California Capital Ins. Co. v. Employers Compensation Ins. Co. ( 2023 )

Filed 3/3/23; Certified for Publication 3/20/23 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
CALIFORNIA CAPITAL INSURANCE
COMPANY,
G060532
Plaintiff and Respondent,
(Super. Ct. No. 30-2017-00928693)
v.
OPINION
EMPLOYERS COMPENSATION
INSURANCE COMPANY,
Defendant and Appellant.
Appeal from a judgment and postjudgment order of the Superior Court of
Orange County, Glenn R. Salter, Judge. Reversed and remanded.
Lewis Brisbois Bisgaard & Smith, Jordon E. Harriman and Jeffry A. Miller
for Defendant and Appellant.
Ellen Sims Langille for California Workers’ Compensation Institute as
Amicus Curiae on behalf of Defendant and Appellant.
Berger Khan and David B. Ezra for American Property Casualty Insurance
Association as Amicus Curiae on behalf of Defendant and Appellant.
Grant, Genovese & Baratta and Lance D. Orloff for Plaintiff and
Respondent.
* * *
This appeal arises from one insurer’s equitable contribution claim against
another insurer related to the defense and settlement of an underlying personal injury
lawsuit against their common insured. The insured’s general liability insurer defended
under a reservation of rights and paid out its $2 million policy limits to settle the lawsuit.
The insured’s workers’ compensation and employers’ liability insurer denied coverage
and did not participate in the defense or settlement.
This lawsuit followed, with the general liability insurer suing the workers’
compensation and employers’ liability insurer for equitable contribution. Following a
bench trial, the trial court entered judgment for the general liability insurer, awarding
roughly half the cost of defense and indemnity.
We reverse. It is well settled that an equitable contribution claim only lies
if the two insurers share the same level of liability on the same risk as to the same
insured. In this case, the general liability insurer is not entitled to equitable contribution
because it did not insure the same risk as the workers’ compensation and employers’
liability insurer. To the contrary, as observed by the trial judge, the two policies are
mutually exclusive: the general liability policy covers bodily injury claims unless the
claimant is an employee injured in the course and scope of his or her employment,
whereas the workers’ compensation and employers’ liability policy covers bodily injury
claims only if the claimant is an employee injured in the course and scope of his or her
employment. Further, the workers’ compensation and employers’ liability policy did not
potentially cover the underlying lawsuit, so that carrier had no duty to defend or
2
indemnify its insured against the claims in question. The judgment must therefore be
reversed and remanded.
FACTS
Byron Remeyer and Asia Torres both worked for the La Sirena Grill
(La Sirena) at its South Laguna location. One night in August 2013, they had drinks
together at La Sirena and then left around 10:00 p.m. to go to a party. Shortly before
midnight, Torres, who was intoxicated, drove his vehicle into a tree in Laguna Niguel.
Remeyer, his passenger, suffered traumatic, life-altering brain injuries as a result.
Remeyer filed a complaint against La Sirena and Torres for negligence and
negligence per se (the Remeyer lawsuit). He alleged that Torres was employed as a cook
for La Sirena and “got drunk on the job” on the night of the accident, that drinking on the
job was a common occurrence at La Sirena, that La Sirena provided the alcohol that
Torres drank on the night of the accident, that La Sirena’s management was well aware of
Torres’s intoxicated state when Torres and Remeyer left for the party, and yet
management did nothing to prevent Torres from driving. Remeyer also alleged that
Torres was acting within the course and scope of his employment for La Sirena at the
time of the accident, and was driving a vehicle that La Sirena had entrusted to him for
performing his job duties. The complaint did not mention that Remeyer was also an
employee of La Sirena.
At the time of the accident, La Sirena was insured by two different insurers.
The first insurer, respondent California Capital Insurance Company (California Capital),
issued La Sirena a commercial general liability (CGL) policy with bodily injury limits of
$2 million per occurrence; this policy generally covered bodily injury claims, but
excluded coverage for workers’ compensation claims and for bodily injuries arising out
of and in the course of a claimant’s employment with La Sirena.
3
The second insurer, appellant Employers Compensation Insurance
Company (ECIC), issued La Sirena a workers’ compensation and employers’ liability
policy. Part One of this policy covered workers’ compensation claims, and Part Two
covered bodily injury claims by employees arising out of and in the course of their
employment with La Sirena if not otherwise covered by workers’ compensation.
La Sirena tendered the Remeyer lawsuit to its CGL insurer, California
Capital. California Capital agreed to defend La Sirena under a reservation of rights
citing, among other provisions, its employer’s liability exclusion for bodily injuries
arising out of and in the course of a claimant’s employment with La Sirena.
During discovery, it came to light that Remeyer had been an employee of
La Sirena at the time of the accident, that both Remeyer and Torres had worked at
La Sirena earlier in the day, but that both had been off the clock for several hours by the
time the accident occurred. Whether Remeyer was acting within the course and scope of
his employment at La Sirena at the time of the accident (a question relevant to the
applicability of California Capital’s employer’s liability exclusion) remained contested.
In May 2014, Remeyer’s counsel made a settlement demand of $2 million,
the California Capital policy limit. California Capital advised La Sirena that if it agreed
to pay the settlement demand, it would do so under a reservation of its right to seek
reimbursement from La Sirena pursuant to Blue Ridge Ins. Co. v. Jacobsen (2001)
25 Cal.4th 489 (Blue Ridge).
California Capital notified La Sirena’s workers’ compensation and
employer liability insurer, ECIC, of the settlement demand, explained that Remeyer was
an employee injured within the course and scope of his employment so as to trigger
coverage under the ECIC policy, and asked ECIC to participate in the settlement. ECIC
denied coverage, asserting there was no potential for coverage under either part of its
policy.
4
In the months that followed, California Capital incurred roughly $88,000 in
attorney fees defending the claims against La Sirena. Then, in June 2015, California
Capital settled the Remeyer lawsuit on La Sirena’s behalf for its policy limits of
$2 million, without any participation from ECIC. California Capital also settled its Blue
Ridge reimbursement claim against La Sirena, and as part of that settlement, La Sirena
assigned California Capital its rights against ECIC.
California Capital then filed the subject lawsuit against ECIC for equitable
1
contribution. ECIC moved for summary judgment, asserting neither part of its policy
covered the allegations in the Remeyer lawsuit; the trial court denied that motion without
explanation.
The trial court conducted a bench trial on stipulated facts in December
2020. After taking the matter under submission, the court found the ECIC policy
potentially covered the Remeyer lawsuit and California Capital was equitably entitled to
half of what it expended in defense and settlement of that lawsuit. The court then entered
judgment for California Capital, awarding it $44,182.42 in equitable contribution for the
cost of defending La Sirena, $1 million in equitable contribution for indemnifying
La Sirena, and interest of $501,299.37.
ECIC moved to set aside the judgment; the trial court denied that motion.
In its minute order, the court acknowledged that the two policies are “mutually exclusive”
and that ECIC generally has no duty to cover civil suits under its workers’ compensation
policy, but reasoned that this “general rule must give way where its uncritical application
would work a hardship.”
1
The complaint also alleged certain claims that California Capital acquired
from La Sirena as part of the settlement of the Remeyer lawsuit, but California Capital
later dismissed those causes of action.
5
ECIC filed a notice of appeal from the judgment and the order denying its
motion to set aside the judgment.
DISCUSSION
The issue on appeal is straightforward: is California Capital entitled to
equitable contribution from ECIC for the cost of defending and indemnifying their
common insured, La Sirena? This is a question of law we review de novo. (Certain
Underwriters at Lloyds, London v. Arch Specialty Ins. Co. (2016) 246 Cal.App.4th 418,
429; Carmel Development Co. v. RLI Ins. Co. (2005) 126 Cal.App.4th 502, 507.)
Equitable contribution (not to be confused with equitable subrogation or
equitable indemnity) is a loss sharing procedure by which an insurer that defended and
settled a claim against its insured may seek to apportion those costs among coinsurers
who refused to settle or defend the claim. (Maryland Casualty Co. v. Nationwide Mutual
Ins. Co. (2000) 81 Cal.App.4th 1082, 1089; see also Croskey et al., Cal. Practice Guide:
Insurance Litigation (The Rutter Group 2022) ¶ 8:65.1, p. 8-26 [discussing differences
between equitable contribution, equitable indemnity, and equitable subrogation, and
noting “it is important for an insurer seeking reimbursement from other insurers to select
the appropriate remedy”].)
“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. Where multiple insurance carriers insure the same insured and cover the same
risk, each insurer has independent standing to assert a cause of action against its
coinsurers for equitable contribution when it has undertaken the defense or
indemnification of the common insured. Equitable contribution permits reimbursement
to the insurer that paid on the loss for the excess it paid over its proportionate share of the
obligation, on the theory that the debt it paid was equally and concurrently owed by the
6
other insurers and should be shared by them pro rata in proportion to their respective
coverage of the risk. 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.” (Fireman’s Fund Ins. Co. v. Maryland Casualty
Co. (1998) 65 Cal.App.4th 1279, 1293, fn. omitted (Fireman’s Fund).)
Equitable contribution is only available if the two insurers “‘share the same
level of liability on the same risk as to the same insured.’” (Transcontinental Ins. Co. v.
Insurance Co. of the State of Pennsylvania (2007) 148 Cal.App.4th 1296, 1303; see also
Fireman’s Fund, supra, 65 Cal.App.4th at p. 1294, fn.4.) If the insurers do not (1) “share
the same level of obligation, (2) on the same risk, (3) as to the same insured[,] . . . the
equitable contribution claim must fail.” (Lexington Ins. Co. v. Allianz Ins. Co. (9th Cir.
2006) 177 Fed.Appx. 572, 573; see, e.g., Travelers Indemnity Co. of Ct. v. Hudson Ins.
Co. (E.D.Cal. 2020) 442 F.Supp.3d 1259, 1269 [CGL insurer was not entitled to
equitable contribution from common insured’s professional liability insurer because their
two policies “did not insure . . . against the same risk”].)
We must therefore determine whether the California Capital policy and
ECIC policy cover the same risk. California Capital’s CGL policy covers bodily injury
claims; it excludes coverage for workers’ compensation claims and claims by employees
2
injured in the course and scope of employment. ECIC’s policy covers workers’
compensation claims in Part One, and in Part Two it covers bodily injury claims by
2
To quote the policy, California Capital agreed to “pay those sums that the
insured becomes legally obligated to pay because of ‘bodily injury’ or ‘property damage’
to which this insurance applies,” and “to defend the insured against any ‘suit’ seeking
those damages.” The policy contains an exclusion for “[a]ny obligation of the insured
under a workers’ compensation . . . law,” as well as an exclusion for bodily injury to an
“‘employee’ of the insured arising out of and in the course of: [¶] (a) [e]mployment by
the insured; or [¶] (b) Performing duties related to the conduct of the insured’s
business . . . .”
7
employees arising out of and in the course of their employment with La Sirena if not
3
otherwise covered by workers’ compensation.
It becomes immediately apparent after reviewing these coverages that
California Capital’s CGL policy does not cover the same risk as ECIC’s workers’
compensation and employers’ liability policy. In fact, we agree with the trial judge the
two policies are mutually exclusive: California Capital’s CGL policy covers bodily
injury claims unless the claimant is an employee injured in the course and scope of his
employment, whereas ECIC’s workers’ compensation and employers’ liability policy
covers bodily injury claims only if the claimant is an employee injured in the course and
scope of his or her employment. Because California Capital and ECIC did not cover the
same risk, California Capital cannot establish one of the requisite elements of equitable
4
contribution, and its claim necessarily fails.
California Capital nonetheless insists it is entitled to equitable contribution
because discovery in the Remeyer lawsuit established Remeyer was a La Sirena
employee, thereby creating a potential for coverage under ECIC’s policy and triggering
3
To quote the ECIC policy, in Part One, ECIC agreed to “pay promptly
when due the benefits required of you by the workers compensation law” and to “defend
at our expense any claim, proceeding or suit against you for benefits payable by this
insurance.” In Part Two, ECIC agreed to “pay all sums that you legally must pay as
damages because of bodily injury to your employees,” provided that the “bodily injury
must arise out of and in the course of the injured employee’s employment by [the
insured].” Part Two contains an exclusion for “[a]ny obligation imposed by a workers
compensation . . . law.”
4
Nor could the two policies cover the same risk, as workers’ compensation
coverage cannot be included in a CGL policy. (Ins. Code, § 108, subd. (a) [liability
insurance includes “[i]insurance against loss resulting from liability for injury, fatal or
nonfatal, suffered by any natural person, . . . but does not include worker’s compensation
. . . insurance” (italics added)]; Reagen’s Vacuum Truck Service, Inc. v. Beaver Ins. Co.
(1994) 31 Cal.App.4th 375, 383 [general liability coverage and other classes of insurance
“may not be included in the same policy providing workers’ compensation and
employers’ liability insurance”].)
8
ECIC’s duty to defend. This argument ignores the fact that the two policies do not insure
against the same risk (an essential element of equitable contribution); it also reflects a
fundamental misunderstanding of what ECIC’s policy covers.
Before addressing California Capital’s argument, we review the interplay
between Parts One and Two of the ECIC policy. As noted, ECIC’s policy covers
workers’ compensation claims in Part One, and in Part Two it covers bodily injury claims
by employees arising out of and in the course of their employment with La Sirena if not
otherwise covered by workers’ compensation. As our Supreme Court has explained,
“these two kinds of coverage are mutually exclusive,” but they are “meant to be read
together.” (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 916
(Producers Dairy).)
Since workers’ compensation is generally an employee’s exclusive remedy
against his or her employer for injuries suffered in the course and scope of employment
(Lab. Code, §§ 3602, subd. (a), 5300; Privette v. Superior Court (1993) 5 Cal.4th 689,
697), Part One of ECIC’s policy (workers’ compensation coverage) applies in the
majority of cases where an employee is injured in the course and scope of employment.
(Power Fabricating, Inc. v. State Comp. Ins. Fund (2008) 167 Cal.App.4th 1446, 1452
(Power Fabricating) [“In the vast majority of cases where an employee is injured in the
course and scope of employment, workers’ compensation exclusivity excludes ELI
coverage”].)
However, there are “rare situations” where an employee may sue his or her
employer for injuries in superior court, in which case Part Two would be triggered.
(Power Fabricating, supra, 167 Cal.App.4th at pp. 1452-1453; see California Capital
Ins. Co. v. Republic Underwriters Ins. Co. (N.D.Cal. 2020) 445 F.Supp.3d 61, 68
(Republic).) For example, an employee injured on the job may sue his or her employer in
superior court if the injury was proximately caused by a willful physical assault by the
employer (Lab. Code, § 3602, subd. (b)(1)); if the injury was aggravated by the
9
employer’s fraudulent concealment of its existence (id., subd. (b)(2)); if the injury was
proximately caused by a defective product manufactured by the employer (id.,
subd. (b)(3)); or if the injury was proximately caused by the employer’s knowing removal
of, or knowing failure to install, a point of operation guard on a power press (Lab. Code,
§ 4558, subd. (b)). Part Two therefore “serve[s] as a ‘gap-filler,’ providing protection to
the employer in those situations where the employee has a right to bring a tort action
despite the provisions of the workers’ compensation statute or the employee is not subject
to the workers’ compensation law.” (Producers Dairy, supra, 41 Cal.3d at p. 916.) It “is
not a general liability policy providing coverage for injuries to members of the general
public.” (Id. at p. 917.)
California Capital insists it is entitled to equitable contribution because
there was a possibility that Remeyer, as a La Sirena employee, was acting in the course
and scope of employment at the time of the accident, thereby triggering a potential for
coverage under the ECIC policy. We cannot agree.
If Remeyer was acting in the course and scope of his employment at the
time of the accident, his exclusive remedy would have been to file a workers’
compensation claim, and his civil suit against his employer would have been statutorily
barred by the workers’ compensation exclusivity doctrine. Although Part One of ECIC’s
policy would potentially cover any workers’ compensation claim he might have filed,
Part One could not cover the civil suit because there is no way the trial court in that case
could acquire jurisdiction to award workers’ compensation benefits. (La Jolla Beach
& Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 43 [workers’
compensation and employers’ liability insurer had no duty to defend insured against its
former employee’s civil suit for wrongful termination; there was no potential for
coverage because “the superior court never had jurisdiction to award workers’
compensation benefits”].)
10
Further, Part Two of ECIC’s policy was not triggered because there were
no allegations or facts in the Remeyer lawsuit suggesting any of the rare exceptions to the
workers compensation exclusivity doctrine apply here: Remeyer did not allege La Sirena
physically assaulted him, fraudulently concealed his injuries, manufactured a defective
product that injured him, or injured him with a punch press. (See Lab. Code, §§ 3602,
5
subd. (b)(1-3), 4558, subd. (b).)
In sum, even if Remeyer was potentially acting in the course and scope of
his employment at the time of the accident, there is no theory whereby the Remeyer
lawsuit could fall within ECIC’s coverage, and thus there was no duty to defend by
ECIC. (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 276, fn.15 [“insurer need
not defend if the third party complaint can by no conceivable theory raise a single issue
which could bring it within the policy coverage”].) California Capital’s equitable
contribution claim fails for this additional reason. (See Republic, supra, 445 F.Supp.3d at
p. 69 [granting summary judgment for workers’ compensation and employers’ liability
5
The federal district court’s analysis in Republic, supra, 445 F.Supp.3d 61,
is instructive. In that case, an employee of a golf course visited the golf course on his day
off to play golf with his father, and his coworker struck him in the head with a golf club
while trying to demonstrate the proper hand grip on the club. (Id. at pp. 63-64.) The
employee filed a workers’ compensation claim and also sued his employer, the golf
course, in superior court. (Id. at p. 63.) Much like in the present case, the employer’s
CGL insurer, California Capital, defended and settled the civil suit, and its workers’
compensation and employers’ liability insurer, Republic, denied coverage. (Id. at p. 64.)
California Capital sued Republic for reimbursement (i.e., equitable contribution) and
other claims. (Ibid.)
The district court granted summary judgment for Republic, finding there
was no potential for coverage under either its workers’ compensation coverage or its
employers’ liability coverage. (Republic, supra, 445 F.Supp.3d at p. 69.) The court
reasoned, as we do above, that “nothing about the undisputed facts presented here raises
the potential that, if [the] injury did occur in the course and scope of his employment, it
would fall outside the provisions of the Workers’ Compensation policy such that
Employers Liability coverage would be available.” (Ibid.)
11
insurer on equitable contribution claim because its policy did not potentially cover the
claims in the insured employee’s underlying personal injury lawsuit].)
DISPOSITION
The judgment for California Capital is reversed. On remand, the trial court
is directed to enter judgment for ECIC. ECIC is to recover its costs on appeal. (Cal.
Rules of Court, rule 8.278(a)(1).)
GOETHALS, J.
WE CONCUR:
O’LEARY, P. J.
BEDSWORTH, J.
12
Filed 3/20/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
CALIFORNIA CAPITAL INSURANCE
COMPANY,
G060532
Plaintiff and Respondent,
(Super. Ct. No. 30-2017-00928693)
v.
OPINION
EMPLOYERS COMPENSATION
INSURANCE COMPANY,
Defendant and Appellant.
Appellant has requested that our opinion filed on March 3, 2023, be certified for
publication. It appears that our opinion meets the standards set forth in California Rules
of Court, rule 8.1105(c). The request is GRANTED.
The opinion is ordered published in the Official Reports.
GOETHALS, J.
WE CONCUR:
O’LEARY, P. J.
BEDSWORTH, J.