Searles Valley Minerals Operations Inc. v. Ralph M. Parsons Service Co.
191 Cal. App. 4th 1394
Cal. Ct. App.2011Background
- Searles appeals a judgment dismissing its action for express indemnity after a demurrer, without leave to amend.
- KM (Kerr-McGee) had an indemnity contract with Parsons; KM assigned indemnity rights to Searles via an acquisition.
- KM tendered defense in the Moore wrongful death action; Parsons declined KM’s tender of defense.
- Searles paid KM’s defense costs after Parsons refused to defend KM; the Moore action later allocated fault.
- The underlying contract provides defense and indemnity to KM; Searles, as KM’s assignee, seeks reimbursement for KM’s defense costs.
- The trial court sustained the demurrer; the appellate court reverses and remands for overruling the demurrer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an assignee may recover defense costs under indemnity rights | Searles, KM's assignee, is entitled to KM's defense costs | KM did not incur losses; assignment cannot create recovery | Yes; assignee may recover defense costs under the indemnity provision |
| Whether KM's lack of payment defeats recovery by the assignee | As assignee, Searles may recover costs KM did not pay | Subdivision 2 bars recovery if indemnified party did not pay | No; assignee may recover costs incurred on KM's behalf |
| Whether the indemnity clause covers defense costs | Clause 17 includes defense and indemnity for KM | Defendant contends only indemnity, not defense costs, are recoverable | Clause 17 covers defense costs; recoverable as indemnity damages |
| Whether Johnson/Fleck/E Essex support assignee recovery | Cases allow assignees to recover when assignor pays nothing | Distinguishable but not controlling here | Yes; these authorities support assignee recovery under proper logic |
| Whether the demurrer was properly sustained without leave to amend | Complaint adequately pled express indemnity as assignee | Pleading insufficient because KM didn't incur loss | Reversed; demurrer should be overruled and leave to amend allowed |
Key Cases Cited
- Crawford v. Weather Shield Mfg., Inc., 44 Cal.4th 541 (Cal. 2008) (defines indemnity defense rights under Civ. Code §2778)
- Johnson v. County of Fresno, 111 Cal.App.4th 1087 (Cal. Ct. App. 2003) (assignee stands in assignor's shoes; entitlement to indemnity recovery)
- Essex Ins. Co. v. Five Star Dye House, Inc., 38 Cal.4th 1252 (Cal. 2006) (assignee recovers Brandt fees in bad faith/defense claims)
- United States Elevator Corp. v. Pacific Investment Co., 30 Cal.App.4th 122 (Cal. Ct. App. 1994) (indemnitor must defend, costs payable when tender refused)
- Brandt v. Superior Court, 37 Cal.3d 813 (Cal. 1985) (foundational on assignee rights and defense costs)