WESTERN AGRICULTURAL INSURANCE COMPANY, an Arizona corporation, Plaintiff-Appellant,
v.
INDUSTRIAL INDEMNITY INSURANCE COMPANY, a California corporation, Defendant-Appellee.
Court of Appeals of Arizona, Division 1, Department D.
*593 Gallagher & Kennedy by Kevin E. O'Malley, Judith A. Morse and G. Starr Rounds, Phoenix, for plaintiff-appellant.
O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears, P.A. by Larry L. Smith and Michael R. Altaffer, Phoenix, for defendant-appellee.
OPINION
GARBARINO, Judge.
Appellant Western Agriculture Insurance Company ("Western") sued Industrial Indemnity Insurance Company ("Industrial") seeking contribution for the payment of a fire loss to premises leased by Industrial's insured to Western's insured.
Appellant raises three issues for our consideration:
1. Does the doctrine of equitable contribution apply to the facts of this case?
2. Does the "other insurance" provision in Western's or Industrial's policy apply?
3. Does the lease between the insureds reflect an intention to share the risk of a fire loss?
The trial court granted Industrial's motion for summary judgment, ruling that Western was not entitled to contribution from Industrial. For the reasons set forth below, we affirm.
FACTS AND PROCEDURAL HISTORY
The facts in this case are essentially undisputed. J.A. Wood-Vista, Inc. ("Wood") leased a paсking shed from Tolleson Industrial Park ("Tolleson"). Wood made improvements to the shed consisting of $120,000 worth of wiring and additional office space to accommodate his use of the premises. The lease provided that Wood was to keep the packing shed in good repair. When the lease terminated, Wood was to return the "premises and facilities" to Tolleson in good condition. The lease provided that Wood would indemnify Tolleson for all claims or loss arising from any accident on the leased premises and notwithstanding any other provision therein, neither would be liable to the other for loss caused by fire. In the event of destruction of the shed or damage to such an extent as to render it unusable, the lease provided that both Wood and Tolleson would be relieved of all further obligations under the lease and the lease would be terminated.
Neither party was expressly required by the lease to obtain fire insurance on the packing shed. However, Wood obtained a *594 fire insurance policy covering the shed and fixtures from Western. Tolleson obtained a fire insurance policy covering the same property from Industrial. Neither insurance policy named the other insured as an additional insured or a loss payee.
On June 28, 1986, fire damaged the shed. Neither Wood nor Tolleson was at fault in causing the fire. Wood submitted a claim to Western in the sum of $159,535.46 for fire damage. Western paid $158,535.46 to Wood and Wood assigned any rights it might have against Industrial to Western. The portion of the claim relating to damage to the structure of the shed was approximately $136,000. After Industriаl denied Western's request for contribution, Western filed the instant lawsuit against Industrial.
Both Western and Industrial moved for summary judgment. The trial court granted Industrial's motion and denied Western's cross motion. The trial judge stated in his minute entry that (1) Western had no right of contribution against Industrial because the two insurance policies covered different parties and different insurable interests; (2) because the policies covered separate and distinct interests, the Industrial policy did not constitute "other insurance" triggering the proration clause in either policy; and (3) Western had no claim against Tolleson or Industrial because the lease required Wood to maintain the shed in good repair and provided that the lessee would not hold the lessor liable for damage such as fire damage.
DISCUSSION
A. Western's Right to Equitable Contribution
Western first argues that because the policies issued by Western and Industrial covered the same property against the risk of fire damage, the doctrine of equitable contribution аpplies and Industrial should equitably share its burden of paying Wood's claim. Western concedes that Industrial's policy did not provide coverage for Wood's interest in the shed as tenant. Western argues that the interest of Industrial's insured, Tolleson, was substantially benefitted by Western's payment to Wood for the purpose of rebuilding thе shed and concomitant fixtures because such property would become Tolleson's at the termination of the lease. See Maricopa County v. Novasic,
Arizona courts have recognized that an insurer who has paid a claim may seek contribution directly from other carriers who are liable for the same loss. St. Paul Fire & Marine Ins. Co. v. Allstate Ins. Co.,
In Granite, the court held that the four-part test was satisfied and contribution was appropriate where the two policies in question both covеred the same house against losses by fire and the same party was insured under one of the policies as a named insured and under the other as a mortgagee payee.
In the instant case, both the Western policy and the Industrial policy covered the packing shed and fixtures against losses by fire. Thereforе, the third and fourth requirements of the test enunciated in Granite are satisfied. However, the policies did not cover the same parties or the same interest. Western's policy covered only Wood and Wood's leasehold interest in the shed. The Industrial policy covered only Tolleson and its interest as owner or remainderman with respect to the packing *595 shed. Therefore, neither the same party nor the same interest prong of the test set forth in Granite is satisfied. Therefore, Western is not entitled to contribution from Industrial for the claim it paid to its insured.
Although Western concedes that the two policies insured different parties and different interests, Western argues that courts have found a sufficient mutuality of parties and interest to warrant contribution in the lessor/lessee setting. However, the cases relied on by Western are all distinguishable from the facts in the case at bar. See California Food Service Corp. v. Great American Ins. Co.,
Western also relied on Pittsburgh Bridge & Ironworks v. Liberty Mut. Fire Ins. Co.,
Also relied upon by Western are Ramsdell v. Ins. Co. of N.A.,
Industrial's policy and Western's policy insured different parties and different interests. Neither Tolleson nor Industrial was obligated to indemnify Wood for loss caused by the fire. Rather, Western was the only party obligated pursuant to the policy it issued to Wood to indemnify Wood for the loss. Because Western merely paid to Wood what it was contractually obligated to pay under its policy, Western is not entitled to contribution from Industrial.
B. "Other Insurance" Provisions of the Policies
The second argument raised by Western is that the Western and Industrial policies both assumed the existence of other insurance and provided for proration. Therefore, Industrial should be required to pay Western a pro rata share of the claim. *596 Western claims that the trial court misconstrued the statutorily mandated "other insurance" сlause contained in Ariz. Rev. Stat. Ann. ("A.R.S.") section 20-1503. Pursuant to A.R.S. § 20-1503, every fire insurance policy issued in Arizona must conform with the provisions of the New York standard fire policy. That standard fire insurance policy provides in relevant part:
This company shall not be liable for a greater proportion of any loss than the amоunts hereby insured shall bear to the whole insurance covering the property against the peril involved, whether collectible or not.
In granting Industrial's motion for summary judgment, the trial court stated that the standard fire insurance policy's "whole insurance covering the property" clause was not intended to apportion loss where the policies covered distinct, separate, insurable interests in the property. The Industrial policy insured a different party and interest. It did not constitute "other insurance" with respect to the Western policy limiting Western's obligations under that policy.
Both Western and Industrial agree that Wood and Tolleson each had a separate insurable interest in the shed and that the policies each obtained covered only its own interest. Western nevertheless claims that the Industrial policy would constitute "other insurance" triggering the pro rata clause in its policy. Western argues that the statutorily mandated "other insurance" clause requires neither mutuality of parties nor of interest. It merely provides that two fire insurance policies which insure the same "property" against the same "peril" shall be prorated. Therefore, Western claims that because the Industrial policy covered the same property аgainst the same peril, it must pay its pro rata share in accordance with its policy.
Western's argument fails because pro rata clauses do not give an insurer a right to contribution from other insurers. They merely limit the insurer's liability to its insured. See, e.g., Farmers Ins. Co. v. St. Paul Fire & Marine,
The statutorily mandated "other insurance" provisions of the Western and Industrial policies have no effect here because the policies covered distinct, separate insurable interests in the packing shed. The trial court properly ruled that the other insurance clauses contained in the policies did not limit Western's liability to pay the full amount of the claim to Wood or require Industrial to pay a pro rata shаre of Wood's claim.
C. Terms of the Lease
Western's final argument is that, under the terms of the lease, Tolleson assumed primary responsibility for protecting the property. Therefore, equity compels that its insurer, Industrial, contribute to the cost of the rebuilding of the packing shed. The trial court rejected this argument, stating that Wood was obligated under the lease to maintain and repair any damage to the shed and that, although Wood may have been entitled, pursuant to the lease, to simply "walk away" from the property after the fire, it was unrealistic that Wood would do so given the $120,000 investment Wood had made in the property. The trial court also noted that Wood did not choose to repair the shed out of goodwill, but rather to protect its own investment. We agree with the trial court's reasoning.
Paragraph 10 of the lease requires Wood to maintain the shed in good repair and, upon termination of the lease, to return the premises to Tolleson in good rеpair. Paragraphs 20 and 21 provide that Tolleson *597 would not be liable to Wood for damages sustained by Wood relating to the shed or any occurrence affecting the shed, that Wood would indemnify Tolleson against all claims or loss relating to the shed and that neither party would be liable to the other for loss or damages arising from fire. Therefore, Wood could have no claim against Tolleson with respect to damages from the fire. Pursuant to paragraph 24 of the lease, upon destruction of the shed or damage thereto to such an extent as to render the shed unusable, the lease would terminate and both Wood and Tolleson would be relieved of all further obligations under the lease except the obligation set forth in paragraph 10 to return the premises to the lessor in their original condition and in a state of good repair.
Under the lease, Wood had an obligation to restore the premises to their original сondition and then he could have simply walked away from the lease. However, it is apparent that Wood chose to continue the lease and rebuild the shed and its improvements after the fire in order to protect its $120,000 investment in the shed. Wood's purpose in obtaining the Western policy was obviously to cover the cоsts of repair in the event it decided not to walk away but to repair and continue using the leased property.
Although Tolleson may have benefitted incidentally from Wood's decision to rebuild because Tolleson will obtain possession of the property at the termination of the lease, this is irrelevant. Although Tоlleson was also benefitted by the $120,000 worth of improvements made by Wood, Wood was not entitled to contribution from Tolleson for the costs of such improvements. See Grizzle v. Runbeck,
CONCLUSION
We affirm the triаl court's grant of summary judgment in favor of Industrial and denial of Western's cross motion for summary judgment. The policy issued by Western insured a different party and a different interest than did the policy issued by Industrial. Therefore, Western is not entitled to contribution from Industrial for the claim paid to Wood. We further grant Industrial's request for reasonable attorney's fees on appeal pursuant to A.R.S. section 12-341.01 and upon Industrial's compliance with Rule 21(c), Arizona Rules of Civil Appellate Procedure.
McGREGOR, P.J., and LANKFORD, J., concur.