U.S. Fire Ins. v. Arrowood Indemnity CA1/4

Filed 4/17/13 U.S. Fire Ins. v. Arrowood Indemnity CA1/4
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

UNITED STATES FIRE INSURANCE
COMPANY,
Plaintiff and Appellant, A133665

v. (San Francisco County
ARROWOOD INDEMNITY COMPANY Super. Ct. No. CGC09490808)
et al.,
Defendants and Respondents.

Appellant United States Fire Insurance Company (U.S. Fire) paid various costs in
defending and settling seven lawsuits alleging asbestos-related injuries. It brought this
case to recover a portion of these costs from respondents Arrowood Indemnity Company
and United States Fidelity and Guaranty Company (USF&G). Following a four-day
bench trial, the trial court agreed that respondents were responsible for a portion of the
costs and calculated their share to be $177,715.10. In this appeal, U.S. Fire maintains
that this amount was too low and that the trial court misapplied principles of insurance
law by limiting respondents’ liability on the basis of contractual indemnity provisions.
We disagree and affirm.

1
 I.
FACTUAL AND PROCEDURAL
BACKGROUND
Union Electric Company entered into two contracts with Bechtel Corporation to
build power-generating units at a Union Electric power plant in Labadie, Missouri. The
contracts required Bechtel to engineer, construct, and start up these units.
Both contracts contained an identical indemnity clause, which provided: “Bechtel
hereby assumes entire responsibility and liability for any and all damage, loss or injury,
including death, of any kind or nature, whatever, to person or persons, or property or
properties, caused by, resulting from or arising out of the performance of the work
provided for in this Contract. Bechtel agrees to defend any suit or action brought against
[Union Electric] based upon the foregoing injury or damage, and agrees further to pay all
costs and expenses, including legal fees in connection with such suit or action; provided,
however, that Bechtel’s aforesaid indemnity and hold harmless agreement shall not be
applicable to any loss, expense, damage, demand or claim or liability caused by the sole
negligence of [Union Electric], its officers, representatives or employees; and provided
further, that Bechtel’s aforesaid indemnity and hold harmless agreement is for the
exclusive benefit of [Union Electric] and in no event shall inure to the benefit of any third
party.”
Bechtel obtained insurance for its work at the Labadie plant from Industrial
Indemnity Company, the predecessor to appellant U.S. Fire.
Bechtel was also the general contractor for the construction of another Union
Electric plant in Missouri (the Rush Island plant), and it again obtained insurance from
Industrial Indemnity. Industrial Indemnity issued an endorsement adding Union Electric
as an insured for the project, providing that “ ‘this insurance on behalf of owner is
primary insurance and any other insurance maintained by owner shall be specific excess
insurance, notwithstanding condition XI, other insurance.’ ” The trial court concluded
that this provision made Industrial Indemnity (and, by novation, U.S. Fire) the sole
primary insurer for Union Electric’s liabilities arising out of new construction at the Rush

2
Island plant. U.S. Fire does not challenge this finding on appeal, and we accept it as
binding on this court. Our subsequent references to the “indemnity agreement” are to the
provisions in the contracts quoted above, under which U.S. Fire, through its predecessor
Industrial Indemnity, agreed to insure Union Electric for the construction at the Labadie
and Rush Island plants.
Respondents Arrowood and USF&G provided general liability insurance to Union
Electric. These policies covered various time periods from the 1950s through the 1980s,
but neither respondent provided coverage for asbestos claims after September 30, 1989.
Seven lawsuits were filed by workers who alleged injuries from asbestos exposure
while working at Union Electric facilities. These workers alleged that they were exposed
to asbestos while working at various times at the Labadie, Rush Island, or other Union
Electric plants. Union Electric’s legal counsel learned through discovery in these
lawsuits that the workers’ claims focused heavily on asbestos exposure during new
construction at Labadie and Rush Island. The defenses of these cases were therefore
tendered to Bechtel’s insurer U.S. Fire based on the indemnity agreement. U.S. Fire
eventually paid a total of $1,374,384.38 in defense and settlement costs.1
U.S. Fire then brought this action against respondents Arrowood and USF&G,
seeking declaratory relief and contribution. The main issue throughout the litigation has
been the effect of the indemnity agreement on respondents’ obligations to contribute to
defense and settlement costs. In denying a motion for summary judgment filed by
respondents, the trial court agreed with U.S. Fire that the indemnity agreement did not

1
On March 23, 2012, this court granted U.S. Fire’s application to file its opening brief
and portions of its appendix under seal. In the public version of its opening brief,
U.S. Fire redacts the amounts it paid in defense and settlement costs and cites to a sealed
portion of the record containing an apportionment allocation table prepared below by
respondents. U.S. Fire claims that disclosure of information contained in the table “could
prejudice Union Electric’s future defense against asbestos claims.” But these same
amounts are listed in the trial court’s statement of decision included in the public version
of the record filed with this court, which is available on the trial court’s website. Because
this information already is part of the public record, we include in our opinion the
numbers listed in the statement of decision.

3
necessarily relieve respondents of all liability and concluded that questions of fact existed
about the scope of the parties’ duties to defend and the extent of liability.
At trial, U.S. Fire argued that all of the insurance companies shared a duty to
defend the lawsuits and that respondents’ duty arose because the workers alleged that
they were exposed to asbestos at multiple Union Electric sites, including sites not covered
by U.S. Fire insurance policies. U.S. Fire maintained that respondents were accordingly
“joint[ly] and several[ly]” liable for defense and settlement costs. However, U.S. Fire did
not specify how, exactly, those costs should be apportioned. Counsel at one point argued
that if respondents had been defending the lawsuits, “we would all be in the suit and we
would all be paying some established allocable share, time on the risk[2] or risk—limits
times years, or something.” Counsel later criticized allocating costs based on a “site-by-
site analysis,” adding, “So I don’t know what the answer is, Your Honor, but it can’t be
month by month because months by months—trying to do it months by months, there is
too much fatal uncertainty and ever-changing allegations of the time of exposure within a
site. And we cannot do it by site, Your Honor, because there was, likewise, fatal
uncertainty between the sites.” The trial court observed in its statement of decision that
“U.S. Fire did not propose a method for apportioning damages other than a pro rata share
of all defense and indemnity costs for all lawsuits based upon policy limits and years of
coverage.”
For their part, respondents acknowledged that the lawsuits involved asbestos
exposure at sites not covered by U.S. Fire, but they argued that they should be relieved of
reimbursing defense and settlement costs that were attributable to claims arising out of
exposure during construction of the Labadie and Rush Island plants because of the
indemnity agreement.

2
The “ ‘time on the risk’ ” method of allocating liability among primary insurers
covering the same liability has been defined as “[a]pportionment based upon the relative
duration of each primary policy as compared with the overall period during which the
‘occurrences’ ‘occurred’ . . . .” (Stonewall Ins. Co. v. City of Palos Verdes Estates (1996)
46 Cal.App.4th 1810, 1861.)

4
 Respondents presented the testimony of an attorney witness who had represented
Union Electric in about 200 matters, including five of the seven underlying lawsuits. He
testified under seal about the evidence gathered and the exposure analysis conducted in
those cases. He testified that in analyzing asbestos-injury claims, he considered the
length of the project causing exposure, the years when the claimant worked on the
project, and whether the claimant was a smoker. He also testified that asbestos was used
less and less after the early 1970s, as more became known about its health hazards.
Based in large part on this testimony, respondents provided an “apportionment
summary,” which allocated defense and settlement costs between U.S. Fire, on the one
hand, and both respondents, on the other, based on the plants involved and the nature and
timing of the workers’ exposure to asbestos. The trial court agreed with respondents that,
while difficult, it was not impossible to apportion losses among the various power
plants.3 It made the following findings with regard to the seven underlying lawsuits:
Bunton v. Union Carbide et al.: U.S. Fire paid $17,995 in defense costs and
$82,500 to settle a lawsuit brought against Union Electric and others for injury suffered
by Paul Bunton. The trial court concluded that Bunton was injured by being exposed to
asbestos while working for five months on the construction of the Labadie plant and
while working four months at another Union Electric power plant.
Capestro v. Amchem Products, Inc. et al.: U.S. Fire paid $282,579.20 in defense
costs and $375,000 to settle a lawsuit brought against Union Electric and others for injury
suffered by Joseph Capestro. The trial court concluded that Capestro was injured by
being exposed to asbestos while working on the construction of the Labadie plant, and
was not injured by being exposed to asbestos at any other Union Electric facility.
Farrar v. Nooter Corp. et al.: U.S. Fire paid $41,882.19 in defense costs and
$100,000 to settle a lawsuit brought against Union Electric and others for injury suffered
3
The trial court pointed out that, “Juries do that [allocate liability] in every [asbestos]
case. They will have multiple defendants and they have to allocate fault for each
defendant, so they have to say 20 percent of the fault is attributable to company A,
30 percent to B, 40 percent to the Navy. Juries do that in every single case. If they do it
in that situation, then I don’t know why it’s impossible to do it here.”

5
by Homer Farrar. The trial court concluded that Farrar was injured by being exposed to
asbestos while working 48 months on the construction of the Labadie plant, working
24 months on the construction of the Rush Island plant, performing repairs for 27 months
at the Labadie plant before 1990, performing repairs for three months at the Labadie plant
after 1990, and for working for several months at other Union Electric power plants, both
before and after 1990.
Maloney v. A.W. Chesterton et al.: U.S. Fire paid $13,363.33 in costs to defend a
lawsuit brought for injury suffered by Richard Maloney, but paid no settlement amount.
The trial court concluded that Maloney was injured by being exposed to asbestos while
working for 60 months on the construction of the Labadie plant, working for 18 months
on the construction of the Rush Island plant, performing repairs for 11.5 months at two
other United Electric power plants before 1990, and performing repairs for 6.5 months at
yet another Union Electric power plant.
Morris v. Avocet Enterprises, Inc. et al.: U.S. Fire paid $1,464.60 in defense costs
and $25,000 to settle a lawsuit brought against Union Electric and others for injury
suffered by Billy Joe Morris. The trial court found that Morris was injured by being
exposed to asbestos while working on the construction of the Labadie plant, and was not
injured by being exposed to asbestos by working at any other Union Electric facility.
Schlosser v. A.W. Chesterton, Inc. et al.: U.S. Fire paid $9,600.06 in defense costs
and $250,000 to settle a lawsuit brought against United Electric and others for injury
suffered by Arlan Schlosser. The trial court found that Schlosser was injured by being
exposed to asbestos while working for 45.25 months on new construction of the Labadie
plant; for working 29 months on the construction of the Rush Island plant; for performing
repairs and engaging in refueling work at five Union Electric power plants, including the
Labadie and Rush Island plants, before 1990; and for performing repairs for 7.5 months
at three Union Electric power plants, including the Labadie and Rush Island plants, after
1990.
Silverstein v. A.W. Chesterton, Inc. et al.: U.S. Fire paid no defense costs, but paid
$175,000 to settle a lawsuit brought against Union Electric and others for injury suffered

6
by Morton Silverstein. The trial court found that Silverstein was injured by being
exposed to asbestos while working a total of 24 months on the construction of the
Labadie plant, and while working for 8.5 months on a different Union Electric plant.
In its statement of decision, the court concluded that U.S. Fire was entitled to
equitable contribution from respondents, but only for the portion of U.S. Fire’s payments
attributable to asbestos exposure at Union Electric facilities other than exposure
occurring during construction of the Labadie and Rush Island plants.
Based on this conclusion, the court ruled that U.S. Fire was entitled to no
contribution in connection with Capestro and Morris because those claims related solely
to the construction of the Labadie plant. As for the other five cases, the court concluded
that U.S. Fire was entitled to equitable contribution from respondents in the total amount
of $177,715.10, calculated as follows: (1) in Bunton, $2,267.63 of the $17,995 in defense
costs and $12,688.50 of the $82,500 paid in settlement; (2) in Farrar, $25,602.58 of the
$41,882.19 in defense costs and $61,130 of the $100,000 paid in settlement; (3) in
Maloney, $624.01 of the $13,363.33 in defense costs (no amount was paid in settlement);
(4) in Schlosser, $712.32 of the $9,600.06 in defense costs and $18,550 of the $250,000
paid in settlement; and (5) in Silverstein, $56,140 of the $175,000 paid in settlement (no
defense costs were paid by U.S. Fire). These amounts were identical to the
apportionment proposed by respondents, which was based on the duration of each
plaintiff’s work at each Union Electric plant; whether the plaintiff’s work was performed
before or after the effective date of relevant safety regulations—when the use of asbestos
became less widespread; and whether the plaintiff’s exposure occurred while repairing
existing plants or while working on new plant construction, which typically involved
greater risk of harm.
U.S. Fire timely appealed from the subsequent judgment.

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 II.
DISCUSSION
A. General Legal Principles.
U.S. Fire argues that the trial court did not properly treat this as an equitable
contribution case. The general principles applicable in equitable contribution cases were
summarized in Hartford Casualty Ins. Co. v. Mt. Hawley Ins. Co. (2004) 123 Cal.App.4th
278 (Mt. Hawley), which we quote at length: “ ‘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. 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 other. Where multiple insurance carriers insure
the same insured and cover the same risk, each insurer has independent standing to assert
a cause of action against its coinsurers for equitable contribution when it has undertaken
the defense or indemnification of the common insured. 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. The purpose of this rule of equity is to
accomplish substantial justice by equalizing the common burden shared by coinsurers,
and to prevent one insurer from profiting at the expense of others. . . .
“ ‘This right of equitable contribution belongs to each insurer individually. It is
not based on any right of subrogation to the rights of the insured, and is not equivalent to
“ ‘standing in the shoes’ ” of the insured. . . . Instead, the reciprocal contribution rights
of coinsurers who insure the same risk are based on the equitable principle that the
burden of indemnifying or defending the insured with whom each has independently
contracted should be borne by all the insurance carriers together, with the loss equitably
distributed among those who share liability for it in direct ratio to the proportion each
insurer’s coverage bears to the total coverage provided by all the insurance [policies]. . . .

8
“As a matter of equity, insurers of the ‘same risk’ may sue each other for
contribution. . . . This right is not a matter of contract, but flows ‘ “from equitable
principles designed to accomplish ultimate justice in the bearing of a specific
burden.” ’ . . . The idea is that the insurers are ‘equally bound,’ so therefore they ‘all
should contribute to the payment.’ . . .” . . .
“ ‘Unlike subrogation [defined as 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,” Mt. Hawley, supra, 123 Cal.App.4th at p. 287], the right to equitable contribution
exists independently of the rights of the insured. It 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.’ ”
(Mt. Hawley at pp. 287-288, italics omitted.) “ ‘[T]he aim of equitable contribution is to
apportion a loss between two or more insurers who cover the same risk, so that each pays
its fair share and one does not profit at the expense of the others.’ [Citations.]” (Id. at
p. 288; see also Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998)
65 Cal.App.4th 1279, 1293.)
“The application of equitable considerations must be made on a case-by-case
basis, ‘in light of varying equitable considerations which may arise, and which affect the
insured and the primary and excess carriers, and which depend upon the particular
policies of insurance, the nature of the claim made, and the relation of the insured to the
insurers.’ [Citation.]” (North American Capacity Ins. Co. v. Claremont Liability Ins. Co.
(2009) 177 Cal.App.4th 272, 295.)
B. Standard of Review.
A judgment of the trial court is presumed correct, and it is appellant’s burden to
demonstrate error. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564; Cahill v. San
Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956.) Because the proper

9
allocation of costs in an equitable contribution action among insurers is within a trial
court’s broad discretion (Maryland Casualty Co. v. Nationwide Mutual Ins. Co. (2000)
81 Cal.App.4th 1082, 1093-1094), we review the trial court’s order for an abuse of that
discretion. (Cahill at p. 957.) “Under that standard, there is no abuse of discretion
requiring reversal if there exists a reasonable or fairly debatable justification under the
law for the trial court’s decision or, alternatively stated, if that decision falls within the
permissible range of options set by the applicable legal criteria.” (Ibid.) The abuse of
discretion standard is particularly appropriate in equitable contribution cases, where there
are “no ‘hard and fast “bright line” ’ rules for the proper method of allocating defense
costs among coinsurers, . . . a matter left to the sound equitable discretion of the trial
court.” (North American Capacity Ins. Co. v. Claremont Liability Ins. Co., supra,
177 Cal.App.4th at pp. 295-296.)
U.S. Fire contends that the outcome of trial turned on the interpretation of legal
instruments, an issue of law this court reviews de novo. Even where an appellate court
reviews an issue de novo, such review “is limited to issues which have been adequately
raised and supported in [appellant’s] brief.” (Reyes v. Kosha (1998) 65 Cal.App.4th 451,
466, fn. 6.) Although U.S. Fire makes general claims that the trial court committed “legal
error,” some of its arguments lack adequate factual support or reasoned argument
demonstrating that the trial court erred, as we discuss below.
C. Effect of Indemnity Agreement.
Respondents argued below, and the trial court agreed, that the indemnity
agreement limited respondents’ obligation to contribute because respondents were not
coinsurers of loss attributable to the Labadie and Rush Island plants, following
Mt. Hawley, supra, 123 Cal.App.4th 278. In Mt. Hawley, a subcontractor agreed to
indemnify a general contractor for claims and liabilities arising out of the subcontractor’s
performance and to secure a commercial general liability policy listing the subcontractor
as the named insured and the general contractor as an additional insured. (Id. at p. 281.)
After an employee of the subcontractor was injured while construction was in progress,
the employee sued the general contractor, and the subcontractor’s insurer provided a

10
defense and settled the case using its own funds. (Ibid.) The subcontractor’s insurer then
filed suit against the general contractor’s insurer, seeking payment of half of the defense
and settlement expenses, under a theory of equitable contribution. (Id. at pp. 281, 285-
286.) The trial court granted summary judgment in favor of the subcontractor’s insurer
and awarded that insurer more than $136,000. (Ibid.)
The appellate court reversed. (Mt. Hawley, supra, 123 Cal.App.4th at pp. 281,
305.) It held that because the general contractor was not liable to the subcontractor under
the parties’ indemnity provision, it followed that the general contractor’s insurer was not
liable to the subcontractor’s insurer. (Id. at pp. 282, 288-289, 292.) “As a general matter,
‘the courts will assess whether the factual circumstances “create[] a relationship between
the indemnity contract and the insurance allocation issues . . . .” ’ [Citation.]” (Id. at
p. 289.) Because the subcontractor in Mt. Hawley had agreed to indemnify and hold
harmless the general contractor absent the general contractor’s sole negligence or willful
misconduct, and the general contractor was shown not to be solely negligent or have
engaged in willful misconduct, it followed that the general contractor’s insurer was not
required to provide equitable contribution. (Id. at pp. 289, 291-292.) To require the
general contractor’s insurer to pay the subcontractor’s insurer, when the general
contractor was not liable for anything due to the indemnity provision, would effectively
negate the indemnity agreement, and would be “inconsistent with ‘ “ ‘equitable principles
designed to accomplish ultimate justice,’ ” ’ [would not be] ‘predicated on [any]
commonsense principle,’ and [would] not further the goal that each insurer pay its ‘fair
share.’ [Citation.]” (Id. at p. 292, italics added by Mt. Hawley court; see also Rossmoor
Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 634-635 [indemnity provision affects
allocation of liability in insurance action even where “other insurance” provision
available].)
Here, the trial court concluded that Mt. Hawley controlled and ruled that U.S. Fire,
as the insurer for Bechtel, was solely responsible for the defense and settlement costs for
asbestos-related injuries arising out of the construction of the Labadie plant. Unlike the
situation in a typical equitable contribution action, where insurers equally and

11
concurrently owe on a debt paid and share a common burden as coinsurers (Mt. Hawley,
supra, 123 Cal.App.4th at p. 287), the trial court here concluded that the parties were not
coinsurers, because there was no overlapping coverage.4 “To hold otherwise[] would be
unreasonable, arbitrary and contrary to the intent of the underlying parties in entering into
the indemnity agreement for the Labadie construction,” the court concluded. Likewise,
because U.S. Fire agreed that it would be the primary insurer for liability arising out of
new construction at the Rush Island plant, U.S. Fire was not entitled to contribution for
defense or settlement for any asbestos-related injuries arising out of the plant’s
construction. The trial court then ruled that U.S. Fire was entitled to equitable
contribution from respondents for defense and indemnity costs to the extent that those
payments were for injuries resulting from exposure at Union Electric facilities other than
during new construction of the Labadie or Rush Island plants. We conclude that this was
an eminently reasonable approach under Mt. Hawley and in light of the circumstances of
this case.
D. Duty to Defend.
U.S. Fire argues that the trial court’s ruling “revealed a fundamental
misunderstanding of the insurance law principles that govern a contribution action among
carriers, a misunderstanding that infected all of the court’s conclusions with reversible
error.” Appellant places much emphasis on respondents’ legal duty to defend the
underlying lawsuits. “[T]he insurer’s duty to defend [a lawsuit] runs to claims that are
merely potentially covered, in light of facts alleged or otherwise disclosed. [Citations.]
It entails the rendering of a service, viz., the mounting and funding of a defense
[citations] in order to avoid or at least minimize liability [citation]. It arises as soon as

4
U.S. Fire contends that respondents “withdrew” the defense that they were not
coinsurers. It cites a portion of the trial court’s statement of decision stating that “[i]ssues
not resolved in this Statement of Decision were withdrawn by the parties.” The trial
court specifically resolved the issue of whether the parties were coinsurers, the primary
disputed issue at trial, and concluded that they were not, because there was no
overlapping coverage. Although other defenses were dropped, we do not consider the
issue of whether the parties were coinsurers to have been “withdrawn.”

12
tender is made. [Citation.] It is discharged when the action is concluded. [Citation.] It
may be extinguished earlier, if it is shown that no claim can in fact be covered.
[Citation.] If it is so extinguished, however, it is extinguished only prospectively and not
retroactively: before, the insurer had a duty to defend; after, it does not have a duty to
defend further. [Citations.] [¶] Obviously, the insurer’s duty to defend is broader than its
duty to indemnify. [Citations.]” (Buss v. Superior Court (1997) 16 Cal.4th 35, 46-47.)
“If any facts stated or fairly inferable in the complaint, or otherwise known or discovered
by the insurer, suggest a claim potentially covered by [an insurance] policy, the insurer’s
duty to defend arises and is not extinguished until the insurer negates all facts suggesting
potential coverage. On the other hand, if, as a matter of law, neither the complaint nor
the known extrinsic facts indicate any basis for potential coverage, the duty to defend
does not arise in the first instance.” (Scottsdale Ins. Co. v. MV Transportation (2005)
36 Cal.4th 643, 655.) “When a duty to defend is shown, nonparticipating coinsurers are
presumptively liable for both the costs of defense and settlement.” (Safeco Ins. Co. of
America v. Superior Court (2006) 140 Cal.App.4th 874, 880 (Safeco).) “Although an
insurer may have a duty to defend, it may ultimately have no duty to indemnify—either
because no damages were awarded or because the actual judgment was for damages not
covered by the policy. [Citations.]” (Armstrong World Industries, Inc. v. Aetna
Casualty & Surety Co. (1996) 45 Cal.App.4th 1, 108 (Armstrong).)
When a complaint states multiple claims, some of which are potentially covered
by an insurance policy and some of which are not, it is a “ ‘mixed action.’ ” In such a
case, “the insurer has a duty to defend as to the claims that are at least potentially
covered, having been paid premiums by the insured therefor, but does not have a duty to
defend as to those that are not, not having been paid therefor. This conclusion is in line
with the ‘general rule’ that ‘[w]hen a complaint in an action . . . states different causes of
action . . . against the insured, one of which is within . . . coverage . . . and others of
which may not be, the insurer is bound to defend with respect to those which, if proved,
would be within . . . coverage.’ [Citations.]” (Buss v. Superior Court, supra, 16 Cal.4th
at p. 48, italics omitted.) Despite this rule, our Supreme Court has held that, “in a

13
‘mixed’ action,’ the insurer has a duty to defend the action in its entirety.” (Ibid.)
However, the insurer may thereafter seek reimbursement from the insured for defense
costs that can be attributed to claims that are not even potentially covered. (Id. at p. 53.)
Here, the trial court followed a similar model by allocating defense and settlement costs
after taking into account the nature, severity, and length of exposure to asbestos at the
various Union Electric plants involved in the underlying suits.
The trial court accepted U.S. Fire’s contention that the allegations in the
underlying suits gave rise to an initial duty by respondents to defend the underlying
cases. But it concluded that any such duty did not affect the proper way to allocate the
costs of defense and settlement payments among the parties: “If[,] for example,
Arrowood and USF&G had a duty to defend and did not defend, or if they had
participated in the defense and the parties were now seeking to allocate their respective
shares of the costs of defense and settlements, the method of allocation would be the
same.”
We understand U.S. Fire’s argument to be that because respondents had an initial
duty to defend the underlying lawsuits, it necessarily follows that the trial court used an
incorrect method of allocating defense costs and settlement amounts among the parties.
In making this argument, U.S. Fire focuses almost entirely on respondents’ duties when
the underlying lawsuits were filed and defenses tendered, and suggests that these duties
control respondents’ contribution rights for all time, no matter what information was
subsequently learned, and no matter the effect of the indemnity agreement.
U.S. Fire’s approach is not supported by the case law upon which it relies. For
example, citing Safeco, supra, 140 Cal.App.4th 874, appellant claims that “all carriers
with a duty to defend are obligated to equitably contribute to the defense.” In Safeco, a
settling insurer sued a nonparticipating insurer for equitable contribution after the settling
insurer paid the costs of defense and settlements of 17 underlying property damage
lawsuits. (Id. at p. 877.) In denying the settling insurer’s motion for summary judgment,
the trial court concluded that because the underlying complaints were “ ‘very general’ ”
there were questions whether damages occurred when the nonparticipating insurer’s

14
policies were in effect and thus whether there was a corresponding duty to defend. (Id. at
p. 878.) The trial court further ruled that the settling insurer would not be entitled to
equitable contribution until the insurer established as a matter of law that the
nonparticipating insurer’s policy covered the loss. (Ibid.)
The appellate court thereafter granted the settling insurer’s petition for a writ of
mandate. (Safeco supra, 140 Cal.App.4th at pp. 878, 881.) It held that “in an action for
equitable contribution by a settling insurer against a nonparticipating insurer, the settling
insurer has met its burden of proof when it makes a prima facie showing of coverage
under the nonparticipating insurer’s policy—the same showing necessary to trigger the
recalcitrant insurer’s duty to defend—and that the burden of proof then shifts to the
nonparticipating insurer to prove the absence of actual coverage. [Citation.]” (Id. at
p. 881.) Here, respondents met their burden by demonstrating that the indemnity
agreement relieved them of any duty to cover losses sustained during construction at the
Labadie and Rush Island plants and by presenting evidence on the extent to which the
plaintiffs were exposed to asbestos while working on the construction of those plants.
Moreover, Safeco was a writ proceeding that did not address any particular
allocation method—the main issue on appeal in this case. (Safeco, supra,
140 Cal.App.4th at pp. 881-882.) Instead, it focused on the showing necessary to obtain
contribution for settlement payments as opposed to defense costs. (Id. at p. 879.) As for
defense costs, the parties agreed that a settling insurer need only establish a
nonparticipating coinsurer’s potential for coverage under the coinsurer’s policy in order
to obtain contribution. (Ibid.) To the extent that U.S. Fire contends that under Safeco it
was entitled to contribution for defense costs, as opposed to settlement payments, we
disagree. Respondents established that there was no potential for coverage for injuries
sustained during new construction at the Labadie and Rush Island plants. This case is
thus more akin to Buss v. Superior Court, supra, 16 Cal.4th 35, a “ ‘mixed’ action,”
where the court held that an insured could recover defense costs “that can be allocated
solely to the claims that are not even potentially covered.” (Id. at p. 53; see also
Mt. Hawley, supra, 123 Cal.App.4th at p. 292.)

15
 U.S. Fire contends that Mt. Hawley’s analysis regarding indemnity agreements is
inapplicable here because Mt. Hawley was a “single-site, single-injury and complete
indemnity situation,” whereas this case involved five different sites. In other words, U.S.
Fire concedes that Mt. Hawley would apply if a construction worker had been injured in a
single accident at the Labadie plant. But here, U.S. Fire claims that the trial court should
have found that U.S. Fire and respondents were “co-insurers,” necessitating that
“allocation issue[s]” be “analyzed under insurance law principles,” because U.S. Fire had
assumed liability at only two of five implicated sites. We disagree with the notion that in
allocating defense costs and settlement payments the trial court was required to ignore the
indemnity agreement and the facts that were established in applying it, just because
plaintiffs alleged damages at multiple locations.
This is particularly true in the Capestro and Morris lawsuits, where the trial court
found that plaintiffs suffered injuries solely related to new construction at the Labadie
plant. The Capestro complaint alleged injury only at the Labadie plant.5 Although the
Morris complaint alleged injury suffered at plants other than those covered by U.S. Fire’s
policies, it would not be equitable to find that U.S. Fire was a coinsurer in that lawsuit
simply because plaintiff initially alleged that he suffered injury at other facilities. In its
opening brief, U.S. Fire does not directly challenge the trial court’s factual finding that
plaintiffs in Capestro and Morris suffered injuries only at Labadie or offer any reasoned
argument why it is entitled to contribution for claims covered solely by the indemnity
agreement.6

5
There was a factual dispute at trial over whether some of Capestro’s asbestos exposure
occurred after new construction was complete, when Capestro serviced a soda vending
machine at the Labadie plant. Respondents provided substantial evidence that Capestro’s
duties servicing the machine did not contribute to his asbestos-related illness.
6
U.S. Fire belatedly asserts in its reply brief that even if it is not entitled to contribution
of the amount paid to settle the Capestro and Morris lawsuits, it must be awarded its
defense costs for those suits. “Points raised in the reply brief for the first time will not be
considered, unless good reason is shown for failure to present them before.” (Campos v.
Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3.)

16
 U.S. Fire also relies on Scottsdale Ins. Co. v. MV Transportation, supra,
36 Cal.4th 643, but this case also supports the trial court’s order. In Scottsdale, an
insurance company defended its insured against a third party lawsuit under a reservation
of rights to recover defense costs in the event that it was determined that the company
owed no defense. (Id. at p. 649.) The company was permitted to recover defense costs
from its insured because it was later determined as a matter of law that the insurance
company’s policies in fact afforded no potential coverage. (Ibid.) The Supreme Court
noted that in such a situation, the insurance company’s duty to defend was never
“ ‘extinguished’ ”; instead, it never arose in the first place. (Ibid.) “The insured pays for,
and can reasonably expect, a defense against third party claims that are potentially
covered by its policy, but no more. Conversely, the insurer does not bargain to assume
the cost of defense of claims that are not even potentially covered. To shift these costs to
the insured does not upset the contractual arrangement between the parties. Thus, where
the insurer, acting under a reservation of rights, has prophylactically financed the defense
of claims as to which it owed no duty of defense, it is entitled to restitution. Otherwise,
the insured, who did not bargain for a defense of noncovered claims, would receive a
windfall and would be unjustly enriched. [Citation.]” (Id. at p. 659.) Although this is an
equitable contribution action and not an action against an insured, we find this reasoning
useful here. It was not improper for the trial court to decline ordering respondents to
contribute to defense and settlement costs for claims that were not potentially covered
simply because the complaints alleged other potentially covered claims.7
In a related argument, U.S. Fire contends that because asbestos bodily injury
claims “ ‘trigger’ ” insurance policy coverage throughout successive policy periods,
respondents had a duty to defend in this matter. Where successive comprehensive

7
U.S. Fire’s reliance on Maryland Casualty Co. Nationwide Mutual Ins. Co., supra,
81 Cal.App.4th 1082 and Fireman’s Fund Ins. Co. v. Maryland Casualty Co., supra,
65 Cal.App.4th 1279 is equally misplaced. Both cases involved situations where insurers
sought contribution from insurance companies both liable for the same loss and did not
consider the effect of indemnity agreements relieving them from that liability. (Maryland
Casualty at p. 1093; Fireman’s Fund at p. 1289.)

17
general liability policy periods are implicated, “bodily injury . . . which is continuous or
progressively deteriorating throughout several policy periods is potentially covered by all
policies in effect during those periods.” (Montrose Chemical Corp. v. Admiral Ins. Co.
(1995) 10 Cal.4th 645, 689.) U.S. Fire apparently contends that respondents’ coverage
for some of the time periods implicated in the underlying complaints triggered a duty to
defend the entire complaints because asbestos injury is a continuing injury and it can
never be established which precise asbestos fiber led to a particular plaintiff’s asbestos-
related injury. (E.g., Armstrong, supra, 45 Cal.App.4th at p. 41 [asbestos-related diseases
“ ‘insidious diseases with delayed manifestations’ ”].) U.S. Fire reasons that this makes
respondents jointly liable for the entire underlying injury that occurred over time, as
opposed to the discrete injury in Mt. Hawley, supra, 123 Cal.App.4th at page 283, which
occurred when a worker fell into an open elevator shaft on a single occasion. Again, this
ignores the effect of the indemnity agreement and the fact that damages are frequently
apportioned among defendants in asbestos cases. (Armstrong, supra, 45 Cal.App.4th at
pp. 57-58.)
It may be true, as the trial court assumed, that respondents had a duty to defend at
least some of the underlying complaints because they involved “mixed actions.” But it
does not follow that the trial court erred in allocating costs and settlement among the
parties, as illustrated by the cases upon which U.S. Fire relies. In Armstrong, supra,
45 Cal.App.4th 1, a lengthy opinion from Division One of this court addressing
coordinated asbestos proceedings, the court analyzed when bodily injury occurs for
purposes of triggering insurance coverage. (Id. at p. 41.) Applying our Supreme Court’s
decision in Montrose Chemical Corp. v. Admiral Ins. Co., supra, 10 Cal.4th 645,
Armstrong affirmed the trial court’s ruling that all of a policyholder’s policies in effect
from first exposure to asbestos until either date of death or date of claim, whichever
occurs first, are triggered with respect to an asbestos-related bodily injury claim.
(Armstrong, supra, at pp. 43-45.)
Armstrong went on to conclude that an insured must be indemnified by one insurer
for the full extent of loss up to the policy’s limits, but that liability was properly

18
apportioned among all insurers “based upon the policy limits and the years of coverage.”
(Armstrong, supra, 45 Cal.App.4th at p. 49.) “ ‘Allocation of the cost of indemnification
once several insurers have been found liable to indemnify the insured for all or some
portion of a continuing injury or progressively deteriorating property damage requires
application of principles of contract law to the express terms and limitations of the
various policies of insurance on the risk. [Citation.]’ ” (Id. at p. 51, quoting Montrose
Chemical Corp. v. Admiral Ins. Co., supra, 10 Cal.4th at p. 681, fn. 19.) Armstrong
rejected the insurance companies’ claims that successive insurers share joint and several
liability. (Armstrong at p. 55.)
U.S. Fire points out that there are “established allocation methodologies for
contribution actions under California law.” (Initial capitals and boldface omitted; see
Maryland Casualty Co. v. Nationwide Mutual Ins. Co., supra, 81 Cal.App.4th at p. 1094
[courts have developed several methods to equitably apportion loss].) It contends that
had the trial court correctly analyzed the duty to defend, the court would have used a
“time on the risk methodology” (ante, fn. 2) and thus allocated the “vast majority of the
responsibility for the underlying claims” to respondents. U.S. Fire does not define “vast
majority” or explain how the “time on the risk methodology” should have been applied in
this case. It likewise accuses the trial court of “ignor[ing]” relevant insurance policies
but does not explain how examining them would have led to a different result. U.S. Fire
is perhaps hinting that its contribution award should have been larger because
respondents insured Union Electric over several decades, while the construction period
covered by the indemnity period was shorter. But “[s]imply hinting at an argument and

19
leaving it to the appellate court to develop it is not adequate.”8 (Cryoport Systems v. CNA
Ins. Cos. (2007) 149 Cal.App.4th 627, 633.)
U.S. Fire does concede that it is liable for “some portion” (original boldface) of
each claim by virtue of the indemnity agreement, but that it “simply asserts that the
indemnity agreements be limited to their terms—they apply to liability arising out of only
two of the five sites [implicated in the parties’ lawsuits] (and each claimant was exposed
at both indemnified and non-indemnified sites).” As was the case in the trial
proceedings, it is still unclear what exact relief U.S. Fire seeks. It asks this court to
remand the matter “with instructions to allocate the parties’ respective coverage
obligations under insurance principles and not to treat this as an underlying asbestos
trial.” At one point it states that “there is no ‘exception’ to the joint and several defense
obligation for recalcitrant insurers that elect not to defend but await a contribution action
after the fact,” apparently suggesting that respondents are jointly and severally liable for
the entire amount U.S. Fire paid. It later states that the trial court “was required to
examine ‘the nature of the claim, the relation of the insured to the insurers, the particulars
of each policy and any other equitable considerations,’ ” quoting Truck Ins. Exchange v.
Unigard Ins. Co. (2000) 79 Cal.App.4th 966, 974. But a fair reading of the trial court’s
statement of decision reveals that the court did take many, if not all, of those factors into
account. It considered the nature and timing of the workers’ claims, the relation of the
parties to Bechtel and Union Electric, and the particulars of the policies (including the
indemnity agreement).
8
In a footnote in its reply brief and then again at oral argument, U.S. Fire argued that the
trial court’s allocation method was improper because expenditures related to post-1990
injuries were “somehow [made] U.S. Fire’s exclusive responsibility” even though none
of the insurance policies covered asbestos-related injuries after that date. We reject this
argument for two reasons. First, we decline to consider arguments raised for the first
time in reply briefs. (See Campos v. Anderson, supra, 57 Cal.App.4th at p. 794, fn. 3.)
Second, we cannot conclude on the record before us that the trial court abused its
discretion in declining to attribute a portion of post-1990 expenditures to Arrowood and
USF&G, especially because U.S. Fire has never proposed a specific alternative allocation
method and it fails to quantify how it was supposedly harmed by the purported allocation
error.

20
 U.S. Fire repeatedly directs this court to the following excerpt from an insurance
treatise regarding equitable contribution: “The sharing of defense costs will typically be
pro rata because every insurer that potentially covers the risk owes an immediate and
complete defense [citation]. On the other hand, an insurer’s share of the indemnity
obligation will depend on whether there is actual coverage and may vary depending on
equitable considerations such as policy limits, time on the risk, etc. [citation].” (Croskey
et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2012) ¶ 8:67.1, p. 8-
29, original italics.) But the treatise underscores the importance of flexibility in
allocating responsibility by emphasizing that there is “no fixed rule for allocating defense
and indemnity costs . . . .” (Croskey et al., supra, ¶ 8:67, p. 8-28, italics added; see also
Maryland Casualty Co. v. Nationwide Mutual Ins. Co., supra, 81 Cal.App.4th at p. 1094
[“no single required method of apportionment” in equitable contribution case].)
Trial courts have great latitude in apportioning defense and settlement costs in
contribution actions, and U.S. Fire has failed to demonstrate that the trial court
improperly apportioned them in this case.
III.
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal.

_________________________
Humes, J.

We concur:

_________________________
Reardon, Acting P.J.

_________________________
Rivera, J.

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