INSURANCE-RELATED COURT CASES
Digested from case reports published online
Don’t drink and drive
Asia Torres and Byron Remeyer both worked for the La Sirena Grill at its South Laguna location. One night in August 2013 they had drinks together at La Siena and then left around 10:00 p.m. to go to a party. Shortly before midnight, Torres, who was intoxicated, drove his vehicle into a tree in Laguna Niguel. Remeyer, his passenger, suffered traumatic, life-altering brain injuries as a result.
Remeyer filed a complaint against La Sirena and Torres for negligence and negligence per se.
He alleged that Torres was employed as a cook for La Sirena and “got drunk on the job” on the night of the accident, that drinking on the job was a common occurrence at La Sirena, that La Sirena provided the alcohol that Torres drank on the night of the accident, that La Sirena’s management was well aware of Torres’s intoxicated state when Torres and Remeyer left for the party, and yet management did nothing to prevent Torres from driving.
Remeyer also alleged that Torres was acting within the course and scope of his employment for La Sirena at the time of the accident and was driving a vehicle that La Sirena had entrusted to him for performing his job duties. The complaint did not mention that Remeyer was also an employee of La Sirena.
At the time of the accident, La Sirena was insured by two different insurers. The first insurer, California Capital Insurance Company, issued La Sirena a commercial general liability policy with bodily injury limits of $2 million per occurrence; this policy generally covered bodily injury claims but excluded coverage for workers compensation claims and for bodily injuries arising out of and in the course of a claimant’s employment with La Sirena.
The second insurer, Employers Compensation Insurance Company (ECIC), issued La Sirena a workers compensation and employers liability policy. Part one of this policy covered workers compensation claims, and part two covered bodily injury claims by employees arising out of and in the course of their employment with La Sirena if not otherwise covered by workers compensation.
La Sirena tendered the Remeyer lawsuit to its CGL insurer, California Capital. California Capital agreed to defend La Sirena under a reservation of rights citing, among other provisions, its employers liability exclusion for bodily injuries arising out of and in the course of a claimant’s employment with La Sirena.
During discovery, it came to light that Remeyer had been an employee of La Sirena at the time of the accident, that both Remeyer and Torres had worked at La Sirena earlier in the day, but that both had been off the clock for several hours by the time the accident occurred. Whether Remeyer was acting within the course and scope of his employment at La Sirena at the time of the accident remained contested.
In May 2014, Remeyer’s counsel made a settlement demand of $2 million, the California Capital policy limit. California Capital advised La Sirena that if it agreed to pay the settlement demand, it would do so under a reservation of its right to seek reimbursement from La Sirena.
California Capital notified La Sirena’s workers compensation and employers liability insurer, ECIC, of the settlement demand, explained that Remeyer was an employee injured within the course and scope of his employment so as to trigger coverage under the ECIC policy, and asked ECIC to participate in the settlement. ECIC denied coverage, asserting that there was no potential for coverage under either part of its policy.
In June 2015, California Capital settled the Remeyer lawsuit on La Sirena’s behalf for its policy limit of $2 million, without any participation from ECIC. California Capital also settled its reimbursement claim against La Sirena; and as part of that settlement La Sirena assigned California Capital its rights against ECIC.
California Capital then filed suit against ECIC for equitable contribution. ECIC moved for summary judgment, asserting that neither part of its policy covered the allegations in the Remeyer lawsuit; the trial court denied that motion without explanation.
The trial court conducted a bench trial on stipulated facts in December 2020. The court found that the ECIC policy potentially covered the Remeyer lawsuit and California Capital was equitably entitled to half of what it expended in defense and settlement of that lawsuit. The court then entered judgment for California Capital, awarding it $44,182.42 in equitable contribution for the cost of defending La Sirena, $1 million in equitable contribution for indemnifying La Sirena, and interest of $501,299.37.
ECIC moved to set aside the judgment; the trial court denied that motion. In its order, the court acknowledged that the two policies were “mutually exclusive” and that ECIC generally had no duty to cover civil suits under its workers compensation policy but reasoned that this “general rule must give way where its uncritical application would work a hardship.” ECIC appealed.
After reviewing the coverages it became apparent that California Capital’s CGL policy did not cover the same risk as ECIC’s workers compensation and employers liability policy. In fact, the court agreed with the trial judge that the two policies were mutually exclusive: California Capital’s CGL policy covered bodily injury claims unless the claimant is an employee injured in the course and scope of his employment, whereas ECIC’s workers compensation and employers liability policy covered bodily injury claims only if the claimant is an employee injured in the course and scope of his or her employment.
Because California Capital and ECIC did not cover the same risk, California Capital could not establish one of the requisite elements of equitable contribution, and its claim necessarily failed.
California Capital nonetheless insisted it was entitled to equitable contribution because discovery in the Remeyer lawsuit established that Remeyer was a La Sirena employee, thereby creating a potential for coverage under ECIC’s policy and triggering ECIC’s duty to defend. This argument ignored the fact that the two policies did not insure against the same risk (an essential element of equitable contribution); it also reflected a fundamental misunderstanding of what ECIC’s policy covered.
California Capital insisted it was entitled to equitable contribution because it was possible that Remeyer, as a La Sirena employee, was acting in the course and scope of employment at the time of the accident, thereby triggering a potential for coverage under the ECIC policy. The court stated that it could not agree.
The judgment for California Capital was reversed. On remand, the trial court was directed to enter judgment for ECIC. ECIC was to recover its costs on appeal.
California Capital Insurance Company v. Employers Compensation Insurance Company—Court of Appeal of the State of California, Fourth Appellate District, Division Three—March 20, 2023—No. 30-2017-00928693.