32 Cal. App. 5th 1230
Cal. Ct. App. 5th2019Background
- Centex Homes subcontracted R-Help to install all dry-utility boxes/conduits for the Novella subdivision; the subcontract required R-Help to defend and indemnify Centex for claims arising out of R-Help’s work and to cover attorney fees enforcing the indemnity.
- Plaintiff Wagener sued various parties after falling into a utility box, alleging negligence and that the box was installed or abandoned by R-Help; Centex was later added as a defendant.
- Centex tendered defense to R-Help; R-Help declined to respond or defend Centex.
- Centex cross-complained against R-Help for breach of contract, indemnity, and declaratory relief; Wagener’s underlying action settled, leaving Centex’s cross-complaint for trial.
- At trial the court submitted the duty-to-defend issue to the jury; the jury found Wagener’s injuries did not arise from R-Help’s work and also found information at tender eliminated any reasonable potential of coverage; the trial court entered judgment for R-Help.
- Centex appealed, arguing the duty to defend was a question of law that arose on tender under the subcontract and should not have been submitted to the jury.
Issues
| Issue | Centex's Argument | R-Help's Argument | Held |
|---|---|---|---|
| Whether duty to defend under an indemnity clause is a question of law for the court or a jury question | Tender of a complaint alleging injuries from R-Help’s work triggers a duty to defend as a matter of law (per Crawford) | Scope of subcontract work is a factual issue; jury should decide whether the box was within R-Help’s scope | Court: duty to defend arises as a matter of law on proper tender when underlying complaint alleges coverage; it was error to submit duty-to-defend to the jury |
| Whether R-Help conclusively showed no potential coverage so duty could be extinguished | Allegations in Wagener’s complaint invoked the indemnity, so duty persisted unless R-Help conclusively showed no potential for coverage | R-Help claimed undisputed evidence proved the box was outside its scope | Court: R-Help failed to conclusively show lack of potential coverage; duty continued through underlying action |
| Admissibility/weight of evidence on scope of work | Centex presented project plans, change order, manager and expert testimony showing the box was within R-Help’s scope | R-Help challenged credibility and argued the box was not on plans and was not its work | Court: Centex’s evidence constituted substantial evidence; credibility disputes do not negate that duty-on-tender rule |
| Remedy and next steps | Centex sought a determination of breach and damages for failure to defend | R-Help prevailed at trial but court erred by sending duty issue to jury | Court reversed and remanded for new trial limited to damages for failure to defend; costs awarded to Centex |
Key Cases Cited
- Crawford v. Weather Shield Mfg., Inc., 44 Cal.4th 541 (court duty to defend arises on proper tender when underlying complaint alleges facts within indemnity)
- Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (an insurer need not defend when undisputed facts conclusively show no coverage)
- Scottsdale Ins. Co. v. MV Transportation, 36 Cal.4th 643 (defense duty arises on tender and continues until lawsuit concludes or no potential for coverage shown; extinguishment is prospective)
- Morlin Asset Management LP v. Murachanian, 2 Cal.App.5th 184 (indemnity clause scope may limit duty to defend where underlying allegations fall outside indemnity and defendant shows conclusive evidence)