FILED
NOT FOR PUBLICATION JUL 10 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ST. PAUL FIRE & MARINE No. 12-15751
INSURANCE COMPANY,
D.C. No. 1:10-cv-01669-LJO-GSA
Plaintiff - Appellant,
v. MEMORANDUM*
VADNAIS CORPORATION; et al.,
Defendants - Appellees.
Appeal from the United States District Court
for the Eastern District of California
Lawrence J. O’Neill, District Judge, Presiding
Argued and Submitted March 13, 2014
San Francisco, California
Before: THOMAS, FISHER, and BERZON, Circuit Judges.
Plaintiff St. Paul Fire & Marine Insurance Company (“St. Paul”) appeals
from the district court’s grant of summary judgment to Steadfast Insurance
Company (“Steadfast”). We have jurisdiction pursuant to 28 U.S.C. § 1291 and
reverse. Because the parties are familiar with the history of the case, we will not
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
recount it here. We review a grant of summary judgment de novo. New
Hampshire Ins. Co. v. Vieira, 930 F.2d 696, 697 (9th Cir. 1991).
A claim for equitable 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.” Maryland Cas. Co. v. Nationwide Mut. Ins. Co., 97 Cal. Rptr. 2d 374,
378 (Ct. App. 2000) (internal quotation marks omitted).
“An insurer must defend its insured against claims that create a potential for
indemnity under the policy.” Scottsdale Ins. Co. v. MV Transp., 115 P.3d 460, 466
(Cal. 2005). “The duty to defend is broader than the duty to indemnify, and it may
apply even in an action where no damages are ultimately awarded.” Id. “The
defense duty arises upon tender of a potentially covered claim and lasts until the
underlying lawsuit is concluded, or until it has been shown that there is no
potential for coverage.” Id. “When the duty, having arisen, is extinguished by a
showing that no claim can in fact be covered, it is extinguished only prospectively
and not retroactively.” Id. (internal quotation marks omitted).
Under the “continuous injury” trigger of coverage, a duty to defend can arise
based on allegations of defective construction and subsequent ongoing
deterioration, even though damages are not manifested until years later, because
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there could potentially have existed a covered event during the policy period.
Pepperell v. Scottsdale Ins. Co., 73 Cal. Rptr. 2d 164, 169–70 (Ct. App. 1998).
The district court properly determined that the continuous injury trigger is
applicable here. Cawelo “alleged that the pipeline had defective design and
installation in May 1996, that it corroded and deteriorated, and that because of the
nature of the injuries, the damages were only discovered . . . later.” Likewise, the
district court properly determined that Steadfast’s duty to defend Vadnais arose in
the first instance because, based on the allegations in the complaint of the
progressive deterioration of the defective pipeline, causing leakage into and
dangerous erosion of the surrounding area, there existed—at least potentially—a
covered event. Specifically, we agree with St. Paul that the facts stated or fairly
inferable in the complaint, or otherwise known to Steadfast, suggested a claim for
soil erosion that was potentially covered by the policy. We are not persuaded by
Steadfast’s argument that “there was absolutely nothing to suggest the potential
that Cawelo was claiming damages for erosion at the time Steadfast withdrew from
the defense of Vadnais and denied any further obligation to defend.” Steadfast
knew that the pipeline had deteriorated over time, that it had leaked, and that it
ultimately had produced a sinkhole. Cawelo’s complaint, moreover, expressly
alleged damages “to the property upon which the pipeline is situated and the
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surrounding lands thereto.” We need not reach any other claims alleged by the
complaint.
Steadfast’s duty to defend, having arisen, lasts until the underlying action is
concluded or until it is shown that no claim can in fact be covered, but the duty to
defend is only extinguished prospectively. Scottsdale, 115 P.3d at 466. The
underlying action here settled before Steadfast may have shown that no claim was
in fact covered by its policy. Thus, because St. Paul defended the action without
participation by Steadfast, St. Paul is entitled to equitable contribution for
Steadfast’s share of the costs of defense. Safeco Ins. Co. of Am. v. Superior Court,
44 Cal. Rptr. 3d 841, 844 (Ct. App. 2006) (“a settling insurer seeking equitable
contribution from a nonparticipating coinsurer need only establish a potential for
coverage under the recalcitrant coinsurer’s policy in order to obtain contribution
for the costs of defense”).
REVERSED and REMANDED.
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