American Safety Indemnity Co. v. Admiral Insurance
220 Cal. App. 4th 1
| Cal. Ct. App. | 2013Background
- Insurer Admiral insured Horton entities with primary coverage and a Self-Insured Retention (SIR) of $250,000; defense costs count toward SIR.
- ASIC paid Horton and Holding defense costs during the Fessler subsidence litigation; ASIC sought reimbursement via equitable subrogation.
- ASIC II sought reimbursement for Horton defense costs under Admiral’s duty to defend when tendered claims exceeded policy limits or were arguably covered.
- Trial court held Horton entities had a defense duty independent of SIR and awarded ASIC $1.9 million.
- Court analyzes whether SIR operates to limit defense duty and whether ASIC’s subrogation rights are preserved when Allianz/Admiral’s defense obligations arise.
- Court confirms judgment; appellate resolution upholds the defense obligation framework and subrogation recovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SIR limits defense duty or only indemnity | ASIC relies on Legacy Vulcan: defense not conditioned by SIR | Admiral: SIR limits both defense and indemnity | SIR does not condition defense obligation |
| Whether Admiral owed a duty to defend Horton entities | Admiral's duty to defend exists despite SIR | SIR and policy terms limit defense until retention paid | Yes, Admiral owed defense to Horton entities |
| Whether ASIC’s settlement with Holding affected subrogation rights | Settlement did not waive subrogation rights | Settlement implied waiving other claims | ASIC may pursue subrogation for defense costs |
| Whether ASIC acted as volunteer or waived subrogation | ASIC did not voluntary defeat its rights | Volunteer defense by insurers possible | ASIC did not waive rights; no volunteer defense bar |
| Whether SIR language unambiguously excludes defense costs from SIR | SIR excludes defense costs from retention | SIR covers indemnity only; defense costs not included | SIR does not unambiguously exclude defense costs; defense obligation remains |
Key Cases Cited
- Fireman's Fund Ins. Co. v. Maryland Casualty Co., 65 Cal.App.4th 1279 (1998) (equitable subrogation elements and derivation)
- Legacy Vulcan Corp. v. Superior Court, 185 Cal.App.4th 677 (2010) (SIR applies to indemnity, not necessarily defense; primary vs excess carrier roles)
- Aerojet-General Corp. v. Transport Indemnity Co., 17 Cal.4th 38 (1997) (self-insurance concept and insured not uninsured during self-retention periods)
- Montgomery Ward & Co. v. Imperial Casualty & Indemnity Co., 81 Cal.App.4th 356 (2000) (retained limits vs underlying insurance; policy language controls defense duty)
- USAA v. Alaska Insurance Co., 94 Cal.App.4th 638 (2001) (volunteer defense and subrogation rights where excess carrier seeks recovery)