Advent, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA

In Advent, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, ______ Cal.App.5th ______ (December 6, 2016), the Sixth District Court of Appeal affirmed the trial court’s entry of summary judgment in favor of National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) against excess insurer, Topa Insurance Company (“Topa”). The insurers’ dispute arose out of a job site accident, wherein, an employee of National Union’s named insured, Johnson Western Gunite (“Johnson”), was severely injured after falling down a stairwell. Employee, Jerry Kielty, filed a lawsuit against the general contractor in charge of the job site, Advent Inc., (“Advent”), and a subcontractor, Pacific Structures, Inc. Johnson had contracted with Pacific Structures, Inc. to perform work at the job site. Advent was covered by a primary insurance policy issued by Landmark American Insurance Company (“Landmark”) and an excess insurance policy issued by Topa. Johnson was covered by primary and excess insurance policies issued by National Union. Advent contended that it was an additional insured under the National Union primary and excess policies.

Ultimately, the Kielty lawsuit was settled for $10 million with contributions from Landmark, Topa and the National Union primary policy. National Union did not contribute to the settlement under its excess policy. Thereafter, Advent filed a lawsuit against National Union seeking a declaration that it was an additional insured under the National Union excess policy. Topa also intervened in this action seeking declaratory relief, equitable contribution and equitable subrogation from National Union. Advent moved for summary judgment in this action. However, the trial court denied its motion. Thereafter, Advent dismissed its complaint against National Union with prejudice.

Subsequently, Topa and National Union filed cross-motions for summary judgment. The trial court denied Topa’s motion and granted National Union’s motion. The trial court held that based on undisputed facts, National Union established that Johnson did not cause Kielty’s accident. Hence, Topa could not establish that it was entitled to actual indemnity coverage under the National Union excess policy pursuant to the additional insured coverage afforded by the National Union primary policy (required errors and omissions by Johnson) which was incorporated by reference by the National Union excess policy. In addition, the trial court held that because coverage under the Topa excess policy attached immediately upon exhaustion of the underlying Landmark primary policy, and the National Union policy afforded coverage only after all scheduled and available other insurance was exhausted, the National Union policy was excess of the Topa policy, such that Topa was not entitled to contribution from National Union.

In affirming the trial court’s entry of summary judgment in favor of National Union, the Court of Appeal held that the undisputed facts established that Johnson did not cause Kielty’s accident. As such, National Union established that indemnity coverage was not afforded under its policy to Advent for the Kielty accident.

Alternatively, even if coverage was afforded by the National Union excess policy, based on the holding in Carmel Development Company v. RLI Ins. Co. (2005) 126 Cal.App.4th 502, 507 – 508 (“Carmel Development”), the Court of Appeal held that coverage under the Topa policy attached immediately upon exhaustion of the underlying Landmark policy and constituted a “specific excess policy,” while coverage attached under the National Union policy only upon exhaustion of scheduled underlying insurance (i.e., National Union primary policy) and other insurance (defined as a “valid and collectible policy of insurance providing coverage for damages” covered by the National Union excess policy). Thus, the Court of Appeal held that the National Union excess policy afforded “general excess insurance.” As such, based on the holding in Carmel Development, exhaustion of the Topa specific excess policy was required before coverage was triggered under the National Union general excess policy. In effect, because the Topa specific excess policy did not afford coverage to Advent on the same level as the National Union general excess policy, it could not seek contribution from National Union for the settlement of the Kielty lawsuit. The Court of Appeal reasoned as follows:

Additionally, Topa's policy contained specific language that indicated that coverage applied immediately once the Landmark policy was exhausted. In contrast, National Union's "other insurance" clause is clearly written, specifically defining other insurance as "a valid and collectible policy of insurance providing coverage for damages covered in whole or in part by this policy." And, importantly, National Union's excess policy expressly states that coverage will not apply until "the total applicable limits of Scheduled Underlying Insurance have been exhausted by the payment of Loss to which this policy applies and any applicable, Other Insurance have been exhausted by the payment of Loss . . . ."

Based on the foregoing, we also do not find the court erred when it entered summary judgment in favor of National Union. Topa cannot demonstrate that its policy was the same level excess policy as National Union's.