>U.S.> Fire Ins.
v. Arrowood Indemnity















Filed 4/17/13 U.S. Fire Ins. v. Arrowood Indemnity CA1/4

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>NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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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opinion has not been certified for publication or ordered published for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.





IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



FIRST
APPELLATE DISTRICT



DIVISION
FOUR




>

UNITED STATES FIRE INSURANCE COMPANY, Plaintiff and Appellant, v. ARROWOOD INDEMNITY COMPANY et al., Defendants and Respondents.

A133665 (San Francisco County Super. Ct. No. CGC09490808)

Appellant
United States Fire Insurance Company (U.S. Fire) paid various costs in
defending and settling seven lawsuits alleging href="http://www.sandiegohealthdirectory.com/">asbestos-related injuries. It brought this case to recover a portion of these
costs from respondents Arrowood Indemnity Company and United States Fidelity
and Guaranty Company (USF&G).
Following a four-day bench trial, the trial court agreed that
respondents were responsible for a portion of the costs and calculated their
share to be $177,715.10. In this appeal,
U.S. Fire maintains that this amount was too low and that the trial court
misapplied principles of insurance law by limiting respondents’ liability on
the basis of contractual indemnity
provisions. We disagree and affirm.

I.

Factual and Procedural

Background

Union Electric Company entered into two contracts with
Bechtel Corporation to build power-generating units at a Union Electric power
plant in Labadie, Missouri. The contracts
required Bechtel to engineer, construct, and start up these units.

Both
contracts contained an identical indemnity clause, which provided: “Bechtel hereby assumes entire responsibility
and liability for any and all damage, loss or injury, including death, of any
kind or nature, whatever, to person or persons, or property or properties,
caused by, resulting from or arising out of the performance of the work
provided for in this Contract. Bechtel
agrees to defend any suit or action brought against [Union Electric] based upon
the foregoing injury or damage, and agrees further to pay all costs and
expenses, including legal fees in connection with such suit or action;
provided, however, that Bechtel’s aforesaid indemnity and hold harmless
agreement shall not be applicable to any loss, expense, damage, demand or claim
or liability caused by the sole negligence of [Union Electric], its officers,
representatives or employees; and provided further, that Bechtel’s aforesaid
indemnity and hold harmless agreement is for the exclusive benefit of [Union
Electric] and in no event shall inure to the benefit of any third party.”

Bechtel
obtained insurance for its work at the Labadie plant from Industrial Indemnity
Company, the predecessor to appellant U.S. Fire.

Bechtel
was also the general contractor for the construction of another Union Electric
plant in Missouri (the Rush Island plant), and it again obtained insurance from
Industrial Indemnity. Industrial
Indemnity issued an endorsement adding Union Electric as an insured for the
project, providing that “ ‘this insurance on behalf of owner is primary
insurance and any other insurance maintained by owner shall be specific excess
insurance, notwithstanding condition XI, other insurance.’ ” The trial court concluded that this provision
made Industrial Indemnity (and, by novation, U.S. Fire) the sole primary
insurer for Union Electric’s liabilities arising out of new construction at the
Rush Island plant. U.S. Fire does
not challenge this finding on appeal, and we accept it as binding on this
court. Our subsequent references to the
“indemnity agreement” are to the provisions in the contracts quoted above,
under which U.S. Fire, through its predecessor Industrial Indemnity, agreed to
insure Union Electric for the construction at the Labadie and Rush Island
plants.

Respondents
Arrowood and USF&G provided general liability insurance to Union
Electric. These policies covered various
time periods from the 1950s through the 1980s, but neither respondent provided
coverage for asbestos claims after September 30, 1989.

Seven
lawsuits were filed by workers who alleged injuries from asbestos exposure
while working at Union Electric facilities.
These workers alleged that they were exposed to asbestos while working
at various times at the Labadie, Rush Island, or other Union Electric
plants. Union Electric’s legal counsel
learned through discovery in these lawsuits that the workers’ claims focused
heavily on asbestos exposure during new construction at Labadie and Rush Island. The defenses of these cases were therefore
tendered to Bechtel’s insurer U.S. Fire based on the indemnity
agreement. U.S. Fire eventually
paid a total of $1,374,384.38 in defense and settlement costs.href="#_ftn1" name="_ftnref1" title="">[1]

U.S. Fire
then brought this action against respondents Arrowood and USF&G, seeking href="http://www.fearnotlaw.com/">declaratory relief and contribution. The main issue throughout the litigation has
been the effect of the indemnity agreement on respondents’ obligations to
contribute to defense and settlement costs.
In denying a motion for summary judgment filed by respondents, the trial
court agreed with U.S. Fire that the indemnity agreement did not
necessarily relieve respondents of all liability and concluded that questions
of fact existed about the scope of the parties’ duties to defend and the extent
of liability.

At
trial, U.S. Fire argued that all of the insurance companies shared a duty
to defend the lawsuits and that respondents’ duty arose because the workers
alleged that they were exposed to asbestos at multiple Union Electric sites,
including sites not covered by U.S. Fire insurance policies. U.S. Fire maintained that respondents
were accordingly “joint[ly] and several[ly]” liable for defense and settlement
costs. However, U.S. Fire did not
specify how, exactly, those costs should be apportioned. Counsel at one point argued that if
respondents had been defending the lawsuits, “we would all be in the suit and
we would all be paying some established allocable share, time on the risk^{[href="#_ftn2" name="_ftnref2" title="">[2]]}
or risk—limits times years, or something.”
Counsel later criticized allocating costs based on a “site-by-site
analysis,” adding, “So I don’t know what the answer is, Your Honor, but it
can’t be month by month because months by months—trying to do it months by
months, there is too much fatal uncertainty and ever-changing allegations of
the time of exposure within a site. And
we cannot do it by site, Your Honor, because there was, likewise, fatal
uncertainty between the sites.” The
trial court observed in its statement of decision that “U.S. Fire did not
propose a method for apportioning damages other than a pro rata share of all
defense and indemnity costs for all lawsuits based upon policy limits and years
of coverage.”

For
their part, respondents acknowledged that the lawsuits involved asbestos
exposure at sites not covered by U.S. Fire, but they argued that they
should be relieved of reimbursing defense and settlement costs that were
attributable to claims arising out of exposure during construction of the
Labadie and Rush Island plants because of the href="http://www.mcmillanlaw.com/">indemnity agreement.

Respondents
presented the testimony of an attorney witness who had represented Union
Electric in about 200 matters, including five of the seven underlying
lawsuits. He testified under seal about
the evidence gathered and the exposure analysis conducted in those cases. He testified that in analyzing asbestos-injury
claims, he considered the length of the project causing exposure, the years
when the claimant worked on the project, and whether the claimant was a
smoker. He also testified that asbestos
was used less and less after the early 1970s, as more became known about its
health hazards.

Based
in large part on this testimony, respondents provided an “apportionment
summary,” which allocated defense and settlement costs between U.S. Fire,
on the one hand, and both respondents, on the other, based on the plants
involved and the nature and timing of the workers’ exposure to asbestos. The trial court agreed with respondents that,
while difficult, it was not impossible to apportion losses among the various
power plants.href="#_ftn3" name="_ftnref3"
title="">[3] It made the following findings with regard to
the seven underlying lawsuits:

>Bunton v. Union Carbide et al.: U.S. Fire paid $17,995 in defense costs
and $82,500 to settle a lawsuit brought against Union Electric and others for
injury suffered by Paul Bunton. The
trial court concluded that Bunton was injured by being exposed to asbestos
while working for five months on the construction of the Labadie plant and
while working four months at another Union Electric power plant.

>Capestro v. Amchem Products, Inc. et al.: U.S. Fire paid $282,579.20 in defense
costs and $375,000 to settle a lawsuit brought against Union Electric and
others for injury suffered by Joseph Capestro.
The trial court concluded that Capestro was injured by being exposed to
asbestos while working on the construction of the Labadie plant, and was not
injured by being exposed to asbestos at any other Union Electric facility.

>Farrar v. Nooter Corp. et al.: U.S. Fire paid $41,882.19 in defense
costs and $100,000 to settle a lawsuit brought against Union Electric and
others for injury suffered by Homer Farrar.
The trial court concluded that Farrar was injured by being exposed to
asbestos while working 48 months on the construction of the Labadie plant,
working 24 months on the construction of the Rush Island plant, performing
repairs for 27 months at the Labadie plant before 1990, performing repairs
for three months at the Labadie plant after 1990, and for working for several
months at other Union Electric power plants, both before and after 1990.

>Maloney v. A.W. Chesterton et al.: U.S. Fire paid $13,363.33 in costs to
defend a lawsuit brought for injury suffered by Richard Maloney, but paid no
settlement amount. The trial court
concluded that Maloney was injured by being exposed to asbestos while working
for 60 months on the construction of the Labadie plant, working for
18 months on the construction of the Rush Island plant, performing repairs
for 11.5 months at two other United Electric power plants before 1990, and
performing repairs for 6.5 months at yet another Union Electric power
plant.

>Morris v. Avocet Enterprises, Inc. et al.: U.S. Fire paid $1,464.60 in defense
costs and $25,000 to settle a lawsuit brought against Union Electric and others
for injury suffered by Billy Joe Morris.
The trial court found that Morris was injured by being exposed to
asbestos while working on the construction of the Labadie plant, and was not
injured by being exposed to asbestos by working at any other Union Electric
facility.

>Schlosser v. A.W. Chesterton, Inc. et al.: U.S. Fire paid $9,600.06 in defense
costs and $250,000 to settle a lawsuit brought against United Electric and
others for injury suffered by Arlan Schlosser.
The trial court found that Schlosser was injured by being exposed to
asbestos while working for 45.25 months on new construction of the Labadie
plant; for working 29 months on the construction of the Rush Island plant;
for performing repairs and engaging in refueling work at five Union Electric
power plants, including the Labadie and Rush Island plants, before 1990; and
for performing repairs for 7.5 months at three Union Electric power plants,
including the Labadie and Rush Island plants, after 1990.

>Silverstein v. A.W. Chesterton, Inc. et al.: U.S. Fire paid no defense costs, but
paid $175,000 to settle a lawsuit brought against Union Electric and others for
injury suffered by Morton Silverstein.
The trial court found that Silverstein was injured by being exposed to
asbestos while working a total of 24 months on the construction of the
Labadie plant, and while working for 8.5 months on a different Union
Electric plant.

In
its statement of decision, the court concluded that U.S. Fire was entitled
to equitable contribution from respondents, but only for the portion of U.S.
Fire’s payments attributable to asbestos exposure at Union Electric facilities
other than exposure occurring during construction of the Labadie and Rush
Island plants.

Based
on this conclusion, the court ruled that U.S. Fire was entitled to no
contribution in connection with Capestro
and Morris because those claims
related solely to the construction of the Labadie plant. As for the other five cases, the court
concluded that U.S. Fire was entitled to equitable contribution from
respondents in the total amount of $177,715.10, calculated as follows: (1) in Bunton, $2,267.63 of the $17,995 in defense costs and $12,688.50 of
the $82,500 paid in settlement; (2) in Farrar,
$25,602.58 of the $41,882.19 in defense costs and $61,130 of the $100,000 paid
in settlement; (3) in Maloney,
$624.01 of the $13,363.33 in defense costs (no amount was paid in settlement);
(4) in Schlosser, $712.32 of the
$9,600.06 in defense costs and $18,550 of the $250,000 paid in settlement; and
(5) in Silverstein, $56,140 of
the $175,000 paid in settlement (no defense costs were paid by
U.S. Fire). These amounts were
identical to the apportionment proposed by respondents, which was based on the
duration of each plaintiff’s work at each Union Electric plant; whether the
plaintiff’s work was performed before or after the effective date of relevant
safety regulations—when the use of asbestos became less widespread; and whether
the plaintiff’s exposure occurred while repairing existing plants or while
working on new plant construction, which typically involved greater risk of
harm.

U.S. Fire
timely appealed from the subsequent judgment.

II.

Discussion

A.
General
Legal Principles.

U.S. Fire
argues that the trial court did not properly treat this as an equitable
contribution case. The general
principles applicable in equitable contribution cases were summarized in >Hartford Casualty Ins. Co. v.
Mt. Hawley Ins. Co. (2004) 123 Cal.App.4th 278 (Mt. Hawley), which we quote at length: “ ‘Equitable contribution is the right
to recover, not from the party primarily liable for the loss, but from a
co-obligor who shares such liability with the party seeking contribution. 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 other. 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 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. . . .

“ ‘This
right of equitable contribution belongs to each insurer individually. It is not based on any href="http://www.fearnotlaw.com/">right of subrogation to the rights of the
insured, and is not equivalent to “ ‘standing in the shoes’ ” of the
insured. . . . Instead,
the reciprocal contribution rights of coinsurers who insure the same risk are
based on the equitable principle that the burden of indemnifying or defending
the insured with whom each has independently contracted should be borne by all
the insurance carriers together, with the loss equitably distributed among
those who share liability for it in direct ratio to the proportion each
insurer’s coverage bears to the total coverage provided by all the insurance
[policies]. . . . “As a
matter of equity, insurers of the ‘same risk’ may sue each other for
contribution. . . . This
right is not a matter of contract, but flows ‘ “from equitable principles
designed to accomplish ultimate justice in the bearing of a specific
burden.” ’ . . . The
idea is that the insurers are ‘equally bound,’ so therefore they ‘all should
contribute to the payment.’ . . .” . . .

“ ‘Unlike
subrogation [defined as the “substitution of another person in place of the
creditor or claimant to whose rights he or she succeeds in relation to the debt
or claim,” Mt. Hawley, >supra, 123 Cal.App.4th at
p. 287], the right to equitable contribution exists independently of the
rights of the insured. It 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.’ ” (>Mt. Hawley at pp. 287-288,
italics omitted.) “ ‘[T]he aim of
equitable contribution is to apportion a loss between two or more insurers who
cover the same risk, so that each pays its fair share and one does not profit
at the expense of the others.’
[Citations.]” (>Id. at p. 288; see also >Fireman’s Fund Ins. Co. v. Maryland Casualty
Co. (1998) 65 Cal.App.4th 1279, 1293.)

“The
application of equitable considerations must be made on a case-by-case basis,
‘in light of varying equitable considerations which may arise, and which affect
the insured and the primary and excess carriers, and which depend upon the
particular policies of insurance, the nature of the claim made, and the
relation of the insured to the insurers.’
[Citation.]” (>North American Capacity Ins. Co. v.
Claremont Liability Ins. Co. (2009) 177 Cal.App.4th 272, 295.)

>B.
Standard
of Review.

A
judgment of the trial court is presumed correct, and it is appellant’s burden
to demonstrate error. (>Denham v. Superior Court (1970) 2 Cal.3d
557, 564; Cahill v. San Diego Gas &
Electric Co. (2011) 194 Cal.App.4th 939, 956.) Because the proper allocation of costs in an
equitable contribution action among insurers is within a trial court’s broad
discretion (Maryland Casualty Co. v.
Nationwide Mutual Ins. Co. (2000) 81 Cal.App.4th 1082, 1093-1094), we
review the trial court’s order for an abuse of that discretion. (Cahill
at p. 957.) “Under that standard,
there is no abuse of discretion requiring reversal if there exists a reasonable
or fairly debatable justification under the law for the trial court’s decision
or, alternatively stated, if that decision falls within the permissible range
of options set by the applicable legal criteria.” (Ibid.) The abuse of discretion standard is
particularly appropriate in equitable contribution cases, where there are “no
‘hard and fast “bright line” ’ rules for the proper method of allocating
defense costs among coinsurers, . . . a matter left to the sound
equitable discretion of the trial court.”
(North American Capacity Ins. Co.
v. Claremont Liability Ins. Co., supra,
177 Cal.App.4th at pp. 295-296.)

U.S. Fire
contends that the outcome of trial turned on the interpretation of legal
instruments, an issue of law this court reviews de novo. Even where an appellate court reviews an
issue de novo, such review “is limited to issues which have been adequately
raised and supported in [appellant’s] brief.”
(Reyes v. Kosha (1998)
65 Cal.App.4th 451, 466, fn. 6.)
Although U.S. Fire makes general claims that the trial court
committed “legal error,” some of its arguments lack adequate factual support or
reasoned argument demonstrating that the trial court erred, as we discuss
below.

>C.
Effect
of Indemnity Agreement.

Respondents
argued below, and the trial court agreed, that the indemnity agreement limited
respondents’ obligation to contribute because respondents were not coinsurers
of loss attributable to the Labadie and Rush Island plants, following >Mt. Hawley, supra, 123 Cal.App.4th 278.
In Mt. Hawley, a
subcontractor agreed to indemnify a general contractor for claims and
liabilities arising out of the subcontractor’s performance and to secure a
commercial general liability policy listing the subcontractor as the named
insured and the general contractor as an additional insured. (Id.
at p. 281.) After an employee of
the subcontractor was injured while construction was in progress, the employee
sued the general contractor, and the subcontractor’s insurer provided a defense
and settled the case using its own funds.
(Ibid.) The subcontractor’s insurer then filed suit
against the general contractor’s insurer, seeking payment of half of the
defense and settlement expenses, under a theory of equitable contribution. (Id.
at pp. 281, 285-286.) The trial
court granted summary judgment in favor of the subcontractor’s insurer and
awarded that insurer more than $136,000.
(Ibid.)

The
appellate court reversed. (>Mt. Hawley, supra, 123 Cal.App.4th at pp. 281, 305.) It held that because the general contractor
was not liable to the subcontractor under the parties’ indemnity provision, it
followed that the general contractor’s insurer was not liable to the
subcontractor’s insurer. (>Id. at pp. 282, 288-289, 292.) “As a general matter, ‘the courts will assess
whether the factual circumstances “create[] a relationship between the
indemnity contract and the insurance allocation
issues . . . .” ’
[Citation.]” (>Id. at p. 289.) Because the subcontractor in >Mt. Hawley had agreed to indemnify
and hold harmless the general contractor absent the general contractor’s sole
negligence or willful misconduct, and the general contractor was shown not to
be solely negligent or have engaged in willful misconduct, it followed that the
general contractor’s insurer was not required to provide equitable
contribution. (Id. at pp. 289, 291-292.)
To require the general contractor’s insurer to pay the subcontractor’s
insurer, when the general contractor was not liable for anything due to the href="http://www.mcmillanlaw.com/">indemnity provision, would effectively
negate the indemnity agreement, and would be “inconsistent with
‘ “ ‘equitable principles designed to accomplish ultimate
justice,’ ” ’ [would not be] ‘predicated on [any] commonsense
principle,’ and [would] not further the goal that each insurer pay its ‘>fair share.’ [Citation.]”
(Id. at p. 292, italics added
by Mt. Hawley court; see also >Rossmoor Sanitation, Inc. v. Pylon, Inc.
(1975) 13 Cal.3d 622, 634-635 [indemnity provision affects allocation of
liability in insurance action even where “other insurance” provision
available].)

Here,
the trial court concluded that Mt. Hawley
controlled and ruled that U.S. Fire, as the insurer for Bechtel, was
solely responsible for the defense and settlement costs for asbestos-related injuries arising out of the
construction of the Labadie plant.
Unlike the situation in a typical equitable contribution action, where
insurers equally and >concurrently owe on a debt paid and
share a common burden as coinsurers (>Mt. Hawley, supra, 123 Cal.App.4th at p. 287), the trial court here
concluded that the parties were not
coinsurers, because there was no overlapping coverage.href="#_ftn4" name="_ftnref4" title="">[4] “To hold otherwise[] would be unreasonable,
arbitrary and contrary to the intent of the underlying parties in entering into
the indemnity agreement for the Labadie construction,” the court concluded. Likewise, because U.S. Fire agreed that
it would be the primary insurer for liability arising out of new construction
at the Rush Island plant, U.S. Fire was not entitled to contribution for
defense or settlement for any asbestos-related injuries arising out of the
plant’s construction. The trial court
then ruled that U.S. Fire was entitled to equitable contribution from
respondents for defense and indemnity costs to the extent that those payments
were for injuries resulting from exposure at Union Electric facilities other
than during new construction of the Labadie or Rush Island plants. We conclude that this was an eminently
reasonable approach under Mt. Hawley
and in light of the circumstances of this case.

>D.
Duty
to Defend.

U.S. Fire
argues that the trial court’s ruling “revealed a fundamental misunderstanding
of the insurance law principles that govern a contribution action among
carriers, a misunderstanding that infected all of the court’s conclusions with
reversible error.” Appellant places much
emphasis on respondents’ legal duty to defend the underlying lawsuits. “[T]he insurer’s duty to defend [a lawsuit]
runs to claims that are merely potentially covered, in light of facts alleged
or otherwise disclosed.
[Citations.] It entails the
rendering of a service, viz., the mounting and funding of a defense [citations]
in order to avoid or at least minimize liability [citation]. It arises as soon as tender is made. [Citation.]
It is discharged when the action is concluded. [Citation.]
It may be extinguished earlier, if it is shown that no claim can in fact
be covered. [Citation.] If it is so extinguished, however, it is
extinguished only prospectively and not retroactively: before, the insurer had a duty to defend;
after, it does not have a duty to defend further. [Citations.]
[¶] Obviously, the insurer’s duty to defend is broader than its
duty to indemnify. [Citations.]” (Buss
v. Superior Court (1997) 16 Cal.4th 35, 46-47.) “If any facts stated or fairly inferable in
the complaint, or otherwise known or discovered by the insurer, suggest a claim
potentially covered by [an insurance] policy, the insurer’s duty to defend
arises and is not extinguished until the insurer negates all facts suggesting
potential coverage. On the other hand,
if, as a matter of law, neither the complaint nor the known extrinsic facts
indicate any basis for potential coverage, the duty to defend does not arise in
the first instance.” (>Scottsdale Ins. Co. v. MV Transportation
(2005) 36 Cal.4th 643, 655.) “When
a duty to defend is shown, nonparticipating coinsurers are presumptively liable
for both the costs of defense and settlement.”
(Safeco Ins. Co. of America v.
Superior Court (2006) 140 Cal.App.4th 874, 880 (Safeco).) “Although an
insurer may have a duty to defend, it may ultimately have no duty to
indemnify—either because no damages were awarded or because the actual judgment
was for damages not covered by the policy.
[Citations.]” (>Armstrong World Industries, Inc. v. Aetna
Casualty & Surety Co. (1996) 45 Cal.App.4th 1, 108 (>Armstrong).)

When
a complaint states multiple claims, some of which are potentially covered by an
insurance policy and some of which are not, it is a “ ‘mixed
action.’ ” In such a case, “the
insurer has a duty to defend as to the claims that are at least potentially
covered, having been paid premiums by the insured therefor, but does not have a
duty to defend as to those that are not, not having been paid therefor. This conclusion is in line with the ‘general
rule’ that ‘[w]hen a complaint in an action . . . states
different causes of action . . . against the insured, one of
which is within . . . coverage . . . and others
of which may not be, the insurer is bound to defend with respect to those
which, if proved, would be within . . . coverage.’ [Citations.]”
(Buss v. Superior Court, >supra, 16 Cal.4th at p. 48, italics
omitted.) Despite this rule, our Supreme
Court has held that, “in a ‘mixed’ action,’ the insurer has a duty to defend
the action in its entirety.” (>Ibid.)
However, the insurer may thereafter seek reimbursement from the insured
for defense costs that can be attributed to claims that are not even
potentially covered. (>Id. at p. 53.) Here, the trial court followed a similar
model by allocating defense and settlement costs after taking into account the
nature, severity, and length of exposure to asbestos at the various Union
Electric plants involved in the underlying suits.

The
trial court accepted U.S. Fire’s contention that the allegations in the
underlying suits gave rise to an initial duty by respondents to defend the
underlying cases. But it concluded that
any such duty did not affect the proper way to allocate the costs of defense
and settlement payments among the parties:
“If[,] for example, Arrowood and USF&G had a duty to defend and did
not defend, or if they had participated in the defense and the parties were now
seeking to allocate their respective shares of the costs of defense and
settlements, the method of allocation would be the same.”

We
understand U.S. Fire’s argument to be that because respondents had an initial
duty to defend the underlying lawsuits, it necessarily follows that the trial
court used an incorrect method of allocating defense costs and settlement
amounts among the parties. In making
this argument, U.S. Fire focuses almost entirely on respondents’ duties
when the underlying lawsuits were filed and defenses tendered, and suggests
that these duties control respondents’ contribution rights for all time, no
matter what information was subsequently learned, and no matter the effect of
the indemnity agreement.

U.S. Fire’s
approach is not supported by the case law upon which it relies. For example, citing Safeco, supra, 140
Cal.App.4th 874, appellant claims that “all carriers with a duty to defend are
obligated to equitably contribute to the defense.” In Safeco,
a settling insurer sued a nonparticipating insurer for equitable contribution
after the settling insurer paid the costs of defense and settlements of 17
underlying property damage lawsuits. (>Id. at p. 877.) In denying the settling insurer’s motion for
summary judgment, the trial court concluded that because the underlying
complaints were “ ‘very general’ ” there were questions whether
damages occurred when the nonparticipating insurer’s policies were in effect
and thus whether there was a corresponding duty to defend. (Id.
at p. 878.) The trial court further
ruled that the settling insurer would not be entitled to equitable contribution
until the insurer established as a matter
of law that the nonparticipating insurer’s policy covered the loss. (Ibid.)

The
appellate court thereafter granted the settling insurer’s petition for a writ
of mandate. (Safeco supra, 140
Cal.App.4th at pp. 878, 881.) It
held that “in an action for equitable contribution by a settling insurer
against a nonparticipating insurer, the settling insurer has met its burden of
proof when it makes a prima facie showing of coverage under the
nonparticipating insurer’s policy—the same showing necessary to trigger the
recalcitrant insurer’s duty to defend—and that the burden of proof then shifts
to the nonparticipating insurer to prove the absence of actual coverage. [Citation.]”
(Id. at p. 881.) Here, respondents met their burden by demonstrating that the indemnity agreement relieved
them of any duty to cover losses sustained during construction at the Labadie
and Rush Island plants and by presenting evidence on the extent to which the
plaintiffs were exposed to asbestos while working on the construction of those
plants.

Moreover,
Safeco was a writ proceeding that did
not address any particular allocation method—the main issue on appeal in this
case. (Safeco, supra,
140 Cal.App.4th at pp. 881-882.)
Instead, it focused on the showing necessary to obtain contribution for
settlement payments as opposed to defense costs. (Id.
at p. 879.) As for defense costs,
the parties agreed that a settling insurer need only establish a
nonparticipating coinsurer’s potential
for coverage under the coinsurer’s policy in order to obtain contribution. (Ibid.) To the extent that U.S. Fire contends
that under Safeco it was entitled to
contribution for defense costs, as opposed to settlement payments, we
disagree. Respondents established that
there was no potential for coverage
for injuries sustained during new construction at the Labadie and Rush Island
plants. This case is thus more akin to >Buss v. Superior Court, >supra, 16 Cal.4th 35, a “ ‘mixed’
action,” where the court held that an insured could recover defense costs “that
can be allocated solely to the claims that are not even potentially
covered.” (Id. at p. 53; see also Mt. Hawley,
supra, 123 Cal.App.4th at
p. 292.)

U.S. Fire
contends that Mt. Hawley’s
analysis regarding indemnity agreements is inapplicable here because >Mt. Hawley was a “single-site,
single-injury and complete indemnity situation,” whereas this case involved
five different sites. In other words,
U.S. Fire concedes that Mt. Hawley
would apply if a construction worker had been injured in a single accident at
the Labadie plant. But here,
U.S. Fire claims that the trial court should have found that U.S. Fire and
respondents were “co-insurers,” necessitating that “allocation issue[s]” be
“analyzed under insurance law principles,” because U.S. Fire had assumed
liability at only two of five implicated sites.
We disagree with the notion that in allocating defense costs and
settlement payments the trial court was required to ignore the indemnity
agreement and the facts that were established in applying it, just because
plaintiffs alleged damages at multiple locations.

This
is particularly true in the Capestro
and Morris lawsuits, where the trial
court found that plaintiffs suffered injuries solely related to new
construction at the Labadie plant. The >Capestro complaint alleged injury only
at the Labadie plant.href="#_ftn5"
name="_ftnref5" title="">[5] Although the Morris complaint alleged injury suffered at plants other than those
covered by U.S. Fire’s policies, it would not be equitable to find that
U.S. Fire was a coinsurer in that lawsuit simply because plaintiff initially
alleged that he suffered injury at other facilities. In its opening brief, U.S. Fire does not
directly challenge the trial court’s factual finding that plaintiffs in >Capestro and Morris suffered injuries only at Labadie or offer any reasoned
argument why it is entitled to contribution for claims covered solely by the
indemnity agreement.href="#_ftn6"
name="_ftnref6" title="">[6]

U.S. Fire
also relies on Scottsdale Ins. Co. v. MV
Transportation, supra,
36 Cal.4th 643, but this case also supports the trial court’s order. In Scottsdale,
an insurance company defended its insured against a third party lawsuit under a
reservation of rights to recover defense costs in the event that it was
determined that the company owed no defense.
(Id. at p. 649.) The company was permitted to recover defense
costs from its insured because it was later determined as a matter of law that
the insurance company’s policies in fact afforded no potential coverage. (Ibid.) The Supreme Court noted that in such a
situation, the insurance company’s duty to defend was never
“ ‘extinguished’ ”; instead, it never arose in the first place. (Ibid.) “The insured pays for, and can reasonably
expect, a defense against third party claims that are potentially covered by
its policy, but no more. Conversely, the
insurer does not bargain to assume the cost of defense of claims that are not
even potentially covered. To shift these
costs to the insured does not upset the contractual arrangement between the
parties. Thus, where the insurer, acting
under a reservation of rights, has prophylactically financed the defense of
claims as to which it owed no duty of defense, it is entitled to
restitution. Otherwise, the insured, who
did not bargain for a defense of noncovered claims, would receive a windfall
and would be unjustly enriched.
[Citation.]” (>Id. at p. 659.) Although this is an equitable contribution
action and not an action against an insured, we find this reasoning useful
here. It was not improper for the trial court
to decline ordering respondents to contribute to defense and settlement costs
for claims that were not potentially covered simply because the complaints
alleged other potentially covered claims.href="#_ftn7" name="_ftnref7" title="">[7]

In
a related argument, U.S. Fire contends that because asbestos bodily injury
claims “ ‘trigger’ ” insurance policy coverage throughout successive
policy periods, respondents had a duty to defend in this matter. Where successive comprehensive general
liability policy periods are implicated, “bodily injury . . .
which is continuous or progressively deteriorating throughout several policy
periods is potentially covered by all policies in effect during those
periods.” (Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645,
689.) U.S. Fire apparently contends that
respondents’ coverage for some of the time periods implicated in the underlying
complaints triggered a duty to defend the entire complaints because asbestos
injury is a continuing injury and it can never be established which precise
asbestos fiber led to a particular plaintiff’s asbestos-related injury. (E.g., Armstrong,
supra, 45 Cal.App.4th at p. 41
[asbestos-related diseases “ ‘insidious diseases with delayed
manifestations’ ”].) U.S. Fire
reasons that this makes respondents jointly liable for the entire underlying
injury that occurred over time, as opposed to the discrete injury in >Mt. Hawley, supra, 123 Cal.App.4th at page 283, which occurred when a
worker fell into an open elevator shaft on a single occasion. Again, this ignores the effect of the
indemnity agreement and the fact that damages are frequently apportioned among
defendants in asbestos cases. (>Armstrong, supra, 45 Cal.App.4th at pp. 57-58.)

It
may be true, as the trial court assumed, that respondents had a duty to defend
at least some of the underlying complaints because they involved “mixed
actions.” But it does not follow that
the trial court erred in allocating costs and settlement among the parties, as
illustrated by the cases upon which U.S. Fire relies. In Armstrong,
supra, 45 Cal.App.4th 1, a
lengthy opinion from Division One of this court addressing coordinated asbestos
proceedings, the court analyzed when bodily injury occurs for purposes of
triggering insurance coverage. (>Id. at p. 41.) Applying our Supreme Court’s decision in >Montrose Chemical Corp. v. Admiral Ins. Co.,
supra, 10 Cal.4th 645, >Armstrong affirmed the trial court’s
ruling that all of a policyholder’s policies in effect from first exposure to
asbestos until either date of death or date of claim, whichever occurs first,
are triggered with respect to an asbestos-related bodily injury claim. (Armstrong,
supra, at pp. 43-45.)

>Armstrong went on to conclude that an
insured must be indemnified by one insurer for the full extent of loss up to
the policy’s limits, but that liability was properly apportioned among all
insurers “based upon the policy limits and the years of coverage.” (Armstrong,
supra, 45 Cal.App.4th at
p. 49.) “ ‘Allocation of the
cost of indemnification once several insurers have been found liable to
indemnify the insured for all or some portion of a continuing injury or
progressively deteriorating property damage requires application of principles
of contract law to the express terms
and limitations of the various policies of insurance on the risk. [Citation.]’ ” (Id.
at p. 51, quoting Montrose Chemical
Corp. v. Admiral Ins. Co., supra,
10 Cal.4th at p. 681, fn. 19.)
Armstrong rejected the
insurance companies’ claims that successive insurers share joint and several
liability. (Armstrong at p. 55.)

U.S. Fire
points out that there are “established allocation methodologies for
contribution actions under California law.”
(Initial capitals and boldface omitted; see Maryland Casualty Co. v. Nationwide Mutual Ins. Co., >supra, 81 Cal.App.4th at
p. 1094 [courts have developed several methods to equitably apportion
loss].) It contends that had the trial
court correctly analyzed the duty to defend, the court would have used a “time
on the risk methodology” (ante,
fn. 2) and thus allocated the “vast majority of the responsibility for the
underlying claims” to respondents.
U.S. Fire does not define “vast majority” or explain how the “time
on the risk methodology” should have been applied in this case. It likewise accuses the trial court of
“ignor[ing]” relevant insurance policies but does not explain how examining
them would have led to a different result.
U.S. Fire is perhaps hinting that its contribution award should
have been larger because respondents insured Union Electric over several
decades, while the construction period covered by the indemnity period was
shorter. But “[s]imply hinting at an
argument and leaving it to the appellate court to develop it is not adequate.”href="#_ftn8" name="_ftnref8" title="">[8] (Cryoport
Systems v. CNA Ins. Cos. (2007) 149 Cal.App.4th 627, 633.)

U.S. Fire
does concede that it is liable for “>some portion” (original boldface) of
each claim by virtue of the indemnity agreement, but that it “simply asserts
that the indemnity agreements be limited to their terms—they apply to liability
arising out of only two of the five sites [implicated in the parties’ lawsuits]
(and each claimant was exposed at both indemnified and non-indemnified
sites).” As was the case in the trial
proceedings, it is still unclear what exact relief U.S. Fire seeks. It asks this court to remand the matter “with
instructions to allocate the parties’ respective coverage obligations under
insurance principles and not to treat this as an underlying asbestos
trial.” At one point it states that
“there is no ‘exception’ to the joint and several defense obligation for
recalcitrant insurers that elect not to defend but await a contribution action
after the fact,” apparently suggesting that respondents are jointly and
severally liable for the entire amount U.S. Fire paid. It later states that the trial court “was
required to examine ‘the nature of the claim, the relation of the insured to
the insurers, the particulars of each policy and any other equitable
considerations,’ ” quoting Truck
Ins. Exchange v. Unigard Ins. Co. (2000) 79 Cal.App.4th 966, 974. But a fair reading of the trial court’s
statement of decision reveals that the court did take many, if not all, of those factors into account. It considered the nature and timing of the
workers’ claims, the relation of the parties to Bechtel and Union Electric, and
the particulars of the policies (including the indemnity agreement).

U.S. Fire
repeatedly directs this court to the following excerpt from an insurance
treatise regarding equitable contribution:
“The sharing of defense costs will typically be pro rata because every
insurer that potentially covers the
risk owes an immediate and complete defense [citation]. On the other hand, an insurer’s share of the
indemnity obligation will depend on whether there is actual coverage and may vary depending on equitable considerations
such as policy limits, time on the risk, etc. [citation].” (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2012)
¶ 8:67.1, p. 8-29, original italics.)
But the treatise underscores the importance of flexibility in allocating
responsibility by emphasizing that there is “no fixed rule for allocating defense and indemnity
costs . . . .”
(Croskey et al., supra,
¶ 8:67, p. 8-28, italics added; see also Maryland Casualty Co. v. Nationwide Mutual Ins. Co., >supra, 81 Cal.App.4th at p. 1094
[“no single required method of apportionment” in equitable contribution case].)

Trial
courts have great latitude in apportioning defense and settlement costs in
contribution actions, and U.S. Fire has failed to demonstrate that the
trial court improperly apportioned them in this case.

III.

Disposition

The judgment is affirmed. Respondents shall recover their costs on
appeal.







_________________________

Humes,
J.





We concur:





_________________________

Reardon, Acting P.J.





_________________________

Rivera, J.