Mercury Caualty Company v. Scottsdale Indemnity Company

LAW OFFICES
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
Appeals Attorney Los Angeles
LIABILITY UPDATE
March 28, 2008

In Mercury Casualty Company v. Scottsdale Indemnity Company 2007 Daily Journal D.A.R 16928, the Fourth Appellate District of the California Court of Appeal held that a statute regulating payments of defense costs by primary and excess insurers did not violate an excess insurer’s due process or equal protection rights; nor did it violate the contracts clause of the United States Constitution because the excess policy was issued after the effective date of the statute.

Mercury Casualty Company (Mercury) and Scottsdale Indemnity Company (Scottsdale) each issued automobile liability policies to the same insured. Mercury’s policy was primary, and Scottsdale’s was secondary, or “excess.” The insured was involved in an accident during the coverage period of both policies, and a lawsuit was filed against her. Mercury provided a defense to the lawsuit, which was ultimately settled. Mercury paid the limits of its policy toward the settlement, and Scottsdale paid the remaining amount. Mercury then demanded that Scottsdale reimburse it for a portion of the expense of providing the insured’s defense, in accordance with California Insurance Code section 11850.9(g). Scottsdale refused, and Mercury filed this action for declaratory relief against Scottsdale. Scottsdale answered the complaint, and denied liability on the basis that its policy did not impose upon it any duty to defend the insured in this case. Scottsdale further alleged that section 11580.9(g) is unenforceable as it violates the California and United States Constitutions, and that Mercury was barred from recovery based on the doctrine of “unclean hands.”

In October of 2005, Scottsdale served Mercury “with what can fairly be described as a barrage of discovery demands, all designed to ferret out the extent of Mercury’s involvement in the passage of section 11580.9(g) and to establish that the Legislature’s true motive in passing the legislation was to ‘serve the private interests of a small and favored group,’ which included Mercury and other insurers who provide primary automobile liability coverage to individual consumers. Mercury declined to provide the bulk of this discovery, contending it was not reasonably calculated to lead to the discovery of admissible evidence.”

In November of 2005, Mercury moved for summary judgment, asserting that it was entitled to payment from Scottsdale pursuant to the statute. While that motion was pending, Scottsdale moved to compel further responses to its discovery. Scottsdale’s motions were denied, but the trial court granted Mercury’s motion, and Scottsdale appealed from the judgment. The Court of Appeal affirmed.

Scottsdale contended that section 11580.9(g) is invalid and unenforceable for a number of reasons. “In making these arguments, Scottsdale takes on a Gordian task. As this court has previously explained, ‘[s]tatutes are presumed to be valid and a court will not strike down a legislative enactment unless its invalidity is clearly established. Mere doubt as to a law’s validity will not support invalidating it. . . . Furthermore, judicial review of a statute does not involve a consideration of the legislation’s wisdom. . . .’ ”

The court found that “[u]nfortunately, Scottsdale had given short shrift to the statutory language in this case, and essentially skipped right to the arguments concerning its allegedly unfair and improper purpose.” “What section 11580.9(g) actually says is this: ‘Where two or more personal policies affording valid and collectible liability insurance apply to the same motor vehicle in an occurrence out of which a loss shall arise, and one policy, as defined in subdivision (a) of Section 660, is primary, either by its terms or by operation of law, and one or more of the personal policies providing liability insurance, as defined in Section 108, are excess, either by their terms or by operation of law, then the following shall apply: [¶] (1) Each insurer shall pay its share of the defense costs. Each insurer’s share of the defense costs shall be the percentage of the total defense costs equal to the amount of damage paid by that insurer as a percentage of total damages paid by all insurers whose policies apply to that motor vehicle. [¶] (2) The term ‘defense costs’ means, for purposes of this subdivision, reasonable attorney’s fees and expenses, investigation expenses, expert witness fees, and costs allowable under Section 1033.5 of the Code of Civil Procedure.’ ”

Scottsdale asserted that section 11580.9(g) violated its constitutional right to equal protection under the law. (U.S. Const., 14th Amend.) “However, contrary to Scottsdale’s arguments, there is nothing in the language of section 115880.9(g) that ‘favors’ those insurers who sell primary automobile liability policies. The statute says nothing about relieving them of pre-existing obligations to pay the cost of defending the insured, nor does it require any ‘shifting’ of a portion of that obligation onto excess insurers, who otherwise would have no duty to defend. What the legislation does say is that all insurers, whether primary or excess, must contribute to defense costs in proportion to their share of the liability covered by the individual automobile liability policy they issued. Thus, the legislation, on its face, would seem to impose the same obligation on both primary and excess carriers who offer policies covering individual automobile liability.”

Scottsdale next argued that section 11580.9(g) is “arbitrary,” because “it draws inappropriate distinctions, serves no valid purpose, and does not “meaningfully advance[ ] the stated purpose of encouraging settlement.” According to Scottsdale, the true purpose of the legislation was to provide a private benefit to Mercury and the “small group of insurers” who, like Mercury, sell primary automobile liability policies to individual consumers. Scottsdale therefore contended that the enactment of this legislation constituted a violation of its right to due process under the 14th Amendment of the United States Constitution. “Of these assertions, only one is supported by any evidence—according to the legislative history relied upon by Scottsdale, Mercury is identified as the ‘sponsor’ of the bill which ultimately became section 11580.9(g). However, that same legislative history is actually inconsistent with the assertions that Mercury ‘wrote’ the legislation and that the Legislature gave it no independent consideration—because the bill initially sponsored by Mercury was apparently quite different from the legislation actually passed.”

In any event, we cannot accept Scottsdale’s implicit assertion that there would be anything suspicious, let alone sinister, in the fact that Mercury promoted the legislation, or even had a hand in its drafting. “Special interests” have been affecting the content of our laws for as long as our Legislatures have been passing them, and while reasonable minds can (and do) disagree about whether that effect is too significant to serve the common good, no one contends that our constitutional right to petition the government should be abolished. . . . Mercury was clearly entitled to petition the Legislature in support of any proposed legislation it chose to favor. As is Scottsdale.

Finally, Scottsdale contended the trial court erred in granting summary judgment before allowing Scottsdale to complete its discovery in this case. “We are about as unpersuaded as we can be. As we have already explained, the primary flaw in Scottsdale’s arguments is that they are largely based upon unsupported assertions about the insurance industry and a flawed analysis of the effect section 11580.9(g) purportedly has on alleged ‘categories’ of insurers. None of these assertions were dependent upon information obtainable only from Mercury.”

Neither Scottsdale nor anyone else (including us) can have legislation invalidated on the basis it was unwise or ineffectual. And Scottsdale has offered nothing to show this legislation was unconstitutional. Until it does, there is no factual issue to be disputed. The trial court correctly granted summary judgment.

----Andrea Lynn Rice

Wrongful Death of a Passenger

LAW OFFICES
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
Los Angeles Attorney
LIABILITY UPDATE
March 21, 2008

In Truong v. Nguyen 2007 Daily Journal D.A.R 16643, the Sixth Appellate District of the California Court of Appeal held that the doctrine of primary assumption of risk bars a claim for the wrongful death of a passenger who died as a result of a collision between the personal watercraft she was riding and another similar watercraft owned and operated by the defendants.

Long Truong and Yen Truong (Plaintiffs), parents of Decedent Rachael Truong (Rachael), sued Cu Van Nguyen (Cu Van) and Chuong Nguyen (Chuong) (Defendants) for wrongful death after Rachael was killed in a collision between two personal watercraft on Coyote Lake. The Polaris watercraft on which Rachael was riding could carry a driver and one passenger, both in a seated position. Anthony Nguyen (Anthony) was the driver of the Polaris. On July 29, 2005, Defendants moved for summary judgment of all the claims against them. Citing Whelihan v. Espinoza (2003) 110 Cal.App.4th 1566 (Whelihan), which involved a jet ski, and Peart v. Ferro (2004) 119 Cal.App.4th 60 (Peart), which involved a Sea-Doo personal watercraft, Defendants asserted that the doctrine of primary assumption of risk applies to the recreational activity of riding personal watercraft and was a complete bar to the causes of action in the Plaintiffs’ complaint. The trial court granted Defendants’ motion for summary judgment, finding that Plaintiffs’ claims were barred by the primary assumption of risk doctrine. Plaintiffs appealed, and the Court of Appeal affirmed.

Plaintiffs contended on appeal that the primary assumption of risk doctrine did not apply in this case because Rachael was a passenger on the personal watercraft and was not engaged in an active sporting activity at the time of the accident. “Plaintiffs urge us to distinguish between ‘ordinary’ or ‘casual’ use of the personal watercraft and ‘extreme’ use such as competitions or racing and argue that the doctrine should not apply to the casual use in this case. They contend Anthony’s declaration that there are no skills required to be a passenger on a sit-down personal watercraft raises a triable issue sufficient to defeat summary judgment. We conclude the court properly granted summary judgment of the claims against Cu Van because the doctrine of primary assumption of risk applies and is a complete defense. . . .”

The appellate court observed that the California Supreme Court examined the doctrine of assumption of risk in the seminal cases of Knight v. Jewett (1992) 3 Cal.4th 296, 305-315 (Knight) and Ford v. Gouin (1992) 3 Cal.4th 339 (Ford), and recently revisited the doctrine in Shin v. Ahn (2007) 42 Cal.4th 482 (Shin) and examined the question “whether the primary assumption of risk doctrine should apply to noncontact sports, such as golf.”

In Shin, the Court had held that the primary assumption of the risk doctrine applies to golf, and that being struck by a carelessly hit ball is an inherent risk of the sport. The Court had summarized the applicable rule, stating: “In Knight . . ., we considered the duty of care that should govern the liability of sports participants. We recognized that careless conduct by coparticipants is an inherent risk in many sports, and that holding participants liable for resulting injuries would discourage vigorous competition. Accordingly, those involved in a sporting activity do not have a duty to reduce the risk of harm that is inherent in the sport itself. They do, however, have a duty not to increase that inherent risk. [Citation.] Thus, sports participants have a limited duty of care to their coparticipants, breached only if they intentionally injure them or ‘engage[ ] in conduct that is so reckless as to be totally outside the range of the ordinary activity involved in the sport.’ This application of the primary assumption of risk doctrine recognizes that by choosing to participate, individuals assume that level of risk inherent in the sport.”

The appellate court pointed out that since the decision in Knight, which involved a recreational game of touch football, “our state Supreme Court and appellate courts have examined the applicability of the primary assumption of the risk defense in a wide variety of cases involving sports and recreational activities. In Ford, supra, 3 Cal.4th 339, the companion case to Knight, the Supreme Court expanded the doctrine and applied it to the noncompetitive, nonteam sporting activity of waterskiing.”

Plaintiffs attempted to differentiate the present case from Whelihan, supra, and Peart, supra, arguing that the primary assumption of the risk doctrine did not apply because Rachael was just a passenger on the watercraft. Plaintiffs distinguished between “ordinary” or “casual” use of the personal watercraft and “extreme” use like professional exhibitions or racing, and argued that the assumption of the risk doctrine should not apply to the casual use in this case. The appellate court rejected this argument.

The appellate court found support for its analysis in Whelihan, supra, where the Court of Appeal concluded that jet skiing is “the type of sporting activity that meets the criteria governing application of the doctrine of primary assumption of risk.” The Whelihan court explained: “As a matter of common knowledge, jet skiing is an active sport involving physical skill and challenges that pose a significant risk of injury, particularly when it is done—as it often is—together with other jet skiers in order to add to the exhilaration of the sport by racing, jumping the wakes of the other jet skis or nearby boats, or in other respects making the sporting activity more challenging and entertaining.” In response to the Whelihan plaintiff’s argument that the trial court erroneously assumed “ ‘that the litigants were contestants in some sort of consensual competition event and/or spectator sport,’ ” that court noted that “the doctrine applies equally to competitive and noncompetitive but active sports.”

The court in the present matter pointed out that, while the vessel at issue in Whelihan was a “jet ski,” “[b]oth the stand-up models like the original Jet Ski and the sit-down style personal watercraft like the Polaris and the Yamaha are open to the elements; their riders are not protected by a hull or a cabin. Riders of both types of vessels wear flotation devices in the event they fall from the personal watercraft. The parties in Whelihan operated their vessels at high speeds in close proximity to one another while executing turns and other maneuvers. In Ford v. Polaris Industries, Inc. (2006) 139 Cal.App.4th 755, 760 (Polaris ), there was evidence that when a Polaris personal ‘watercraft is accelerating and encounters a wave, the passenger can “get some lift” off the seat, and if the passenger is not well coupled to the craft he or she may lose balance and roll off.’ In that case, the passenger suffered serious internal, orifice injuries after being ejected off the back of the vessel into the stream of water thrust by the jet nozzle. (Ibid.) Regardless of the statistics in the NTSB report regarding the frequency of injuries involving personal watercraft, given the nature of the vessel and the manner in which it is used, the Whelihan court was correct to conclude that the activity of ‘jet skiing’ presented a significant risk of injury.”

In urging the court to reject Peart, Plaintiffs attacked the “fundamental factual underpinning of the case,” arguing that there was no evidence that sit-down personal watercraft are essentially identical to stand-up personal watercraft. “However, Plaintiffs also refer us to footnote 5 of the [Peart] opinion where the court stated: ‘In deposition testimony undisputed by appellants, respondent Ferro described stand-up jet skis and sit-down Sea-Doos as almost identical in terms of similarity of engines, and manner of forward propulsion, turning, slowing down and general maneuvering. The only difference mentioned by Ferro—aside from that between standing and sitting—was with regard to what happens when one falls off. . . .’ Thus, there is no merit to Plaintiffs’ claim that there was no factual support for the [trial] court’s conclusions.”

----Andrea Lynn Rice

Michel v. Moore & Associates

LAW OFFICES
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
Los Angeles Appellate Attorney
LIABILITY UPDATE
March 14, 2008

In Michel v. Moore & Associates, Inc. 2007 Daily Journal D.A.R 16495, the Second Appellate District of the California Court of Appeal held that a real estate broker may be liable to a buyer on a theory of negligent nondisclosure.

Mike Kirkpatrick was a real estate agent working for defendant Larry Moore & Associates Realtors, Inc. (Moore), a licensed real estate broker. Sometime around the beginning of 2000, he inspected a home in Rolling Hills Estates owned by a friend’s parents. Hoping to become the listing agent if the parents decided to sell their house, he took notes of the property’s defects, including possible water leaks, cracked interior walls, and damage to the pool. If he won the listing, he planned to use his notes to identify needed repairs and possible disclosure to potential buyers.

About six months later in June 2000, the house was on the market. Kirkpatrick, who had not received the sellers’ listing, showed the house to plaintiffs Carl and Sydne Michel, who were represented by agent Nicola Lagudis (Lagudis), a colleague of Kirkpatrick also working for Moore. During the home tour, Kirkpatrick did not point out any of the defects from his notes. Plaintiffs submitted an offer to buy the house. Plaintiffs and the sellers shortly thereafter agreed on the terms of sale and entered escrow. At the end of July, plaintiffs’ agent Lagudis visually inspected the property and gave plaintiffs her obligatory transfer disclosure statement (“TDS”). The TDS noted that cracks had been patched and painted. The TDS did not, however, disclose some of the defects listed in Kirkpatrick’s notes. Although mindful of his notes as he reviewed the TDS, he did not tell Lagudis about them, nor did he augment her TDS with anything from those notes. The Michels thus never knew the contents of Kirkpatrick’s notes before escrow closed.

Plaintiffs started remodeling their backyard and pool. To do so, they needed a permit, which required a soil engineer to inspect their property. The engineer discovered poor top soil and fill had caused significant instability and ground movement on the property. Upset by the engineer’s report, the Michels met with Kirkpatrick in January 2001. They told him about the soil instability and cracks in the walls, which would likely cost about half a million dollars to fix. Kirkpatrick replied he had seen during his inspection before the house was put on the market cracks big enough to slip a coin into. Hearing about his notes for the first time, the Michels asked for a copy, which Kirkpatrick gave them.

In September 2002, the Michels sued Moore. They alleged causes of action for violation of Civil Code section 2079 for Moore’s failure to competently inspect the property. They also alleged a cause of action for fraudulent concealment for the failure of Lagudis’s TDS to disclose defects known by Moore. And, finally, they alleged a cause of action for negligent nondisclosure in Moore’s not telling the Michels about problems Moore knew about the property.

The case went to trial. Before the Michels’ opening statement, Moore moved for a judgment of nonsuit on the Michels’ cause of action for negligent nondisclosure. Moore argued California law required that Moore’s negligence involve an affirmative assertion, but negligence in failing to disclose a fact was not actionable. The court granted Moore’s motion. Trial proceeded only on the Michels’ causes of action for violation of Civil Code section 2079 (section 2079) and fraudulent concealment. The jury returned a verdict for Moore on both causes of action. Rejecting the claim under section 2079, the jury found Moore did not fail to conduct a reasonably competent and diligent visual inspection of the property, and did not fail to disclose to the Michels any material fact about the property that an investigation would reveal. Similarly rejecting the claim for fraudulent concealment, the jury found Moore did not conceal or suppress any material fact from the Michels. The court entered judgment for Moore. This appeal from the grant of nonsuit followed, and the Court of Appeal reversed.

The court found that the court’s dismissal of the Michels’ cause of action for negligent nondisclosure was error because that cause of action involved elements different from the Michels’ section 2079 and fraudulent concealment causes of action. (Karoutas v. HomeFed Bank (1991) 232 Cal.App.3d 767, 771 [recognizing negligent nondisclosure where bank did not disclose soil instability to buyer purchasing property after bank foreclosed on the property].) “For those latter two causes of action submitted to the jury, Lagudis may very well have been competent in her visual inspection of the property in preparing her TDS for the Michels AND Kirkpatrick may very well have had no fraudulent intent in not telling the Michels about his inspection and notes before escrow closed—circumstances justifying the jury’s verdict for Moore on the section 2079 and fraud causes of action—but that does not mean Moore did not injure the Michels by not telling them before they bought their house about Kirkpatrick’s notes.”

The court observed that a broker has a fiduciary duty to its client. (Civ. Code, § 2079.24; Field v. Century 21 Klowden-Forness Realty, supra, 63 Cal.App.4th at p. 25 [“a broker’s fiduciary duty to his client requires the highest good faith and undivided service and loyalty”].) The fiduciary duty is greater than the negligence standard of due care under section 2079. (Section 2079.2 [standard of care is of a “reasonably prudent real estate licensee”].) “Thus a broker can be professionally competent under section 2079 without satisfying the greater duty of a trusted fiduciary. As Field, supra, explained, ‘the fiduciary duty owed by brokers to their own clients is substantially more extensive than the nonfiduciary duty codified in section 2079.’ ”

A fiduciary must tell its principal of all information it possesses that is material to the principal’s interests. (L. Byron Culver & Associates v. Jaoudi Industrial & Trading Corp. (1991) 1 Cal.App.4th 300, 304; 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 794, p. 1149; 2 Miller & Starr, Cal. Real Estate (3d ed.2000), §§ 3.25, p. 120, 3:27, p. 149, 4:17, p. 41.) A fiduciary’s failure to share material information with the principal is constructive fraud, a term of art obviating actual fraudulent intent. (Civ. Code, § 1573.)

[Plaintiffs’] negligent nondisclosure/constructive fraud theory relieved them of the burden of needing to prove [defendant] intended to defraud them, a much easier row to hoe than proving actual intent to defraud for fraudulent concealment.

Defendant Moore argued that no difference existed between the Michels’ causes of action for negligent nondisclosure and violation of section 2079 because the statute codifies a claim for common law negligence. “Hence, [defendant] concludes, the jury’s rejection of the Michels’ cause of action for violation of section 2079 necessarily decided in [defendant’s] favor the question of [defendant’s] common law negligence. . . . [However, defendant’s] conclusion does not follow because it rests on a flawed premise. Section 2079 codifies a negligence standard of care for one particular task that the law imposes on brokers—the obligation (by a seller’s agent) to visually inspect the property and disclose the results of that inspection to the buyer. [Plaintiffs’] cause of action for negligent nondisclosure rests, in contrast, on Moore’s fiduciary duty to disclose material information within its possession. It was immaterial how the fiduciary obtained the information; it has a duty to disclose the information to its principal. [Plaintiffs’] two causes of action were not the same: As Field, supra, 63 Cal.App.4th 18, observed, ‘the fiduciary duty owed by brokers to their own clients is substantially more extensive than the nonfiduciary duty codified in section 2079.’ ”

----Andrea Lynn Rice

Edmondson Property Management v. Kwock

LAW OFFICES
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
Appellate Attorney Los Angeles
LIABILITY UPDATE
March 7, 2008

In Edmondson Property Management v. Kwock 2007 Daily Journal D.A.R 15967, the Fifth Appellate District of the California Court of Appeal held that a landlord’s obligation to indemnify its property manager under a Type II indemnity agreement did not bar an equitable contribution claim brought by the landlord’s insurer against the manager’s insurer.

A personal injury action was filed after a seven-year-old child fell off the roof of a storage shed located adjacent to the apartment she shared with her mother and on property owned by Lin Kwock (Kwock). Kwock employed Edmondson Property Management (Edmondson) to manage the apartment complex where the child lived. Both Kwock and Edmondson were named as defendants in the personal injury action. Kwock was insured by California Capital Insurance Company (Capital). Edmondson was an additional insured under the Capital policy by virtue of its role as property manager. Additionally, Farmers Insurance Group (Farmers) insured Edmondson under a general business liability policy. Capital defended Kwock and Farmers and Capital shared the defense of Edmondson in the personal injury action. Ultimately, the lawsuit settled within Capital’s policy limits, but Farmers refused to contribute to the settlement, claiming that the indemnity provision of the property management agreement rendered its coverage excess and to require contribution would be to nullify the indemnity agreement.

Edmondson filed a cross-complaint in the personal injury action against Kwock for indemnification, subrogation, and declaratory relief, asserting that the indemnity provisions of the property management contract governing their relationship required Kwock to fully indemnify Edmondson. The personal injury action settled pursuant to a negotiated agreement in which Capital paid $550,000 to the plaintiffs. The agreement, while disclaiming all liability for the child's injuries, apportioned the liability as follows: $50,000 from Kwock and $500,000 from Edmondson. Capital negotiated the agreement on behalf of both Kwock and Edmondson, and the agreement resolved all claims against these two individuals. The agreement did not resolve the cross-complaint filed by Edmondson against Kwock.

Capital then filed an action against Farmers seeking subrogation, contribution, and indemnity for the amount paid to settle the personal injury action. Farmers filed a cross-complaint seeking equitable subrogation and indemnification for the amounts it expended in defense of the personal injury action. The two were consolidated and tried before the trial court on a stipulated statement of facts and documentary evidence.

In its judgment, the trial court found (1) that the indemnity provision in the property management agreement was a “Type II” provision, indemnifying Edmondson only for passive negligence; (2) because Edmondson had knowledge that the child had played unsupervised on the roof of the shed and had not acted to prevent the fall, its alleged negligence was active, not passive, and the indemnity provision did not apply; (3) that Farmers’s policy was not intended to be an excess policy; (4) both policies bore the same level of liability; and (5) each was liable for 50 percent of the settlement paid. Farmers appealed, and the Court of Appeal affirmed.

The appellate court noted that a “Type II” provision was classified as a “general” indemnity clause in Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622. “It is characterized that way because it does not explicitly address the issue of the indemnitee’s negligence. (Id. at p. 628.) These clauses may be interpreted to cover an indemnitee’s passive negligence, but generally will not include an indemnitee’s active negligence. (Ibid; see also MacDonald & Kruse, Inc. v. San Jose Steel Co. (1972) 29 Cal.App.3d 413, 419-420.)”

The “crux of the issues” presented on appeal was whether the indemnity provision found in the property management contract precluded Capital from seeking contribution from Farmers for the settlement paid. The appellate court observed that, generally, when multiple insurance carriers insure the same insured and cover the same risk, each insurer may assert a claim against a coinsurer for equitable contribution when it has undertaken the defense or paid a liability on behalf of the insured. Equitable contribution is not a matter of contract and exists independently of the insured’s rights under the policy. “ ‘It is not based on any right of subrogation to the rights of the insured, and is not equivalent to “ ‘standing in the shoes’ ” of the insured . . .’ ” (Hartford Casualty Ins. Co. v. Mt. Hawley Ins. (2004) 123 Cal.App.4th 278, 288.)

Farmers rested its contrary argument on the indemnity provision in the property management agreement. It argued that Farmers and Capital did not equally and concurrently share the liability generated by the child's injury because, pursuant to the negotiated indemnity provision, Kwock assumed the obligation of providing insurance for this particular risk, making Capital the primary insurer and Farmers the excess insurer. “According to Farmers, to hold otherwise would nullify the indemnification provision of the property management agreement. . . . In other words, although Farmers’s policy was written as a primary policy, the contract between Kwock and Edmondson defeats an equitable claim for contribution.” The Court of Appeal rejected this argument.

The appellate court looked to the language of the agreement negotiated between Edmondson and Kwock. The contract provided in a section titled “Owner’s Obligations” as follows: “Owner shall indemnify and save the Agent harmless from any and all costs, expenses, attorney’s fees, suits, liabilities, damages from or connected with the management of the property by Agent, or the performance or exercise of any of the duties, obligations, powers, or authorities herein or hereafter granted to Agent. [¶] Owner shall not hold Agent liable for any error of [judgment], or for any mistake of fact or law, or for anything which Agent may do or refrain from doing hereinafter, except in cases of willful misconduct or gross negligence.”

The court agreed with the trial court that the cited language is a general-indemnity provision and did not expressly address whether Kwock would fully indemnify Edmondson against third-party claims generated as a result of Edmondson’s own negligence. It also agreed with the trial court that the second quoted paragraph did not convert the general language of the first paragraph into an express agreement to indemnify even in cases of active negligence.

The court went on to reject Farmers’s argument that whether the indemnity provision was a Type II or Type I provision was a red herring in this case because the underlying action settled without a determination of the liability issue. “[T]he insurance company seeking to defeat a claim of equitable contribution must prove that the indemnification agreement would bar any recovery between the insureds before it can successfully claim equitable contribution would negate the negotiated contract between the insureds.”

In the absence of any contractual provision converting Farmers’s primary policy to an excess policy, we agree with the trial court and will affirm its application of the general rules of equitable contribution. Since both Farmers and Capital issued primary insurance policies covering the same risk at the same level of insurance, Farmers must pay its fair share of the liability paid by Capital in settlement of the personal injury action. The trial court apportioned the responsibility to 50 percent for each party. The apportionment has not been challenged on appeal, and we see no reason to disturb the trial court's conclusion that this is a fair apportionment.

----Andrea Lynn Rice