American Safety Indemnity Company v. Admiral Insurance Company – Lewis Brisbois Bisgaard – Smith LLP

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American Safety Indemnity Company v. Admiral Insurance Company

Related Practice Area(s): Insurance Coverage

In American Safety Indem. Co. v. Admiral Ins. Co.. 220 Cal.App.4th 1 (September 27, 2013), the California Fourth District Court of Appeal affirmed the trial court s entry of judgment in favor of American Safety Indemnity Company ( ASIC ) regarding its action for equitable subrogation and indemnity against Admiral Insurance Company ( Admiral ) in connection with the defense of a general contractor against an underlying lawsuit arising out of damage sustained by homes due to adjacent slope failure. ASIC insured the grader for the adjacent property, Ebensteiner Company ( Ebensteiner ). Ebensteiner had been hired by the developer of the property, D. R. Horton, Inc. and certain other D.R. Horton Companies (collectively Horton entities ) under a general liability policy which included a $250,000 self-insured retention. ASIC did not insure the Horton entities (neither as named insureds nor additional insureds). Nonetheless, ASIC defended the Horton entities in the underlying lawsuit.

Ultimately, ASIC settled the homeowners lawsuits in conjunction with Admiral. Thereafter, ASIC requested Admiral to contribute to the cost of defending the Horton entities against the underlying homeowner lawsuit. Admiral refused to contribute to the cost of defending the Horton entities as it contended that the $250,000 self-insured retention applicable to its policy had not been satisfied by payments from such entities. In response, ASIC took the position that the Horton entities were not insureds under its policy and that it was entitled to equitable subrogation for the cost of defending the Horton entities against the homeowners lawsuit. The trial court agreed with ASIC and held that Admiral was entitled to reimburse ASIC for the cost of defending the Horton entities against the underlying lawsuit.

The Court of Appeal characterized the language in the Admiral s policy as follows:

The insuring clause in Admiral s policy states: We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies. We will have the right and duty to defend the insured against any `suit seeking those damages. However, we will have no duty to defend the insured against any suit seeking damages for bodily injury or property damage to which this insurance does not apply. (Italics added.)

The Admiral policy contains the following definitions:

17. Property damage means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the occurrence that caused it.

18. Suit means a civil proceeding in which damages because of bodily injury, property damage or personal and advertising injury to which this insurance applies are alleged.

Admiral s duties are limited by an SIR endorsement to its policy which provides in part:

1. Our total liability for all damages will not exceed the limits of liability as stated in the Declarations and will apply in excess of the insured s self-insured retention (the Retained Limit ). Retained Limit is the amount shown below, which you are obligated to pay, and only includes damages otherwise payable under this policy.





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