Opinion
NOT TO BE PUBLISHED
San Mateo County Super. Ct. No. CV464750.
Margulies, J.
Lexington Insurance Company (Lexington) appeals from judgments entered after the trial court sustained, without leave to amend, demurrers to Lexington’s cross-complaint against Pyramid Builders, Inc. (Pyramid) and Sage Electric Company (Sage). Lexington contends its cross-complaint states valid claims for declaratory relief as to Lexington’s rights of subrogation, indemnity, and contribution against Sage and Pyramid. We conclude the cross-complaint states causes of action for declaratory relief as to subrogation and indemnity, but not as to contribution. Accordingly, we affirm in part and reverse in part.
I. FACTUAL AND PROCEDURAL BACKGROUND
In summarizing the relevant facts, we rely on the allegations of Lexington’s cross-complaint. The contracts and insurance policies to which we refer are not attached to the cross-complaint, and are not in the record on this appeal.
According to Lexington’s cross-complaint in this action, that dismissal was without prejudice. Pyramid contends the dismissal was with prejudice; Pyramid also asserts, in passing, the dismissal with prejudice “confirm[s]” the subcontractors fully complied with their contractual obligations so as to preclude Lexington’s claims in this action. However, Pyramid does not develop this argument or provide any supporting authority. Accordingly, we need not address the parties’ arguments as to the nature of the dismissal, and we deny the parties’ requests for judicial notice of documents from the record in the Friday action pertaining to that issue.
Travelers also filed a demurrer, which the trial court overruled in part and sustained in part. That ruling is not at issue in this appeal.
The cases cited by Sage and Pyramid on this point-Ringler Associates, Inc. v. Maryland Casualty Co. (2000) 80 Cal.App.4th 1165, and Tradewinds Escrow, Inc. v. Truck Ins. Exchange (2002) 97 Cal.App.4th 704-are inapposite. The courts in Ringler and Tradewinds held an insured suing its insurer for bad faith refusal to defend a prior action cannot recover damages for breach of the duty to defend if other insurers paid the defense costs. (Ringler, at pp. 1187–1188; Tradewinds, at p. 712.) These holdings do not contradict the rule an insurer that pays defense or settlement costs on behalf of its insured may assert a subrogation claim against third parties even though the insured itself has made no payments.
Contrary to Sage’s and Pyramid’s arguments, the fact INA asserted a subrogation claim against another insurer, while Lexington is asserting claims against indemnitors that are not insurance carriers, does not persuade us the rationale of INA v. Liberty is inapplicable here.
We do not determine whether Lexington’s equitable position is superior, or seek to address all of the factual and legal issues that may be relevant to the ultimate determination of that question. We only conclude Sage and Pyramid have not shown Lexington cannot establish superior equities as a matter of law.
Noninsurers who are co-obligors or coindemnitors may also seek equitable contribution from each other. (See Civ. Code, § 1432; Great Western Bank v. Kong (2001) 90 Cal.App.4th 28, 33 [partners who settled with creditor had equitable contribution claim against nonsettling partner].)
See DiMugno & Glad, Cal. Insurance Law Handbook (2009) Contribution and Indemnity, section 21.1, pages 674−675; Subrogation, section 74.2.7, pages 2013−2014 for a discussion regarding the differences between contribution and subrogation in the insurance context.
A. The Parties
T.G. Construction, Inc. (T.G.) was the general contractor for a commercial construction project. T.G. entered into separate subcontracts with Sage to perform electrical work and with Pyramid to perform concrete/rebar work.
The subcontracts include provisions requiring Sage and Pyramid to procure commercial general liability insurance for T.G.’s benefit. Each subcontract requires the subcontractor to obtain from its insurer an endorsement naming T.G. as an additional insured and providing the subcontractor’s insurance is primary and any insurance carried by T.G. is excess. Each subcontract also specifies the subcontractor’s insurance “shall be primary insurance” and any insurance maintained by T.G. shall be excess. Finally, each subcontract requires the subcontractor to indemnify and hold harmless T.G. against claims arising from the subcontractor’s work or negligence, and to defend T.G. in actions arising from such claims.
Travelers Property Casualty Company of America (Travelers) issued a commercial general liability policy to Sage. As required by its subcontract, Sage (1) arranged to have T.G. scheduled as an additional insured under the policy; and (2) obtained an endorsement listing T.G. as an insured in connection with the construction project, and specifying “ ‘[a]ny other insurance available to [T.G.] shall be considered to be excess of this insurance and this insurance shall apply as primary.’ ”
Axis Specialty Insurance Company (Axis) issued a commercial general liability policy to Pyramid with liability limits of $1 million per occurrence, a general aggregate limit of $2 million, and a total policy general aggregate of $5 million. However, Pyramid did not obtain the required endorsement. The Axis policy includes an endorsement making T.G. an additional insured; however, the endorsement does not specify the Axis policy is primary to T.G.’s own liability insurance.
Lexington issued a commercial general liability policy to T.G. The policy has liability limits of $1 million per occurrence, a general aggregate limit of $2 million, and a total policy general aggregate of $5 million.
B. The Friday Action
In March 2004, a Sage employee, John Friday, sustained injuries when he tripped and fell while stepping across the transition from an unfinished floor onto a concrete floor at the project site. In October 2005, Friday sued T.G. (the Friday action), alleging T.G. failed to maintain a safe work environment at the project site.
T.G. tendered the defense of the Friday action to Lexington in October 2005. Lexington accepted the tender.
T.G. later tendered its defense to Sage and Pyramid pursuant to the indemnity and insurance provisions in the subcontracts. In turn, Sage and Pyramid tendered T.G.’s defense to their insurers, Travelers and Axis. T.G. also filed cross-complaints for indemnity against Sage and Pyramid in the Friday action.
In December 2005, Travelers agreed to defend and indemnify T.G. pursuant to a reservation of rights. Axis later agreed to participate in T.G.’s defense pursuant to “ ‘full’ reservation of rights.” Travelers and Axis assumed all costs of T.G.’s defense from the dates of T.G.’s tenders to Sage and Pyramid.
After Travelers and Axis assumed T.G.’s defense in the Friday action, T.G. dismissed the cross-complaints for indemnity it had filed against Sage and Pyramid in that action.1 Axis later withdrew its reservation of rights and agreed to defend T.G. without reservation and to indemnify T.G. in the Friday action up to its policy limit of $1 million as consideration for T.G.’s agreement to dismiss its indemnity cross-complaint against Pyramid.
In September 2007, the Friday action was settled on behalf of T.G. for $750,000. The settlement amount was paid in equal shares by Travelers and Axis, without any contribution from Sage or Pyramid.
C. The Present Action
In July 2007, shortly before the settlement in the Friday action, Axis initiated the present action by filing a complaint for declaratory relief and equitable contribution and reimbursement against Lexington. Axis alleges the Lexington policy obligated Lexington to defend and indemnify T.G. in the Friday action, but Lexington refused to provide a defense or to indemnify T.G.
Lexington filed a cross-complaint against Axis, Travelers, Sage, and Pyramid. In the causes of action relevant to this appeal, Lexington asserts claims for declaratory relief, alleging in the event Lexington is adjudged liable to Axis, it will be (1) subrogated to the rights of T.G. to enforce the terms of the subcontracts against Sage and Pyramid (third cause of action), (2) entitled to recover from Sage and Pyramid based upon the indemnity provisions of the subcontracts (fourth cause of action), (3) entitled to contribution from Sage and Pyramid (fifth cause of action), and (4) subrogated to T.G.’s right to recover from Pyramid based upon Pyramid’s breach of its obligation to obtain an endorsement specifying its insurance coverage is primary and T.G.’s own coverage is excess (sixth cause of action).
Sage and Pyramid filed demurrers to Lexington’s cross-complaint. Sage and Pyramid argued Lexington had no viable claims under the subcontracts because T.G. was fully defended and indemnified in the Friday action. Specifically, Sage and Pyramid contended Lexington could not state causes of action for (1) subrogation, because neither T.G. nor Lexington suffered any loss; (2) indemnity, because Lexington did not enter into a written contract with either Sage or Pyramid, and was not a joint tortfeasor with either of them; and (3) contribution, because neither Sage nor Pyramid is a coinsurer with Lexington.
In opposing the demurrers, Lexington requested leave to amend its cross-complaint to allege it paid $1,950 in defense fees on behalf of T.G. in the Friday action between Lexington’s acceptance of T.G.’s tender in October 2005 and Travelers’ acceptance of the tender in December 2005.
After a hearing, the trial court sustained the demurrers without leave to amend.1 The trial court ruled Lexington has no rights of subrogation, indemnification, or contribution against Sage or Pyramid based upon their subcontracts with T.G., because neither Lexington nor T.G. paid any sums in connection with the Friday action. The court also ruled any liability under the subcontracts was extinguished by the settlement in the Friday action, and Lexington had no valid cause of action for contribution against the subcontractors.
The trial court entered judgments dismissing the cross-complaint as to Sage and Pyramid. The trial court also denied Lexington’s motion for a new trial. Lexington filed a timely notice of appeal.
II. DISCUSSION
In reviewing Lexington’s claim the trial court erred in sustaining Sage’s and Pyramid’s demurrers without leave to amend, we conduct a de novo review, examining the cross-complaint to determine whether it alleged facts sufficient to state a cause of action under any legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) “ ‘ “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.” [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.’ ” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
We will affirm a “ ‘trial court’s decision to sustain a demurrer [if it] was correct on any theory. [Citation.]’ [Citation.] Accordingly, ‘we do not review the validity of the trial court’s reasoning but only the propriety of the ruling itself. [Citations.]’ [Citation.]” (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034–1035.)
A. Prospective Declaratory Relief
As noted above, the trial court, in sustaining the demurrers, relied in part on the fact Lexington has not paid any sums in connection with the defense and settlement of the Friday action. On appeal, Sage and Pyramid also contend Lexington’s claims are defective for this reason. Sage and Pyramid note an insurer’s right to subrogation does not arise unless the insurer has paid a loss on behalf of its insured. (See, e.g., Interstate Fire & Casualty Ins. Co. v. Cleveland Wrecking Co. (2010) 182 Cal.App.4th 23, 34–35 (Interstate); Smith v. Parks Manor (1987) 197 Cal.App.3d 872, 878–879.) Similarly, a claim for indemnification or contribution accrues “when the indemnitee or party seeking contribution suffers a loss through payment of a judgment debt (or settlement) or through payment of more than his fair share of damages.” (Smith v. Parks Manor, at pp. 879–880.)
Lexington agrees its liability has not yet been determined, but contends it is entitled to assert prospective claims for declaratory relief to ascertain its rights against Sage and Pyramid. We agree. A defendant that has not yet sustained a loss may file a cross-complaint, including one for declaratory relief, alleging it is entitled to recover from third parties if it is adjudged liable to the plaintiff. (See Code Civ. Proc., §§ 428.10, subd. (b), 428.70, subd. (a)(1) [defendant/third party plaintiff may file cross-complaint against new parties, claiming the right to recover amounts “for which he may be held liable” on the original complaint]; see also People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744, 758–759 [defendant may file declaratory cross-complaint for indemnity before sustaining loss].)
Specifically, an insurer that has not yet made any payment to its insured or been found liable for a loss may file a cross-complaint for prospective declaratory relief against third parties, seeking a determination it will have rights to subrogation and indemnification against the third parties in the event it is found liable on the original complaint. (Roylance v. Doelger (1962) 57 Cal.2d 255, 258, 262 (Roylance); Liberty Mut. Ins. Co. v. Harris, Kerr, Forster & Co. (1970) 10 Cal.App.3d 1100, 1102–1103 (Liberty v. Harris).) In Roylance, the insured paid a claim, and then filed suit against its insurer. (Id. at p. 257.) The insurer, which had not paid the insured, filed a cross-complaint for declaratory relief against two other persons (the cross-defendants), alleging if the insured recovered from the insurer, the insurer would be subrogated to the insured’s right of indemnity against the cross-defendants. (Id. at pp. 257–258.) After the trial court struck the cross-complaint, the Supreme Court reversed, holding the insurer’s allegations were sufficient to state a cause of action for declaratory relief against the new parties. (Id. at pp. 258, 262.)
Similarly, in Liberty v. Harris, supra, 10 Cal.App.3d 1100, an insured sustained a loss as the result of the dishonesty of an employee, and then sued its two insurers, both of which had refused to pay the insured for the loss. (Id. at pp. 1101–1102.) The insurers filed cross-complaints against the insured’s accountants, “seeking declaratory relief in the form of a judgment that if the insurer is liable to the insured, the accountants are liable to the insurer.” (Id. at p. 1102.) After the trial court sustained demurrers to the cross-complaints, the appellate court reversed, relying on Roylance and ruling the cross-complaints for declaratory relief were proper even though the insurers had made no payments to their insured. (Liberty v. Harris, at pp. 1102–1104.)
Lexington thus is not required to allege it has already paid any amount on behalf of T.G. to seek a prospective determination of its rights in relation to Sage and Pyramid. It is sufficient for Lexington to allege if it is adjudged liable to pay sums on behalf of T.G., it will have the right to recover from Sage and Pyramid.
Sage contends Lexington’s claims for declaratory relief are not proper because “Lexington is effectively seeking payment from Sage, not merely declaratory relief.” However, the prayer for relief in Lexington’s cross-complaint seeks only declaratory relief against Sage and Pyramid (as well as costs and attorney fees). The possibility Sage and/or Pyramid could become obligated to pay Lexington in the future provides no basis for dismissing Lexington’s cross-complaint for declaratory relief.
B. Third Cause of Action-Declaratory Relief re: Subrogation
“Subrogation is the ‘substitution of another person in place of the creditor or claimant to whose rights he or she succeeds in relation to the debt or claim.’ [Citation.] ‘In the case of insurance, subrogation takes the form of an insurer’s right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid. [Citations.]’ [Citation.] ‘The subrogated insurer is said to “ ‘stand in the shoes’ ” of its insured, because it has no greater rights than the insured and is subject to the same defenses assertable against the insured. Thus, an insurer cannot acquire by subrogation anything to which the insured has no rights, and may claim no rights which the insured does not have.’ [Citation.]” (Interstate, supra, 182 Cal.App.4th at pp. 31–32.)
“ ‘The essential elements of an insurer’s cause of action for equitable subrogation are as follows: [1] the insured suffered a loss for which the defendant is liable, either as the wrongdoer whose act or omission caused the loss or because the defendant is legally responsible to the insured for the loss caused by the wrongdoer; [2] the claimed loss was one for which the insurer was not primarily liable; [3] the insurer has compensated the insured in whole or in part for the same loss for which the defendant is primarily liable; [4] the insurer has paid the claim of its insured to protect its own interest and not as a volunteer; [5] the insured has an existing, assignable cause of action against the defendant which the insured could have asserted for its own benefit had it not been compensated for its loss by the insurer; [6] the insurer has suffered damages caused by the act or omission upon which the liability of the defendant depends; [7] justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer; and [8] the insurer’s damages are in a liquidated sum, generally the amount paid to the insured.’ [Citation.]” (Interstate, supra, 182 Cal.App.4th at pp. 33–34.)
Sage and Pyramid contend several of these elements are not met. They assert because Travelers and Axis defended and indemnified T.G. in the Friday action, neither T.G. nor Lexington suffered damage resulting from any breach by Sage or Pyramid. However, as we discuss below, the allegations in Lexington’s cross-complaint are sufficient to state a cause of action for prospective declaratory relief as to subrogation.
1. Loss Suffered by T.G.
According to the allegations in the cross-complaint, Lexington may become obligated to pay on behalf of T.G. a portion of the defense and settlement costs incurred in the Friday action. Lexington alleges Sage and Pyramid are legally obligated to pay these amounts pursuant to the subcontracts, while Lexington is not primarily liable for these amounts.
Sage and Pyramid argue these allegations do not establish T.G. suffered any damages. As Sage and Pyramid note, according to the cross-complaint, T.G. was defended and indemnified by Travelers and Axis in the Friday action, and did not have to pay defense or settlement costs.
However, as Division Five of this court explained in Interstate, when an insurer pays defense and/or settlement costs on behalf of its insured, the insured suffers a loss for purposes of the insurer’s subsequent subrogation claim; it is not necessary for the insured to pay any money itself. (See Interstate, supra, 182 Cal.App.4th at pp. 34–35.) In Interstate, Webcor Construction, Inc. (Webcor), a general contractor for a construction project, entered subcontracts with two subcontractors, Cleveland Wrecking Company (Cleveland) and Delta Steel Erectors (Delta). (Id. at p. 28.) In the subcontracts, Cleveland and Delta agreed to indemnify Webcor for liability arising out of their work and to procure general liability insurance with Webcor as an additional insured. (Ibid.) Only Delta complied with the latter obligation, obtaining a policy from Interstate listing Webcor as an additional insured. (Id. at pp. 28–29.) An employee of Delta (Frisby) sustained injuries at the job site, and filed suit against Webcor and Cleveland (the Frisby action). (Interstate, at p. 29.) Webcor tendered its defense and indemnification to Cleveland pursuant to the Webcor-Cleveland subcontract, and to Interstate pursuant to the Interstate-Delta policy. (Ibid.) Cleveland rejected the tender; Interstate accepted it. (Ibid.) Webcor settled with Frisby for $575,000, with Interstate funding the settlement and paying an additional $152,000 in attorney fees and costs to defend Webcor in the Frisby action. (Interstate, at p. 30.) Cleveland also settled with Frisby. (Ibid.)
Interstate then filed a complaint for subrogation against Cleveland, alleging Cleveland had breached its contract with Webcor by failing to defend and indemnify Webcor in the Frisby action. (Interstate, supra, 182 Cal.App.4th at p. 30.) Cleveland filed a demurrer, arguing Webcor did not incur damages as a result of Cleveland’s alleged breach of the indemnification provision in the subcontract. (Id. at pp. 30–31.) After the trial court sustained the demurrer, the appellate court reversed. (Id. at pp. 28, 31, 50.) The appellate court rejected as “untenable” Cleveland’s contention Webcor did not suffer damages because it was defended and indemnified in the Frisby action. (Interstate, at pp. 34–35.) The court noted, “Under Cleveland’s view, no insurer could ever state a cause of action for subrogation in order to recover amounts it paid on behalf of its insured, because of the very fact that it had paid amounts on behalf of its insured. Not only is this illogical, it contradicts decades of cases consistently holding that an insurer may be equitably subrogated to its insured’s indemnification claims. [Citations.]” (Id. at p. 34; see, e.g., Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 634 (Rossmoor); Truck Ins. Exchange v. County of Los Angeles (2002) 95 Cal.App.4th 13, 27.)1 Similarly, here, the fact T.G. was defended and indemnified in the Friday action does not defeat a subrogation claim by its insurers.
Sage contends this principle does not assist Lexington, because Travelers and Axis, not Lexington, paid defense and settlement costs in the Friday action on behalf of T.G.; Sage asserts only Travelers and Axis are subrogated to T.G.’s rights. However, Lexington alleges it may also become liable to pay amounts on behalf of T.G. As discussed in part II.A., ante, this allegation supports a prospective claim for declaratory relief as to subrogation. (Roylance, supra, 57 Cal.2d at pp. 258, 262; Liberty v. Harris, supra, 10 Cal.App.3d at pp. 1102–1103.)
2. T.G.’s Assignable Cause of Action
This element asks whether T.G. would have an assignable cause of action against Sage and Pyramid “had it not been compensated for its loss” by its insurers. (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1292; see United Services Automobile Assn. v. Alaska Ins. Co. (2001) 94 Cal.App.4th 638, 646.) The cross-complaint satisfies this element by alleging if Lexington is adjudged liable to pay on behalf of T.G. defense and settlement costs incurred in the Friday action, T.G. would have the right to recover those costs from Sage and Pyramid, and Lexington will be subrogated to T.G.’s right. T.G. could have pursued a cause of action against Sage and Pyramid based on the indemnification provisions in the subcontract had the insurers not made the payments. There is no contention the cause of action is of a type that cannot be assigned. (See Interstate, supra, 182 Cal.App.4th at p. 36.)
Sage and Pyramid argue T.G. does not have an assignable cause of action because it was fully compensated for its defense and settlement costs in the Friday action and therefore suffered no damages. As discussed in part II.B.1., ante, this argument is incorrect. Moreover, as the Interstate court explained, this contention contradicts the wording of the subrogation element itself. (See Interstate, supra, 182 Cal.App.4th at p. 36.) The element “asks whether the insured has a cause of action against the defendant which it could have asserted ‘had it not been compensated for its loss by the insurer.’ [Citation.]” (Ibid.)
3. Payments on Behalf of T.G. and Damages to Lexington
In its cross-complaint, Lexington alleges if it becomes obligated to pay defense and settlement costs on behalf of T.G., it will suffer damages caused by Sage’s and/or Pyramid’s failure to pay such costs as required by the subcontracts.
In contending Lexington has not suffered damages, Sage and Pyramid note Lexington has not yet paid any of T.G.’s defense and settlement costs in the Friday case. However, as discussed above, Lexington may assert a prospective claim for declaratory relief, alleging it will have subrogation rights against Sage and Pyramid if it becomes obligated to pay such amounts.
Pyramid also contends Lexington will only become obligated to make future payments if its own policy language so requires, and such future payments therefore will not be damages resulting from any act or omission by Sage or Pyramid. In Interstate, the subcontractor made a similar argument, asserting payments by the insurer on behalf of its insured did not support a subrogation claim, and did not constitute damages, because the insurer was obligated to make the payments under its policy. (Interstate, supra, 182 Cal.App.4th at pp. 36–37.) The Interstate court rejected this contention, stating: “[R]egardless of why [the insurer] made the payments, it made the payments. Indeed, it can always be said that an insurer has compensated its insured because it had to under its insurance policy. [The subcontractor] provides no authority for its suggestion that subrogation must be denied on this ground.” (Id. at p. 36.) We agree with the Interstate court, and we reject Pyramid’s argument.
4. Sage’s and Pyramid’s Compliance with the Subcontracts
Sage argues it is not liable for any damage to T.G. or to Lexington, because Sage has fully performed its contractual obligations by procuring insurance from Travelers, which, along with Axis, defended and indemnified T.G. in the Friday action. However, the payments by Travelers and Axis do not establish as a matter of law Sage and Pyramid have fully complied with their indemnification obligations under the subcontracts. According to the allegations in the cross-complaint, the subcontracts place on Sage and Pyramid, rather than Lexington, the primary responsibility to pay any defense and settlement costs, so any liability Axis succeeds in shifting from itself to Lexington should be borne instead by Sage and Pyramid. The cross-complaint also alleges Sage and Pyramid have not paid any defense or settlement costs themselves.
Moreover, even if Sage and Pyramid, by tendering to Travelers and Axis, did what the subcontracts required of them at that time, that would not establish they could never have further liability based on the subcontracts. (See Insurance Co. of North America v. Liberty Mutual Ins. Co. (1982) 128 Cal.App.3d 297, 304 (INA v. Liberty).) In INA v. Liberty, an insurer (Liberty) made payments on behalf of its insured (HMI) to settle an underlying personal injury case, but later (via a suit it filed on behalf of HMI) recovered the amounts from another insurer, INA. (Id. at pp. 299–300.) When INA filed a declaratory relief action seeking reimbursement from Liberty, Liberty argued it had “fully performed” its contract with HMI by defending and settling the underlying injury case; HMI therefore had no unrealized rights against Liberty, and there was no right of action against Liberty to which INA could be subrogated. (Id. at p. 304.) The appellate court rejected Liberty’s argument, holding “HMI’s right to indemnification from Liberty was only provisionally redeemed, later to be retracted when Liberty, in the name of HMI, prevailed in the previous action against INA.” (Ibid.) Similarly, here, the payments by Travelers and Axis may have provisionally redeemed T.G.’s right to indemnification from Sage and Pyramid. However, in the present action, Axis arguably seeks to retract some or all of the amount it paid on behalf of T.G. by shifting liability for that amount to Lexington, T.G.’s own insurer, giving rise to claims by Lexington against Sage and Pyramid. In these circumstances, the payments by Travelers and Axis do not establish Sage and Pyramid cannot, as a matter of law, have further liability under the subcontracts.1 (See INA v. Liberty, at p. 304.)
5. The Parties’ Equitable Positions
This element asks whether it is fair to shift the entire amount of any liability imposed on Lexington to Sage and/or Pyramid, because Lexington’s equitable position is superior to Sage’s and Pyramid’s. (See Interstate, supra, 182 Cal.App.4th at p. 37.) In its cross-complaint, Lexington alleges its equitable position is superior, because Sage and Pyramid are obligated under the subcontracts to defend and indemnify T.G., and have not made any payments themselves to defend or settle the Friday action.
Sage and Pyramid had the burden in their demurrers to show Lexington cannot establish superior equities as a matter of law. (Interstate, supra, 182 Cal.App.4th at p. 37.) In seeking to meet this burden, Sage and Pyramid contend it would be unjust to shift any liability to them because they satisfied their contractual obligations to defend and indemnify T.G. However, as discussed above, the payments by Travelers and Axis do not establish Sage and Pyramid have fully satisfied their contractual obligations.
Moreover, the Interstate decision supports an argument Lexington’s equitable position is superior. In Interstate, the court compared the equitable positions of (1) an insurer whose policy covered a construction general contractor, and (2) a subcontractor that agreed to indemnify the general contractor for claims arising out of a construction project. (Interstate, supra, 182 Cal.App.4th at pp. 42–44.) The Interstate court concluded: “The parties directly involved in the transaction are better able to evaluate and control the risk. Therefore, for purposes of weighing the equities in an equitable subrogation case, and absent language in the insurance policy or indemnification agreement leading to a contrary conclusion..., the Agreement between the parties who were connected to the incident giving rise to the loss... creates the greater equitable responsibility for indemnification, as compared to that of the general liability insurer....” (Id. at p. 44, fn. omitted.)
Here, according to the cross-complaint, Sage and Pyramid, along with T.G., were directly involved in the construction project, while Lexington was T.G.’s general liability insurer. Sage and Pyramid promised to indemnify T.G. for losses arising out of their work. Lexington also alleges Sage and Pyramid agreed to take “ ‘sole responsibility’ ” to ensure their work would comply with applicable health and safety standards. Accordingly, depending on the provisions of the relevant subcontracts and insurance policies and other facts developed in discovery, Lexington may be able to establish its equitable position is superior to that of Sage and Pyramid.1
C. Fourth Cause of Action-Declaratory Relief re: Indemnity
Indemnity is “the obligation resting on one party to make good a loss or damage another party has incurred.” (Rossmoor, supra, 13 Cal.3d at p. 628.) There are “two basic types of indemnity: express indemnity and equitable indemnity.” (Prince v. Pacific Gas & Electric Co. (2009) 45 Cal.4th 1151, 1157.) Express indemnity is indemnity expressly provided for by contract. (Ibid.; Rossmoor, at p. 628.) Equitable indemnity has two forms: (1) “traditional equitable indemnity, ” which is indemnity “arising from the equities of particular circumstances, ” and “ ‘is premised on a joint legal obligation to another for damages’ ”; and (2) “implied contractual indemnity, ” which is “indemnity implied from a contract not specifically mentioning indemnity.” (Prince v. Pacific Gas & Electric Co., at pp. 1157–1158.)
As noted above, according to the allegations in Lexington’s cross-complaint, the Sage and Pyramid subcontracts contain express indemnity provisions. In its fourth cause of action for declaratory relief as to indemnity (including allegations incorporated by reference), Lexington alleges if it is adjudged liable to pay amounts on behalf of T.G., it will be subrogated to T.G.’s rights to enforce those express indemnity provisions against Sage and Pyramid. This cause of action is thus essentially the same as Lexington’s third cause of action for declaratory relief as to subrogation. For the reasons discussed in part II.B., ante, these allegations are sufficient to state a cause of action.
Sage and Pyramid argue other potential grounds for an indemnity claim do not apply here. They contend Lexington cannot state a cause of action for (1) express indemnity independent of its subrogation rights, because there is no contract between Lexington and Sage or Pyramid; (2) traditional equitable indemnity, because Lexington and Sage/Pyramid do not share joint tort liability to Axis or T.G.; or (3) implied contractual indemnity via subrogation, because the subcontracts contain express indemnity provisions that preempt any claim for implied contractual indemnity. Lexington does not assert the first two of these theories-Lexington agrees it has no contractual relationship with Sage or Pyramid, and makes no allegations or arguments supporting a cause of action for traditional equitable indemnity. Lexington contends it does have a claim for implied contractual indemnity via subrogation under other provisions of the subcontracts if the indemnity provisions “do[] not apply.”
We need not address the parties’ arguments as to implied contractual indemnity. Because Lexington’s fourth cause of action states a viable prospective claim for express indemnity via subrogation, the trial court’s order sustaining the demurrers as to that cause of action must be reversed. We need not determine whether that cause of action is also viable on a separate theory of prospective implied contractual indemnity via subrogation.
D. Fifth Cause of Action-Declaratory Relief re: Equitable Contribution
As an alternative theory of recovery, Lexington contends if it is adjudged liable to pay amounts on behalf of T.G., it will be entitled to seek contribution from Sage and/or Pyramid of “their respective and/or equitable share” of such amounts.
Equitable contribution is “the right to recover, not from the party primarily liable for the loss, but from a co-obligor who shares such liability with the party seeking contribution. [Fn. omitted.] In the insurance context, the right to contribution arises when several insurers are obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action without any participation by the others.”1 (Fireman’s Fund Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.App.4th at p. 1293.) The right of equitable contribution is “predicated on the commonsense principle that where multiple insurers or indemnitors share equal contractual liability for the primary indemnification of a loss or the discharge of an obligation, the selection of which indemnitor is to bear the loss should not be left to the often arbitrary choice of the loss claimant, and no indemnitor should have any incentive to avoid paying a just claim in the hope the claimant will obtain full payment from another coindemnitor.” (Id. at p. 1295.)
The trial court ruled Lexington, as a matter of law, had no cause of action for contribution against Sage and Pyramid, because they are subcontractors rather than coinsurers with Lexington.
On appeal, the parties dispute whether an insurer may ever seek equitable contribution from a noninsurer. The Supreme Court and other courts have rejected efforts by insurers to seek contribution from noninsurers. (See Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 72 [rejecting insurers’ argument they were entitled to contribution from their own common insured; stating “[e]quitable contribution applies only between insurers [citations], and only in the absence of contract”]; Truck Ins. Exchange v. Amoco Corp. (1995) 35 Cal.App.4th 814, 827–828.) However, as Lexington notes, in some cases, courts have held or stated an insurer may seek equitable contribution from a noninsurer when their contractual indemnification obligations are equivalent. (See California Food Service Corp. v. Great American Ins. Co. (1982) 130 Cal.App.3d 892, 900, 901–902 [insurer of lessee of real property was entitled to contribution from sublessee, because both insurer and sublessee had promised to indemnify lessee in the event lessee was forced to compensate property owners for loss]; see also Patent Scaffolding Co. v. William Simpson Constr. Co. (1967) 256 Cal.App.2d 506, 517 [stating construction subcontractor’s fire insurers might have been able to assert contribution claim against general contractor that had breached its promise to procure fire insurance for subcontractor]; Bramalea California, Inc. v. Reliable Interiors, Inc. (2004) 119 Cal.App.4th 468, 475, fn. 5 (Bramalea).)
In any event, assuming an insurance carrier may in some circumstances seek contribution from a party that is not an insurance carrier, contribution is only available among parties who have agreed to indemnify the same loss or risk. (Fireman’s Fund Ins. Co. v. Maryland Casualty Co., supra, 65 Cal.App.4th at p. 1293; see Herrick Corp. v. Canadian Ins. Co. (1994) 29 Cal.App.4th 753, 759, 763–765 (Herrick); California Food Service Corp. v. Great American Ins. Co., supra, 130 Cal.App.3d at pp. 900, 901–902.) Sage argues that is not the case here. We agree.
In Herrick, an insurer provided coverage for a construction general contractor and reimbursed the contractor for amounts paid to settle an action filed by a worker who sustained personal injuries at a construction project site. (Herrick, supra, 29 Cal.App.4th at pp. 757–758.) The appellate court held the insurer could not seek equitable contribution from a subcontractor that had agreed to indemnify the general contractor for certain losses in connection with its work on the construction project. (Id. at pp. 757–758, 763–765.) The court held there was a crucial difference between the subcontractor’s and the insurer’s promises to indemnify the general contractor-“the difference between liability unlimited in amount, but limited to a given project, versus liability limited in amount, but indifferent to the project.” (Id. at p. 765.) The court further stated indemnification agreements between subcontractors and general contractors are “in the nature of promises to stand behind specifically identifiable work, ” while insurance contracts “cover generally defined sets of risks in exchange for a premium having (hopefully) some rational relationship to those risks.” (Id. at p. 763; accord, Pylon, Inc. v. Olympic Ins. Co. (1969) 271 Cal.App.2d 643, 648–649 (Pylon) [construction contractor that had promised to indemnify property owner and engineering firm could not seek contribution from engineering firm’s insurer, because contractor and insurer had not agreed to indemnify same risk].)
Lexington argues the decision in Bramalea supports a contrary result. However, in Bramalea, an action by a real estate developer against its subcontractors, the court only mentioned this issue in dictum, and only in a footnote, in which it stated the developer’s insurer (which was not a party) “[p]resumably” could pursue an action against the subcontractors “for equitable contribution as a coinsurer or coindemnitor.” (Bramalea, supra, 119 Cal.App.4th at p. 475, fn. 5.)
Cf. Travelers Casualty & Surety Co. v. American Equity Ins. Co. (2001) 93 Cal.App.4th 1142.
In Interstate, the court compared the indemnification obligations of a construction subcontractor and an insurer in the context of weighing the relative equities of the parties to an equitable subrogation claim. (See Interstate, supra, 182 Cal.App.4th at pp. 42–44.) The Interstate court cited Pylon and noted the subcontractor’s obligation was tied to its work on the specific project, while the insurer’s obligation was not. (Ibid., citing Pylon, supra, 271 Cal.App.2d at p. 648.) The Interstate court thus concluded the subcontractor and the insurer “did not agree to indemnify the same loss.” (Id. at p. 44.)
We agree with the conclusions reached in Herrick, Pylon, and Interstate. Here, according to the cross-complaint, Lexington’s promise to indemnify T.G. arose from a commercial general liability policy, which specified liability limits and apparently was not tied to a particular construction project. In contrast, Sage and Pyramid agreed to indemnify T.G. only for claims arising out of their own work or negligence in connection with a specific construction project, and without any specified limit of liability. Lexington and Sage/Pyramid did not agree to indemnify the same loss. (Herrick, supra, 29 Cal.App.4th at pp. 763–766; Pylon, supra, 271 Cal.App.2d at pp. 648–649; see Interstate, supra, 182 Cal.App.4th at p. 44.) Lexington cannot seek equitable contribution from Sage or Pyramid.
In light of our conclusion, we need not address Sage’s and Pyramid’s contention the contribution claim is defective for other reasons.
The trial court did not abuse its discretion in denying leave to amend as to this cause of action. The only new allegation Lexington contends it should have been permitted to add in an amended complaint is the allegation it paid approximately $1,950 in defense costs in the Friday action prior to Travelers’ acceptance of T.G.’s tender. This allegation would not cure the defect in Lexington’s contribution claim. Regardless of whether Lexington has made or will make payments on behalf of T.G., Lexington and Sage/Pyramid did not promise to indemnify the same loss.
E. Sixth Cause of Action-Declaratory Relief re: Subrogation for Breach of Contract
In this cause of action, Lexington alleges Pyramid breached the insurance procurement provisions in its subcontract by failing to obtain an endorsement from Axis expressly specifying the coverage provided to T.G. by the Axis policy was primary and the coverage provided by T.G.’s own insurer (Lexington) was excess. Lexington alleges if it is adjudged liable to pay amounts on behalf of T.G., it will be subrogated to T.G.’s rights against Pyramid arising from that contractual breach.
The trial court sustained the demurrer as to this cause of action, ruling T.G. suffered no damages, because it was fully defended and indemnified in the Friday action. Pyramid makes the same argument on appeal. However, as discussed in parts II.A. and II.B.1., ante, Lexington’s allegation it may become obligated to make payments on behalf of T.G. satisfies the element of damage to T.G. for purposes of a prospective subrogation claim.
III. DISPOSITION
The judgments of dismissal in favor of Sage and Pyramid are vacated. The order sustaining Sage’s and Pyramid’s demurrers to Lexington’s cross-complaint is affirmed in part and reversed in part. The order is affirmed as to the ruling sustaining, without leave to amend, the demurrers to Lexington’s fifth cause of action for declaratory relief as to contribution. The order is reversed as to the rulings sustaining the demurrers to Lexington’s third, fourth, and sixth causes of action for declaratory relief regarding subrogation, indemnity, and subrogation for breach of contract. The trial court shall enter a new order overruling Sage’s and Pyramid’s demurrers as to those causes of action. The parties shall bear their own costs on appeal.
I concur: Dondero, J.
Marchiano, P.J.
I concur in the result. I add the following perspective to emphasize the importance of the indemnity agreements. The case is at the demurrer stage with the pleadings from Lexington Insurance Company’s (Lexington) cross-complaint accepted as true. As pled, the cross-complaint raises contractual indemnity and insurance coverage issues. Subcontractors Sage Electric Company (Sage) and Pyramid Builders, Inc. (Pyramid) agreed to indemnify and hold harmless Lexington’s insured, T.G. Construction Inc. (T.G.), against claims and damages arising from the subcontractor’s work or negligence. They also agreed to obtain insurance coverage for T.G. that was to be primary, with T.G’s insurance designated as excess coverage. T.G. was to be named as an additional insured on a certificate of insurance. Pyramid and Sage complied with their contractual obligations, except that Pyramid did not obtain a policy from Axis Specialty Insurance Company (Axis) that designated Pyramid’s policy as primary to T.G.’s. The parties have not provided an appellate record that contains copies of the insurance policies and the indemnity contracts, so we do not know the breadth of the agreements.
Essentially, this court is left to consider whether the allegations in the cross-complaint are sufficient to allow the case to proceed to discovery, possible summary adjudication, or on to trial on causes of action seeking declaratory relief. Lexington, as T.G.’s insurance carrier, is asking the court to adjudicate the respective rights and obligations of the parties, including Sage and Pyramid, arising out of the indemnity agreements and the insurance contracts as they affect Axis’ claim that Lexington is liable for the settlement paid by Axis to John Friday, an employee of Sage. T.G. is an insured under three policies and is an indemnitee of Sage and Pyramid. Lexington, as T.G.’s insurance carrier, is claiming the benefits of the indemnification obligation and its contractual designation as an excess insurer. Without more, the case cannot be disposed of prematurely by demurrer before the underlying facts regarding the indemnity agreements and coverage have been developed and determined. Equitable subrogation and equitable indemnity may or may not be viable means of recovery for Lexington, but that cannot be determined by the demurrer herein.1 If Axis were to prevail on its complaint and recover from Lexington the money it paid in settlement, Lexington may have a right through T.G. to seek reimbursement from Sage and Pyramid under the terms of the indemnity agreements. Indemnity agreements requiring insurance coverage for the protection of an additional insured have been found to be controlling in disputed circumstances such as Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622 and Hartford Casualty Ins. Co. v. Mt. Hawley Ins. Co. (2004) 123 Cal.App.4th 278, 288−299.2 Because the scope of Sage and Pyramid’s potential indemnity obligation is subject to determination through declaratory relief, the demurrers should not have been sustained.