The Travelers Indemnity Company Of Connecticut v. Navigators Specialty Insurance Company – Insurance

Claims legitimately alleged by the insurer for fair compensation and fair contribution against other insurers who have failed to pay defense costs incurred in legal action for construction failure

(December 2021) – In Travelers allowance. Co. of Conn. v. Navigators Specialty Ins. Co., 70 Cal.App. 5th 341 (October 15, 2021), the California Fourth District Court of Appeals reversed the trial court order dismissing a lawsuit filed by the travelers alleging causes of action for a declaratory judgment, fair contribution and fair indemnity against Navigators Specialty Insurance Company (“Navigators”) and Mt. Hawley Insurance Company (“Mt. Hawley”). The dispute between the parties arose out of Travelers’ defense of a general contractor as additional insured in a construction defect suit. Travelers subsequently amended its complaint alleging that coverage was never owed to the general contractor under its policy in the first place. Travelers argued that Navigators was required to participate in the defense of the general contractor on the same basis as Travelers, because its policy made the general contractor an In addition, since Mt. Hawley insured the general contractor directly, it was also required to share the prosecution’s defense costs. tively, Travelers argued that she was entitled to fair compensation from Navigators and Mt. Hawley for all defense costs she paid on behalf of the general contractor because coverage was not offered under from Travelers Police.

In response to Travelers’ lawsuit, Navigators filed a claim and argued that Travelers could not seek declaratory relief because the underlying lawsuit had ended and Travelers were no longer paying for the lawsuit’s defense. Navigators also argued that Travelers was not entitled to an equitable contribution because it argued that coverage was not available under its policy. Finally, Navigators argued that Travelers was not entitled to fair compensation because such recourse was not provided for reimbursement of defense costs.

Mt. Hawley also filed a challenge based on a request that the trial court take judicial notice of the policies of Travelers and Mt. Hawley. According to Mt. Hawley, the wording of the Travelers and Mt. Hawley policies required Travelers to provide primary coverage to the general contractor while the Mt. Hawley policy provided additional coverage. Alternatively, Mt. Hawley adopted the arguments of the navigators as the basis for rejecting the Travelers trial.

The trial court supported the Navigators ‘opposition and issued an order dismissing the Travelers’ lawsuit. The trial court dismissed Mt. Hawley’s request for judicial notice of policies, but supported Mt. Hawley’s opposition on the same basis as the Navigators’ opposition.

In reversing the order of the trial court, the Court of Appeal gave the following reasons in relation to the arguments put forward by Navigators and Mr. Hawley:

The decision of the court of first instance was based on the general principle that “”[t]The equitable contribution doctrine applies to insurers who share the same level of obligation on the same risk as with regard to the same insured. “(Fireman’s Fund, supra, 65 Cal.App.4th at 1294, footnote. 4.) More precisely, “In the insurance context, the right to contribution arises when several insurers are obliged to indemnify or defend the same loss or claim and an insurer has paid more than its share of the loss or has defended the action without no participation of others. When several insurance companies insure the same insured and cover the same risk, each insurer has independent standing to assert a cause of action against its co-insurers for a fair contribution when it has undertaken the defense or indemnification of the common insured. The equitable contribution makes it possible to reimburse the insurer who has paid on the loss the excess that it has paid over its proportional share of the obligation, assuming that the debt that it has paid was also and concurrently owed by the other insurers and should be shared among them pro rata in proportion to their respective risk coverage. The purpose of this fairness rule is to achieve substantial justice by equalizing the common burden shared by co-insurers, and to prevent one insurer from profiting at the expense of others. (Id. At p. 1293.) Following these principles, the trial court observed that Travelers would not have a valid claim for an equitable contribution if they were not among the obligated insurance companies to provide a defense to TFM in the action for construction defect.

The Court of Appeal also rejected arguments by Navigators and Mt. Hawley that Travelers’ claims that his policy did not provide coverage for the general contractor constituted a “judicial admission” barring his claim for equitable contribution. . The Court of Appeal reasoned as follows:

First, as we have explained, Travelers’ claim that it had no obligation to defend TFM was not a factual claim, but rather an claim as to what it believed to be the legal effect of his recent discovery of the allegedly backdated subcontractor agreement. (Feldman, supra, 198 Cal.App.4th at p. 1500.) Thus, there is no basis for Navigators’ contention that travelers should be precluded from alleging “conflicting and conflicting facts” as to whether it had a duty to defend TFM.

Second, the requirements for | establishing a judicial admission are not present here. A judicial admission is “” a waiver of proof of a fact by conceding its truthfulness, and it has the effect of removing the matter from questions. “(Valerio v. Andrew Youngquist Construction (2002) 103 Cal.App.4e 1264, 1271 [127 Cal. Rptr 2d 436].) “To be considered a legally binding admission, the statement or statement must be a fact and not a legal conclusion, claim or argument.” (Eisen v. Tavangarian (2019) 36 App Cal. 5th 626, 637 [248 Cal.Rptr. 3d 744].) “[A] a mere finding, or a “mixed factual legal finding” in a complaint, is not considered a binding judicial admission. “(Castillo vs. Barrera (2007) 146 Cal. App 4th 1317, 1324 [53 Cal. Rptr. 3d 494].) Here, as we have explained, Travelers’ claim that it did not have a duty to defend TFM is not a factual claim. Consequently, it cannot be equated with a judicial confession. What’s more, “[a] judicial admission is[…]conclusive both for the side that admits and for the opponent of that game. … Thus, if a factual claim is treated as a judicial admission, then neither party can attempt to contradict it – the admitted fact is indeed admitted by both parties. “(Barsegian v. Kessler & Kessler (2013) 215 Cal.App.4e 446, 452[155 Cal. Rptr.
3d 567].) Applying this principle, it is clear that Travelers did not make a judicial confession. As we have explained, far from admitting that Travelers had no obligation to defend TFM, Mt. Hawley takes the opposite position, asserting that Travelers had an obligation to defend, which cannot be extinguished retroactively.

In sum, because Travelers is not bound by its claim that it had no obligation to defend TFM, the trial court erred in supporting the opponents of the equitable contribution cause of action. .

With respect to the arguments of Navigators and Mt. Hawley relating to Travelers’ fair claim for compensation, the Court of Appeal also rejected these arguments and reasoned as follows:

Case law and commentators recognize that a fair compensation claim can be made in a dispute between insurance companies, even if they are not co-perpetrators of a tort. In the context of disputes between insurers, “[although courts often use the terms
‘equitable contribution,’ ‘equitable indemnity’ and
‘equitable subrogation’ interchangeably, they are really
separate remedies that apply in discrete situations Equitable
contribution is a loss-sharing procedure. It lies where several
insurers insure the same risk at the same level (e.g., all primary
insurers) and one pays the entire loss. That insurer may seek
equitable contribution from the others to obtain reimbursement for
a portion of what it has paid…. Equitable indemnity is a
loss-shifting procedure. ‘Equitable indemnity applies in cases
in which one party pays a debt for which another is primarily
liable and which in equity and good conscience should have been
paid by the latter party.'” (Croskey et al., Cal. Practice
Guide: Insurance Litigation (The Rutter Group 2021) 8:65.1, pp.
8-26 to 8-27, citation omitted, quoting United Services
Auto. Assn, v. Alaska Ins. Co.
 (2001) 94 Cal.App.4th 638,
644-645 [114 Cal.Rptr.2d 449].)

The Court of Appeal also concluded that an equitable claim for compensation could apply to a cause of action for the reimbursement of defense costs.

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Justin D. O'Neill