Procedural Posture

Procedural Posture

Appellant first insurer challenged a judgment of the Superior Court of Contra Costa County (California), which applied exclusions for products-completed operations coverage and premises coverage in the first insurer’s equitable contribution action against respondent second insurer. The appeal concerned insurance coverage for two lawsuits filed against the insurers’ insureds, a successor corporation and its predecessor.

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Overview

The insureds were liquid latex manufacturers. Carpet manufacturers one and two brought suit against them for breach of contract and breach of express and implied warranties. The court held that the second insurer’s policy endorsement excluded coverage for damage arising out of the predecessor’s products and that only the predecessor’s products were implicated by carpet manufacturer one’s complaint. Accordingly, carpet manufacturer one’s complaint was not a suit that even potentially sought damages covered by the second insurer’s policies. The second insurer had no duty to defend or to indemnify and thus owed no duty of equitable contribution to the first insurer for its defense of its own insured. Carpet manufacturer two’s action concerned not only pre-merger products supplied by the predecessor, but also alleged that the successor corporation itself supplied some of the defective latex. An exclusion in the second insurer’s policy pertaining to premises-operations coverage involving the claim of carpet manufacturer two did not apply to damages arising under the products-completed operations coverage. Thus, the second insurer had a duty to defend until that action was concluded.

Outcome

The court reversed the trial court’s judgment as to the first insurer’s claim for contribution to the cost of defense of carpet manufacturer two’s action. The matter was remanded for a determination of the amounts due to the first insurer on its contribution claim. The part of the judgment awarding costs to the second insurer was vacated and remanded for reconsideration with the issue of damages. In all other respects, the judgment was affirmed.