ROSSMOOR SANITATION, INC. and Insurance Company of North America, Plaintiffs, Cross-Defendants and Respondents, v. PYLON, INC. and United States Fire Insurance Company, Defendants, Cross-Complainants and Appellants.
The developer of Leisure World in Laguna Hills (‘Rossmoor’) employed an independent contractor (‘Pylon’) to construct a sewage pump station for $88,000. In turn, the contractor agreed to indemnify and save the owner harmless against all claims for damages to persons or property arising out of the performance of the contract. The contractor also named the owner as an additional insured under a liability policy issued by the contractor's insurer United States Fire Insurance Company (‘U. S. Fire’) with limits of $500,000 per person. Independent of the coverage afforded by the contractor's policy, the owner also had full coverage for liability under a policy of comprehensive liability insurance issued by its own insurer Insurance Company of North America (‘INA’) with limits of $1,000,000 per person.
During the course of construction, a cave-in occurred. One of the contractor's employees was killed (Cagigas); another was injured (Widman). Widman and Cagigas' dependents sued Rossmoor. Widman recovered $30,000; Cagigas' heirs recovered $275,000, less legal setoffs (workmen's compensation benefits). On appeal, we affirmed the judgment. (Widman v. Rossmoor Sanitation, Inc., 19 Cal.App.3d 734, 97 Cal.Rptr. 52.)
Rossmoor satisfied the judgment and brought an action for indemnity against Pylon and U. S. Fire. U. S. Fire cross-complained against INA, Rossmoor's carrier. The indemnity action was tried before the same judge who presided over the tort action. Because of his familiarity with the main action, the indemnity proceeding was relatively brief. Introduced in evidence were the following: (1) the transcripts and exhibits in Widman and Cagigas vs. Rossmoor; (2) the Rossmoor-Pylon construction contract; and (3) the U. S. Fire and INA policies. With this record before him, the judge found that Pylon was actively negligent in connection with the cave-in and that Rossmoor was only passively negligent and awarded Rossmoor judgment against Pylon and U. S. Fire in the sum of $285,000, representing the net loss, plus interest and attorney fees. U. S. Fire took nothing on its cross-complaint against INA on the theory that it was the primary carrier and that INA was only the excess insurer.
The contractor (Pylon) and its carrier (U. S. Fire) raise two principal issues on appeal from the judgment of indemnification:
(1) Rossmoor was actively negligent as a matter of law. The general indemnity provision of the Rossmoor-Pylon contract does not indemnify Rossmoor against loss resulting from its own active negligence—as distinguished from passive negligence. Therefore, Rossmoor is barred from recovery against Pylon under the indemnity provision of the contract; and
(2) Both the U. S. Fire and INA policies provide coverage to Rossmoor for the Widman-Cagigas judgment. Both policies contain identical ‘other insurance’ clauses which provide for proration. There is nothing in either policy which indicates that U. S. Fire would provide primary coverage and the INA policy would provide only excess coverage. Therefore, the ‘other insurance’ clause in each contract should control and the loss should be prorated in accordance with the ‘other insurence’ clause in each policy.
In addition, the contractor and its carrier claim that the active-passive negligence test should be abolished in indemnity cases or limited in its application. However, we are not inclined to overrule the California Supreme Court and will not consider the issue inasmuch as the active-passive test has been judicially approved in indemnity cases in California and the test, although criticized by some courts and scholars, has considerable integrity.
We conclude that there is substantial evidence indicating that Pylon was primarily responsible for Widman's injury and Cagigas' death. However, the court's ruling that U. S. Fire was entirely liable for the loss was wrong. The loss must be prorated in accordance with the express ‘other insurance’ clauses of both policies.
The facts surrounding the cave-in are set forth in extenso in our prior opinion (Widman v. Rossmoor Sanitation, Inc., supra, 19 Cal.App.3d 734, 97 Cal.Rptr. 52) and only those facts will be repeated which are necessary to resolve the issues raised on appeal.
Rossmoor Corporation, the developer of Leisure World in Laguna Hills, through its subsidiary Rossmoor Sanitation, Inc., contracted with Pylon, Inc., to construct the sewage pump station and the lines necessary to provide sanitation services for the project. The pump station was to be constructed in conformity with plans prepared by a private engineering firm retained by Rossmoor. These plans called for construction of two parallel trenches in which pipes were to be installed. The two trenches were to be only 18 inches apart. Each was to be 30–35 feet in length, over 14 feet in depth, and 30 inches wide. The first trench was excavated to a depth of 17 feet and the pipeline was installed and the trench was filled and compacted on the day prior to the accident. The second trench was dug on the morning of the accident and the cave-in occurred shortly after the lunch hour.
After lunch, Widman and Cagigas entered the trench. The trench was then 14 feet deep and the side walls thereof were straight up and down. While shoring was available and lying on the edge of the trench, the workmen entered the trench without shoring because it would be easier, faster and more economical to do the work than wait until the trench had been properly braced. Shortly after they entered the unshored trench, the cave-in occurred.
In support of their argument that Rossmoor Sanitation was actively negligent as a matter of law, Pylon and U. S. Fire maintain that the plans calling for two parallel trenches were prepared by an engineering firm (Toups Engineering) employed by Rossmoor; that Rossmoor personnel participated in the preparation of the plans and approved the plans; that both Rossmoor and the engineering firm had numerous engineering and safety personnel on the overall project; that they knew, or should have known, that the existence of parallel trenches presented a danger and created an extremely hazardous and unsafe condition; that the existence of parallel trenches with only an 18 inch wide wall or partition of undisturbed earth between them caused the cave-in; that it would have been a safer practice to build a single trench and lay both pipes in the single trench rather than build two narrow parallel trenches; that Rossmoor had experienced difficulties with slippage and collapses in connection with other excavations at the project site; that they never requested a compaction report on the first trench; that they were conducting dynamiting operations, trucking operations and heavy equipment operations which caused vibrations in the ground near the excavation site; that the foregoing knowledge and participation constitutes active negligence, barring Rossmoor from indemnity.
Turning to the law, indemnity becomes a consideration when one person is exposed to liability because of what another person did. ‘The duty to indemnify may arise, and indemnity may be allowed, in those fact situations where in equity and good conscience the burden of the judgment should be shifted from the shoulders of the person seeking indemnity to the one from whom indemnity is sought. The right depends upon the principle that everyone is responsible for the consequences of his own wrong, and if others have been compelled to pay damages which ought to have been paid by the wrongdoer, they may recover from him. Thus the determination of whether or not indemnity should be allowed must of necessity depend upon the facts of each case.’ (Herrero v. Atkinson, 227 Cal.App.2d 69, 74, 38 Cal.Rptr. 490, 493; Ralke Co. v. Esquire Bldg. Maintenance Co., 246 Cal.App.2d 141, 144–145, 54 Cal.Rptr. 556.)
A distinction exists between contribution and indemnity in that in the former the parties liable for the tort are said to be in pari delicto and the damages are equally divided, but in the latter, the parties are not deemed to be in pari delicto and the entire burden is placed upon one of them. (See Prosser, Torts (4th ed. 1971), § 51 at p. 313; 88 A.L.R.2d Anno., Tortfeasors—Right of Indemnity, 1355, 1356–1357.)
As suggested by Pylon, the tests utilized in applying the doctrine of indemnity are not always precise or helpful. Some authorities characterize the negligence of the indemnitor as ‘active,’ ‘primary,’ or ‘positive’ and the negligence of the indemnitee as ‘passive,’ ‘secondary,’ or ‘negative.’ (See Leflar, Contribution and Indemnity Between Tortfeasors, 81 U.Pa.L.Rev. 130, 156; Davis, Indemnity Between Negligent Tortfeasors: A Proposed Rationale, 37 Iowa L.Rev. 517, 539.) Other authorities indicate that the application of the doctrine depends on whether the claimant's liability is ‘primary,’ ‘secondary,’ ‘constructive,’ or ‘derivative.’ (Herrero v. Atkinson, supra, 227 Cal.App.2d 69, 75, 38 Cal.Rptr. 490; Conley and Sayre, Indemnity Revisited: Insurance of the Shifting Risk, 22 Hastings L.J. 1201, 1213; Prosser, Torts (4th ed. 1971) § 51 at p. 313.)
But regardless of the terminology employed, two critical prerequisites are generally necessary under the law of indemnity: (1) the damages which the claimant seeks to shift are imposed upon him as the result of some legal obligation to the injured party; and (2) it must appear that the claimant did not actively nor affirmatively participate in the conduct which caused the injury. (King v. Timber Structures, Inc., 240 Cal.App.2d 178, 182, 49 Cal.Rptr. 414; Cahill Bros., Inc. v. Clementina Co., 208 Cal.App.2d 367, 382, 25 Cal.Rptr. 301; see Molinari, Tort Indemnity in California, 8 Santa Clara Lawyer, 159, 166.) The crux of the inquiry is to determine whether there is participation in some manner by the person seeking indemnity in the conduct or omission which caused the injury beyond the mere failure to perform a duty imposed upon him by law (Morgan v. Stubblefield, 6 Cal.3d 606, 625–626, 100 Cal.Rptr. 1, 493 P.2d 465) inasmuch as an indemnitee is generally barred from recovering when his own active negligence proximately contributes to the injury in question. (Morgan v. Stubblefield, supra, 6 Cal.3d 606, 624, 100 Cal.Rptr. 1, 493 P.2d 465; Price v. Shell Oil Co., 2 Cal.3d 245, 256–258, 85 Cal.Rptr. 178, 466 P.2d 722; Goldman v. Ecco-Phoenix Elec. Corp., 62 Cal.2d 40, 42–44, 41 Cal.Rptr. 73, 396 P.2d 377.)
Applying the foregoing criteria to the case under review, Rossmoor was required to satisfy the Widman-Cagigas judgment because it employed Pylon to conduct an ultrahazardous activity on its land, to wit, to dig deep excavations for the installation of pipelines. Excavating is a serious and dangerous undertaking. Numerous injuries and deaths occur from cave-ins every year due to the failure to shore. Under state law, all trenches five feet or more in depth are required to be braced or shored. (Cal.Admin.Code, tit. 18, § 1541.) In its contract with Pylon, Rossmoor insisted that the contractor comply with all state safety laws. (See Widman v. Rossmoor Sanitation, Inc., supra, 19 Cal.App.2d 734, 97 Cal.Rptr. 52.)
Causation was a serious issue in this case. All parties in the underlying action produced considerable evidence, including expert testimony, as to the reason for the cave-in. At the time of the accident, Pylon had supervisory personnel present. Rossmoor did not. Consequently, the trial court determined quite properly that the cave-in occurred, not because of a defect in plans and specifications, not because of vibrations caused by dynamiting or otherwise, but occurred because the trench was not shored, and that Pylon's supervisory personnel were solely responsible in permitting the workmen to enter the trench in an unshored condition. In short, Pylon and its employees caused the cave-in by failure to shore the trench in violation of state safety laws; and Rossmoor was only passively negligent in that it had overall supervisory control of the job but did not participate in the act or failure to act that caused the cave-in.
The question of whether an indemnitee's conduct constitutes active or passive negligence depends on the facts of each case. (Morgan v. Stubblefield, supra, 6 Cal.3d 606, 626, 100 Cal.Rptr. 1, 493 P.2d 465.) In the final analysis, the determination of whether or not a given factual situation would give rise to indemnity is for the jury to decide. The nature and scope of the relationship between the plaintiff and the defendant; the obligations owing by one to the other; the extent of the participation of the plaintiff, if any, with the defendant's acts of negligence by knowledge or acquiescence; or the failure of the plaintiff to perform some duty it may have undertaken by virtue of its agreement—all are questions of fact that should be left to the jury. (Alisal Sanitary Dist. v. Kennedy, 180 Cal.App.2d 69, 79–80, 4 Cal.Rptr. 379.) Whether indemnity is or is not precluded by the plaintiff's own conduct becomes a question of law only when the result is clear and indisputable. (Kerr Chemicals, Inc. v. Crown Cork & Seal Co., 21 Cal.App.3d 1010, 1015, 99 Cal.Rptr. 162.)
U. S. Fire and Pylon claim that U. S. Fire was not solely liable for the Widman-Cagigas judgment but that liability should be prorated in accordance with the ‘other insurance’ provisions of the U. S. Fire and INA policies. The trial court found that the insurance coverage provided to Rossmoor by U. S. Fire was primary; that the coverage provided by INA was excess; and that the entire burden of the Widman-Cagigas judgment was cast upon Pylon and U. S. Fire.
Both the INA and U. S. Fire policies contain identical ‘other insurance’ clauses calling for proration. Paragraph 14 of the INA policy and paragraph 13 of the U. S. Fire policy each provide as follows: ‘Other Insurance. If the insured has other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss; . . ..’
Although the ‘other insurance’ provisions of both policies provided for proration, the trial court nevertheless ruled that the U. S. Fire policy was primary and the INA policy was excess by reason of the fact that U. S. Fire issued an endorsement to its policy designating Rossmoor as an additional insured. In effect, the trial court ruled that the designation of Rossmoor as an additional insured under the U. S. Fire policy in some manner vitiated the ‘other insurance’ provisions of both the INA and U. S. Fire policies.
No extrinsic evidence was introduced to aid in the interpretation of either policy or the endorsement to the U. S. Fire policy. Neither was there any evidence introduced concerning the intention of the parties to the Rossmoor-Pylon contract pertaining to this issue.
Where no extrinsic evidence is introduced to aid in the construction of a contract, such construction presents a question of law; on review of the judgment, the appellate court is free to make independent determinations of the policies' meanings as deduced from the pertinent portions of the policies. (Argonaut Ins. Co. v. Transport Indem. Co., 6 Cal.3d 496, 502, 99 Cal.Rptr. 617, 492 P.2d 673.)
This case presents a problem of coinsurance. Coinsurance exists only when the insurable interest contemplated by both policies is identical, i. e., coverage by different insurers of the same insured and the same risk. (Ohio Cas. Ins. Co. v. Harbor Ins. Co., 259 Cal.App.2d 207, 213, 66 Cal.Rptr. 340.)
Turning to the construction of the foregoing ‘other insurance’ clause, it should be first noted that an endorsement upon an insurance policy is a part of the insurance contract; the endorsement and the policy to which it is attached must be construed as a whole; conditions stated in the policy apply to the endorsement. (Ohio Farmers Indem. Co. v. Interinsurance Exchange, 266 Cal.App.2d 772, 776–777, 72 Cal.Rptr. 269.) Nothing in the U. S. Fire endorsement purports to modify or change the ‘other insurance’ clause.
At first glance it might seem that the party deemed actively negligent, and derivatively its insurer, should be primarily liable for the loss incurred. But in California the equitable doctrine of indemnity does not come into play in a situation involving two joint tortfeasors and two insurers—both of whom simultaneously provide coverage for the same risk to one of those tortfeasors. INA is the insurer of Rossmoor, while U. S. Fire insures Pylon and Rossmoor. Both policies covering Rossmoor contain identical ‘other insurance’ clauses providing for proration of any loss. These clauses are in direct conflict with any equitable rights of indemnity which might otherwise exist between the parties. The insurers have undertaken to insure against negligence—and have not included terms which would preclude coverage in the event their insured was merely ‘passively’ negligent.
In Universal Underwriter's Ins. Co. v. Aetna Ins. Co., 249 Cal.App.2d 144, 57 Cal.Rptr. 240, the argument was advanced in a case involving coinsurers that the primary tortfeasor's insurer should be required to bear the loss; Aetna claimed that inasmuch as its insured would have been entitled to indemnification from Universal's insured, it was therefore entitled to indemnification from Universal; the court rejected the argument and held that questions of contribution between coinsurers are decided by reference to the terms of their respective contracts and not to any right to indemnification that might exist among the persons insured by the policies; inasmuch as Aetna insured the risk under its policy, it could not escape liability for its insured's negligence.
The basis of the Universal court's decision not to consider indemnity rights is that Aetna undertook the risk of insuring against the loss involved, and it should be held to the terms of its contract covering that loss regardless of any rights of indemnity which may exist outside of that contract.
This same reasoning is applicable to the present case. Both INA and U. S. Fire undertook to insure against the loss which has been incurred. Both concurrently insured one of the negligent parties against the same risk, and both explicitly stated that any loss incurred should be prorated with other insurers. There is no public policy which mandates indemnification between coinsurers. Where dual coverage is provided for the same risk, public policy plays a minor role in the determination of which coverage is primary, for to the public it makes little difference which of two insurers is ultimately held responsible for a particular loss. (Pacific Indem. Co. v. Liberty Mut. Ins. Co., 269 Cal.App.2d 793, 75 Cal.Rptr. 559.)
In Pacific Indem. Co. v. Truck Ins. Exch., 269 Cal.App.2d 420, 74 Cal.Rptr. 793, the court noted that equitable doctrines may have to give way in the face of express contractual clauses. Following a discussion of subrogation and indemnity, the court stated: ‘. . . clauses in the policies might have changed the effect of the principles of law cited under the last heading, . . ..’ (P. 426, 75 Cal.Rptr. p. 797.)
Thus, insurance clauses can nullify such equitable doctrines as indemnity and the express terms of the respective insurance contracts will be determinative. This theory has also been articulated by an earlier court, which held, ‘Where, as here, two insurance policies apply to the same risk, the relative application thereof is generally determined by the explicit provisions of the respective ‘other insurance’ clauses.' (General Ins. Co. v. Truck Ins. Exch., 242 Cal.App.2d 419, 422, 51 Cal.Rptr. 462, 465.)
That court also failed to see any distinction in the equities involved between coinsurers, despite the existence of rights of indemnity between the insured parties when it stated: ‘Both insurers argue that the other should be primarily liable. Truck Insurance argues that it is only equitable that a negligent permissive user . . . should bear the ultimate burden of the loss rather than the innocent owner or his insurer. We cannot agree with this contention. The purpose of indemnity insurance is to provide protection for the ‘wrongdoer.’ We can see no difference between the equities of an insurer whose named insured . . . is the actual wrongdoer and another insurer whose named insured . . . is the owner of the vehicle which the wrongdoer uses.' (P. 423, 51 Cal.Rptr. p. 466.)
The policy of proration among coinsurers has received support in a recent legal journal. One author notes that in the absence of legislative action, the decisions indicate a definite trend toward ordering a proration in all cases as the judicial solution. Under such a rule, the insurers will know their position and can devote their full efforts toward disposition of the claim. At present, a good deal of time and money is spent to establish reasons why the primary burden should be shifted to another carrier. A particular carrier under such a rule will presumably be on one side of the loss as often as the other and should suffer no particular financial detriment. With cooperation, settlements can be more easily accomplished since each insurer will be contributing only a portion of the loss. (Russ, The Double Insurance Problem—A Proposal, 13 Hastings L.J. 183, 192.)
Proration of loss among insurers based upon the limits of the policies not only provides the insured with the maximum possible protection, but also spreads the liability equitably between the insurers. In addition to facilitating settlements, litigation over active and passive negligence will be precluded in cases such as the present one. The court will not need to reach the question of indemnity. Thus, disputes over the active-passive test will not arise.
California is not alone in rejecting the idea that the primary tortfeasor's policy provides primary coverage for any loss. The Supreme Court of Minnesota made the following statement in a case where four insurance companies were insurers of the same risk: ‘The application of rules of construction based upon some relatively arbitrary circumstance—such as holding the insurer of the primary tortfeasor primarily liable, . . . brings about a circuity of reasoning and inequitable and confusing results which have little relation to contractual intent or regard for the contractual rights of the respective parties. In determining the respective liabilities of insurance coverage in cases of overlapping coverage, the decision must rest upon construction of the language employed by the respective insurers and not upon any so-called primary-tortfeasor doctrine. . . .’ (Woodrich Construction Co. v. Indemnity Ins. Co., 252 Minn. 86, 89 N.W.2d 412, 420–421.)
The Woodrich case has been quoted with approval by the Supreme Court of Oregon. (See Lamb-Weston Inc. v. Oregon Automobile Insurance Co., 219 Or. 110, 341 P.2d 110, 118.)
Rossmoor relies on Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, 296 P.2d 801, to support its contention that U. S. Fire should be primarily liable under a theory of indemnification. The Continental case did not deal with the factual situation posed by the present case—two insurers concurrently covering one of the negligent parties. None of the negligent parties was simultaneously covered by two of the primary insurance carriers in that case, and thus its holding as to indemnification is not controlling here. Although Continental does say that under equitable principles of subrogation an insurer may recover certain judgments it has been compelled to pay, the case deals with a situation which the doctrine of indemnity had not been nullified in respect to the insurer due to its own express ‘other insurance’ clause providing for proration. Under the language of Universal Underwriters Ins. Co. v. Aetna Ins. Co., supra, 249 Cal.App.2d 144, 57 Cal.Rptr. 240, despite any rights of indemnification existing between the parties insured, the respective rights of coinsurers are determined by the terms of their respective contracts. INA is not entitled to be subrogated to Rossmoor's right of indemnity. Subrogation is precluded by the express terms of its policy.
Where two comprehensive general liability policies contain identical clauses, liability and the cost of defense should be prorated according to the amount of coverage afforded by each. (Argonaut Ins. Co. v. Transport Indem. Co., supra, 6 Cal.3d 496, 507, 99 Cal.Rptr. 617, 492 P.2d 673; Liberty Mut. Ins. Co. v. Colonial Ins. Co., 8 Cal.App.3d 427, 434, 87 Cal.Rptr. 348.)
The INA policy insuring Rossmoor affords coverage for $1,000,000 per person; the U. S. Fire policy has limits of $500,000 per person. It therefore follows that liability should be apportioned on the basis of two-thirds chargeable to INA and one-third chargeable to U. S. Fire. (See Pylon, Inc. v. Olympic Ins. Co., 271 Cal.App.2d 643, 77 Cal.Rptr. 72.)
The judgment is reversed with directions to enter new findings and judgment consistent with the views expressed herein.
KERRIGAN, Acting Presiding Justice.
TAMURA and KAUFMAN, JJ., concur.