2016-00197777-CU-PO

Michael Mcmahan vs. Capitol Iron Works, Inc.

Nature of Proceeding: Motion for Judgment on the Pleadings

Filed By: Bortz, Arthur N.

Cross-Defendant Tilbury Constructors, Inc.’s (“Tilbury”) motion for judgment on the pleadings as to Capitol Iron Works, Inc.’s (“Capitol”) Cross-Complaint is denied.

Tilbury’s unopposed request for judicial notice is granted.

Plaintiffs initiated this action against Capitol and others in connection with injuries incurred when a steel structure at Mather Air Force Base collapsed. Plaintiffs were employed by Tilbury at the time. Capitol filed its cross-complaint against Tilbury. The two remaining causes of action are the fifth cause of action for express indemnity and the tenth causes of action for breach of contract.

A defendant/cross-defendant may move for judgment on the pleadings if the complaint/cross-defendant does not state facts sufficient to constitute a cause of action against that defendant/cross-defendant. (See Code Civ. Proc. §438(b)(l), (c)(l)(B)(ii).) Except as provided by statute, a motion for judgment on the pleadings is analyzed like a general demurrer. (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999.) Thus, on a motion for judgment on the pleadings, the Court may extend consideration to matters that are subject to judicial notice; in doing so, the Court performs essentially the same task as ruling on a general demurrer. (Smiley v. Citibank (1995) 11 C.4th 138, 146.)

The Court addresses the arguments in the order presented.

Breach of Contract-Insurance (Tenth Cause of Action)

Tilbury argues that this cause of action is barred by Workers’ Compensation Exclusive Remedy doctrine. Tilbury argues that pursuant to Labor Code § 3602, an injured employee’s remedy against his or her employer is limited to workers’ compensation benefits and § 3864 bars third party tortfeasor claims against the employer. Tilbury relies upon Labor Code § 3864 which provides that: “If an action as provided in this

chapter is prosecuted by the employee, the employer, or both jointly against the third person results in judgment against such third person, or settlement by such third person, the employer shall have no liability to reimburse or hold such third person harmless on such judgment or settlement in absence of a written agreement so to do executed prior to the injury.”

Tilbury argues that Section 3864 prohibits a third party tortfeasor from suing the employer for breach of contract. The case cited by Tilbury, however, does not support Tilbury’s argument. (Alameda Tank Co. v. Starkist Foods, Inc. (1980) 103 Cal.App.3d 428, 431.) That case, involved a situation where a third party asserted numerous claims in a cross-complaint against an employer in an action brought by an employee against the third party. One of the claims was for breach of an oral contract where the third party argued that employer was required to install certain safety features that would have prevented the employee’s injury and as a result breached the contract and was responsible for the employee’s injury. The court found that § 3864 barred not only the cause of action for implied indemnity but all causes of action including the oral breach of contract cause of action as it was essentially a cause of action attempting to have the employer “hold [the third party] harmless” which was precluded by § 3864. “The statutory right of the employer, in situation such as herein involved, to be free from liability beyond that imposed by the worker’s compensation laws cannot be evaded by the ingenuity of counsel in presenting his claim for reimbursement under any variety of theories or nomenclature.” (Id. at 433.) Alameda did not involve a written breach of contract cause of action whereby the employer agreed to hold the third party harmless.

Here, however, Capitol’s breach of contract cause of action is not, as was the case in Alameda, an attempt to allege that Tilbury’s breach of contract was the cause of the employee’s injuries. Rather, Capitol has alleged that the contract between itself and Tilbury required Tilbury to name Capitol as an additional insured on its insurance policy and that the coverage to be provided shall be for all liability arising from the subject work. (RJN Exh. C ¶ 57.) It is axiomatic that an insurance policy is an indemnity contract.” (Safeco Ins. Co. v. Robert S. (2001) 26 Cal.4th 758, 767.)

Against this backdrop, Capitol alleged that the contract required Tilbury to procure insurance that would have and does cover Plaintiffs’ claims and damages in this action. (Id. ¶ 58.) Capitol alleges that Tilbury breached the contract by failing to name Capitol as an additional insured. (Id. ¶ 59.)

In reply Tilbury argues that the instant cause of action fails because Capitol conceded in its opposition to its motion to bifurcate that Tilbury’s insurance carrier has been providing Capitol a defense. It reasons that this provides a complete defense to the cause of action. The Court disagrees. Capitol’s statement in the opposition to the motion to bifurcate simply stated that Capitol tendered its defense to Tilbury’s insurance carrier and that they accepted the tender with a reservation of rights. Parenthetically, an insurance policy is a contract in which the insurer agrees to pay up to a specified sum should certain losses occur. In exchange, the insured pays the insurer premiums for this coverage against risk of loss. (Buss v. Superior Court (1997) 16 Cal. 4th 35, 45; Bank of the West v. Superior Court (1992) 2 Cal. 4th 1254, 1264.) While an insurer has the right and broad duty to defend the insured against third party claims potentially within the policy’s coverage. (See, e.g., Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal. 4th 645, 659, fn. 9, it must be observed that the duty to indemnify is much narrower. (Ibid.; Buss, supra, 16 Cal. 4th at pp. 46-47, fn. 10.) An

insurer can reserve its right to assert noncoverage unilaterally merely by giving notice to the insured. (Cf. American Motorists Ins. Co. v. Allied-Sysco Food Services, Inc. (1993) 19 Cal. App. 4th 1342, 1356, disapproved on other grounds in Buss, supra, 16 Cal. 4th at p. 50, fn. 12.) Accepting the insurer’s defense under these circumstances means the insured is deemed to have accepted this condition. (American Motorists Ins. Co., at p. 1356; Val’s Painting & Drywall, Inc. v. Allstate Ins. Co. (1975) 53 Cal. App. 3d 576, 586.) No unequivocal tender and acceptance is shown.

Capitol also stated that Capitol has maintained its express indemnity claim as Tilbury denies responsibility for the same. The instant cause of action for breach of contract (insurance) is premised on the allegations that Tilbury failed to name Capital as an additional insured as required by the subject contract under a separate provision than the indemnity provision. (Cross-Compl. ¶¶ 57-60.) That Tilbury’s insurer may have accepted a tender of defense does not preclude a cause of action for breach of contract for failure to name Capitol as an insured.

The motion as to the Tenth Cause of Action is denied.

Express Indemnity (Fifth Cause of Action)

Tilbury argues that this cause of action fails because the Plaintiffs did not allege that it was negligent and thus the express indemnity provision in the contract between itself and Capitol was not triggered. The subject indemnity provision provides that: “To the fullest extent of the law, Subcontractor agrees to defend, indemnify, and hold Contractor, Owner, their consultants, agents, and employees of any of them , from and against any and all claims, suits, losses or liability, including attorneys’ fees and litigation expenses, for or on account of injury to or death of persons, including subcontractor’s employees, subcontractors subcontractor or their employees, or damage to or destruction of property, and any bond obtained for same, but only to the extent that the injury or damage is caused by the subcontractor’s negligence or by the negligence of those acting on behalf of the subcontractor.” (RJN Exh. D) Tilbury argues that its indemnity obligation is limited to situations where it, or those acting on its behalf, were negligent. It reasons that the obligation was not triggered because the Plaintiffs here do not allege it was negligent and instead have alleged that Tilbury built the subject structure according to the plans supplied by Capitol.

As an initial matter, Labor Code § 3864 has no bearing on this cause of action. Indeed, “section 3864 does not define the scope of the employer’s duty to indemnify under an express contract, and does not specify what words must be used in such a contract. Where an employer has expressly contracted with respect to the duty to indemnify, the extent of the duty must be determined from the contract. An indemnity provision is to be construed according to the same rules which govern other contracts, in order to determine the actual intent of the parties.” (Kaiser Eng’rs v. Grinnel Fire Prot. Sys. Co. (1985) 173 Cal.App.3d 1050, 1054 [citations omitted].) “No different or artificial rules of interpretation apply to an indemnity provision of a contract [citations omitted] and there is no requirement that a contract authorized by section 3864 must be more specific than other indemnity contracts.” (Id.)

Moreover, the fact that Plaintiffs may not have alleged that Tilbury was negligent does not mean that the indemnity obligation cannot be triggered. The single case cited by Tilbury does not stand for this proposition. (Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541.) Crawford stands for the proposition that an indemnitor under

an express contractual indemnity provision incurs a duty to defend as soon as the indemnitee tenders a defense to the indemnitor even if there is an eventual verdict that the indemnitor was not negligent. (Id. at 568.)

It is true that Crawford involved a situation where the underlying plaintiffs alleged that the subcontractor was negligent, but as later case have recognized, the contractual obligation does not depend on such allegations by the plaintiff. (UDC-Universal Development, L.P. v. CH2M Hill (2010) 181 Cal.App.4th 10.) In that action a homeowner’s association sued a contractor of negligence in designing a housing project. The HOA did not allege that the subcontractor consultant was negligent. The contractor filed a cross-complaint for express contractual indemnity against the consultant and the trial court found that the consultant was liable to the contractor for defense costs under the indemnity provision. The consultant tried to argue that Crawford only applied where there was an underlying allegation of negligence. The appellate court rejected this argument. “[T]he indemnity provision does not state that there must be an underlying claim of negligence specifically against [consultant] in order to trigger [consultant’s] defense obligation. It calls for indemnification when claims against [contractor] ‘arise out of or are in any way connected with’ a negligent act or omission by [consultant].’” (Id. at 20.) “We thus are unconvinced by [consultant’s] assertion that the underlying plaintiff must have alleged negligence by the consultant in order for the consultant’s defense obligation to arise. In a construction project involving multiple consultants and subcontractors, any of them might have been negligent. An indemnitee should not have to rely on the plaintiff to name a particular subcontractor or consultant in order to obtain a promised defense by the one the indemnitee believes is responsible for the plaintiff’s damages…The ‘negligent act or omission’ language limited [consultant’s] indemnity liability scenario in which [consultant] was proven negligent. The duty to defend, however, arose when the cross-complaint attributed responsibility for the HOA’s damages to [consultant’s] deficient performance of its role in the project. Although the HOA complaint did not specifically identify each subcontractor or the details of each role in the project, its general description of the defects in the project implicated [consultant’s] work. This was sufficient to trigger [consultant’s] duty to defend.” (Id. at 21.)

Like the indemnity provision in UDC, there is nothing in the subject indemnity provision requiring an underlying claim of negligence against Tilbury in order to trigger its indemnity provision. The subject provision simply required indemnification and defense “to the extent that the injury or damage is caused by the subcontractor’s negligence or by the negligence of those acting on behalf of the subcontractor.” Saliently, the allegations in the cross-complaint that Tilbury was negligent are sufficient to state an express contractual indemnity cause of action against Tilbury.

Tilbury’s arguments in reply do not change the above. Tilbury argues that Capital has attempted to confuse the separate defense and indemnity obligations set forth in the indemnity provision as one and the same. Tilbury again points to the fact that Capitol stated in its opposition to its motion to bifurcate that Tilbury’s insurance carrier has been providing Capitol a defense. Tilbury’s reply argues that the instant motion is not seeking to eliminate or challenge its defense obligation. Rather it argues that its indemnity obligation, which is distinct from its defense obligation, will not be triggered unless and until Capitol is found liable to Plaintiffs and that Tilbury caused the damages for which Capitol was found liable. Essentially Tilbury is arguing that the indemnity cause of action is premature. However, “a tort defendant may file a cross-complaint against a third party when the defendant properly alleges entitlement to

indemnity from such a party, should the plaintiff prevail on the original complaint.” ( Postley v. Harvey (1984) 153 Cal.App.3d 280, 285.) The Supreme Court has praised the practical advantages of indemnity cross-complaints as a method of making a complete determination of disputes among all parties in a single judicial proceeding. ( Valley Circles Estates v. VTN Consolidated, Inc. (1983) 33 Cal.3d 604, 614.)

The motion as to the Fifth Cause of Action is denied.

The motion for judgment on the pleadings is denied in its entirety.