Low, Ball & Lynch’s

WEEKLY LAW RESUME

June 10, 2004 Issue      By: Raymond Coates

Duty to Defend - Contribution Between Insurers

Travelers Casualty & Surety Company v. Century Surety Company

Court of Appeal, Fourth District

(May 21, 2026)

Contribution arguments between insurers in construction defect litigation commonly involve disputes over the manner in which to share defense and indemnification.  This case addresses that issue.

Standard Wood Structures, Inc., a framing contractor, performed carpentry and framing work on Canyon Estates between 1987 and 1990.  In 1998, the homeowners association filed a lawsuit contending that there was continuing damage to their properties caused by defective construction work.  Standard was named as a defendant.

Standard tendered to Travelers Casualty & Surety Company, which insured Standard between 1988 and 1993.  Standard also tendered to Century Surety Company, which insured Standard between September 1996 and September 1997, and CNA, whose policy period was not stated in the opinion.  All three insurers provided Standard with a defense.  Century later withdrew.  Travelers and CNA settled the claims.  Travelers then sued Century for contribution.  The trial court granted Travelers' motion for summary adjudication, finding Century had a duty to defend and also finding that Century had a duty to contribute to settlement represented by its time on the risk.  Judgment was entered accordingly.  Century appealed.

The Court of Appeal affirmed the judgment.  It noted that both insurers provided primary insurance to Standard.  Century contended that its "other insurance" provision controlled because the Travelers policy contained a pro rata "other insurance" clause, whereas its policy contained an excess insurance clause over any other primary insurance.

The Court noted that both policies provided primary insurance for different periods of time.  During the time period each policy was in effect, there was no other insurance.  The Court noted that where two policies provide primary insurance to the same insured for the same risk and have conflicting "other insurance" clauses, the modern trend of decisions is to prorate the coverage.  This includes policies which provide that they are excess over any other available insurance.  The Court noted that to honor the excess clause would impose the entire burden on the insurer which provided for pro rata coverage and would result in all insurers providing excess "other insurance" clauses to avoid being stuck with the entire burden.

Here, both policies covered the same loss.  They provided insurance during different periods of time.  Giving effect to the "other insurance" clause of Century would impose the entire burden on Travelers.  This the Court felt to be unfair.

The Court noted that the California Supreme Court had not yet addressed this question.  The Court noted that while the terms of an insurance policy are generally honored, equitable considerations are used to spread the cost among insurers in the absence of any language decreeing otherwise.  As such, the Court felt it would be inequitable in this situation to honor the defendant's excess "other insurance" clause.  The judgment was thus affirmed.

COMMENT

This case is consistent with the recent trend of cases to prorate policies in continuous loss cases where one has an excess clause and one has a prorate clause.  This approach of the courts is an attempt to even out the burden on each of the insurers.

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