Opinion
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. CGC-02-406755
Ruvolo, P. J.
I.
INTRODUCTION
James E. Roberts-Obayashi Corporation (Obayashi) appeals from a summary judgment in favor of PMN Design Electric, Inc. (Design). The underlying action against Obayashi arose from an injury suffered by a Design employee while performing under the terms of a subcontract between Design and Obayashi. Obayashi cross-complained against Design for indemnity, and both parties moved for summary adjudication or judgment on the cross-complaint. We affirm the judgment in Design’s favor.
II.
FACTUAL AND PROCEDURAL BACKGROUND
Obayashi was the general contractor for the University of San Francisco Anza Faculty Housing Project Construction (Anza Project). Obayashi and Design entered into a subcontract under which Design would perform specified electrical work on the Anza Project for $1,962,984.
Under the subcontract, Design agreed to indemnify Obayashi as follows: “Subcontractor agrees to defend, indemnify, and hold harmless the Contractor, and its agents and employees, from and against any liability claims, losses, and damages, including costs and reasonable attorney fees, arising out of or in any way connected with the performance of the work under this subcontract, regardless of whether it is caused in part by the negligence of the Contractor, whether active or passive, excepting only such liability, claims, losses, or damages which are caused solely and exclusively by the fault or negligence of the Contractor. [¶] Subcontractor agrees to be responsible for any and all damages done to persons or property by him or his workmen, and to protect and hold the Contractor harmless therefrom. Subcontractor further agrees to maintain continuously during the life of this contract liability insurance and property damage insurance, automobile insurance, workers’ compensation insurance, and course of construction insurance . . . in the amounts stated on Contractor’s Exhibit ‘A’.” Exhibit A provided that the policies must have limits of $1 million for each occurrence and $1 million aggregate, with a “separate endorsement . . . naming as additional insured James E. Roberts-Obayashi Corporation . . . .”
Design was insured through a policy issued by with Royal Surplus Lines Insurance Company (Royal). The policy provided primary coverage for Design regarding the Anza Project, with coverage of $1 million per occurrence, as required by the subcontract. The policy also contained an endorsement naming Obayashi as an additional insured, and indicated that the Royal policy was primary as to any insurance Obayashi may have otherwise procured. The certificate of insurance indicated that, in addition to its commercial general liability policy with Royal, Design was insured by three other insurance companies, including National Union Fire Insurance Company, Golden Eagle Insurance, and Legion Insurance Company, with policies for automobile liability, excess liability, workers’ compensation, and rented/leased equipment.
On April 16, 2002, Tyrone Hillman (Hillman), an electrician employed by Design, and his wife Deborah Hillman (collectively, the Hillmans) filed a complaint against Obayashi. They alleged causes of action arising out of personal injuries suffered by Hillman on April 23, 2001, while employed by Design on the Anza Project. Hillman also filed a workers’ compensation claim against Design.
Obayashi filed a cross-complaint against Design on November 20, 2003, alleging causes of action for express contractual indemnity, breach of contract, and implied indemnity. Design was served with the summons and complaint on November 24, 2003, but did not answer until May 12, 2004.
In February 2004, Obayashi and the Hillmans reached a settlement of the Hillmans’ action. Obayashi’s attorney recited the terms of the settlement agreement on the record as follows: “we are settling the Complaint which is the action by the injured employee . . . of . . . electrical subcontractor [Design] against the general contractor [Obayashi]. There is still an outstanding Cross-Complaint by [Obayashi] against the injured employee’s employer, Design Electric. The terms of the Settlement Agreement are that $1 million shall be paid [by Royal] on behalf of the general contractor [Obayashi] upon execution of the Settlement Agreement. . . . [Royal] has agreed to pay $1 million upon . . . execution of the Settlement Agreement to [the Hillmans] on behalf of my client [Obayashi]. There is also an agreement for payment of an additional $1 million with interest . . . at the prime rate starting from February 12[,] 2004, upon a finding of fault by [the Hillman’s] employer [Design] on my client’s Cross-Complaint, and also a finding of duty to indemnify my client . . . . [I]n the alternative, if there is a finding of no fault on the part of [the Hillmans’] employer [Design] and/or no duty for [Design] to indemnify my client for claims alleged by [the Hillmans], then Zurich [Obayashi’s insurer] shall pay [the Hillmans] an additional $500,000 with interest . . . in full settlement of the claim. [¶] So the entire claim may end up being either a $2 million payment or a $1[.5 million] payment.” Obayashi’s attorney did not state on the record which entity would make the additional $1 million payment.
There is no written settlement agreement in the record before us. Obayashi’s attorney represented to the court that he had “authority on behalf of the carriers to enter into the Settlement Agreement.”
In December 2004, Obayashi filed a motion for summary adjudication of its cause of action for express contractual indemnity. In its motion, Obayashi indicated the additional $1 million payment, if it occurred, would be made by Design. Obayashi stated the settlement agreement provided for “$1 [million] to be paid by defendant and cross-complainant [Obayashi] through its ‘primary’ carrier, Royal; and [¶] a future payment of $500,000.00 or $1 [million] depending on whether cross-defendant Design is found to be at least 1% liable for plaintiffs’ injuries. . . . Therefore, when Design is found to be even 1% liable for plaintiffs’ injuries, plaintiff will be paid an additional $1 [million] by Design. . . . Alternatively, if Design were found not to be at all negligent, then [Obayashi] will pay $500,000.00 through Steadfast, as liability/excess carrier for [Obayashi].” The trial court denied Obayashi’s motion, holding that Obayashi had not established that it had suffered loss or damages within the meaning of the subcontract.
Counsel for the Hillmans asserted in the trial court that the additional $1 million payment, if made, would be “by Design Electric, Inc., allegedly through its umbrella carrier, National Union Fire Insurance Company.”
Though not clear from the record before this court, the Steadfast policy apparently provided coverage excess to Obayashi’s Zurich policy.
Design then moved for summary judgment as to all causes of action in Obayashi’s cross-complaint, or in the alternative, summary adjudication. Obayashi and Design agreed, in the context of the motion for summary judgment, that the following was an undisputed material fact: “The initial terms of the Settlement were as follows: ‘The agreement of the parties is not dispositive of the cross-complaint. [The Hillmans] will be paid $1 [million] upon their filing a release and dismissal of the main complaint. If there is a finding of fault as to Design Electric on the cross-complaint then the additional $1 [million] will be paid to plaintiffs. If there is no finding of fault as to Design Electric on the cross-complaint then the additional payment will only total $500,000.’ ” The settlement agreement was later modified as follows: “The original agreement remains the same except that the initial payment from Defendant to Plaintiff will be $990,000 instead of $1 [million] and will be paid by 4:30 p.m. this day. The other amendment was that all releases and dismissal[s] are deferred until all proceedings and procedures are finalized. The total settlement will remain either [$]1.5 million or [$]2 million as set forth in the original agreement.”
The court granted Design’s motion for summary judgment, holding that “Obayashi cannot establish that it has incurred or will incur damages . . . [and] [b]ased on the exclusivity of California’s Worker Compensation Scheme, Obayashi is prohibited from seeking equitable indemnity.” Judgment in favor of Design was entered on May 3, 2006. This timely appeal followed.
Design’s motion for attorney fees and costs was denied. Though Design filed a cross-appeal from the order denying its motion, it has informed this court it is not pursuing the cross-appeal. Accordingly, we dismiss the cross-appeal.
III.
DISCUSSION
A. Standard of Review
A party is entitled to summary judgment when there is no triable issue of material fact and the party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) “If a party moving for summary judgment in any action . . . would prevail at trial without submission of any issue of material fact to a trier of fact for determination, then he should prevail on summary judgment.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 855 (Aguilar).) A defendant moving for summary judgment must show that one or more elements of the cause of action cannot be established or that there is a complete defense. (Code Civ. Proc., § 437c, subd. (o)(1), (2); Aguilar, supra, 25 Cal.4th at p. 849.) Once the defendant meets its burden, the burden shifts to the plaintiff to set forth “specific facts” showing that a triable issue of fact exists. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, at p. 849.) “On appeal, we independently review the trial court’s ruling and apply the same legal standard that governs the trial court. [Citation.]” (State Farm General Ins. Co. v. Wells Fargo Bank, N.A. (2006) 143 Cal.App.4th 1098, 1105.)
B. Express Contractual Indemnity Based on Liability
Obayashi asserts the court erred in granting Design’s summary judgment motion as to the express contractual indemnity cause of action on the basis that it had suffered no damages. It maintains that it “did not have to prove actual loss but only that it had become liable” in order to be indemnified by Design under the indemnity provisions of the subcontract. Obayashi argues that once a settlement was reached with the Hillmans, the settlement was “presumptive evidence of . . . liability and its amount.”
Obayashi does not argue that the court erred in granting summary judgment as to its causes of action for equitable/implied indemnity or breach of contract. It concedes that, in order to be indemnified for claims based on equitable/implied indemnity or breach of contract, it must have suffered actual damage.
Obayashi bases its argument primarily on the language of Civil Code section 2778 and Alberts v. American Casualty Co. (1948) 88 Cal.App.2d 891 (Alberts). Section 2778 provides, in pertinent part: “In the interpretation of a contract of indemnity, the following rules are to be applied, unless a contrary intention appears: [¶] 1. Upon an indemnity against liability, expressly, or in other equivalent terms, the person indemnified is entitled to recover upon becoming liable. [¶] 2. Upon an indemnity against claims, or demands, or damages, or costs . . . the person indemnified is not entitled to recover without payment thereof. . . .” (§ 2778.)
Unless otherwise noted, all further statutory references are to the Civil Code.
In Alberts, the court discussed section 2778 and the difference between indemnity for loss and indemnity against liability. There, defendant American Casualty Co. (American) issued an insurance policy to the owners of a hotel, which the trial court found was a contract of indemnity against loss and liability. (Id. at p. 898.) An employee of the hotel embezzled money held by the hotel in the office safe, including funds owned by the hotel and by a guest. The guest sued the hotel owners. At the time of trial, there was no evidence that the hotel owners had paid any money to the guest. (Id. at p. 898.) American argued that “because [the hotel owners] had not paid the amount of the loss to the guest [they] may not recover.” (Id. at p. 898.) The court explained that there are two types of indemnity contracts: those that indemnify against loss and those that indemnify against liability. In the case of indemnity against loss, “the indemnitor’s liability for the loss does not arise until the debt has been paid and the indemnitee has thus suffered a loss. [Citations.]” (Id. at p. 899.) If the indemnity is against liability, “the indemnitee need not prove actual loss but only that he has become liable. The indemnitee may, without having paid anything, recover from the indemnitor as soon as liability is legally imposed. . . .” (Ibid., citing § 2778.)
Obayashi cites numerous cases for the proposition that the right to indemnity against liability accrues upon liability, and not when the indemnitee actually pays that liability and therefore suffers loss. Accordingly, cases have held that an indemnitee may be indemnified against liability when its liability accrues, and before it actually suffers any loss. The distinction between indemnity against liability and indemnity for damage, however, is about when the right to indemnity accrues.
Obayashi asserts that, because Design agreed to indemnify it against both damages and liability, Design must indemnify it regardless of whether it has or will have any uncompensated loss. The obligation to indemnify another, however, is to make the indemnitee whole or prevent harm to the indemnitee, not provide a windfall. Indemnity is “ ‘the obligation resting on one party to make good a loss or damage another party has incurred.’. . .” (Maryland Casualty Co. v. Bailey & Sons, Inc. (1995) 35 Cal.App.4th 856, 864, citing Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628.) A contract of indemnity against liability “binds the indemnitor to pay money in order to prevent harm or injury to the indemnitee.” (14 Cal.Jur.3d Part 2 (1999) Contribution and Indemnification, § 50, p. 81.)
But, Obayashi’s claim is contrary to the fundamental principle that a party cannot receive a double recovery for the same loss. (See Patent Scaffolding Co. v. William Simpson Constr. Co. (1967) 256 Cal.App.2d 506, 510 (Patent).) An exception to this general tenet is found in the “collateral source rule,” which “allows an injured person to recover from the wrongdoer for damages suffered even if he has been compensated for the injury ‘from a source wholly independent of the wrongdoer,’ such as insurance. . . .” (Bramalea California, Inc. v. Reliable Interiors, Inc. (2004) 119 Cal.App.4th 468, 472 , citing Anheuser-Busch, Inc. v. Starley (1946) 28 Cal.2d 347, 349.) That rule, however, applies only in actions sounding in tort. “The collateral source rule, if applied to an action based on breach of contract, would violate the contractual damage rule that no one shall profit more from the breach of an obligation than from its full performance. [Citation.]” (Bramalea, supra, at p. 472.)
Obayashi attempts to distinguish Bramalea on the basis that indemnity was not at issue there because there was a settlement, and the indemnity involved was equitable rather than contractual. To the contrary, Bramalea, the subcontractors, and the third-party claimants reached a settlement and executed mutual releases “with the exception of Bramalea’s claim for indemnity against the subcontractors.” (Bramalea, supra, 119 Cal.App.4th at p. 472.) The court held that “Bramalea’s causes of action against the subcontractors are based entirely in contract.” (Id. at p. 473.)
The Patent opinion illustrates this rule. In that case, the general contractor and a subcontractor, Patent Scaffolding Co., entered into a subcontract for certain scaffolding work. The subcontract provided that “ ‘[s]ubcontractor’s work and materials . . . are to be protected from fire loss and damage by insurance procured by the contractor or the owner, without cost to the subcontractor.’ ” (Patent, supra, 256 Cal.App.2d at p. 508.) A fire damaged Patent’s equipment, but neither the contractor nor the owner paid Patent, and the contractor had failed to procure or require the owner to procure insurance covering Patent. (Ibid.) Patent had, however, procured its own insurance. The issue was whether Patent’s insurers were equitably subrogated to Patent’s cause of action against the general contractor for breach of its contract to either indemnify Patent or procure insurance on its behalf. (Id. at p. 509.)
The court held that if “Patent had had no insurance . . . [it] could have recovered damages [from the general contractor] for all detriment proximately caused by [the general contractor’s] breach of its contractual duty to indemnify or to procure insurance. [Citations.]” (Id. at p. 510.) Because Patent was fully compensated for the loss by its own insurance company, however, it “could recover twice for the same loss only if the ‘collateral source’ rule applies. ‘When an injured party receives compensation for his losses from a collateral source “wholly independent of the tortfeasor,” such payment generally does not preclude or reduce the damages to which it is entitled from the wrongdoer.’. . .” (Ibid., citing Anheuser-Busch, Inc. v. Starley, supra, 28 Cal.2d at pp. 349-350.) The collateral source rule applies only to tort damages, not damages for breach of contract, because the “collateral source rule is punitive; contractual damages are compensatory.” (Id. at p. 511; Bramalea, supra, 119 Cal.App.4th at p. 472.) Accordingly, the court denied recovery to Patent because it had “suffered no uncompensated detriment caused by [the general contractor’s] breach of contract.” (Ibid.) The court explained that an “application of the collateral source rule is particularly indefensible in a situation in which the injured party potentially could make a [multiple] recovery: one from his insurer [and] one from a defendant who has undertaken a contractual liability for the loss . . . .” (Ibid.)
In the analogous situation where an insurance company is the entity contractually obligated to indemnify for a loss, courts have held that the indemnitee has no right to recover more than the full amount of its loss, even where more than one insurance policy covers the same risk. “The fact that several insurance policies may cover the same risk does not increase the insured’s right to recover for the loss, or give the insured the right to recover more than once. Rather, the insured’s right of recovery is restricted to the actual amount of the loss. Hence, where there are several policies of insurance on the same risk and the insured has recovered the full amount of its loss from one or more, but not all, of the insurance carriers, the insured has no further rights against the insurers who have not contributed to its recovery. Similarly, the liability of the remaining insurers to the insured ceases, even if they have done nothing to indemnify or defend the insured.” (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1295, italics omitted; Emerald Bay Community Assn. v. Golden Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078, 1090.)
As Obayashi frames it, “the only issue here is whether Design can avoid its obligation to indemnify Obayashi by relying on the very insurance that it promised to procure for it.” We fail to see how Design has avoided its obligation to Obayashi. “ ‘An indemnitee has no right to insist on being saved harmless or protected in any particular manner, and the undertaking of the indemnitor is fulfilled by any course on his part which actually saves harmless and protects the indemnitee.’ ” (List & Clark Construction Company v. McGlone (1956) 296 S.W.2d 910, 914.)
Obayashi concedes that by being “named as an ‘additional insured’ in Design’s policies [with Royal, it] obtained significantly greater protection than it did pursuant to Design’s promise to indemnify.”
Design obtained an insurance endorsement from its own insurer Royal in favor of Obayashi, which it promised to provide under the subcontract, in order to ensure that Obayashi would be indemnified. Design, in fact, indemnified Obayashi against its liability arising out of the subcontract when its insurer, Royal, paid $1 million to the Hillmans on Obayashi’s behalf, pursuant to the settlement agreement. Furthermore, if Obayashi is found to be “solely” at fault, then an additional $500,000 would be paid to the Hillmans by Obayashi’s insurer. On the other hand, if Design is found to be partly at fault, then Design, through its insurer, would pay an additional $1 million to the Hillmans. Either way, Obayashi will suffer no uncompensated loss. Obayashi is not entitled to what would amount to a double recovery.
As previously indicated, counsel for Obayashi has represented to the court on different occasions that either Zurich or Steadfast, as Obayashi’s insurers, will pay the $500,000.
It is unclear from the record which of Design’s insurance carriers will ultimately make that payment. Royal’s coverage attorney was present at the hearing regarding the modification to the settlement agreement, where the court observed: “The issue here is the dispute between carriers about who will be on the risk or the claim for the additional sum that has already been agreed to.” Royal’s coverage counsel indicated that “Royal enters into this [modified] agreement understanding that in this fashion it will allow us to avoid a situation where there is a gap in coverage for Design. . . .”
C. Obayashi’s Claim of Damages
Acknowledging that it has not made any payments to the Hillmans in settlement of their claims, Obayashi argues for the first time on appeal that it will suffer damage because its “own insurance policy” will be “invaded”, thereby “deplet[ing] the amount available under its policy for any other liability that it might incur . . . .” It also claims it has suffered damages because the “judgment pursuant to the Settlement Agreement obligates Obayashi to pay the plaintiffs $1 million if there is a finding of fault as to Design Electric, or $500,000.00 if it is not.”
We note at the outset that the record reflects no judgment entered in favor of the Hillmans and against Obayashi. While judgment may be entered pursuant to a settlement agreement under Code of Civil Procedure section 664.6, the record does not reflect that this was done here. Obayashi concedes in its reply brief that no judgment pursuant to the settlement agreement was entered.
Obayashi next claims that the settlement agreement obligates it to pay an additional $1 million to the Hillmans if Design is found to be at fault. We disagree. As we have already discussed, should Design be found to have been at fault (one percent or more), an additional payment of $1 million will be made by Design, through its own insurance carriers. Only if Obayashi is found to be solely at fault will its own insurance come into play.
Indeed, Obayashi took this very same position in the court below: it stated in its motion for summary adjudication that the settlement agreement provided “for “$1 [million] to be paid by defendant and cross-complainant [Obayashi] through its ‘primary’ carrier, Royal; and [¶] a future payment of $500,000[] or $1 [million] depending on whether cross-defendant Design is found to be at least 1% liable for plaintiffs’ injuries. . . . Therefore, when Design is found to be at least 1% liable for plaintiffs’ injuries, plaintiffs will be paid an additional $1 [million] by Design. . . . Alternatively, if Design were found not to be at all negligent, then [Obayashi] will pay $500,000[] through Steadfast, as liability/excess carrier for [Obayashi].” Obayashi’s claim that it is obligated to pay $1 million to the Hillmans if Design is partially at fault is inconsistent and contrary to the subcontract, and the terms of the settlement as previously represented to the trial court by Obayashi.
Obayashi next raises a new claim of damages not made in the trial court. It asserts the potential “invasion” of its own insurance policies will cause it to suffer damage. The failure to raise this issue in the trial court constitutes a waiver. (See Baxter Healthcare Corp. v. Denton (2004) 120 Cal.App.4th 333, 371, fn. 8.) As to the merits of this issue, we fail to see how the potential “invasion” of Obayashi’s own insurance policy is loss or damage suffered as a result of any claimed breach of contract or duty by Design. Again, under the settlement agreement, if Design is found to be even one percent liable for plaintiffs’ injuries, the Hillmans would be paid an additional $1 million. Obayashi asserted in the trial court, and Design asserts here, that this payment would be made by Design or its insurers. The only circumstance in which Obayashi’s own insurance company would be required to pay $500,000 to the Hillmans would be if Obayashi is found to be “solely” at fault for the Hillmans’ injuries. But in that case, pursuant to the subcontract, Design would not be required to indemnify Obayashi. Accordingly, we fail to see how a potential payment by Obayashi’s own insurer for a loss for which Design has no liability is “damage” to Obayashi for which Design must be responsible.
IV.
DISPOSITION
The judgment is affirmed.
We concur: Reardon, J. Sepulveda, J.