St. Paul Mercury Insurance v. Mountain West Farm Bureau Mutual Insurance
210 Cal. App. 4th 645
| Cal. Ct. App. | 2012Background
- St. Paul Mercury Insurance Company sought equitable contribution from Mountain West, the insurer for the framing subcontractor, based on Mountain West’s additional insured endorsement naming the general contractor Jacobsen.
- The trial court allocated defense costs and settlement liability to Mountain West after finding it failed to defend Jacobsen in the underlying action and thus triggered Safeco’s shifted burdens.
- The underlying action FSJH v. Jacobsen involved construction defects; two settlements resolved siding/drywall issues (1 million by St. Paul Mercury) and roofing issues (1.6 million with Mountain West contributing 100,000 on behalf of Teton).
- Jacobsen tendered defense to Mountain West; Mountain West refused to accept and did not assign defense counsel or pay defense costs in the underlying action.
- St. Paul Mercury paid approximately $1.784 million to defend and the total settlement reached about $3.07 million; Mountain West contributed $100,000 to the roofing phase and nothing to the siding phase.
- The court used a time-on-the-risk allocation and prejudgment interest was later found to be error.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Burden allocation under Safeco framework | St. Paul Mercury carried prima facie coverage potential; Mountain West bears absence of coverage. | St. Paul Mercury must prove actual coverage; Mountain West has no duty to defend. | Safeco shifted burden applied; Mountain West failed to prove absence of actual coverage. |
| Mountain West’s defense participation | Mountain West owed a defense to Jacobsen and did not participate. | Mountain West defended through contributing to the roofing settlement on behalf of Teton, not needed to defend Jacobsen. | Mountain West did not participate in defense; Safeco burden shifting applied. |
| Effect of roofing settlement on Mountain West’s obligation | Roofing settlement did not release Mountain West from contribution to Jacobsen. | Settlement released Mountain West’s claims as a third-party beneficiary. | Roofing settlement did not release Mountain West or bar contribution; obligation remained. |
| Prejudgment interest on contribution | Interest is proper on the prorated share if damages are certain; the settlement amount is presumed evidence. | Damages not certain until allocation method decided; interest inappropriate. | Prejudgment interest award was error; cannot determine exact contribution until allocation method chosen. |
Key Cases Cited
- Safeco Ins. Co. of Am. v. Superior Court, 140 Cal.App.4th 874 (Cal. App. Dist. 2 (2006)) (shifted burden in equitable contribution when nonparticipating insurer must prove absence of coverage)
- Axis Surplus Ins. Co. v. Glencoe Ins. Ltd., 204 Cal.App.4th 1214 (Cal. App. Dist. 2 (2012)) (affirmative defenses and coverage issues in contribution)
- Maryland Cas. Co. v. Nationwide Ins. Co., 65 Cal.App.4th 21 (Cal. App. Dist. 4 (1998)) (additional insured endorsement creates defense duty to defend)
- Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287 (Cal. 1993) (interpretation of ‘arising out of’ and duty to defend; continuous injury trigger)
- Pepperell v. Scottsdale Ins. Co., 62 Cal.App.4th 1045 (Cal. App. Dist. 4 (1998)) (occurrence-based trigger and continuous damage doctrine)
- Stonelight Tile, Inc. v. California Ins. Guarantee Assn., 150 Cal.App.4th 19 (Cal. App. Dist. 4 (2007)) (triggering coverage for occurrence-based policies in construction defect)
- Transcontinental Ins. Co. v. Insurance Co. of the State of Pa., 148 Cal.App.4th 1296 (Cal. App. Dist. 4 (2007)) (duty to defend entire action when insured is named as additional insured)
- Maryland Casualty Co. v. Nationwide Mut. Ins. Co., 81 Cal.App.4th 1082 (Cal. App. Dist. 4 (2000)) (allocation and extent of defense costs in contribution)