JPI Westcoast Construction, L.P. v. RJS & Associates, Inc.
October 26, 2007, First District, Division Three
Cite as 2007 SOS 6772

Appellate Court Affirms Summary Judgment Ruling In Insurance Dispute

In the insurance coverage dispute between JPI Westcoast Construction, L.P. and RJS & Associates, Inc., the Court of Appeals for the First Appellate District affirmed the rulings of the trial court on motions for summary judgment. The district court said that the subcontractor's excess carrier was not “obligated to contribute to the settlement of a wrongful death action until both the subcontractor's and general contractor's primary insurance were exhausted”.

The dispute stemmed from the litigation case filed by the family of a subcontractor worker who was accidentally killed at a project. The family of the accident victim sued JPI, RJS and some individuals for a wrongful death claim.

JPI Westcoast Construction, L.P., a general contractor, entered into a subcontract with RJS & Associates to build concrete podium structures. The subcontract contained an indemnity clause in JPI's favor applying even where JPI was negligent. The indemnity provisions did not apply to JPI's sole negligence or willful misconduct. RJS also was required to name JPI and the project's owner as additional insureds on a primary basis.

JPI purchased commercial general liability coverage from Transcontinental Insurance Company with a per occurrence limit of $1 million while RJS, through commercial general liability insurance from Underwriters at Lloyds, has coverage of $2 million, with a per occurrence limit of $1 million.

In addition, RJS was the sole named insured on a Commercial Umbrella policy it obtained from Agricultural Excess and Surplus (now Great American Insurance Company) with a general aggregate and per occurrence limit of $9 million.

During the trial, the jury found defendants negligent, finding 20% of faults to JPI and 70% of fault to RJS. The jury awarded the workers' family $6,853,284. RJS, through its insurers, Lloyds and Great American, then settled the action for $4.9 million.

However, Transcontinental, JPI’s insurer, refused to contribute.

JPI then filed a complaint for express contractual indemnity and declaratory relief against RJS and its insurers, Great American and Lloyds, alleging "JPI and RJS clearly intended that RJS would be primarily responsible for fully indemnifying JPI … and JPI's own insurance carriers owe no obligation to pay any of the verdict entered in the underlying action." Great American filed a cross-complaint for equitable subrogation and equitable indemnity against Transcontinental.

JPI filed a joint motion for summary judgment against RJS. The general contractor argued that the indemnity in the subcontract was triggered by the jury finding that JPI was not solely negligent.

Following this, RJS filed a motion for summary judgment against JPI on the latter's claim for express contractual indemnity arguing JPI's claim should be dismissed as moot, JPI’s exposure having ‘evaporated when post-trial settlement was reached and satisfied by Lloyds and Great American.’ RJS also argued the indemnification clause does not indemnify JPI for its own active negligence.

Great American filed separate motions for summary judgment against JPI and Transcontinental. The trial court granted RJS's and Great American's motions for summary judgment, agreeing with JPI'S claim for express contractual indemnity.

The trial court rejected JPI's and Transcontinental's arguments and resolved the coverage issue in favor of RJS and Great American. The court also concluded that the primary carrier of the indemnitee had to pay before the excess carrier of the indemnitor. Accordingly, the trial court concluded Great American was entitled to equitable contribution from Transcontinental.

The appellate court affirmed this decision.

The Court of Appeal reasoned that the policy terms should be enforced whenever possible. JPI and Transcontinental contracted to provide primary liability coverage of $1 million per occurrence regardless of the subcontract. California law requires primary policies to exhaust before excess policies must pay.