the subcontract, "Liability for Injury and Damages."
As we have concluded, RSI is obligated under Paragraph I to indemnify Hunter Storm only if RSI is negligent. While Fidelity supported its motion for summary judgment with an expert opinion declaration that RSIs conduct was a substantial factor in causing Current and Lows injuries, Great American alleged in its complaint and presented competing evidence that Hunter Storms active conduct was the cause of their injuries. As yet there has been no definitive finding or admission that RSI was negligent. Until there are undisputed facts that RSIs negligence caused Current and Lows injuries and Hunter Storm is therefore fully indemnified under the South Bay/RSI subcontract against those injuries, Hunter Storm retains a right to demand that its insurer, Fidelity, indemnify it against Current and Lows injuries. In the context of this subrogation action, Great American, which paid those losses on behalf of Hunter Storm, retains the right to seek recovery of those losses from Fidelity. (Travelers Casualty, supra, 93 Cal.App.4th at pp. 1151-1152.)
CONCLUSION
On this record, Fidelity did not establish that the indemnity provision in the South Bay/RSI subcontract constituted a complete defense to Great Americans action for subrogation. Nor did it demonstrate that Great American was unable to establish, as a matter of law, one or more elements of its action. Therefore, it was not entitled to summary judgment. Because this appeal pertains only to the judgment entered in favor of Fidelity on its motion for summary judgment, we do not reach the issue of whether Great American was entitled to judgment.
DISPOSITION
The judgment is reversed. Costs to appellant.
We concur:
GEMELLO, J.
NEEDHAM, J.