Byron Remeyer and Asia Torres both worked for the La Sirena Grill at its South Laguna location. One night in August 2013, they had drinks together at La Sirena and then left around 10:00 p.m. to go to a party. Shortly before midnight, Torres, who was intoxicated, drove his vehicle into a tree in Laguna Niguel. Remeyer, his passenger, suffered traumatic, life-altering brain injuries as a result.

Remeyer filed a complaint against La Sirena and Torres for negligence. He alleged that Torres was employed as a cook for La Sirena and “got drunk on the job” on the night of the accident, that drinking on the job was a common occurrence at La Sirena, that La Sirena provided the alcohol that Torres drank on the night of the accident, that La Sirena’s management was well aware of Torres’s intoxicated state when Torres and Remeyer left for the party, and yet management did nothing to prevent Torres from driving. Remeyer also alleged that Torres was acting within the course and scope of his employment for La Sirena at the time of the accident, and was driving a vehicle that La Sirena had entrusted to him for performing his job duties. The complaint did not mention that Remeyer was also an employee of La Sirena.

La Sirena was insured by two different insurers. California Capital Insurance Company issued La Sirena a commercial general liability (CGL) policy with bodily injury limits of $2 million per occurrence; this policy generally covered bodily injury claims, but excluded coverage for workers’ compensation claims and for bodily injuries arising out of and in the course of a claimant’s employment with La Sirena.

The second insurer, appellant Employers Compensation Insurance Company (ECIC), issued La Sirena a workers’ compensation and employers’ liability policy. Part One of this policy covered workers’ compensation claims, and Part Two covered bodily injury claims by employees arising out of and in the course of their employment with La Sirena if not otherwise covered by workers’ compensation.

La Sirena tendered the Remeyer lawsuit to its CGL insurer, California Capital. California Capital agreed to defend La Sirena under a reservation of rights citing, among other provisions, its employer’s liability exclusion for bodily injuries arising out of and in the course of a claimant’s employment with La Sirena.

During discovery, it came to light that Remeyer had been an employee of La Sirena at the time of the accident, that both Remeyer and Torres had worked at La Sirena earlier in the day, but that both had been off the clock for several hours by the time the accident occurred. Whether Remeyer was acting within the course and scope of his employment at La Sirena at the time of the accident (a question relevant to the applicability of California Capital’s employer’s liability exclusion) remained contested.

California Capital incurred roughly $88,000 in attorney fees defending the claims against La Sirena. Then, in June 2015, California Capital settled the Remeyer lawsuit on La Sirena’s behalf for its policy limits of $2 million, without any participation from ECIC. California Capital then filed the subject lawsuit against ECIC for equitable contribution. ECIC moved for summary judgment, asserting neither part of its policy covered the allegations in the Remeyer lawsuit; the trial court denied that motion without explanation.

The trial court conducted a bench trial on stipulated facts in December 2020. The court found the ECIC policy potentially covered the Remeyer lawsuit and California Capital was equitably entitled to half of what it expended in defense and settlement of that lawsuit. The court then entered judgment for California Capital, awarding it $44,182.42 in equitable contribution for the cost of defending La Sirena, $1 million in equitable contribution for indemnifying La Sirena, and interest of $501,299.37.

The Court of Appeal reversed in the unpublished case of Cal. Capital Ins. Co. v. Employers Compensation Ins. Co -G060532 (March 2023)

The issue on appeal is straightforward: is California Capital entitled to equitable contribution from ECIC for the cost of defending and indemnifying their common insured, La Sirena?

Equitable contribution (not to be confused with equitable subrogation or equitable indemnity) is a loss sharing procedure by which an insurer that defended and settled a claim against its insured may seek to apportion those costs among coinsurers who refused to settle or defend the claim.

Equitable contribution permits reimbursement to the insurer that paid on the loss for the excess it paid over its proportionate share of the obligation, on the theory that the debt it paid was equally and concurrently owed by the other insurers and should be shared by them pro rata in proportion to their respective coverage of the risk. (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279)

Equitable contribution is only available if the two insurers share the same level of liability on the same risk as to the same insured. In this case California Capital’s CGL policy does not cover the same risk as ECIC’s workers’ compensation and employers’ liability policy. In fact, the two policies are mutually exclusive.

The judgment for California Capital was reversed. On remand, the trial court was directed to enter judgment for ECIC.