Opinion
D040249.
11-12-2003
NORTH AMERICAN SPECIALTY INSURANCE COMPANY, Plaintiff and Appellant, v. ST. PAUL MERCURY INSURANCE COMPANY, Defendant and Respondent.
North American Special Insurance Company (North American) appeals a judgment on the pleadings in favor of St. Paul Mercury Insurance Company (St. Paul) on North Americans complaint for declaratory relief and equitable contribution, which was filed after a marathon participant sued Elite Racing, Inc. (Elite) for personal injuries stemming from his participation in an event organized by Elite. North American insured Elite under a commercial general liability (CGL) policy; Elite was also named as an additional insured by an endorsement to a CGL policy issued by St. Paul to USA Track and Field, Inc. and other named insureds. On competing motions for judgment on the pleadings, the superior court determined St. Pauls coverage was excess to North Americans under the plain language of the endorsement, and thus North American had no right of equitable contribution. We conclude as a matter of law both insurance policies provide primary coverage to Elite and St. Pauls endorsement only added an "other insurance" clause, presenting a question of reconciling that clause with North Americans competing "other insurance" clause. We further conclude reconciliation of these clauses requires an assessment of equitable considerations, which prevents resolution of the question by motion for judgment on the pleadings. Accordingly, we reverse the judgment and direct the court to enter an order denying St. Pauls motion for judgment on the pleadings.
FACTUAL AND PROCEDURAL HISTORY
In 1999, Richard Saffro sued Elite, the organizer of the 1998 "Suzuki Rock `N Roll Marathon," alleging he suffered personal injuries following his participation in that event on June 21, 1998. North American insured Elite under a CGL policy in effect at the time of the marathon. That policy, in effect from March 8, 1998 to March 8, 1999, provides "general" or "blanket" coverage and is primary insurance for Elite. It contains an "other insurance" provision stating in part:
"If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:
"a. Primary Insurance
"This insurance is primary except when b. below [inapplicable fire, automobile and aircraft losses] 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 described in c. below.
. . .
"c. Method of Sharing
If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes equal amounts until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first."
On or about June 10, 1998, Elite was named as the certificate holder on a certificate of insurance affording it "`event specific "coverage under a CGL policy issued by St. Paul to USA Track and Field, Inc. and other entities.[] Elite is not a named insured under the St. Paul policy. The "Description of Operations" portion of the certificate provides:
Those entities are the Athletic Congress of the USA, Inc.; the National Track and Field Hall of Fame, Inc.; and any Member Association (as defined in Article 2.5 and Article 5.A of the USA Track and Field, Inc. bylaws). St. Pauls policy was effective from December 31, 1997 through December 31, 1998. Elite was added as an insured approximately six months into the policy period.
"EVENT: Suzuki Rock `n Roll Marathon DATE: 6-21-98 SANCTION #1954 Certificate Holder is an additional insured for this sanctioned event."
The St. Paul policy provides: "What this Agreement Covers [¶] Bodily injury and property damage liability. Well pay amounts any protected person is legally required to pay as damages for covered bodily injury or property damage that: [¶] happens while this agreement is in effect; and [¶] is caused by an event." The policy defines "protected person" as "any person or organization who qualifies as a protected person under the Who is Protected Under This Agreement section." It defines "event" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The St. Paul policy further provides St. Paul has the "right and duty to defend any protected person against a claim or suit for injury or damage covered by this agreement."
Like the North American policy, the St. Paul policy contains an "other insurance" clause. That provision reads in part:
"This agreement is primary insurance. If there is any other valid and collectible insurance for injury or damage covered by this agreement, the following applies in connection with that other insurance:
"Other primary insurance. When there is other primary insurance, well share with that insurance the amounts youre legally required to pay as damages for injury or damage covered by this agreement. Well do so with one of the methods of sharing described in the Methods of sharing section."
St. Pauls policy also contains an endorsement, entitled "Sanctioned Events Endorsement — Additional Protected Persons" (the Sanctioned Events Endorsement) providing in part:
"This endorsement changes your Commercial General Liability Protection
"How Coverage is Changed
"There are four changes which are explained below.
"1. The following is added to the Who is Protected Under This Agreement section. This change adds certain protected persons and limits their protection.
. . .
"Certificate of insurance protected persons. Any person or organization shown as a protected person on a certificate of insurance issued by or for you is a protected person. But only for covered injury or damage that results from a sanctioned event.
. . .
"4. The following is added to the Other Insurance section. This change explains how well apply this agreement in connection with sanctioned events.
"Sanctioned events insurance. Well apply this agreement as excess insurance for any sanctioned event for which there is other valid and collectible insurance for injury or damage covered by this agreement, unless a statement that this agreement is primary insurance for that event is included in:
"— an endorsement to this policy, other than the Sanctioned Events Endorsement — Additional Protected Persons; or
"— a certificate of insurance for this policy.
"We explain how well apply this agreement as excess insurance in the Excess Insurance section."
As to excess insurance, the St. Paul policy provides in part:
"Excess Insurance. When this insurance is excess insurance, we wont have a duty to defend the protected person against the part or parts of any claim or suit for which any other insurer has the duty to defend the protected person."
North American defended Elite in Saffros action. Elite also tendered its defense to St. Paul, which acknowledged the tender but refused to defend Elite on the basis its insurance was excess and non-contributing to North Americans.
In October 2001, North American filed the present action for declaratory relief and equitable contribution against St. Paul. It sought a determination that St. Pauls policy was issued as primary general liability insurance, and St. Paul was required to defend Elite on a pro-rata basis or alternatively pay up to its policy limits before North American was required to contribute to Elites defense. St. Paul answered and sought a determination that its obligation to defend and indemnify Elite was provided only in excess of all other valid and collectible insurance, including North Americans insurance.
Both St. Paul and North American moved for judgment on the pleadings, stipulating to the genuineness of the policy documents attached to and incorporated by reference in North Americans complaint. In a telephonic ruling, the court granted St. Pauls motion and denied North Americans. It observed Elite was not a named insured on the St. Paul policy as was USA Track & Field, Inc., but was an additional insured on the policy via the Sanctioned Events Endorsement. Looking to the language of that endorsement, the court found it plainly provided excess coverage to Elite for the sanctioned event unless there was another endorsement or certificate of insurance stating that the coverage would be primary. Because there was no such other endorsement or certificate, the court determined St. Paul was an excess insurance carrier, and accordingly North American — admittedly a primary insurer — had no right of equitable contribution. Following arguments, the court confirmed its telephonic ruling and entered judgment in St. Pauls favor.
North American filed this appeal.
DISCUSSION
I. Standard of Review
A motion for judgment on the pleadings has the same function as a general demurrer, and is used to attack a pleading only as to defects disclosed on its face or by matters that can be judicially noticed. (Cloud v. Northrop Gumman Corp. (1998) 67 Cal.App.4th 995, 999.) We review the courts order denying judgment on the pleadings under the same standard by which we review a decision to overrule a general demurrer. (See Smiley v. Citibank (1995) 11 Cal.4th 138, 146.) We liberally construe and accept the truth of all material facts alleged in North Americans complaint, consider matters that may be judicially noticed, and determine as a matter of law whether the complaint states a cause of action under any possible legal theory. (Ibid.; Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515-516; Rolfe v. California Transportation Comn (2002) 104 Cal.App.4th 239, 242-243; see, e.g., Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)
II. North Americans Cause of Action for Declaratory Relief
A. Nature of Relief
"`The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject." (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 79.) The declaratory relief statute, Code of Civil Procedure section 1060, provides such relief is available "in cases of actual controversy relating to the legal rights and duties of the respective parties. . . ." (Code Civ.Proc., § 1060; Ludgate Ins. Co. v.. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 605.) For North American to state a cause of action for declaratory relief, there must arguably be a right on its part or a duty on St. Pauls part. (Gilbert v. State of California (1990) 218 Cal.App.3d 234, 248.) On St. Pauls motion for judgment on the pleadings as to this claim, the only question is whether North American has sufficiently pleaded an actual controversy relating to the legal rights and duties of the parties. (Cf. Ludgate Ins. Co. v. Lockheed Martin Corp., at p. 606 [declaratory relief statute requires only an actual controversy relating to parties legal rights and duties, accordingly allegation that underlying insurance policy limits were exhausted, while necessary to entitle insured to recover on an excess policy, is not necessary to create an actual controversy; "[f]acts showing exhaustion of the underlying limits merely establish the insureds right to recovery, not whether an actual controversy exists between the parties"].)
The question whether North American can state a declaratory relief cause of action turns on the interpretation of the insurance policies incorporated by reference in North Americans complaint. It is St. Pauls burden on its motion to establish conclusively an interpretation of its policy that negates beyond reasonable controversy the construction expressly alleged in the body of the complaint. (Columbia Casualty Co. v. Northwestern Nat. Ins. Co. (1991) 231 Cal.App.3d 457, 469, 471.) To meet this burden, St. Paul must demonstrate that the policy language supporting its position is so clear and simple that parol evidence will be inadmissible to refute it. (Id. at p. 469.) Thus, if St. Paul establishes its policy language unambiguously precludes any right of equitable contribution for North American, North Americans assertion of an actual controversy as to that question must fail, as of course must its cause of action for equitable contribution.
Neither party challenges the trial courts resolution of the question as a matter of law. In the absence of any argument that extrinsic evidence is needed to interpret the policy language, we consider the question of policy interpretation to be one of law. (Underground Construction Co., Inc. v. Pacific Indemnity Co. (1975) 49 Cal.App.3d 62, 67; see Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 [interpretation of an insurance policy is a question of law]; Century Surety Company v. United Pacific Insurance Company (2003) 109 Cal.App.4th 1246, 1254.)
B. Excess and Primary Insurance
Our threshold task is to determine whether St. Pauls policy as to Elite is a true excess (sometimes referred to as secondary) policy, or whether it is a primary policy with an "excess only" other-insurance clause. The distinction is important, for the parties agree that "[o]ne insurer has no right of contribution from another insurer with respect to its payment on an obligation for which it was primarily responsible, and as to which the liability of the second insurer was only secondary." (Firemans Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1298.) Stated another way, "equitable contribution is only available where coinsurers share the same primary level of liability on the same risk. Consequently, in the absence of an express agreement to the contrary, there is never any right to contribution between primary and excess carriers of the same insured." (Id. at p. 1300; see also Scottsdale Ins. Co. v. Essex Ins. Co. (2002) 98 Cal.App.4th 86, 90-91; Maryland Casualty Co. v. Nationwide Mutual Ins. Co. (2000) 81 Cal.App.4th 1082, 1089; Commerce & Industry Ins. Co. v. Chubb Custom Ins. Co. (1999) 75 Cal.App.4th 739, 745 [predicate for prorating policies with conflicting "other insurance" provisions is that the policies operate on the same level of coverage, i.e., they apply to the same damage or loss suffered by the same party].)"
`"Primary coverage is insurance coverage whereby, under the terms of the policy, liability attaches immediately upon the happening of the occurrence that gives rise to liability . . . . `Excess . . . is coverage whereby, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted."" (Maryland Casualty Co. v. Nationwide Mutual Ins. Co., supra, 81 Cal.App.4th at p. 1087, fn. 2, quoting Reliance Nat. Indemnity Co. v. General Star Indemnity Co. (1999) 72 Cal.App.4th 1063, 1076.) "The `excess insurance referred to in this definition is that secondary insurance which provides coverage after other identified insurance is no longer on the risk. The identification of the underlying primary insurance may be as to (1) a particular policy or policies that are specifically described or (2) underlying coverage provided by a particular and specifically described insurer. In short, excess insurance is insurance that is expressly understood by both the insurer and insured to be secondary to specific underlying coverage which will not begin until after that underlying coverage is exhausted and which does not broaden that underlying coverage." (Century Surety Co. v. United Pacific Ins. Co., supra, 109 Cal.App.4th at p. 1255, citing Wells Fargo Bank v. California Ins. Guarantee Assn. (1995) 38 Cal.App.4th 936, 940.)
This court and others have made a distinction between true excess insurance, and primary insurance that purports to transform into excess insurance in the presence of other available insurance by virtue of an "other insurance" clause. (See, e.g., Pacific Indemnity Co. v. Bellefonte Ins. Co. (2000) 80 Cal.App.4th 1226, 1235; Century Surety Co. v. United Pacific Ins. Co., supra, 109 Cal.App.4th at pp. 1255-1256; Travelers Casualty and Surety Co. v. American Equity Ins. Co. (2001) 93 Cal.App.4th 1142, 1149-1150; Commerce & Industry Ins. Co. v. Chubb Custom Ins. Co., supra, 75 Cal.App.4th at pp. 746-747.) "Other insurance" provisions, commonly found in the typical CGL insurance policy, attempt to limit the insurers liability where other insurance covers the same risk, and also attempt to control the manner in which each insurer contributes to or shares a covered loss. (Dart Industries, Inc. v. Commercial Union Ins. Co. (2002) 28 Cal.4th 1059, 1078, fn. 6 (Dart Industries).) "`Historically, "other insurance" clauses were designed to prevent multiple recoveries when more than one policy provided coverage for a particular loss." (Id. at p. 1079, quoting Firemans Fund Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.App.4th at p. 1304.)
"Other insurance" provisions may take several forms. The clause appearing in the North American policy is commonly known as a pro rata provision, which generally looks to limit the insurers liability to the total proportion that its policy limits bear to the total coverage available to the insured. (Commerce & Industry Ins. Co. v. Chubb Custom Ins. Co., supra, 75 Cal.App.4th at pp. 743-744; see also Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2002) ¶ 8:16, pp. 8-4-8-5.) Another type of "other insurance" clause is one that provides the insurer becomes liable only to the extent the loss exceeds other valid and collectible insurance; the intended effect of this so-called "excess only" provision is that the insurer acts as an excess insurer. (Commerce & Industry Ins. Co. v. Chubb Custom Ins. Co., supra, at p. 744; Croskey, et al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 8:19, p. 8-6.) A third type of clause, referred to as an "escape clause," is one in which the presence of other valid and collectible insurance completely extinguishes the insurers liability. (Century Surety Co. v. United Pacific Ins. Co., supra, 109 Cal.App.4th at pp. 1255-1256; Croskey, et al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 8:20, p. 8-6.)
C. The St. Paul Policy Unambiguously Provides Elite with Primary Insurance Coverage Limited to the Sanctioned Event
North American contends St. Pauls policy provides primary insurance to Elite. It argues the St. Paul policy meets the definition of primary insurance because it obligates St. Paul to "pay amounts any protected person is legally required to pay as damages for covered bodily injury or property damage that happens while this agreement is in effect and is caused by an event," and by this language provides immediate coverage upon the happening of an occurrence giving rise to liability. North American maintains the St. Paul policy does not meet the definition of an excess policy because it does not attach only after a predetermined amount of primary coverage has been exhausted, and it also provides coverage in the absence of other insurance. Characterizing the Sanctioned Events Endorsement as adding an excess-only provision to the "other insurance" section of the policy. North American argues that addition does not transform the St. Paul policy into an excess insurance policy. Instead, North American argues St. Pauls policy remains primary insurance notwithstanding the excess-only "other insurance" provision, and the conflicting "other insurance" provisions in St. Pauls and North Americans competing primary policies must be cancelled as irreconcilable as similar provisions were by this court in Pacific Indemnity Co. v. Bellefonte Ins. Co., supra, 80 Cal.App.4th 1226 and also by the court in Commerce and Industry Ins. Co. v. Chubb Custom Ins. Co., supra, 75 Cal.App.4th 739.
St. Paul, on the other hand, argues its policy is primary only vis-a-vis its "named" insureds, USA Track & Field, Inc. and the other named entities. It maintains that as a "certificate of insurance protected person," Elite is not entitled to the same broad coverage afforded to the named insureds under St. Pauls policy, rather, Elites coverage is limited by virtue of the Sanctioned Events Endorsement according to the endorsements terms. St. Paul characterizes the excess-only provision of the endorsement as an "insuring agreement" rendering its limited, specific-event coverage of Elite excess coverage only.
Resolution of this question turns on the effect of the Sanctioned Events Endorsement on the coverage afforded to Elite by St. Paul. Absent that endorsement, St. Paul concedes its policy by its plain language affords coverage on a primary basis. "`Endorsements are modifications to the basic insuring forms in the policy. Endorsements may alter or vary any term or condition of the policy." (Adams v. Explorer Ins. Co. (2003) 107 Cal.App.4th 438, 450, quoting Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 3:188, p. 3-50.) "Endorsements may be attached to a policy at its inception or added during the term of the policy. [Citation.] [¶] Thus, an endorsement is an amendment to or modification of an existing policy of insurance. It is not a separate contract of insurance. Standing alone, an endorsement means nothing. `Endorsements on an insurance policy form a part of the insurance contract [citation], and the policy of insurance with the endorsements and riders thereon must be construed together as a whole [citation]. [Citation.] `Conditions stated in the policy as such apply to the endorsement." (Adams v. Explorer Ins. Co., 107 Cal.App.4th at pp. 450-451.)
We apply the same standard rules of insurance contract interpretation to the endorsement. "Since endorsements are part of the insurance contract, the rules of interpretation apply equally to these provisions." (Maryland Casualty Co. v. Nationwide Ins. Co. (1998) 65 Cal.App.4th 21, 29.) Our goal is to give effect to the parties mutual intent. (Id. at p. 28, citing Civ. Code, § 1636.) "If contract language is clear and explicit, we ascertain this intent from the written provisions and go no further. [Citation.] Words in an insurance policy must be understood in their ordinary sense unless given special meanings by the policy." (Maryland Casualty Co. v. Nationwide Ins. Co., 65 Cal.App.4th at p. 28; see La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 37.) As we have stated, where, as here, there is no conflicting extrinsic evidence, the policies interpretation is a legal issue to be decided by the court. (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 429-430; Maryland Casualty Co. v. Nationwide Ins. Co., 65 Cal.App.4th at p. 29.) We also apply the established doctrine that amendatory endorsements control over the provisions they amend. (See, e.g., Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 50, fn. 4; Continental Cas. Co. v. Phoenix Constr. Co., supra, 46 Cal.2d at p. 431; Estate of Murphy (1978) 82 Cal.App.3d 304, 309-310; see also Civ. Code, § 1651 [written or specially prepared portions of a contract control over those which are printed or taken from a form].)
The Sanctioned Events Endorsement explains that it makes four changes to St. Pauls coverage, two of which are central here. The first change adds as a protected person "[a]ny person or organization shown as a protected person on a certificate of insurance issue by or for you," "[b]ut only for covered injury or damage that results from a sanctioned event." Read in conjunction with the certificate of insurance, this first change made Elite an insured on the St. Paul policy for a single event: the 1998 Suzuki Rock `N Roll Marathon held on June 21, 1998. But contrary to St. Pauls suggestion, this change did not affect or limit the primary nature of St. Pauls policy. St. Pauls contention that Elites coverage is limited by its status as a "certificate of insured protected person" is accurate to the extent St. Paul insured Elite only for covered injury or damage that results from the June 21, 1998 marathon event. The fact Elite was added as an insured or "protected person" for a single event by virtue of a certificate of insurance does not in and of itself change the nature of the coverage afforded to Elite under the policy terms. A certificate of insurance is only evidence that an insurance policy has been issued. (See Ins. Code, § 384; Pardee Const. Co. v. Insurance Co. of the West (2000) 77 Cal.App.4th 1340, 1347, fn. 2; Empire Fire & Marine Ins. Co. v. Bell (1997) 55 Cal.App.4th 1410, 1423, fn. 25.) Indeed, Elites certificate states it "confers no rights upon the certificate holder" and "does not amend, extend or alter the coverage afforded by the policies [listed] below." We are not persuaded by St. Pauls emphasis on the fact North Americans policy "specifically names Elite and its associated entities as Named Insureds" and St. Pauls policy does not list Elite as a named insured. If Elite falls within the category of a "protected person" — and we conclude it does so under the endorsement albeit solely for purposes of the June 21, 1998 sanctioned event — the fact Elite is not expressly identified as an insured in the master policy is irrelevant.
The Sanctioned Events Endorsements second key change, by its terms, constitutes an addition to the "other insurance" section of St. Pauls policy. This change "explains how well apply this agreement in connection with sanctioned events" and provides:
"Well apply this agreement as excess insurance for any sanctioned event for which there is other valid and collectible insurance for injury or damage covered by this agreement, unless a statement that this agreement is primary insurance for that event is included in:
"— an endorsement to this policy, other than the Sanctioned Events Endorsement — Additional Protected Persons; or
"— a certificate of insurance for this policy.
We agree with North American that by its terms, the Sanctioned Events Endorsement amended the St. Paul policy to add an excess-only "other insurance" provision applicable to sanctioned events. The endorsement did not alter the "What this Agreement Covers" section of the policy or redefine who was a "protected person." As a protected person solely for the June 21, 1998 Suzuki Rock `N Roll Marathon, Elite was insured under St. Pauls policy against damages for covered bodily injury or property damage that "happens while this agreement is in effect and is caused by an event." Thus, for that one-day occasion, St. Paul insured Elite on the same level of liability and on the same risk as North American. Nothing in the sanctioned events endorsement changed the covered risk; it therefore did not transform the St. Paul policy from a primary policy into an excess policy.
We reached a similar conclusion in Pacific Indemnity v. Bellefonte Ins. Co. There, we rejected Pacific Indemnitys argument that its excess-only "other insurance" clause contained within its CGL policy covering the San Diego Unified Port District rendered its policy an excess policy, eliminating any defense duty. (Pacific Indemnity v. Bellfonte Ins. Co., supra, 80 Cal.App.4th at p. 1235.) We pointed out that the Port Districts CGL policies required Pacific to defend and indemnify it immediately upon the occurrence of a covered event, and thus both it and the Port Districts other insurer, Bellfonte, were primary insurers on the same risk. (Ibid.) Although St. Paul emphasizes there are no decisions factually on point with this case, it does not attempt to distinguish Pacific Indemnity v. Bellfonte Ins. Co. or explain why its reasoning should not apply. We do not perceive any distinguishing factor by virtue of the fact the other-insurance clause in this case was inserted by an endorsement; the clause has all the indicia of an excess-only "other insurance" clause in that it broadly purports to make its coverage excess whenever there is other available insurance. (Accord, Century Surety Co. v. United Pacific Ins. Co., supra, 109 Cal.App.4th at pp. 1255-1256.)
D. Resolution of the Conflicting Other Insurance Clauses
Because the language of the insurance policies and particularly the Sanctioned Events Endorsement does not support St. Pauls interpretation, St. Paul did not establish that it is entitled to judgment on the pleadings on North Americans declaratory relief cause of action. In other words, St. Paul did not conclusively establish an interpretation of its policy that negates beyond reasonable controversy the construction expressly alleged in the body of the complaint. (Columbia Casualty Co. v. Northwestern Nat. Ins. Co., supra, 231 Cal.App.3d at p. 471.) Thus, the superior court erred in granting St. Pauls motion for judgment on the pleadings on that cause of action.
Because the parties maintain the issue presents questions of law, it remains to be determined whether this court has the ability to also reconcile the "other insurance" clauses as a matter of law so as to require St. Paul to contribute equitably to Elites indemnity and defense costs. (E.g. Pacific Indemnity Co. v. Bellefonte Ins. Co. (2000) 80 Cal.App.4th 1226; Commerce and Industry Ins. Co. v. Chubb Custom Ins. Co., supra, 75 Cal.App.4th 739.) As we explain, it is not appropriate to do so based only on the pleadings and policy language, and we therefore reverse the judgment and remand the matter with directions that the superior court enter an order denying St. Pauls motion for judgment on the pleadings.
In Pacific Indemnity v. Bellefonte Ins. Co., we found persuasive the reasoning of CSE Ins. Group v. Northbrook Property & Casualty Co. (1994) 23 Cal.App.4th 1839, 1843 (CSE), and an ensuing line of cases holding that equitable contribution principles require proration of defense costs where primary insurance policies contain competing excess-only and pro rata clauses.[] (Pacific Indemnity v. Bellefonte Ins. Co., at pp. 1236-1238.) CSE reached its holding after recognizing excess-only provisions have often collided with proration provisions, with results that cannot be harmonized. (Pacific Indemnity v. Bellefonte Ins. Co., 80 Cal.App.4th at p. 1236, citing CSE, 23 Cal.App.4th at p. 1843.) The court offered several reasons for its conclusion that excess-only clauses should bow to proration clauses: First, an insurer with an excess-only clause has no expectation that its "other insurance" clause will always be given effect, because California courts disregard such clauses when two co-insurers policies both include them. (CSE, supra, 23 Cal.App.4th at 1845.) Also, the fact courts require proration in the face of conflicting excess-only clauses "manifest[s] a court-made public policy that proration is a favored method of apportioning loss among those who have contracted to insure against it." (Ibid.) The court analogized excess-only clauses to disfavored escape clauses, and concluded excess-only clauses should also be disfavored, though to a lesser extent than escape clauses, because insurers use them to attempt to avoid coverage for an otherwise covered loss. (Ibid.) Additionally, because courts resolve two excess-only clauses by prorating coverage, it would be anomalous to deny proration when in fact one of the policies actually calls for proration: To rule otherwise, a court "would have to embrace the proposition that an insurance policy will prorate if and only if it states that it will not prorate." (Id. at p. 1846.)
At the time, we observed CSEs reasoning had been adopted by Firemans Fund Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.App.4th 1279 and Commerce & Industry Ins. Co. v. Chubb Custom Ins. Co., supra, 75 Cal.App.4th 739.) We add Century Surety Co. v. United Pacific Ins. Co., supra, 109 Cal.App.4th 1246 to that list.
In Dart Industries, the California Supreme Court acknowledged these principles, recognizing the "judicial distrust" of "other insurance" provisions that attempt to shift the burden away from one primary insurer partly or wholly to other insurers. "`[P]ublic policy disfavors "escape" clauses, whereby coverage purports to evaporate in the presence of other insurance. [Citations.] This disfavor should also apply, to a lesser extent, to excess-only clauses, by which carriers seek exculpation whenever the loss falls within another carriers policy limit." (Dart Industries, supra, 28 Cal.4th at p. 1080.) Citing CSE and our decision in Pacific Indemnity v. Bellefonte Ins. Co., the court said: "Partly for this reason, the modern trend is to require equitable contributions on a pro rata basis from all primary insurance regardless of the type of `other insurance clause in their policies." (Dart Industries, at p. 1080, italics added; see also Century Surety Co. v. United Pacific Ins. Co., supra, 109 Cal.App.4th at p. 1258 [quoting Dart Industries].) The court, however, left open the question whether this rule is "universally
applicable . . . ." (Dart Industries, at p. 1080.) In Firemans Fund Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.App.4th 1279, the court observed the California Supreme Court has not formulated a definitive rule to address this type of conflict. (Id. at p. 1305.) "The Supreme Court has `expressly decline[d] to formulate a definitive rule applicable in every case in light of varying equitable considerations which may arise, and which affect the insured and the primary and excess carriers, and which depend upon the particular policies of insurance, the nature of the claim made, and the relation of the insured to the insurers." (Ibid., citing Signal Companies, Inc. v. Harbor Ins. Co. (1980) 27 Cal.3d 359, 369.)[]
In Signal Companies, Inc. v. Harbor Ins. Co., supra, 27 Cal.3d at p. 369, the court emphasized: "`The reciprocal rights and duties of several insurers who have covered the same event do not arise out of contract, for their agreements are not with each other . . . . Their respective obligations flow from equitable principles designed to accomplish ultimate justice in the bearing of a specific burden. As these principles do not stem from agreement between the insurers their application is not controlled by the language of their contracts with the respective policy holders."
We conclude the general rule of proration in view of competing other insurance clauses is just that: a general rule that should not be applied in a bright-line manner under all circumstances. (Accord, Firemans Fund Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.App.4th at p. 1306 ["`[t]he general rule, when multiple policies share the same risk but have inconsistent "other insurance" clauses, is to prorate according to the policy limits"].) Indeed, courts still recognize excess "other insurance" clauses may be honored "when there is no ensuing prejudice to the interests of the insured." (See Hartford Cas. Ins. Co. v. Travelers Indem. Co. (2003) 110 Cal.App.4th 710, 725 (Hartford); Travelers Casualty and Surety Co. v. American Equity Ins. Co. (2001) 93 Cal.App.4th 1142, 1149; Reliance Nat. Indemn. Co. v. General Star Indemn. Co. (1999) 72 Cal.App.4th 1063, 1080 ["In equitable contribution cases, the courts enforce primary and excess provisions in insurance contracts as long as the rights of the policyholder are not adversely affected"].) This rule admittedly has many exceptions: "`The courts will . . . generally honor the language of excess "other insurance" clauses when no prejudice to the interests of the insured will ensue. However, there are many exceptions. For example, where two or more primary insurers policies contain excess `other insurance clauses purporting to be excess to each other, the conflicting clauses will be ignored and the loss prorated among the insurers on the ground the insured would otherwise be deprived of protection." (Travelers Casualty and Surety Co. v. American Equity Ins. Co., 93 Cal.App.4th at pp. 1149-1150, quoting Olympic Ins. Co. v. Employers Surplus Lines Ins. Co. (1981) 126 Cal.App.3d 593, 599.) The exceptions are grounded on equitable considerations. In Hartford, the court observed: "[E]ven when two policies have conflicting other insurance provisions where one requires proration and one claims to be excess, a court considers `"varying equitable considerations which may arise, and which affect the insured and the primary and excess carriers, and which depend upon the particular policies of insurance, the nature of the claim made, and the relation of the insured to the insurers."" (Hartford, at p. 725, quoting Firemans Fund Ins. Co. v. Maryland Casualty Co., 65 Cal.App.4th at p. 1305.)
In Hartford, the court applied these principles in a situation involving excess and pro rata "other insurance" provisions in policies covering a landlord (MPOC) and tenant (Cornerstone). In a lease agreement, Cornerstone agreed to hold MPOC harmless against specified personal injury or death claims, and endorse its CGL policy to name MPOC as an additional insured, specifying that MPOCs insurance was excess and noncontributing. (Hartford, supra, 110 Cal.App.4th at p. 714.)
Hartford issued a CGL policy to Cornerstone that provided it was primary, except when there was other insurance for fire, extended coverage, builders risk, and similar coverage, and when Cornerstone was an additional insured under another policy. When its coverage was primary, the Hartford policy provided Hartford would share with other valid and collectible primary insurance. (Id. at p. 726.) Travelers issued a CGL policy to MPOC with an endorsement entitled "Other Insurance — Additional Insured" providing: "This insurance is excess over any of the other Insurance; whether primary, excess, contingent or on any other basis: [¶] . . . [¶] (4) That is valid and collectible Insurance available to [MPOC] if you are added as an additional insured under any other policy." Tracking language in the lease agreement between the landlord and tenant, the endorsement eliminated Travelers duty to defend any claim or suit that any other insurer had a duty to defend. (Id. at pp. 714-715.)
Travelers assumed defense of a lawsuit filed against MPOC after a Cornerstone employee was killed on the premises while working after hours. (Hartford, supra, 110 Cal.App.4th at pp. 712-713.) It tendered the defense to Hartford and Hartford sought a judicial determination that MPOC was not entitled to defense or indemnity under its policy. (Id. at p. 713.) On competing summary judgment motions, the trial court determined Travelers met its burden of showing Hartfords coverage was primary and Travelers was excess and that Travelers was entitled to recover certain amounts paid in settlement of the underlying action. (Id. at p. 715.)
The court of appeal held the trial court properly gave effect to the excess clause in Travelers policy. It began by observing the matter involved consideration of the equities between the parties: "In evaluating competing claims for equitable contribution, the trial court exercises its discretion to weigh the equities to `"`accomplish ultimate justice."" (Id. at p. 724, quoting Firemans Fund Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.App.4th at pp. 1305-1306.) The Hartford court acknowledged the trend against rigidly enforcing excess-only clauses, but held the facts and equities of its case compelled a different conclusion. (Hartford, supra, 110 Cal.App.4th at pp. 724-725, 726.) It based its holding on the Travelers policy language providing its coverage was excess as to "valid and collectible insurance available to [MPOC] if you are added as an additional insured under any other policy." (Id. at p. 726.) It found both policies "contain narrow exceptions to their operation as primary insurance" — they "declare themselves to be excess in the situation where the parties and the insurers are most likely to intend that result — when the insured is covered as an additional insured on another partys policy for some specific event or situation." (Ibid.) Equity did not compel overriding the policy terms between Hartford and Travelers because the terms did not conflict or interfere with the insureds rights. The court explained: "By its terms, the Hartford policy is primary except in specified instances that do not apply in this case. The Travelers policy is primary except in the specific instance that does apply in this case — when the insured is named as an additional insured under another policy, which makes the Travelers policy excess by definition. Because the policy terms, as they apply in this case, do not conflict or offend public policy and do not infringe on any rights of the insured, there is no reason to disregard the express terms of both policies." (Id. at p. 727.) The circumstances, according to the Hartford court, were different from those in Firemans Fund and other cases in which literal enforcement of the policy language would have left the insured without coverage. "This equitable consideration led the courts to ignore the excess only clauses because they in fact would serve as escape clauses for the insurers — a result that could not have been intended by the policyholders." (Ibid., citing Commerce and Industry Ins. Co. v. Chubb Custom Ins. Co., supra, 75 Cal.App.4th at pp. 744-745.)
In giving effect to Travelers excess clause the Hartford court also focused on the fact Hartford had to have been aware that additional insureds would have coverage in certain circumstances through its special broad form general liability endorsement because it changed its policy to add that endorsement. It therefore accepted the risk of additional insureds like MPOC and presumably structured premiums accordingly. (Hartford, supra, 110 Cal.App.4th at p. 727.)
St. Paul argues that there are no contractual or equitable considerations that should compel this court to dishonor the limitations contained in its policy. It bases this argument on the fact the insurers issued primary policies to two different named insureds (Elite and USA Track and Field, Inc.) and its characterization of the Special Events Endorsement as limiting coverage for one day, one event and on an excess basis. But we have already concluded St. Pauls coverage of Elite was primary for the one-day event, and that the endorsement by its terms merely added an excess-only "other insurance" clause to the policy. These points, in our view, do not resolve the conflicting "other insurance" provisions as a matter of law. There may be other equitable considerations not reflected in North Americans pleadings or the strict language of the policies at issue, which may compel the court to give effect to St. Pauls excess-only clause in the present case.[] But the question does not require that we elaborate on what facts or circumstances those considerations may take into account. We only conclude that in the present case, reconciliation of St. Pauls and North Americans "other insurance" clauses is not strictly a question of law amenable to resolution by judgment on the pleadings.
For example, North American does not allege that USA Track and Field, Inc. or any of the other named insureds on St. Pauls policy was required to procure additional insurance for Elite under that policy, and the record does not indicate the presence of a contract or other agreement requiring Elite to be named as an additional insured. Such agreements are common and significant in determining the objectively reasonable coverage expectations of the additional insured. (See, e.g. St Paul Mercury Ins. Co. v. Frontier Pacific Ins. Co. (2003) 111 Cal.App.4th 1234, 1245; St. Paul Fire & Marine Ins. Co. v. American Dynasty Surplus Lines Ins. Co. (2002) 101 Cal.App.4th 1038, 1059; Maryland Casualty Co. v. Nationwide Mutual Ins. Co. (2000) 81 Cal.App.4th 1082, 1086.)
III. North Americans Cause of Action for Equitable Contribution
The foregoing conclusion also precludes judgment on the pleadings on North Americans cause of action for equitable contribution, which turns on reconciliation of North Americans and St. Pauls "other insurance" clauses.
DISPOSITION
The judgment on the pleadings is reversed and the matter remanded with directions that the superior court enter an order denying St. Paul Mercury Insurance Companys motion for judgment on the pleadings. The parties shall bear their own costs on appeal.
WE CONCUR: McCONNELL, P. J. and HALLER, J.