California Capital Insurance Company v. Employers Compensation Insurance Company Court of Appeal of California, Fourth Appellate District, Division Three (Certified for Publication on 3/20/2023) dealt with the appeal from a judgment of the Superior Court of Orange County awarding a general liability insurer equitable contribution from a workers’ compensation and employers’ liability insurer.
Issue: Whether California Capital Insurance Company was entitled to equitable contribution from Employers Compensation Insurance Company for costs to defend and settle the claim against their shared insured?
Background: Two employees that worked at a restaurant had drinks together at the restaurant and left to attend a party. The driver, who was intoxicated, drove his vehicle into a tree, severely injuring the passenger. The passenger sued the driver and the restaurant, on the theory the driver “got drunk on the job” and was driving a vehicle the restaurant entrusted him with to perform his job duties, and therefore was acting within the course and scope of employment. At the time, the restaurant was insured by two insurers: (1) California Capital Insurance Company issued a general liability policy, which generally covered bodily injury claims but excluded bodily injuries arising out of and in the course of a claimant’s employment with the restaurant; and (2) Employers Compensation Insurance Company issued a workers’ compensation (Part 1) and employers’ liability (Part 2) policy. Part 1 covered workers’ compensation claims and Part 2 covered bodily injury claims by employees not covered by Part 1 (i.e., rare “gap-fillers claims, including if injury was caused by willful assault by employer, injury aggravated by employer’s fraudulent concealment, injury caused by defective product manufactured by employer, etc.).
The claimant made a settlement demand for the $2 million policy limit and California Capital notified Employers Compensation, who denied coverage asserting no potential coverage under either part of its policy. California Capital settled for the policy limits, also incurring $88,000 in fees. The trial court found the Employers Compensation policy potentially covered the lawsuit and California Capital was therefore entitled to equitable contribution in the amount of roughly half the amount incurred to defend and settle the suit. Employers Compensation appealed. The Appellate Court reversed and remanded.
Rule: An equitable contribution claim is only viable if the coinsurers (1) share the same level of liability (2) on the same risk (3) as to the same insured.
Analysis: Equitable contribution permits reimbursement to the insurer that paid on a loss for the excess it paid over its proportionate share of the obligation compared to coinsurers who refused to participate in the defense or settlement of the claim. California Capital and Employers Compensation’s policies covered different risks because the GL policy excluded coverage for workers’ compensation claims and claims by employees injured in the scope of employment while the WC/EL policy only covered bodily injuries sustained by employees injured in the scope of employment. California Capital’s equitable contribution claim failed because it failed to meet a necessary element for an equitable contribution claim – insuring the same risk.
California Capital argued because the claimant was an employee of the restaurant, there was a potential for coverage under the WC/EL policy. The Appellate Court disagreed, explaining if the claimant was an employee injured in the scope of employment, his exclusive remedy would be a workers’ compensation claim and his civil suit would have been statutorily barred by the workers’ compensation exclusivity doctrine. Thus, the WC policy (Part 1) could not cover the civil suit because the trial court could not acquire jurisdiction to award workers’ compensation benefits. Part 2 was not triggered because none of the rare “gap-filler” situations applied here. Summarily, even if the claimant was potentially acting in the scope of employment when he was injured, there is no theory whereby defense of the lawsuit would fall within Employers Compensation’s coverage.
Holding: Reversed and remanded. The policies covered different risks and therefore California Capital was not entitled to equitable contribution.