Where a general liability policy only covered an additional insured for vicarious liability of the named insured, a claim by the additional insured against the named insured did not fall within a policy exclusion for “inter-insured claims.” ( Gemini Ins. Co. v. Delos Ins. Co. (2012) 211 Cal.App.4th 719)
Facts
San Rafael Marina LLC dba Loch Lomond Marina (Loch Lomond) leased premises to Forecastle LLC dba Bobby’s Fo’c’s’le (Bobby’s) for operation of a restaurant. The lease required that Bobby’s maintain a general liability policy and that Loch Lomond be listed as an “additional insured” on the policy.
Bobby’s obtained a general liability policy through Delos Insurance Company (Delos). The Delos policy included an endorsement making Loch Lomond an “additional insured,” but only “with respect to … liability which … results from and by reason of [Bobby’s] act or omission….” The Delos policy also contained an “inter-insured claims” exclusion which barred coverage for claims “by one ‘insured’ against another ‘insured’.”
Bobby’s allegedly caused a fire that resulted in damage to Loch Lomond’s property. Loch Lomond submitted a claim for the fire damage to its own property insurer, Gemini Insurance Company (Gemini). Thereafter, Gemini paid Loch Lomond $288,000 for the fire damage.
Gemini, “standing in the shoes” of Loch Lomond, then filed a subrogation lawsuit against Bobby’s, alleging that Bobby’s had negligently caused the fire. Bobby’s tendered the defense of the subrogation lawsuit to its general liability insurer, Delos. Delos agreed to defend Bobby’s against Gemini’s lawsuit, but asserted that it had no duty to indemnify Bobby’s against Gemini’s claim. Specifically, Delos asserted that: (1) Gemini “stood in the shoes” of Loch Lomond; (2) Loch Lomond was an “additional insured” on Bobby’s liability policy through Delos; and (3) any claim by Loch Lomond as “additional insured” against Bobby’s as “named insured” was thus excluded from coverage by the “inter-insured claims” exclusion in the Delos policy.
Eventually, Gemini settled its subrogation lawsuit against Bobby’s with Delos’ consent. The settlement involved entry of a $288,000 stipulated judgment in favor of Gemini and against Bobby’s, coupled with an agreement that Gemini would only attempt to enforce the judgment against Bobby’s liability insurer, Delos.
Pursuant to Insurance Code section 11580(b)(2), Gemini then brought a judgment creditor action against Bobby’s liability insurer, Delos, in an effort to collect the $288,000 judgment. The sole issue in the case was whether Gemini’s judgment against Bobby’s was excluded from coverage by the “inter-insured claims” exclusion in the Delos policy. The trial court ruled that the exclusion did not apply and that Delos was thereforeobligated to pay the judgment. Delos appealed.
Holding
The Court of Appeal affirmed the judgment.
The appellate court reasoned that although Gemini “stood in the shoes” of Loch Lomond, Loch Lomond was only an “additional insured” on the Delos policy in situations where Loch Lomond was alleged to be vicariously liable for negligence on the part of Bobby’s. Here, however, no third party had ever sued Loch Lomond for an act or omission on the part of Bobby’s. Rather, Gemini’s subrogation lawsuit was founded on a claim by Loch Lomond against Bobby’s. The appellate court concluded that, under such circumstances, Loch Lomond did not qualify as an “additional insured” on Bobby’s policy through Delos. Since Loch Lomond was not an additional insured, any claim by Loch Lomond against Bobby’s as named insured was not subject to the “inter-insured claims” exclusion in the Delos policy. Accordingly, Gemini, standing in the shoes of Loch Lomond, was entitled to recover the $288,000 judgment from Bobby’s liability insurer, Delos.
Comment
The appellate court basically held that Loch Lomond was not an “additional insured” on the Delos policy for any and all purposes . Rather, Loch Lomond only qualified as an additional insured on the Delos policy in the event a third party sued Loch Lomond due to negligence on the part of Bobby’s . Here, no third party had sued Loch Lomond, and thus Loch Lomond did not qualify as an additional insured on the Delos policy. Because in this circumstance Loch Lomond was not an additional insured on the Delos policy, Loch Lomond’s claim against Bobby’s as named insured did not fall within the “inter-insured claims” exclusion in the Delos policy.
Note that the result might have been different if this had been a suit by one named insured against another named insured. In that situation, an “inter-insured claims” exclusion (or similarly-worded “cross-suits” exclusion) apparently would have applied without restriction and would have barred coverage for any liability the one named insured might have had to the other named insured. (See, e.g., Great Western Drywall, Inc. v. Interstate Fire & Casualty Co.(2008) 161 Cal.App.4th 1033.)