Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County. David L. Minning, Judge. Los Angeles County Super. Ct. No. BC333099
Ropers, Majeski, Kohn & Bentley, Todd A. Roberts and Susan H. Handleman for Defendant and Appellant.
Gauntlett & Associates, David A. Gauntlett, M. Catherine Reid, and Eric R. Little for Plaintiff and Respondent.
CHAVEZ, J.
This action concerns the priority of defense obligations between two insurers with respect to an underlying trademark infringement action against their mutual insured, Skechers U.S.A., Inc. (Skechers). Appellant, Hartford Casualty Insurance Company (Hartford), denied coverage under a commercial general liability insurance policy it issued to Skechers and refused to defend Skechers in the underlying action. Respondent, Indian Harbor Insurance Company (Indian Harbor), paid Skechers $400,000 under a defense cost reimbursement policy it issued to Skechers for defense costs incurred in the underlying action. Indian Harbor then commenced this equitable indemnity action against Hartford to recover the $400,000 it paid.
The parties filed cross-motions for summary judgment, each contending the other had the sole duty to defend Skechers in the underlying action. The trial court granted summary judgment in Indian Harbor’s favor, finding that the underlying action was potentially covered under Hartford’s policy, that Hartford owed Skechers a duty to defend, and that Hartford breached that duty by refusing to defend the underlying action. The trial court further found that Indian Harbor paid an obligation owed by Hartford.
Hartford contends the judgment must be reversed because it owed no duty to defend Skechers in the underlying action, and because equitable principles preclude the trial court from imposing on Hartford the entire burden of defending Skechers. We affirm the judgment.
BACKGROUND
A. The Hartford Policy
Hartford issued to Skechers a commercial general liability insurance policy with an advertising injury limit and a general aggregate limit of $1 million, respectively, covering the period from August 19, 1996 to August 19, 1999 (the Hartford policy). The insuring agreement of the Hartford policy provides in relevant part:
“We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘personal injury’ or ‘advertising injury’ to which this insurance applies. We will have the right and duty to defend any ‘suit’ seeking those damages. [¶] . . . [¶] b. This insurance applies to: [¶] . . . [¶] 2. ‘Advertising injury’ caused by an offense committed in the course of advertising your goods, products or services; but only if the offense was committed in the ‘coverage territory’ during the policy period.”
The term “Advertising injury” is defined in relevant part as “injury arising out of one or more of the following offenses: . . . [m]isappropriation of advertising ideas or style of doing business; or . . . [i]nfringement of copyright, title or slogan.”
Section IV.4 of the Hartford policy states: “If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows: [¶] a. Primary Insurance [¶] This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary.” Section IV.4.b. of the Hartford policy specifies certain circumstances, not applicable here, when the Hartford policy is excess over other insurance.
Advertising injury liability is covered under Coverage B of the Hartford Policy.
B. The Indian Harbor Policy
Indian Harbor issued an intellectual property infringement defense and cost reimbursement policy to Skechers covering the period September 1, 2002 to September 1, 2003 (the Indian Harbor Policy). The insuring agreement in the Indian Harbor policy states:
“Subject to the Self Insured Retention, Coinsurance Copayment Percentage and Limits of Liability stated on the Declarations Page for each of the PATENT, COPYRIGHT or TRADEMARK coverages indicated on the Declarations Page, the Company shall reimburse the Named Insured only for LITIGATION EXPENSE and DAMAGES (if DAMAGES are designated on the Declarations Page) for which the Named Insured is liable and has paid to a third party arising out of COVERED LITIGATION, even if such COVERED LITIGATION is groundless, false or fraudulent. All reimbursement of LITIGATION EXPENSE and DAMAGES (if DAMAGES are designated on the Declarations Page) payable under this Policy shall be subject to all the terms, conditions, limitations, and exclusions stated herein. Reimbursements payable under this Policy will be made at periodic intervals, mutually agreeable to the Company and the Named Insured, based upon receipts for LITIGATION EXPENSES paid by Named Insured and submitted to the Company during each period.”
The Indian Harbor policy defines “covered litigation” as “the defense of A CIVIL PROCEEDING or any part thereof brought during the POLICY PERIOD . . . [w]hich alleges INFRINGEMENT by the Named Insured.” It also provides for a self-insured retention of $500,000 per claim. The Indian Harbor policy states:
“PLEASE NOTE THIS IS A DEFENSE COST AND DAMAGES REIMBURSEMENT POLICY ONLY. UNLESS SPECIFICALLY ASSUMED BY THE COMPANY IN WRITING, THE DEFENSE OF THE NAMED INSURED IN ANY ACTION, ADMINISTRATIVE PROCEEDING(S) OR CIVIL PROCEEDING(S) OF WHATEVER NATURE IS AT ALL TIMES THE RESPONSIBILITY OF THE NAMED INSURED.”
The Indian Harbor policy further states: “The insurance provided under this Policy shall apply only as excess insurance over any other valid and collectible insurance available to the Named Insured unless such other insurance specifically applies as excess insurance over the Limits of Liability provided herein.”
C. The Underlying Lawsuit
Skechers was sued by Adidas America, Inc. (Adidas) on February 6, 2003, for trademark infringement, trademark dilution, unfair competition, and deceptive trade practices (the Adidas action). Paragraph 25 of the Adidas complaint states: “On information and belief, Defendant Skechers designs, sources, markets and sells footwear. On further information and belief, Skechers is manufacturing distributing, offering for sale and selling goods in interstate commerce that bear confusingly similar imitations of [A]didas’s Three-Stripe Mark and at least one of which is essentially a two-stripe imitation of [A]didas’s Prajna shoe.” Paragraph 26 states: “On information and belief, Skechers’ imitation of [A]didas’s Prajna model is called the ‘Optiks,’ and is depicted below.” Paragraph 26 includes a photograph of the allegedly infringing Optiks shoe.
Paragraph 28 of the Adidas complaint alleges: “In addition to the Optiks, Skechers has advertised, sold or offered for sale other two-stripe footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark, including the following.” Paragraph 28 includes photographs of six Skechers shoes, the “Frenzies,” the “Motorcar,” “Referals,” “Mellows,” “Loops,” and an unnamed Skechers model.
Paragraph 29 of the Adidas complaint states: “In addition to these two-stripe infringing shoes, Skechers has advertised, sold or offered for sale other four-stripe footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark, including the ‘Fire Storm,’ the ‘Tendon,’ the ‘Redondo Beach,’ and the ‘Floaters II.’”
Paragraph 30 of the Adidas complaint alleges: “In addition to the foregoing, both Defendants have advertised, sold or offered for sale footwear bearing a sideways ‘S’ design that is a confusingly similar imitation of [A]didas’s Three-Stripe Mark.”
Rack Room Shoes Inc. was also named as a defendant in the Adidas action.
Skechers tendered the Adidas action to Hartford on March 28, 2003. Hartford responded in a letter dated April 11, 2003, advising Skechers that, “A review of the complaint indicates that the alleged infringing activities took place after the termination of the Hartford policy” and requesting “any facts, information or material that indicates the claim falls within the policy period and within the insuring agreement.” In a letter dated June 20, 2003, Hartford denied coverage for the Adidas action based on, among other grounds, the absence of any “advertising injury” during the policy period. In its June 20, 2003 letter, Hartford noted that the Adidas complaint had specifically alleged that Skechers was infringing upon Adidas’s “Prajna” shoe, which was developed in 2001 and released in the spring of 2002, and that the Hartford policy had expired on August 19, 1999.
Skechers renewed its request for a defense of the Adidas action in a letter dated June 24, 2003. In its letter, Skechers argued that the Adidas complaint alleged “advertising injury” covered under the Hartford policy and that the allegations of allegedly infringing activities were not limited to the Optiks or Prajna models, or to any specific time period. Skechers cited paragraph 28 of the Adidas complaint as an example of the “open-ended nature” of Adidas’s infringement allegations. Skechers also provided Hartford with a 1998-1999 catalog depicting Skechers footwear matching the description of “other two-stripe footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark” set forth in paragraph 28 of the Adidas complaint. Skechers stated that the catalog was distributed in the summer of 1998 and was used to advertise the products depicted therein. Hartford did not alter its coverage position.
As discussed, paragraph 28 of the Adidas complaint states that, “In addition to the Optiks, Skechers has advertised, sold or offered for sale other two-stripe footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark, including the following” and includes photographic depictions of six allegedly infringing Skechers shoes.
After Hartford denied coverage, Skechers notified Indian Harbor of the Adidas action. Indian Harbor paid Skechers $400,000 as reimbursement for defense costs incurred in excess of the $500,000 self-insured retention specified under the Indian Harbor policy. Skechers eventually settled the Adidas action without paying any damages. Skechers settled its claim against Hartford for $350,000.
D. The Instant Equitable Indemnity Action
Indian Harbor filed this action for equitable indemnity against Hartford, seeking to recover the $400,000 in defense costs it paid to Skechers. Indian Harbor argued that it owed no duty to defend under its policy, but only an obligation to reimburse Skechers for defense costs exceeding the $500,000 self-insured retention, whereas Hartford owed Skechers a duty to defend claims potentially covered under its policy.
1. The Motions for Summary Judgment
Indian Harbor filed a motion for summary judgment, seeking adjudication of the following issues: (1) Hartford had a duty to defend Skechers in the Adidas action, (2) Hartford is obligated to indemnify Indian Harbor in the amount of $400,000 for the defense costs Indian Harbor paid Skechers, and (3) Indian Harbor is entitled to prejudgment interest on the amount paid.
Hartford filed its own motion for summary judgment on the grounds that there were no material facts in dispute and that Indian Harbor is not entitled to indemnity from Hartford as a matter of law.
2. The Trial Court’s Judgment
After hearing argument from the parties, the trial court granted Indian Harbor’s motion for summary judgment and denied Hartford’s motion. The trial court found that the Adidas complaint alleged trademark infringement in the course of advertising Skechers’s products, and that the alleged trademark infringement came within the advertising injury coverage of the Hartford policy. The trial court further found that the Adidas complaint contained broad allegations of trademark infringement that could have subjected Skechers to liability for its activities during the Hartford policy period. The trial court therefore concluded that Hartford owed Skechers a duty to defend the Adidas action, and that Hartford breached that duty.
The trial court also found that Indian Harbor issued a defense cost reimbursement policy that required Indian Harbor to reimburse Skechers after Skechers had actually paid certain amounts for defense, whereas Hartford’s policy included a duty to defend. The court determined that Indian Harbor’s policy would not have been triggered if Hartford had defended Skechers. The trial court concluded that Indian Harbor paid an obligation owed by Hartford. The trial court noted that Hartford had raised no issues concerning allocation of defense costs between the two insurers.
Judgment was entered in favor of Indian Harbor in the amount of $478,904.14, which included the principal sum of $400,000 and interest accruing at $109.59 per day from the date Indian Harbor paid Skechers through April 19, 2006.
Hartford filed the instant appeal.
DISCUSSION
I. Standard of Review
A motion for summary judgment is properly granted when there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) We review the trial court’s grant of summary judgment de novo and decide independently whether the facts not subject to triable dispute warrant judgment for the moving party as a matter of law. (Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348; Code Civ. Proc., § 437c, subd. (c).)
II. Hartford’s Duty to Defend
“[A] liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. [Citation.] . . . ‘[T]he carrier must defend a suit which potentially seeks damages within the coverage of the policy.’ [Citation.] Implicit in this rule is the principle that the duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages are ultimately awarded. [Citations.]” (Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081.) “Any doubt as to whether the facts establish the existence of the defense duty must be resolved in the insured’s favor. [Citations.]” (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 299-300 (Montrose).) An insurer may be relieved of the duty to defend only “if the third party complaint can by no conceivable theory raise a single issue which could bring it within the policy coverage. [Citation.]” (Id. at p. 300, quoting Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 276, fn. 15.)
“‘The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint may also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy. [Citation.]’” (Montrose, supra, 6 Cal.4th at p. 295.) “[T]he extrinsic facts which may create a duty to defend must be known by the insurer at the inception of the third party lawsuit.” (Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1114 (Gunderson).) “An insured may not trigger the duty to defend by speculating about extraneous ‘facts’ regarding potential liability or ways in which the third party claimant might amend its complaint at some future date. . . . ‘[A] third party is not the arbiter of the policy’s coverage. [Citations.] A corollary to this rule is that the insured may not speculate about unpled third party claims to manufacture coverage.’ [Citation.]” (Ibid.)
Applying these principles to the instant case, the relevant inquiry is what facts Hartford knew at the time Skechers tendered the defense of the Adidas action, both from the allegations on the face of the Adidas complaint, and from extrinsic information known to Hartford at that time, and whether these known facts created a potential for coverage under the terms of its policy.
A. The Adidas Complaint
1. Advertising Injury
The Adidas complaint on its face alleges “advertising injury” as defined under the Hartford policy. The Hartford policy defines “advertising injury” as “injury arising out of one or more of the following offenses” including “[m]isappropriation of advertising ideas or style of doing business.” The Adidas complaint alleges misappropriation of Adidas’s Three-Stripe Mark. Paragraph 28 of the Adidas complaint alleges that “Skechers has advertised, sold or offered for sale other two-stripe footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark.” Paragraph 29 states that, “Skechers has advertised, sold or offered for sale other four-stripe footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark” and paragraph 30 alleges that Skechers “advertised, sold or offered for sale footwear bearing a sideways ‘S’ design that is a confusingly similar imitation of [A]didas’s Three-Stripe Mark.”
The Adidas complaint also alleges injury arising out of Skechers’s purported misappropriation. Paragraph 34 of the complaint states: “The likelihood of confusion, mistake and deception engendered by [Skechers’s] misappropriation of [Adidas’s] mark is causing irreparable harm to the goodwill symbolized by the Three-Stripe Mark and the reputation for quality that it embodies.”
2. Offense Committed During the Policy Period
The Hartford policy covers “‘Advertising injury’ caused by an offense committed in the course of advertising your goods, products or services; but only if the offense was committed . . . during the policy period.” Hartford contends that it had no duty to defend Skechers because the Adidas complaint alleges no advertising injury caused by an “offense . . . committed . . . during the policy period.” Hartford maintains there was no potential coverage because the Adidas complaint refers only to allegedly infringing Skechers products marketed or sold after the 1996-1999 period that Hartford’s policy was in effect. Hartford points specifically to allegations concerning Skechers’s purported infringement of Adidas’s “Prajna” shoe, which Adidas did not release until 2002. It argues that Skechers’s alleged infringement of the Prajna design could not have occurred before 2002 – more than two years after the expiration of Hartford’s policy in August 1999.
An examination of the Adidas complaint reveals, however, that allegations concerning Skechers’s offending conduct encompass more than imitating the Prajna design, and include marketing and selling other products that purportedly infringed upon Adidas’s Three-Stripe Mark. For example, paragraph 28 of the Adidas complaint states: “In addition to the Optiks, Skechers has advertised, sold or offered for sale other two-stripe footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark, including the following.” The Adidas complaint then shows photographic depictions of six allegedly infringing Skechers products--the “Frenzies,” the “Motorcar,” the “Referals,” the “Mellows,” the “Loops,” and a “Model Name Presently Unknown.” Hartford argues that these allegations are insufficient to establish a potential for coverage under its policy because Skechers provided no information showing that Skechers advertised or sold any of the six Skechers products depicted in paragraph 28 of the Adidas complaint during the Hartford policy period. Hartford’s argument is premised on the assumption that the allegations of paragraph 28 apply exclusively to the six Skechers shoe models depicted. The allegations are not limited, however, to the Skechers shoes depicted, nor are they limited to Skechers’s post-1999 activities. Rather, they broadly encompass Skechers’s advertising and sale of “other two-stripe footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark.”
Skechers does not dispute that none of the Skechers products depicted or identified by model name in the Adidas complaint appear in the 1998-1999 catalog it provided to Hartford in June 2003.
Paragraphs 29 and 30 of the Adidas complaint contain similarly broad allegations of offending conduct. Paragraph 29 states that Skechers “has advertised, sold or offered for sale footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark, including the ‘Fire Storm,’ the ‘Tendon,’ the ‘Redondo Beach,’ and the ‘Floaters II.’” (Italics added.) Paragraph 30 states: “In addition to the foregoing [Skechers has] advertised, sold or offered for sale footwear bearing a sideways ‘S’ design that is a confusingly similar imitation of [A]didas’s Three-Stripe Mark. The following is a photograph of one such Skechers shoe.” (Italics added.) Neither paragraph limits the scope of its allegations to the specified Skechers products, or to a time period after the expiration of Hartford’s policy.
Hartford suggests that Adidas intentionally limited its allegations of infringement to Skechers products sold and distributed after the expiration of Hartford’s policy period in order to avoid possible statute of limitations issues. An insurer may not, however, rely on the statute of limitations as a means of avoiding its coverage obligations. (Garriott Crop Dusting Co. v. Superior Court (1990) 221 Cal.App.3d 783, 797.) Such an argument may be advanced only for Skechers’s benefit in the underlying action, not as a means of avoiding coverage. (Ibid.)
Paragraphs 28, 29, and 30 of the Adidas complaint allege advertising injury caused by an offense committed in the course of advertising Skechers’s products. The allegations are not limited in time or by product line and potentially cover Skechers’s advertising activities during the period covered by Hartford’s policy. Moreover, as we discuss, Skechers also provided Hartford with a 1998-1999 catalog that advertised, during Hartford’s policy period, allegedly infringing Skechers footwear described in the Adidas complaint. This extrinsic information, together with the allegations of the Adidas complaint, established advertising injury caused by an offense committed during Hartford’s policy period.
3. Causal Connection Between Advertising and Alleged Injury
Hartford contends there could be no reasonable expectation of advertising injury coverage under its policy because the Adidas complaint alleges no causal connection between Adidas’s alleged injury and Skechers’s 1996 to 1999 advertising. For an insured to have a reasonable expectation of coverage under a comprehensive general liability policy insuring against “advertising injury,” the insured must show that: “(1) he was engaged in ‘advertising’ during the policy period when the alleged ‘advertising injury’ occurred; (2) [the third party complainant’s] allegations created a potential for liability under one of the covered offenses (i.e., misappropriation of advertising ideas); and (3) a causal connection existed between the alleged injury and the ‘advertising.’ [Citations.]” (Hameid v. National Fire Ins. of Hartford (2003) 31 Cal.4th 16, 22; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1277 [“‘advertising injury’ must have a causal connection with the insured’s ‘advertising activities’ before there can be coverage”].)
The Adidas complaint alleges a sufficient causal connection between Adidas’s injury and Skechers’s advertising activities. Paragraphs 28, 29, and 30 of the Adidas complaint allege that Skechers advertised footwear bearing confusingly similar imitations of Adidas’s Three-Stripe Mark. Paragraph 34 of the Adidas complaint alleges a causal connection between Skechers’s advertising activities and Adidas’s purported injury: “Defendants’ use of confusingly similar imitations of Plaintiffs’ Three-Stripe Mark is likely to deceive, confuse and mislead prospective purchasers into believing that footwear sold by Defendants is manufactured by, authorized by or in some manner associated with Plaintiffs, which it is not. The likelihood of confusion, mistake and deception engendered by Defendants’ misappropriation of Plaintiffs’ mark is causing irreparable harm to the goodwill symbolized by the Three-Stripe Mark and the reputation for quality that it embodies.”
Hartford maintains that these allegations did not trigger its duty to defend because Adidas did not assert injury specifically caused by Skechers’s 1996 to 1999 advertising. California law does not require such specificity in pleading in order to trigger the duty to defend. Rather, the applicable standard is whether the action “‘potentially seeks damages within the coverage of the policy.’” (Horace Mann Ins. Co. v. Barbara B., supra, 4 Cal.4th at p. 1081.) As discussed, the allegations of the Adidas complaint are not limited in time or by product line. That the Adidas complaint does not expressly mention Skechers’s 1996 to 1999 advertising activities does not mean those activities cannot be encompassed by the complaint’s broadly worded allegations.
Bank of the West v. Superior Court, supra, 2 Cal.4th 1254, and Hameid v. National Fire Ins. of Hartford, supra, 31 Cal.4th 16, on which Hartford relies, are inapposite. Bank of the West did not involve the duty to defend, but concerned indemnity coverage for advertising injury based on inadequate consumer loan disclosures. The insured bank in that case had developed a loan program to finance automobile insurance premiums for consumers who sought to pay in installments. The bank did not advertise the loan program to consumers, but informed insurance agents that it would pay fees for referring such business. When a consumer expressed a desire to pay automobile insurance premiums in installments, the insurance agent would obtain a power of attorney and apply for a loan in the consumer’s name. Sometime later, the consumer would receive a notice of the loan’s acceptance by the bank and disclosure of its terms, which included interest at rates of over 126 percent, as well as substantial fees and penalties. The Supreme Court concluded there was no advertising injury coverage for the consumers’ claims against the bank because of an insufficient causal nexus between those claims and the bank’s advertisements, which were directed not to the consumers, but solely to insurance agents. (Bank of the West v. Superior Court, supra, at p. 1277.) Here, in contrast, Adidas alleged damage to its goodwill and reputation specifically caused by Skechers’s advertising of footwear bearing confusingly similar imitations of Adidas’s Three Stripe Mark.
In Hameid v. National Fire Ins. of Hartford, supra, 31 Cal.4th 16, the Supreme Court held that the insured’s solicitation of customers from a customer list did not constitute “advertising” within the meaning of the liability insurance policy at issue. The court therefore did not reach the issue of whether there was a causal connection between the insured’s activities and the alleged advertising injury. (Id. at pp. 29-30, fn. 9.)
The Adidas complaint alleges a sufficient causal connection between Skechers’s advertising activities and Adidas’s claimed injury. The allegations are sufficiently broad so as to encompass advertising during Hartford’s 1996 to 1999 policy period and to bring Adidas’s claims potentially within the coverage of the Hartford policy. (Horace Mann Ins. Co. v. Barbara B., supra, 4 Cal.4th at p. 1081.)
B. Extrinsic Information
Skechers provided Hartford with extrinsic information, in the form of a 1998-1999 catalog, that showed it had advertised allegedly infringing products during the Hartford policy period. Skechers informed Hartford that the catalog was distributed in the summer of 1998 for the purpose of advertising the products depicted therein. Skechers further informed Hartford that pages 25 and 36 of the catalog showed Skechers footwear that matched the description of “other . . . footwear bearing confusingly similar imitations of [A]didas’s Three-Stripe Mark” set forth in paragraphs 28 and 29 of the Adidas complaint. Skechers’s June 2003 letter thus put Hartford on notice that Skechers had advertised, during Hartford’s policy period, products allegedly infringing on Adidas’s Three-Stripe Mark. The Skechers catalog revealed the existence of claims potentially covered under the Hartford policy and triggered Hartford’s duty to defend the Adidas action.
The facts presented here are similar to those in El-Com Hardware, Inc. v. Fireman’s Fund Ins. Co. (2001) 92 Cal.App.4th 205, which, like the instant case, concerned the duty to defend an underlying trademark infringement action. The underlying complaint in El-Com did not refer to or describe any of the insured’s advertising or promotional literature, nor did it use any variation of the word “advertise.” The insurer denied coverage based on the absence of any allegation that the alleged infringement was done in the course of the insured’s advertising activities. The insured requested reconsideration of the insurer’s coverage position, and provided the insurer with photocopies of the allegedly infringing product from the insured’s catalog. The court in El-Com concluded that the catalog provided notice to the insurer of alleged injury during the course of advertising, thereby triggering the duty to defend. In light of the extrinsic evidence known to the insurer at the inception of the underlying lawsuit, the court in El-Com found it unnecessary to decide whether the allegations of the underlying complaint were sufficient to establish injury caused by advertising. (Id. at pp. 217-218.) Here, as in El-Com, the Skechers catalog depicting allegedly infringing products put Hartford on notice of claims potentially covered under its policy. Moreover, the Adidas complaint itself specifically alleged injury caused by Skechers’s advertising products that purportedly infringed upon Adidas’s Three-Stripe Mark. The Skechers catalog, together with the allegations set forth in the Adidas complaint, revealed the existence of claims potentially covered under the Hartford policy and triggered Hartford’s duty to defend.
III. Indian Harbor’s Entitlement to Equitable Indemnity
“Equitable indemnity ‘“applies in cases in which one party pays a debt for which another is primarily liable and which in equity and good conscience should have been paid by the latter party.”’ [Citation.]” (United States Auto Assn. v. Alaska Ins. Co. (2001) 94 Cal.App.4th 638, 644-645, quoting Phoenix Ins. Co. v. United States Fire Ins. Co. (1987) 189 Cal.App.3d 1511, 1526.) “[F]or instance, an excess insurer who defends and indemnifies the insured following the primary insurer’s wrongful refusal to do so may seek equitable indemnity from the primary insurer for the amounts paid in defense and settlement of the claim.” (Croskey, et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2006) ¶ 8:65.1, p. 8-23.) The propriety of Indian Harbor’s equitable indemnity claim thus requires an analysis of the priority of the parties’ defense obligations, i.e., whether Hartford was “primarily liable” for the defense costs paid by Indian Harbor.
As discussed, Hartford owed Skechers a duty to defend the Adidas action under the terms of the Hartford policy. The Indian Harbor policy, in contrast, contains no provision imposing a duty to defend and expressly disclaims such a duty. It imposes only a duty to reimburse Skechers for defense costs paid to a third party arising out of covered litigation and exceeding the $500,000 self-insured retention. Courts interpreting defense costs reimbursement policies, such as the Indian Harbor policy at issue here, have consistently held that such policies do not impose a duty to defend. (Xebec Development Partners, Ltd. v. National Union Fire Ins. Co. (1993) 12 Cal.App.4th 501, 529 (Xebec), disapproved on another ground by Essex Ins. Co. v. Five Star Dye House, Inc. (2006) 38 Cal.4th 1252, 1265, fn. 4; Gon v. First State Ins. Co. (9th Cir. 1989) 871 F.2d 863, 867-868; see also Helfand v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 869, 879.) Indian Harbor did not owe a duty to defend Skechers, but only the duty to reimburse Skechers for certain costs paid in defending the Adidas action.
Such policies, commonly issued to directors and officers of companies for claims asserted against them in their capacity as such, allow the insured to select counsel and control the defense. (Xebec, supra, 12 Cal.App.4th at p. 539.)
Indian Harbor’s duty to reimburse Skechers for defense costs was not coextensive with Hartford’s duty to defend. Hartford’s policy expressly provides “primary” or “first dollar” coverage, plus a duty to defend. Indian Harbor’s policy, in contrast, includes a self-insured retention of $500,000, and the policy expressly states that the duty to reimburse Skechers for defense costs is subject to that self-insured retention. The term “self-insured retention” “refers to a specific sum or percentage of loss that is the insured’s initial responsibility and must be satisfied before there is any coverage under the policy.” (Croskey, et. al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 7:384, p. 7A-126.) “The consequence of such a provision is that . . . coverage is ‘excess’ to the amount of the retention. [Citation.]” (Continental Ins. Co. v. Superior Court (1995) 37 Cal.App.4th 69, 83, fn. 8.)
The distinction between “primary” and “excess” insurers is relevant to determining the parties’ relative defense obligations. Primary insurance provides immediate coverage upon the occurrence of a covered loss or injury and “coverage usually starts with the first dollar of liability.” (Croskey, et. al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 7:679, p. 7B-64.1.) “Excess insurance . . . provides coverage after other identified insurance is exhausted.” (Id., ¶ 8:177, p. 8-45.) “The primary insurer owes the exclusive duty to defend (and the corollary right to control the defense) even where the third party claim against the insured is for more than the amount of primary coverage, i.e., the fact that the claim may invade the overlying excess coverage does not shift the duty to defend. [Citations.]” (Id., ¶ 7:680, p. 7B-64.1.) An insurer whose policy includes a self insured retention “is treated as an excess insurer and has no duty to defend until the self-insured retention has been exhausted by defense costs or settlements.” (Ibid.; General Star Indemnity Co. v. Superior Court (1996) 47 Cal.App.4th 1586, 1593.) Under the foregoing principles, Indian Harbor had no obligation to make any payment toward the defense of the Adidas action until the $500,000 self-insured retention was exceeded.
Because Hartford declined to defend the Adidas action, we need not determine whether Hartford’s payment of defense costs, had it agreed to defend Skechers, would have satisfied the $500,000 self-insured retention under Indian Harbor’s policy. (See, e.g., Vons Companies v. United States Fire Ins. Co. (2000) 78 Cal.App.4th 52, 59-64.)
Indian Harbor paid for the cost of defending claims potentially covered under Hartford’s policy. Because Hartford was primarily liable for Skechers’s defense costs, Indian Harbor is entitled to equitable indemnity for the amounts it paid.
IV. Equitable Allocation
Hartford contends that equitable principles preclude Indian Harbor from obtaining 100 percent indemnity for defense costs Indian Harbor was obligated to pay under the terms of its own policy. Hartford argues that Indian Harbor was contractually obligated to pay for Skechers’s defense costs because the claims asserted in the Adidas action were covered under Indian Harbor’s policy, and because Indian Harbor paid no defense costs until the $500,000 self-insured retention was exceeded. According to Hartford, allowing Indian Harbor to recover from Hartford the entire sum paid by Indian Harbor would enable Indian Harbor to avoid its contractual obligations altogether and would inequitably shift the entire obligation to Hartford.
Hartford did not allege equitable allocation or contribution as an affirmative defense in this action, nor did it seek allocation in its motion for summary judgment. It accordingly forfeited the right to seek equitable allocation of defense costs and may not do so in this appeal. Moreover, Hartford ignores the language of its own policy expressly providing primary coverage for advertising injury and imposing on it the contractual duty to defend Skechers against potentially covered claims. Although it is true that the respective obligations of insurers who cover the same risk are “not controlled by the language of their contracts with the respective policy holders” but “flow from equitable principles designed to accomplish ultimate justice in the bearing of a specific burden” (Amer. Auto. Ins. Co. v. Seaboard Surety Co. (1957) 155 Cal.App.2d 192, 195-196), Hartford has presented no compelling equitable consideration that would justify changing the priority of its defense obligation owed to Skechers under the terms of its own policy.
DISPOSITION
The judgment is affirmed. Indian Harbor is awarded its costs on appeal.
We concur:
BOREN, P.J., ASHMANN-GERST, J.