Opinion
E072918
06-03-2020
STATE FARM GENERAL INSURANCE COMPANY, Plaintiff and Appellant, v. COLUMBIA CASUALTY COMPANY, Defendant and Respondent.
Grant, Genovese & Baratta, Lane D. Orloff; Greines, Martin, Stein & Richland, and Robert A. Olson for Plaintiff and Appellant. CNA Coverage Litigation Group and Edward J. Tafe for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVDS1616549) OPINION APPEAL from the Superior Court of San Bernardino County. Keith D. Davis, Judge. Affirmed. Grant, Genovese & Baratta, Lane D. Orloff; Greines, Martin, Stein & Richland, and Robert A. Olson for Plaintiff and Appellant. CNA Coverage Litigation Group and Edward J. Tafe for Defendant and Respondent.
After successfully defending a personal injury lawsuit against its named insured (a tenant) and its additional insured (a landlord), appellant State Farm General Insurance Company brought this equitable contribution action seeking a portion of the defense costs from the landlord's other insurer, respondent Columbia Casualty Company. Columbia filed a motion for summary judgment arguing its duty to defend the landlord under its commercial general liability policy never arose because (1) the landlord hadn't paid the required self-insured retention (SIR) amount of $250,000 and (2) its policy was excess to State Farm's policy under the terms of its "other insurance" clause. The trial court agreed with Columbia's first argument and granted summary judgment in its favor.
State Farm appeals that ruling, arguing Columbia's SIR requirement limits its duty to indemnify only, not its duty to defend. We conclude the trial court correctly interpreted Columbia's SIR endorsement and, in any event, Columbia's policy is excess to State Farm's. We therefore affirm.
I
FACTS
We rely on State Farm's allegations and the evidence submitted by the parties on the motions for summary judgment for the facts.
A. The Relevant Contracts
Samarch Corporation (Samarch) ran a mobile dental business out of a building it leased from TA Operating LLC doing business as Travel Centers of America (TCA). The lease agreement between Samarch and TCA required Samarch to indemnify TCA against all third-party claims for personal injury or property damage "in or upon the Premises." The lease agreement also required Samarch to obtain a commercial general liability insurance policy that named TCA as an additional insured and "contain[ed] a clause confirming that such policy and the coverage evidenced thereby shall be primary with respect to any insurance policies carried by [TCA]." Samuel Naveen, co-owner and an officer of Samarch, obtained a commercial general liability policy from State Farm naming him the insured and TCA an additional insured.
TCA obtained a commercial general liability insurance policy from Columbia. That policy contains a SIR endorsement setting the retention amount, or the "amount of liability retained by the insured," at $250,000. The endorsement provides that Columbia's insurance coverage applies in excess of the SIR. The Columbia policy also contains an "other insurance" clause, which says the policy is primary, except when there is "[a]ny other primary insurance available to you covering liability for damages arising out of the premises or operations . . . for which you have been added as an additional insured."
B. The Starnes Lawsuit
After allegedly suffering a broken jaw and cheek bone from a tooth extraction performed by a Samarch employee, Bobby Starnes filed a personal injury lawsuit against Samarch, Naveen, and TCA. Starnes's complaint alleged both Samarch and TCA had been negligent. As to TCA, the complaint alleged both direct (negligent hiring and supervision) and vicarious theories of liability. TCA tendered its defense to State Farm, who accepted and provided a successful defense to Samarch, Naveen, and TCA during the Starnes litigation. State Farm represented the defendants through trial and obtained a defense verdict and judgment.
During the litigation, as soon as State Farm had spent over $250,000 in defense costs, it wrote Columbia asking it to participate in the defense. State Farm acknowledged the SIR requirement in Columbia's policy and argued it had satisfied the requirement by incurring defense costs that exceeded the retention amount. Columbia responded by saying State Farm's policy was primary and its policy was excess, and as such, its duty to defend would not arise until State Farm had exhausted its policy limits. Counsel for State Farm responded by saying the "other insurance" clause in Columbia's policy is disfavored for public policy reasons as articulated in Dart Industries, Inc. v. Commercial Union Ins. Co. (2002) 28 Cal.4th 1059 (Dart). Counsel argued the only thing keeping Columbia's duty to defend from arising was the SIR requirement, and State Farm had recently satisfied it. TCA's counsel responded to State Farm's second letter, by taking the position Columbia's policy was excess, and informing State Farm it would continue to rely solely on them to provide a defense. Columbia also responded to State Farm's second letter. It said, under the terms of its policy, only its insured, TCA, could satisfy the SIR requirement, and that State Farm's payment of more than $250,000 in defense costs did not affect its obligations under the policy. It also reiterated its position that its policy was excess over State Farm's.
C. State Farm's Equitable Contribution Suit
After defending the Starnes suit, State Farm filed this action against Columbia for equitable contribution. State Farm alleged it had incurred no less than $440,000 in the underlying litigation and said equity demands Columbia be responsible for half of the defense costs.
State Farm also asserted a claim of bad faith denial of coverage, but on appeal it doesn't challenge the trial court's dismissal of that claim.
The parties filed cross-motions for summary judgment. State Farm argued Columbia's policy contained a broad duty to defend, which was triggered by the negligent hiring and supervision claims against TCA in the Starnes complaint. Columbia reiterated the arguments it made to State Farm during the litigation—that its policy is excess over State Farm's and that TCA hadn't satisfied the SIR requirement.
State Farm countered that Columbia should be estopped from using the SIR requirement as a ground for refusing to provide a defense. Acknowledging it was "undisputed that the Columbia . . . policy contains a SIR endorsement requiring that the $250,000 retention amount be paid by the insured itself (and only the insured)," State Farm argued Columbia should be estopped from relying on the endorsement because Columbia had caused TCA not to pay the SIR by taking the position their policy was excess to State Farm's. According to State Farm, TCA had agreed with this position, and for that reason refused to pay the SIR and relied instead on State Farm to cover the defense costs. State Farm also argued Columbia's policy was primary. State Farm didn't dispute there was no "other insurance" clause in its policy, while there was one in Columbia's. But, citing Dart, State Farm argued such clauses are disfavored for public policy reasons and the modern trend in California courts is to refuse to enforce them.
Columbia acknowledged the trend disfavoring "other insurance" clauses but, citing Hartford Casualty Ins. Co. v. Travelers Indemnity Co. (2003) 110 Cal.App.4th 710 (Hartford), argued the trend applies only where both insurance policies contain such clauses and enforcing the clauses would harm the insured by leaving them without primary insurance. Columbia pointed out State Farm's policy did not contain an "other insurance" clause and TCA wouldn't be harmed by enforcing Columbia's. Columbia also argued State Farm's estoppel argument was meritless. It argued an excess insurer has no duty to defend, or even to reserve its rights, before exhaustion of the primary coverage, and the reason TCA didn't satisfy the SIR requirement was that TCA also took the position State Farm's insurance was primary and Columbia's excess, not that Columbia told them to take that position.
To support their arguments, the parties submitted the Starnes complaint, the State Farm and Columbia insurance policies, correspondence between the parties regarding State Farm's request that Columbia participate in TCA's defense, and the lease agreement between TCA and Samarch.
At the outset of the hearing on the motions, the trial court announced its tentative decision to grant Columbia's motion. "As I take a look at the insurance agreements in the matter it seems clear to me that there needed to be payment of the quarter million dollars Self-Insured Retention by the insur[ed], not by the insured's carrier.[¶] It's clear that the SIR was never paid by [TCA] . . . and since that's the case, it seems to me Columbia's policy, which really is an excess policy, doesn't come into play." After hearing argument from the parties, the court adopted its tentative, clarifying, "I'm relying, of course, on the Columbia Casualty policy and the SIR endorsement." State Farm filed a timely notice of appeal.
II
DISCUSSION
A. Standard of Review
A trial court properly grants summary judgment when there are no triable issues of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) The purpose of summary judgment "is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar).)
A defendant who moves for summary judgment bears the initial burden to show the action has no merit—that is, "one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action." (Code Civ. Proc., § 437c, subds. (a), (p)(2).) Once the defendant clears this initial hurdle, the burden shifts to the plaintiff to demonstrate a triable issue of material fact. (Aguilar, supra, 25 Cal.4th at pp. 850-851.)
We review the trial court's ruling on a summary judgment motion de novo, liberally construing the evidence in favor of the party opposing the motion and resolving all doubts about the evidence in favor of the opponent. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460.)
B. Legal Principles
"An insurer that has paid defense . . . expenses may pursue reimbursement from other insurers on various equitable grounds, including . . . contribution." (Hartford Casualty Ins. Co. v. Mt. Hawley Ins. Co. (2004) 123 Cal.App.4th 278, 286-287.) "In the insurance context, the right to contribution arises when several insurers are obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action without any participation by the others." (Id. at p. 287.) Equitable contribution "is predicated on the commonsense principle that where multiple insurers or indemnitors share equal contractual liability for the primary indemnification of a loss or the discharge of an obligation, the selection of which indemnitor is to bear the loss should not be left to the often arbitrary choice of the loss claimant, and no indemnitor should have any incentive to avoid paying a just claim in the hope the claimant will obtain full payment from another coindemnitor." (Id. at p. 288, italics added.) "The purpose of this rule of equity is to accomplish substantial justice by equalizing the common burden shared by coinsurers, and to prevent one insurer from profiting at the expense of others." (Id. at p. 287.)
Because contribution is available only between insurers with the same level of contractual liability to the insured, it's important to understand the different levels of insurance. "Under well-settled insurance principles, there are two levels of insurance coverage, primary and excess. [Citations.] . . . '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" or secondary coverage is coverage whereby, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted.'" (Reliance Nat. Indemnity Co. v. General Star Indemnity Co. (1999) 72 Cal.App.4th 1063, 1076 (Reliance).)
"It is settled under California law that an excess or secondary policy does not cover a loss, nor does any duty to defend the insured arise, until all of the primary insurance has been exhausted." (Reliance, supra, 72 Cal.App.4th at p. 1077; see also Maryland Casualty Co. v. Nationwide Mutual Ins. Co. (2000) 81 Cal.App.4th 1082, 1089 ["the primary insurer is obligated to defend the insured and must bear 100 percent of the defense costs until the primary limits have been exhausted"].) Which is why, "[a]s a general rule, there is no contribution between a primary and an excess carrier." (Reliance, at p. 1078; see also Signal Companies, Inc. v. Harbor Ins. Co. (1980) 27 Cal.3d 359, 367-368 [the duty to contribute applies to insurers that share the same level of obligation on the risk as to the same insured].) And this dichotomy makes sense because "a primary insurer typically charges a greater premium than an excess insurer," in order to cover "the cost of providing the insured with a defense." (American Safety Indemnity Co. v. Admiral Ins. Co. (2013) 220 Cal.App.4th 1, 11 (American Safety).)
Finally, "[w]e interpret an insurance policy using the same rules of interpretation applicable to other contracts." (Legacy Vulcan Corp. v. Superior Court (2010) 185 Cal.App.4th 677, 688 (Legacy Vulcan).) "We interpret words in accordance with their ordinary and popular sense, unless the words are used in a technical sense or a special meaning is given to them by usage. [Citation.] If contractual language is clear and explicit and does not involve an absurdity, the plain meaning governs." (Ibid.)
Courts will enforce "the contractual terms of insurance coverage . . . whenever possible. [Citations.] This includes excess insurance provisions in policies, 'even in situations where to do so will be inconsistent with proration provisions in other policies.'" (Reliance, supra, 72 Cal.App.4th at p. 1076.) "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." (Id. at p. 1080, citing Signal Companies, Inc., supra, 27 Cal.3d 359 at pp. 367-369; ); see also Windsor Food Quality Co., Ltd. v. Underwriters of Lloyds of London (2015) 234 Cal.App.4th 1178, 1185 (Windsor) ["an insurer . . . is entitled to limit its coverage to defined risks and, if it does so in clear language, courts will not impose coverage where none was intended"].)
C. The SIR Endorsement
It is well established that a SIR requirement in an insurance policy "effectively transforms the policy from a primary policy into an excess policy covering only amounts in excess of the . . . self-insured retention [amount]." (General Star Indemnity Co. v. Superior Court (1996) 47 Cal.App.4th 1586, 1593-1594 [concluding the SIR endorsement in the policy put the insurer "in the position of an excess carrier having no obligations," including no duty to defend, "until the SIR was exhausted"].) Whether a SIR requirement limits an insurer's duty to defend in addition to its duty to indemnify depends on the policy terms. (See American Safety, supra, 220 Cal.App.4th at p. 4 [courts will enforce policies that "unambiguously make payment of a SIR obligation a condition of any obligation under the policy, including any duty to defend"].)
In this area of insurance law, courts recognize that the term "self-insurance" is something of a misnomer. "'Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.' (Ins. Code, § 22.) '[S]elf-insurance . . . is equivalent to no insurance.'" (American Safety, supra, 220 Cal.App.4th 1, 12, quoting Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 72.)
As the basis for granting summary judgment in Columbia's favor, the trial court concluded, under the terms of its SIR endorsement, Columbia's duty to defend did not arise until TCA paid $250,000 towards its defense. State Farm contends this was a misinterpretation of the endorsement. We disagree.
We begin our analysis by noting this is not a case about whether the claims in the underlying lawsuit triggered Columbia's duty to defend TCA, but rather whether Columbia's duty was triggered under the terms of its policy. It is undisputed that if there were a duty under the policy, Starnes's claims against TCA would trigger it. (Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co. (2018) 5 Cal.5th 216.)
The relevant liability coverage form in this case is Columbia's "Coverage A" form, which applies to bodily injury and property damage liability. The insuring agreement in Coverage A states that Columbia "will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." The insuring agreement also contains the familiar language providing that Columbia has the "duty to defend the insured against any 'suit' seeking those damages." The insuring agreement warns "[v]arious provisions in this policy restrict coverage" and advises the insured to read the entire policy to fully understand the limits of insurance.
One such coverage restriction is contained in the "Self-Insured Retention Endorsement" attached to the policy. That endorsement begins: "In consideration of the premium charged, it is agreed that the limits of insurance for each of the coverages provided by this policy . . . will apply excess of a self-insured retention (hereinafter referred to as the Retention Amount)." The endorsement sets the retention amount at $250,000, which, according to the endorsement, can be satisfied by TCA's payment of "claim costs including defense and/or by pure loss o[r] indemnity costs."
The endorsement also says the policy "does not apply to, and we have no duty or obligation under the policy to provide, investigation or defense for claims or suits seeking damages within the Retention Amount . . . . We shall have the right, but not the duty, to make any investigations we deem necessary, but have no obligation to defend such claims or suits." The endorsement goes on to say: "We shall have the right, but not the duty, to participate with you at our own expense in the defense or settlement of any claim or suit seeking damages covered under this policy. In the event of a claim or suit which in our reasonable judgment may result in payments, including supplementary payments, in an amount in excess of the Retention Amount, we may assume control of the defense or settlement of such claim or suit. You will continue to be responsible for the payment of the Retention Amount." (Italics added.) Finally, the endorsement provides, "We shall not be obligated to advance any amounts within the Retention Amount that the Insured may be legally obligated to pay. However, while retaining all rights to defend suits under this policy, we may advance sums in the defense of any claims or suits. In the event such funds are advanced, the insured shall immediately reimburse us upon demand." (Italics added.)
Columbia argues the first sentence of the endorsement makes clear that its insurance coverage, broadly speaking, does not kick in until TCA has paid the retention amount of $250,000. Under Columbia's interpretation, insurance "coverage" includes the obligation to pay damages as well as defense costs. State Farm counters that the endorsement limits only Columbia's obligation to pay damages. State Farm analogizes Columbia's endorsement to the SIR clauses in Legacy Vulcan and American Safety, where the courts concluded the terms in the primary policies did not clearly and explicitly communicate to the insured that the retention amounts limited the insurers' obligation to pay defense costs.
Like the trial court, we agree with Columbia's interpretation. We find Legacy Vulcan and American Safety inapt because the policy terms were different. In American Safety, the SIR endorsement provided that the insurer's "total liability for all damages will not exceed the limits of liability as stated in the Declarations and will apply in excess of the insured's self-insured retention (the 'Retained Limit')" and that the "'Retained Limit' is the amount shown below, which you are obligated to pay, and only includes damages otherwise payable under this policy." (American Safety, supra, 220 Cal.App.4th at pp. 9-10.) In Legacy Vulcan, the policy provided the insurer would "indemnify the Insured for ultimate net loss in excess of the retained limit hereinafter stated which the Insured shall become legally obligated to pay as damages." (Legacy Vulcan, supra, 110 Cal.App.4th at p. 682, second italics added.) In both cases, the courts found it significant the SIR clauses mentioned "damages" and "indemnity" only.
And rightly so. Because the duty to defend is broader, and triggered sooner, than the duty to indemnify (Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 553-554, 559), without a reference to the duty to defend specifically or to the broader concept of "insurance" or "coverage," an insured cannot reasonably be expected to understand the SIR limits the insurer's obligation to fund its defense. (See, e.g., De May v. Interinsurance Exchange (1995) 32 Cal.App.4th 1133, 1139 [an insurance policy "'should be read as a lay[person] would read it and not as it might be analyzed by an attorney or an insurance expert'"].) Thus, because the clauses in Legacy Vulcan and American Safety mentioned damages and indemnity only, the courts concluded the SIR limited the insurers' duty to indemnify, and not their duty to defend. (Legacy Vulcan, supra, 110 Cal.App.4th at p. 697; American Safety, supra, 220 Cal.App.4th at p. 13.)
Here, in contrast, Columbia's endorsement is not limited by its own terms to its duty to indemnify or obligation to pay damages. Rather, the endorsement states the retention requirement applies to "the limits of insurance for each of the coverages provided by th[e] policy." (Italics added.) This language is important because, as noted, the relevant duty to defend is contained in Columbia's insuring agreement for Coverage A. We read this opening clause as a broad reference to Columbia's insurance obligations in each of the coverage forms, which obligations include the duty to defend. (See Nabisco, Inc. v. Transport Indemnity Co. (1983) 143 Cal.App.3d 831, 834 (Nabisco) [SIR limited the insurer's duty to defend where the policy stated its "coverage" was excess over the retention amount].) State Farm argues the phrase "limits of insurance" refers to Columbia's obligation to pay damages only and not defense costs. To the contrary, the Coverage A form says Columbia's "right and duty to defend ends when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C." That the policy explicitly includes defense costs in its limits of insurance supports our interpretation of Columbia's SIR endorsement.
Legacy Vulcan and American Safety are inapt for the additional reason that they involve primary insurance policies, and as we conclude in the following section, Columbia's policy is excess in this case. As Legacy Vulcan and American Safety explained, when interpreting SIR requirements in primary policies, courts should presume the requirement does not limit the insured's duty to defend unless the requirement "expressly and unambiguously" references the duty to defend. (American Safety, supra, 220 Cal.App.4th at p. 4.) In contrast, when interpreting SIR requirements in excess policies, there is no presumption. "One of the reasons for this rule is that the defense obligation falls on the primary insurer, whose greater premium reflects that risk. [Citation.] '[I]t is unnecessary to impose an immediate duty to defend on the excess carrier to afford the insured that to which it is entitled, namely, the full protection of a defense on its behalf.' [Citation.] Another reason for the rule is that, absent policy language to the contrary, the insured could have no reasonable expectation that an excess insurer would provide a defense before the primary insurance is exhausted." (American Safety, at p. 11, quoting Legacy Vulcan, supra, 185 Cal.App.4th at p. 695.) In any event, as we've explained, Columbia's endorsement does unambiguously reference the duty to defend by stating the SIR limits its coverage.
Next, State Farm relies on a clause in Columbia's endorsement which provides that Columbia's "obligation to pay damages on behalf of the insured applies only to the amount of damage in excess of the Retention Amount." (Italics added.) Were that the only provision explaining how the SIR operated, we would agree Columbia's policy is like those in Legacy Vulcan and American Safety. But we have to look at the entire endorsement, and we can't ignore the clear language at the beginning which announces Columbia's coverage applies to amounts in excess of the retention amount.
State Farm also points to provisions in the endorsement quoted above that specifically refer to Columbia's duty to defend. State Farm argues that while the endorsement explicitly removes the duty to defend cases seeking damages less than $250,000 (the SIR amount), its failure to explicitly remove the duty to defend cases seeking damages over that amount shows Columbia in fact retained the duty. Again, State Farm is ignoring the opening clause of the endorsement, which states that Columbia's coverage, which includes its duty to defend, applies to amounts in excess of the SIR. The endorsement thus creates two scenarios. The first occurs when a plaintiff files a suit seeking less than $250,000 in damages. In that case, Columbia has no duty to defend, full stop. The second occurs when a plaintiff files a suit seeking more than $250,000. In that case, Columbia's duty to defend kicks in when TCA has satisfied the SIR requirement. The record does not indicate which scenario the Starnes suit fell under, but that issue is irrelevant. Columbia's SIR requirement applies when Columbia's duty to defend arises.
State Farm points to the fact that the endorsement gives Columbia the "right . . . to participate" with TCA in the defense of any suit. (Italics added.) State Farm argues the right to participate presupposes a duty to defend. We disagree. As we read the provision, it allows Columbia, at its choosing, to participate with TCA in situations where it is providing a defense. The provision does not speak to when Columbia's duty to defend arises.
We conclude the trial court correctly interpreted the endorsement to limit Columbia's duty to defend, and we affirm the judgment on that basis.
D. The "Other Insurance" Clause
However, we also conclude that even if Columbia's SIR does not limit its duty to defend TCA, there is an alternative basis for affirming the judgment. Although the trial court did not explicitly conclude Columbia's policy is excess over State Farm's (though it did say that was its tentative interpretation), we conclude it constitutes an independent ground to uphold the trial court's grant of summary judgment in Columbia's favor. It is a well-established principle of appellate law that we review a trial court's ruling, not its reasoning, and will affirm the ruling if it's supported by any proper basis. (E.g., Reliance, supra, 72 Cal.App.4th at p. 1074.) As we explain, the record demonstrates Columbia's policy is excess over State Farm's, and this is a proper basis on which to affirm the trial court's ruling because the issue was briefed by the parties both in the trial court and on appeal.
As we've seen, Columbia's policy contains a clause stating its coverage is primary except in situations where there is other primary insurance available to TCA "covering liability for damages arising out of the premises or operations . . . for which [TCA had] been added as an additional insured." The policy further provides, "When this insurance is excess, we will have no duty under Coverages A or B to defend the insured against any 'suit' if any other insurer has a duty to defend the insured against that 'suit.' If no other insurer defends, we will undertake to do so, but we will be entitled to the insured's rights against all those other insurers."
In its summary judgment briefing, State Farm argued it was undisputed its policy didn't contain an "other insurance" clause. It relied on Dart for the proposition that courts disfavor such clauses and generally refuse to enforce them for public policy reasons. Columbia acknowledges "other insurance" clauses are disfavored in certain circumstances but argues those don't obtain here. We agree.
Courts will refuse to enforce the terms of insurance policies when faced with broadly worded "conflicting other insurance clauses" in multiple policies, resulting in a situation where all the insured's insurers deny primary coverage. (Hartford, supra, 110 Cal.App.4th at p. 725; see also Fireman's Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1305 [broad "other insurance" clauses, which "purport to make the coverage excess" of all other insurance, are disfavored].) In other words, courts will not enforce "competing" clauses if doing so "would strand an insured between insurers disclaiming coverage." (Commerce & Industry Ins. Co. v. Chubb Custom Ins. Co. (1999) 75 Cal.App.4th 739, 744-745.)
But here only Columbia's policy contains an "other insurance" clause, and that clause is narrowly tailored to ensure that TCA is not prejudiced by its enforcement. As a result, this case is like Hartford—an equitable contribution case where the court enforced the "other insurance" clause contained in one of the two insurance policies at issue.
In Hartford, like here, the insured was a tenant who, per the terms of their lease agreement, obtained a general commercial liability policy from Hartford that named the landlord as an additional insured. (Hartford, supra, 110 Cal.App.4th at pp. 712-715.) Also like here, the landlord had a general commercial liability policy with Travelers, which contained an "other insurance" clause stating the policy was generally primary, but was excess over any of the other insurance, "whether primary, excess, contingent or on any other basis" that is "valid and collectible Insurance available to you . . . if you are added as an additional insured under any other policy." (Id. at p. 715.) The provision also said when the policy is excess, Travelers would "have no duty under Coverage A or B to defend any claim or 'suit' that any other Insurer has a duty to defend." (Ibid.)
The court noted Travelers' "other insurance" clause "tracked the statement in the Lease regarding [the landlord's] insurance being excess." (Hartford, supra, 110 Cal.App.4th at p. 715.) Hartford's policy also contained an "other insurance" clause, but one that applied differently than Travelers'. The clause made Hartford's insurance excess over "other insurance for fire, extended coverage, builder's risk, and similar coverage." The clause also rendered Hartford's insurance excess "when [the tenant] was an additional insured under another policy." (Id. at p. 726.)
After Hartford paid the defense costs in a personal injury lawsuit against the tenant and the landlord for a death that occurred on the premises, Hartford sued Travelers for equitable contribution. (Hartford, supra, 110 Cal.App.4th at pp. 712-715.) Based on the "other insurance" clause in the Travelers policy, the trial court concluded their insurance was excess over Hartford's and granted summary judgment in Travelers' favor. The appellate court affirmed that ruling over Hartford's objection that courts generally refuse to enforce such clauses. (Id. at pp. 724-725.)
The court acknowledged the "general rule regarding [not enforcing] conflicting other insurance clauses," but concluded a well-recognized exception applied. Namely, that "no prejudice to the interests of the insured w[ould] ensue" from enforcing Travelers' clause. (Hartford, supra, 110 Cal.App.4th at p. 725.) The court explained both policies contained "narrow exceptions to their operation as primary insurance." (Id. at p. 726.) Specifically, "[b]oth policies 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 party's policy for some specific event or situation. A clause that carves out this intended exception to primary coverage is not similar to an escape clause, where the insurer appears to offer coverage that in fact evaporates in the presence of other insurance." (Ibid., italics added.)
Also important to the court was the fact Travelers' clause did not "conflict" with Hartford's. (Hartford, supra, 110 Cal.App.4th at p. 727.) The court explained the trend against enforcing "other insurance" clauses arose because courts were finding themselves faced with "policies that each [broadly] claimed to be excess whenever there was other insurance" such that "[l]iteral enforcement of the policy language would have left the insured without coverage." (Ibid.) "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.)
But the problem of stranding an insured between insurers disclaiming coverage was not present in Hartford. "Equity should not be employed to override the terms of the insurance policies in this case. 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." (Hartford, supra, 110 Cal.App.4th at p. 727.)
Such is the case here. Columbia's policy is primary except in a specific instance that happens to apply in this case, and State Farm's policy does not contain an "other insurance" clause. In other words, the policy terms do not conflict or leave TCA without insurance, and there is thus no reason to disregard the express terms of both policies.
State Farm's reliance on Dart does not alter our conclusion. In Dart, the California Supreme Court simply acknowledged the recent trend of not enforcing conflicting "other insurance" clauses that operate as "escape" provisions. (Dart, supra, 28 Cal.4th at pp. 1079-1080.) Notably, the court did not disapprove of Hartford or the exception for cases where the insured is not harmed by enforcement of such a clause. "Courts generally enforce excess coverage provisions, particularly where there is no reasonable expectation of primary coverage and the rights of insureds and accident victims are unaffected by its application." (Nabisco, supra, 143 Cal.App.3d at p. 835.) There is no equitable reason in this case to ignore the clear language of Columbia's policy.
Perhaps because it recognized too late that this issue turns on the absence of conflicting "other insurance" clauses, State Farm argues for the first time on appeal that the record is too incomplete to determine whether its policy contains such a clause. In its appellate briefs, State Farm contends that "[f]or unknown reasons," the relevant coverage form, Special Policy Form 3 FP-6154, "is not in the summary judgment record" and, as a result, "[t]here is nothing in the record establishing whether State Farm had a competing 'other insurance' provision." But that is simply not the case. What establishes that State Farm's policy does not have an "other insurance" clause is State Farm's own concession to that effect in the trial court. As previously noted, in the parties' statements of undisputed facts on summary judgment, State Farm said it was undisputed its policy does not contain such a clause. That representation is binding on State Farm, and it cannot take a different position on appeal. What's more, State Farm submitted a copy of its policy to the trial court in a document entitled, "Stipulation of Facts for Cross-Motions and Motion for Summary Judgment" and it described the policy as a "true and correct copy of the State Farm Policy." It cannot go back on that representation either.
Also, for the first time on appeal, State Farm challenges the idea that its policy is a primary policy or that it even contains a duty to defend. In its opening brief, State Farm argues that because Special Policy Form 3 FP-6154 is missing from the policy it submitted to the trial court, "one cannot tell" if its policy was primary or included a duty to defend. These belated arguments are not well taken. The issues of which policy was primary and which party bore the duty to defend were the crucial issues before the trial court on summary judgment. State Farm had every opportunity during both rounds of summary judgment briefing to make the arguments it's making now to the trial court, as well as every opportunity to submit the form it now claims is missing.
Indeed, if State Farm believed the policy it submitted to the court was incomplete in a way that affected the merits of the case, not only did it have the opportunity to submit the missing form, it bore the burden to do so. This is another way of saying that Columbia cleared its initial summary judgment hurdle of demonstrating State Farm could not satisfy an essential element of its equitable contribution claim (i.e., that both parties provided the same level of insurance), and State Farm failed to produce evidence demonstrating a triable issue of material fact. If the missing form in State Farm's policy would have demonstrated the policy did in fact contain an "other insurance" clause (and further, one that conflicted with Columbia's), demonstrated the policy wasn't primary, or demonstrated the policy didn't contain a duty to defend, it was State Farm's burden to produce that form. (Aguilar, supra, 25 Cal.4th at pp. 850-851 ["how the parties moving for, and opposing, summary judgment may each carry their burden of . . . production depends on which would bear what burden of proof at trial"]; Windsor, supra, 234 Cal.App.4th at p. 1185 [the party claiming coverage bears the burden "'"to prove that an event is a claim within the scope of the . . . coverage"'"].)
Because the record demonstrates Columbia's policy was excess over State Farm's, Columbia owed no duty to defend TCA in the Starnes lawsuit until State Farm exhausted its policy limits (which did not happen). For this additional reason, we conclude the trial court correctly granted Columbia's motion for summary judgment.
After we issued our tentative opinion to the parties, State Farm filed a request seeking to dismiss its appeal. We exercise our discretion to deny State Farm's request, as it came after the appeal had been fully briefed and the tentative opinion had been issued, and because the appeal raises issues warranting an opinion. (California Rules of Court, rule 8.244(c)(2); see also Greb v. Diamond Internat. Corp. (2013) 56 Cal.4th 243, 247, fn. 3.)
III
DISPOSITION
We affirm the judgment. Columbia is entitled to costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
SLOUGH
Acting P. J. We concur: FIELDS
J. RAPHAEL
J.