56 Cal.App.5th 619
Cal. Ct. App.2020Background
- Owners (the Awads) leased a corner commercial property to Bascon (Holé Molé) in 2012; the Awads’ insurer was Truck Insurance Exchange and Bascon’s insurer was AMCO. The AMCO policy named landlords as additional insureds “with respect to their liability arising out of your use of that part of the premises leased to you.”
- In 2007 a car previously crashed into the building; in 2013 a different car jumped the curb, crashed through Holé Molé’s front, and injured two patrons (the Smiths).
- The Smiths sued the restaurant and later added the landlords, alleging the landlords knew of the 2007 incident and failed to install protections (e.g., bollards). AMCO defended Bascon but denied coverage/tender for the landlords.
- Bascon won summary judgment in the Smith action (court found no foreseeability/knowledge by Bascon); the landlords’ motion was denied (court found landlords had prior-incident knowledge). Truck (landlords’ insurer) settled the landlords’ liability for $785,000 and defense costs.
- Truck sued AMCO for equitable subrogation/indemnity/contribution and declaratory relief, arguing the additional-insured endorsement required AMCO to defend/indemnify the landlords because the patrons were injured while at the restaurant (i.e., due to Bascon’s use).
- On stipulated facts the trial court held the landlords’ liability “arose out of” Bascon’s use, awarded Truck one-half of the settlement plus half defense costs; AMCO appealed.
Issues
| Issue | Truck’s Argument | AMCO’s Argument | Held |
|---|---|---|---|
| Whether landlords’ liability "arose out of" tenant’s use, triggering additional‑insured coverage | Yes — minimal causal link: plaintiffs were injured while patrons of the restaurant; but for tenant’s use they wouldn’t have been present | No — landlords’ liability derived from prior accident/poor repairs; mere situs or prior condition, not tenant use | Held for Truck: “arising out of” needs only a minimal causal connection; landlords were additional insureds |
| Whether Bascon’s summary judgment precludes coverage (res judicata/collateral estoppel) | Not dispositive — endorsement focuses on the relation between use and liability, not comparative fault or findings in underlying suit | Summary judgment for tenant shows tenant not at fault, so landlords’ liability did not arise from tenant use | Held for Truck: underlying liability allocation irrelevant; res judicata/issue preclusion inapplicable here |
| Whether the court’s finding established only a duty to defend (not indemnify) | Finding supports both potential and actual coverage; AMCO failed to prove no indemnity obligation | Trial court only established potential coverage; AMCO should owe defense share only | Held for Truck: court found coverage sufficient for both defense and indemnity; AMCO failed to meet its burden |
| Proper allocation of equitable contribution (50/50 vs prorated by policy limits) | Truck sought full recovery; court split 50/50 | AMCO argued allocation should reflect policy limits (1/3) rather than equal shares | Held for Truck: AMCO forfeited this argument by not raising it below; 50/50 allocation affirmed |
Key Cases Cited
- Acceptance Ins. Co. v. Syufy Enterprises, 69 Cal.App.4th 321 (Cal. Ct. App. 1999) ("arising out of" construed broadly; minimal causal connection suffices for additional‑insured coverage)
- Vitton Const. Co., Inc. v. Pacific Ins. Co., 110 Cal.App.4th 762 (Cal. Ct. App. 2003) (reiterates minimal causal connection standard for "arising out of")
- Kramer v. State Farm Fire & Cas. Co., 76 Cal.App.4th 332 (Cal. Ct. App. 1999) (distinguishes injuries where premises merely serve as a situs from injuries causally related to property use)
- Maryland Cas. Co. v. Nationwide Mut. Ins. Co., 81 Cal.App.4th 1082 (Cal. Ct. App. 2000) (equitable contribution arises when multiple insurers cover the same loss and one pays more than its share)
- State Farm Mut. Automobile Ins. Co. v. Grisham, 122 Cal.App.4th 563 (Cal. Ct. App. 2004) (vehicle‑use cases apply a predominating‑cause/substantial‑factor test — distinguished from general liability "use")
- Fireman’s Fund Ins. Co. v. Atlantic Richfield Co., 94 Cal.App.4th 842 (Cal. Ct. App. 2001) (majority view rejects reading "arising out of" to require vicarious liability; fault allocation not required by endorsement)