Truck Insurance Exchange v. Cal. Capital Insurance Co. CA2/7

Filed 2/17/23 Truck Insurance Exchange v. Cal. Capital Insurance Co. CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

TRUCK INSURANCE B311900
EXCHANGE et al.,
(Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. BC546052)

v.

CALIFORNNIA CAPITAL
INSURANCE COMPANY,

Defendant and Appellant.

APPEAL from a judgment of the Superior Court of
Los Angeles County. Yvette M. Palazuelos and David S.
Cunningham III, Judges. Affirmed.
Ropers Majeski and Susan J. Welde for Plaintiffs and
Respondents.
Grant, Genovese & Baratta and Lance D. Orloff for
Defendant and Appellant.
_______________________
 INTRODUCTION

In this equitable contribution action, California Capital
Insurance Company (“California Capital”) appeals from the trial
court’s judgment in favor of Truck Insurance Exchange (“Truck”)
and Farmers Insurance Exchange (“Farmers”) (collectively,
“Respondents”). The court granted summary adjudication
against California Capital on the duty to defend its insured, a
condominium management entity, in the underlying construction
defect actions and on the duty to indemnify. The court awarded
$1.1 million in equitable contribution to Respondents, who
defended and settled the underlying lawsuits. California Capital
contends its policy insured distinct risks from Respondents’
policies and provided no potential or actual coverage for the
underlying liability. We affirm.

FACTUAL AND PROCEDURAL HISTORY

A. The Parties and Properties
The underlying facts are not in dispute. Jon Williams, and
his company WK Development, formed a conglomerate of
affiliated developer entities and also formed the relevant insured
party, an entity called Davlyn Investments, Inc. (“Davlyn”). In
May 2004 the developer entities purchased three apartment
properties named Saddleback, Palm Lake, and Palermo. Davlyn
then embarked on a joint development venture with the
developer entities to convert the three apartment complexes into
condominiums. Davlyn served as property manager during the
condominium conversion process. The conversion projects
included construction work on the buildings, creation of

2
homeowners associations (HOAs), Declarations of Covenants,
Conditions and Restrictions (CC&Rs) for each complex, and the
marketing and sale of the condominium units. The CC&Rs
provide that the properties’ common areas are “owned in
undivided interests by the Owners of the Residential Units.”1 An
“Ownership of Condominium” provision states: “Ownership of
each Condominium within the Project shall include (a) a
Residential Unit, (b) an undivided interest in the Common Area
located within the Residential Module in which the Residential
Unit is situated, as shown on the Condominium Plan and the
Deed to the Condominium.”
In addition to its property management responsibilities,
Davlyn managed ownership sales and rental management of
unsold units in two of the properties after the conversion.
The equitable contribution judgment from which California
Capital appeals results from litigation involving two of the
properties, Saddleback and Palm Lake.

1 The CC&Rs define “Common Area” to include all areas
designated as “Common Area” in the properties’ respective
Condominium Plans, as well as “the bearing walls located within
a Residential Unit,” “all structural components within a
Residential Unit which may be required for the support of the
building within which the Residential Units are located (except
for the finished surfaces),” and “Utility Facilities” (items such as
the heating and air conditioning systems, pool equipment, sewer
and sprinkler systems).

3
 B. Respondents’ Policies
In conjunction with the condominium conversion projects,
Respondents issued corresponding sets of liability insurance
policies for each complex. Farmers issued an Apartment Owners
Policy to the developers for Palm Lake covering the period
March 31, 2004 to March 31, 2005, and a Condominium Owners
Policy to the Palm Lake HOA effective April 5, 2005 to April 5,
2006 (renewed through April 5, 2009). Truck similarly issued an
Apartment Owners Policy for Saddleback effective May 27, 2004
to May 27, 2005 (renewed through March 17, 2009), and a
Condominium Owners Policy to the Saddleback HOA, effective
June 2, 2005 to June 2, 2006 (renewed through May 27, 2013).
In the underlying construction defect actions, Farmers
defended Davlyn under its Condominium Owners Policy for Palm
Lake and Truck defended Davlyn under its Condominium
Owners Policy for Saddleback. On appeal, the parties do not
dispute Respondents’ policies covered Davlyn. Under virtually
identical policies, Respondents agreed to “pay those sums that
the insured becomes legally obligated to pay as damages because
of . . . ‘property damage’ . . . to which this insurance applies[,]” if
the “‘property damage’ is caused by an ‘occurrence’” that occurs
during the policy period. The policies define “‘occurrence’” as “an
accident, including continuous or repeated exposure to
substantially the same general harmful conditions.”
Respondents’ policies also specified that their covered
insureds included “[t]he developer in the developer’s capacity as a
unit-owner, but only with respect to the developer’s liability
arising out of: [¶] a. The ownership, maintenance or repair of
that portion of the premises which is not owned solely by the
developer; or, [¶] b. The developer’s membership in the

4
Association. [¶] However, the insurance afforded with respect to
the developer does not apply to liability for acts or omissions as a
developer.”

C. California Capital’s Policy
California Capital issued a commercial property general
liability policy to Davlyn effective March 17, 2009, through
March 17, 2012. The policy lists Davlyn’s “Business Description”
as “Rented Condo Units.” A “Description of Premises” schedule
lists the addresses of the Saddleback and Palm Lake properties
(among others not at issue here). A supplemental schedule
detailing the premium basis identifies the total number of units,
but not the specific units, owned by Davlyn in each building. The
policy lists seven units at Palm Lake and 61 at Saddleback, a
number of which were sold over the course of the policy period.
Under the policy, California Capital agreed to “pay those
sums that the insured becomes legally obligated to pay as
damages because of . . . ‘property damage’ to which this insurance
applies[,]” if the “‘property damage’ is caused by an ‘occurrence’”
that takes place during the covered period. The policy defines
“‘occurrence’” as “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.”
The California Capital policy specifies: “This insurance applies
only to . . . ‘property damage’ . . . arising out of: [¶] 1. The
ownership, maintenance or use of the premises shown in the
Schedule and operations necessary or incidental to those
premises including covered operations emanating from the
premises and performed elsewhere.”

5
 California Capital’s policy documents contain an exclusion
for construction defect and development activity. However, the
exclusion endorsement expressly states it does not apply to
“premises described in this policy.”2 The California Capital policy
exclusions also provide that “[t]his insurance does not apply
to . . . ‘Property damage’ to: (1) Property you own, rent, or
occupy.” In other words, California Capital’s policy insured
Davlyn for property damages arising out of Davlyn’s ownership,
maintenance or use of the property, including construction and
real estate development.

D. The Underlying Construction Defect Actions and Equitable
Contribution Actions
In August 2010, the Palm Lake HOA sued Davlyn and
several other affiliated developer entities and individuals for
construction defects. The complaint alleged Davlyn participated
“in the work of developing, designing, converting, constructing,
servicing, marketing and/or selling of the Subject Property[.]”

2 In relevant part, the exclusion states:
“The insurance as provided under this policy does not apply to
‘BODILY INJURY,’ ‘PROPERTY DAMAGE,’ ‘PERSONAL
INJURY,’ ‘CONTRACTUAL LIABILITY’ (including liability
arising out of ‘INCIDENTAL CONTRACT’) or ‘ADVERTISING
INJURY,’ arising out of or in any way connected with any of the
following operations performed by or for, or at the direction of
any ‘INSURED’: (1) CONSTRUCTION; (2) SUBCONTRACTING;
(3) DEVELOPING ; (4) REAL ESTATE; (5) INVESTMENT.
[¶]
“PREMISES DESCRIBED IN THIS POLICY ARE NOT
SUBJECT TO THIS EXCLUSION.” (Emphasis in original.)

6
The complaint defined the “Subject Property” as the real property
tract of the complex and “all buildings and improvements
thereupon.” The Palm Lake complaint alleged a variety of
design, construction, and servicing issues with “the Subject
Property’s residences and common areas” such that, among other
things, “the Subject Property’s residences and the common areas,
at all material times after construction, were not merchantable
quality nor fit for their ordinary purposes,” and that “these
conditions appear in and affect both the Subject Property’s
residences and the Subject Property’s common areas.” The
complaint included a cause of action for negligent
misrepresentation “during the course of marketing and selling
the residential units in the Subject Property,” including “[w]hile
developing, designing, converting, constructing, servicing,
marketing and/or selling residential units in the Subject
Property.”
In June 2012, the Saddleback HOA sued Davlyn and the
affiliated developers for construction defects. The complaint
alleged Davlyn and the other developer defendants “were the
builders, developers and contractors that developed, designed,
converted, constructed, serviced, marketed and sold the Subject
Property, including all of its residential units and common
areas.” The complaint defined the “Subject Property” as the real
property tract of the complex and “all buildings and
improvements thereupon.” As with the Palm Lake action, the
Saddleback complaint alleged a variety of design, construction,
and servicing issues such that, among other things, “the Subject
Property’s residences and common areas, at all material times
after construction, were not of merchantable quality nor fit for
their ordinary purposes,” and alleged “these conditions appear in

7
and affect both the Subject Property’s residences and the Subject
Property’s common areas.” The complaint included a cause of
action for negligent misrepresentation “[w]hile developing,
designing, converting, constructing, servicing, marketing and/or
selling residential units in the Subject Property.” The complaint
attached a “Preliminary Defect List” exhibit detailing the alleged
defects in common areas and residential areas including damage
to private decks and tub/shower units, attics, cabinets and
countertops, exterior walls, and interior floors, walls, and
ceilings.
The Palm Lake and Saddleback complaints both alleged
that, pursuant to the CC&Rs, ownership of each individual unit
included an undivided fractional fee interest in the common areas
of the property.
Thus, both complaints alleged Davlyn, as owner, developer,
and manager of the properties, had engaged in exactly the
activities for which the California Capital policy insured
Davlyn—causing damage to the properties (including the
common areas) with negligent construction and development of
the properties, and “using” the properties as the owner to
negligently operate, maintain, market, and sell them, among
other covered allegations.
Farmers defended Davlyn in the Palm Lake action and
paid $320,119.08 in defense fees and costs and $1,050,000 in
settlement. Truck defended Davlyn in the Saddleback suit and
paid $44,534.74 in defense fees and costs and $1.5 million in
settlement.
In May 2014, Truck sued California Capital for equitable
contribution with regard to the Saddleback action and filed the
operative Second Amended Complaint in September 2015. Truck

8
and Farmers filed Case No. BC550171 against its insureds and
for equitable contribution against California Capital pertaining
to the Palm Lake condominium conversion development project
in June 2014. On June 30, 2015, California Capital issued a
denial of coverage letter for the Palm Lake action, taking the
position that its policies did not cover the conversion and
excluded construction defects. The court consolidated the cases
into a single proceeding.

E. Summary Adjudication on Duty To Defend
In April 2019, the trial court ordered the parties “to file
Cross-Motions for Summary Adjudication as to the duty to defend
and defense costs” in the Palm Lake and Saddleback lawsuits
and ordered that they could later file motions for summary
adjudication as to the duty to indemnify and indemnity costs.
The parties filed competing motions for summary adjudication on
whether California Capital had a duty to defend the Palm Lake
and Saddleback actions. On October 22, 2019, the trial court
granted Respondents’ motion for summary adjudication and
denied California Capital’s motion, finding California Capital had
a duty to defend Davlyn in the underlying lawsuits.
In so doing, the trial court rejected California Capital’s
contention that the Saddleback and Palm Lake complaints
alleged damage only to common areas and not to individual units.
The court found “both the Palm Lake and Saddleback actions
involve ‘property damage’ to individual units and common areas
of the two properties. . . . Both actions allege that ownership of
individual units included ownership of a share of the common
areas.” Thus, “[b]ecause the individual units owned by Davlyn
allegedly suffered property damage, as did the co-owned common

9
areas, a potential for coverage existed” under the policies
covering units in the Palm Lake and Saddleback properties,
which “provide that California Capital would pay those sums that
Davlyn becomes legally liable to pay because of ‘property damage’
to which the insurance applies, if the ‘property damage’ is caused
by an ‘occurrence’ and occurs during the policy period.”
Accordingly, the court concluded Respondents “established a
prima facie case of a possibility of coverage under California
Capital’s policies,” shifting the burden to California Capital to
show that its policies could not possibly cover Davlyn’s alleged
actions (underlining in original).
The trial court then determined that California Capital
failed to meet its burden to establish the absence of coverage for
the underlying lawsuits under its policies. The court held:

“By its plain language, the policy covers occurrences
at the Palm Lake and Saddleback properties, and any
property damage that arises within the policy period.
Both underlying complaints alleged property damage
to common areas and individual units.

[¶]

“As a result, during the California Capital policy
periods, Davlyn was involved in service, marketing,
and sale of both the individual units and the
corresponding portions of the common areas. Such
activities are clearly consistent with the ‘ownership,
maintenance and use’ of the properties covered under
the policies, and which allegedly were performed in a

10
 manner which caused damage to the underlying
plaintiffs. In addition, the underlying plaintiffs
alleged that the negligent activities, including
service, marketing, and sale, resulted in property
damage to individual units.

[¶]

“Moreover, from the plain language of the policy,
even latent property damage that occurs within the
policy period—as a direct result of condominium
conversion—would still be covered under the policy.”

The court found Respondents were entitled to equitable
contribution from California Capital for defense of the Palm Lake
and Saddleback lawsuits, ruling that both Respondents and
California Capital had insured the “same risk” because the
parties’ policies all insured Davlyn for “ownership, maintenance,
or use” of the Palm Lake and Saddleback properties. The court
found California Capital failed to establish the absence of actual
coverage under its policy, stating:

“Here, Plaintiffs and California Capital insured the
same risk. Plaintiffs expressly insured Davlyn for
property damage arising from the ‘ownership,
maintenance, or use’ of the Palm Lake and
Saddleback properties. Under the plain language of
its policy, California Capital also insured Davlyn for
‘ownership, maintenance, or use’ of the Palm Lake
and Saddleback properties.

11
 [¶]

“As noted above, Plaintiffs have established a prima
facie case of a potential for coverage. The burden
shifts to California Capital to show an absence of
coverage. As with the duty to defend, California
Capital has not met its burden.

[¶]

“Accordingly, Plaintiffs are entitled to judgment as a
matter of law as to the issue of equitable
contribution.”

The court ultimately ordered California Capital to pay
Respondents $162,448.00 in defense fees and costs for the Palm
Lake action and $242,267.37 in defense fees and costs for the
Saddleback action.

F. Summary Adjudication on Duty To Indemnify
On September 21, 2020, Respondents moved for summary
adjudication as to California Capital’s duty to indemnify Davlyn.
The trial court granted Respondents’ motion on December 7,
2020, concluding that California Capital had a duty to indemnify
Davlyn in the underlying actions and Respondents were entitled
to equitable contribution from California Capital because it
insured Davlyn for the same risk.
The court found Respondents expressly insured Davlyn for
property damage arising from the “ownership, maintenance, or
use” of the Palm Lake and Saddleback properties, as did

12
California Capital under the plain language of its policy insuring
Davlyn for “ownership, maintenance, or use” of the Palm Lake
and Saddleback properties. The court ordered California Capital
to contribute $500,000 to Respondents for the Saddleback
settlement and $262,500 for the Palm Lake settlement.
The trial court entered judgment on January 12, 2021, and
denied California Capital’s subsequent motion for a new trial on
March 26, 2021.
This appeal timely followed.

DISCUSSION

A. Standard of Review
“‘A party is entitled to summary adjudication of a cause of
action if there is no triable issue of material fact and the party is
entitled to judgment as a matter of law.’” (Cornell v. Berkeley
Tennis Club (2017) 18 Cal.App.5th 908, 924-925; accord,
Syngenta Crop Protection, Inc. v. Helliker (2006) 138 Cal.App.4th
1135, 1154; Code Civ. Proc., § 437c, subds. (c), (f).) “[T]he party
moving for summary judgment bears the burden of persuasion
that there is no triable issue of material fact and that he is
entitled to judgment as a matter of law.” (Aguilar v. Atlantic
Richfield Co. (2001) 25 Cal.4th 826, 850.) “Summary
adjudication works the same way as summary judgment, “except
it acts on specific causes of action or affirmative defenses, rather
than on the entire complaint.” (Oroville Hospital v. Superior
Court (2022) 74 Cal.App.5th 382, 398.) A plaintiff moving for
summary judgment need only “prove [] each element of the cause
of action.” (Aguilar, at p. 853; Code Civ. Proc., § 437c,
subd. (o)(1).) If the moving party satisfies its initial burden, the

13
burden shifts to the nonmoving party to set forth specific facts
showing a triable issue of material fact exists. (Cornell, at
p. 925.) The ruling on a summary adjudication motion concerns
the legal effect of undisputed facts and whether the material
facts are truly undisputed. We review the record de novo,
liberally construing the evidence in favor of the party opposing
summary adjudication and resolving doubts concerning the
evidence in favor of that party. (Salas v. Sierra Chemical Co.
(2014) 59 Cal.4th 407, 415; Miller v. Department of Corrections
(2005) 36 Cal.4th 446, 460.) If summary adjudication was
properly granted on any ground, we affirm “regardless of the trial
court’s stated reasons.” (Syngenta Crop Protection, Inc., at
p. 1155.)
Interpretation of an insurance policy is a question of law,
including whether a particular policy provides a potential for
coverage and duty to defend. (Waller v. Truck Ins. Exchange, Inc.
(1995) 11 Cal.4th 1, 18 (Waller).)
Equitable contribution is a rule of equity subject to the trial
court’s discretion. (Fireman’s Fund Ins. Co. v. Maryland
Casualty Co. (1998) 65 Cal.App.4th 1279, 1293.) Some courts
hold that, to the extent the trial court exercised discretion in
granting summary judgment or summary adjudication, the
standard of review on appeal is abuse of discretion. (See, e.g.,
GuideOne Mutual Ins. Co. v. Utica National Ins. Group (2013)
213 Cal.App.4th 1494, 1501 [equitable contribution]; Mills v.
Forestex Co. (2003) 108 Cal.App.4th 625, 639-640 [equitable
tolling and estoppel]; Centennial Ins. Co. v. United States Fire
Ins. Co. (2001) 88 Cal.App.4th 105, 111 [equitable contribution];
see also Dieden v. Schmidt (2002) 104 Cal.App.4th 645, 654
[equitable subrogation].) Other courts hold review is de novo, in

14
accordance with the ordinary standard of review on appeal
following summary judgment or summary adjudication. (See,
e.g., JP Morgan Chase Bank, N.A. v. Banc of America Practice
Solutions, Inc. (2012) 209 Cal.App.4th 855, 859 [equitable
subrogation]; State Farm General Ins. Co. v. Wells Fargo Bank,
N.A. (2006) 143 Cal.App.4th 1098, 1105 [same].) We need not
decide which standard of review applies to the trial court’s ruling
that Respondents are entitled to equitable subrogation in this
case, because our conclusion does not change whether we review
the ruling de novo or for abuse of discretion.

B. California Capital Had a Duty To Defend Davlyn in the
Palm Lake and Saddleback Lawsuits
California Capital asserts it had no duty to defend the
insureds because it only insured Davlyn for property damage
arising out of Davlyn’s “use” of its individually owned residential
condominium units. Davlyn contends, and the trial court found,
that California Capital reads the insurance policies (and the
underlying complaints) too narrowly. Davlyn has the better
argument.
“[W]hether the insurer owes a duty to defend usually is
made in the first instance by comparing the allegations of the
complaint with the terms of the policy.” (Waller, supra,
11 Cal.4th at p. 19.) In an equitable contribution action between
insurers, “the inquiry is whether the nonparticipating coinsurer
‘had a legal obligation . . . to provide [a] defense [or] indemnity
coverage for the . . . claim or action prior to [the date of
settlement],’ and the burden is on the party claiming coverage to
show that a coverage obligation arose or existed under the
coinsurer’s policy.” (Safeco Ins. Co. of America v. Superior Court

15
(2006) 140 Cal.App.4th 874, 879 (Safeco).) “To prevail, the
[settling insurer] must prove the existence of a potential for
coverage, while the [nonparticipating] insurer must establish the
absence of any such potential. In other words, the [settling
insurer] need only show that the underlying claim may fall
within policy coverage; the [nonparticipating] insurer must prove
it cannot. (Montrose Chemical Corp. v. Superior Court (1993)
6 Cal.4th 287, 300 (Montrose).)
The underlying Palm Lake and Saddleback complaints
allege that the defective “conditions appear in and affect both the
Subject Property’s residences and the Subject Property’s common
areas.” The complaints defined “Subject Property” broadly as “all
buildings and improvements” on the property. The Saddleback
and Palm Lake actions alleged damage to residential units, such
as the alleged damage around tub/shower units in the
Saddleback complaint. The complaints also alleged negligent
misrepresentation while “servicing, marketing and/or selling
residential units.” The complaints also alleged, and the
formation documents confirm, that ownership of each individual
unit includes an undivided fractional fee interest in the common
areas of the property.
These allegations directly implicate the relevant policy
language. For example, both policies require California Capital
to cover losses due to “property damage” caused by an
“occurrence” arising from “ownership, maintenance or use of the
premises shown in the Schedule and operations necessary or
incidental to those premises.” California Capital focuses on the
word “use,” to suggest that Davlyn did not “use” the individually
owned units. But the scope of coverage extends far broader than

16
that.3 It includes “ownership and maintenance.” It also extends
to the “premises.” California Capital asserts, without support in
the policy language itself, that “premises” means only the
individual units owned by Davlyn. The policy does not define the
term “premises,” but the Description of Premises schedule and
supplemental schedule identify the addresses of the Saddleback
and Palm Lake properties and the total number of units owned
by Davlyn in each building.4 Taking the policy language as a

3 California Capital cites a series of inapposite (mostly
vehicle) cases in support of its argument that the underlying
claims do not implicate Davlyn’s “use” of the premises. For
example, State Farm Mutual Auto. Ins. Co. v. Partridge (1973)
10 Cal.3d 94, involved the negligent handling of a weapon in a
car, but the negligence did not extend to the “use” of the car. As
another example, State Farm Mutual Automobile Ins. Co. v.
Grisham (2004) 122 Cal.App.4th 563 involved a driver whose dog
jumped out of his truck and bit a passerby. Again, the liability
centered on the supervision of the dog, not the use of the vehicle
for purposes of invoking the automobile insurance coverage.
These cases provide no guidance here, where the underlying
complaints assert damage from Davlyn’s actual use—and
operation and maintenance—of the premises, including the
common areas.
4 California Capital argues that “premises” cannot mean the
entire property because premises are “occupied by people” and
Davlyn had only an “inchoate [unoccupied] ‘interest in the
common areas.’” California Capital cannot redefine premises to
exclude the common areas in this way. Premises refers to “[a]
house or building, along with its grounds; esp., the buildings and
land that a shop, restaurant, company, etc. uses.” (Black’s Law
Dictionary (11th ed. 2019).) The HOA formation documents, the
policy itself, and the allegations in the underlying complaints all
refer to the common areas as part of the premises.

17
whole, the policy clearly encompasses the buildings on the
property, including the units and common areas. Indeed, having
referenced both the individual units and the entire property, the
policy contains no language limiting coverage to the individual
units, nor does the policy exclude any common areas or other
portions of the two properties from coverage. Moreover, although
the June 2015 denial letter relied on a policy endorsement that
barred coverage for construction, subcontracting, developing, real
estate, or investment, the policy further states: “PREMISES
DESCRIBED IN THIS POLICY ARE NOT SUBJECT TO
THIS EXCLUSION.” Finally, the coverage extends broadly to
“operations necessary or incidental” to the premises.
Based upon the plain language of the policies and the
allegations in the Saddleback and Palm Lake actions,
Respondents have shown the claims may “fall within the scope of
coverage.” (Montrose, supra, 6 Cal.4th at p. 300.) The complaints
alleged damage to both the residential units and the common
areas arising from Davlyn’s “ownership, maintenance or use” of
those areas. The policies did not exclude the common areas from
the “premises,” as the denial of coverage letter asserted, but even
if they did, the complaints alleged that ownership of the
individual units included an undivided interest in the Common

18
Area.5 As a result, California Capital cannot meet its burden to
prove an absence of actual coverage.6

5 The complaints’ allegations are supported by Civil Code
section 4125, subdivision (b), which defines a “condominium” as
“an undivided interest in common in a portion of real property
coupled with a separate interest in space called a unit.” (See
Marina Green Homeowners Assn. v. State Farm Fire & Casualty
Co. (1994) 25 Cal.App.4th 200, 204, citing Civ. Code former
§ 1351, subd. (f), [explaining “Each unit, defined as an ‘interest in
space,’ is separately owned. The structure itself is owned, not
individually, but jointly.”].) Thus, Davlyn’s ownership of
condominium units provides an additional basis for potential
coverage of damage alleged inside the units and in common
areas.
6 California Capital argues this reading of the policies
ignores the “intent” of the policy language, evidence of which it
supplies through, among other things, the deposition testimony of
Davlyn’s insurance broker. Courts must preliminarily “consider
all credible evidence offered to prove the intention of the parties.”
(Oakland-Alameda County Coliseum Authority v. Golden State
Warriors, LLC (2020) 53 Cal.App.5th 807, 817.) But this
extrinsic evidence is only admissible if the contract language is
“‘fairly susceptible’” of the interpretation promoted by the
extrinsic evidence and if it does not “detract from, or vary the
terms of a written contract.” (Pacific Gas & Electric Co. v. G.W.
Thomas Drayage & Rigging Company, Inc. (1968) 69 Cal.2d 33,
39-40; accord, Oakland-Alameda County Coliseum Authority, at
p. 817.) Here, California Capital offers an “interpretation” of the
policy that contradicts, and certainly “var[ies],” the policies’ plain
meaning, rendering its parol evidence inadmissible.

19
 C. Respondents Proved California Capital Had a Duty To
Indemnify
Respondents argue the trial court’s ruling in their favor on
the duty to defend means it also wins on the issues of duty to
indemnify and for equitable contribution. One does not
necessarily flow from the other: “the duty to defend is broader
than the duty to indemnify; an insurer may owe a duty to defend
its insured in an action in which no damages ultimately are
awarded.” (Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th
1076, 1081). Also, because an insurer has a duty to defend
whenever there is a potential for coverage, it may ultimately
have no duty to indemnify if the “judgment is for damages not
covered under the policy.” (Stonewall Ins. Co. v. City of Palos
Verdes Estates (1996) 46 Cal.App.4th 1810, 1835.) However,
these “contingencies are inapplicable” where the trial court
decides the issue of actual coverage “after resolution of the
underlying case.” (Ibid.) Instead, “in an action for equitable
contribution by a settling insurer against a nonparticipating
insurer, the settling insurer has met its burden of proof [on the
duty to indemnify] 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.”
(Safeco, supra, 140 Cal.App.4th at p. 881.) Thus, “[w]hen a duty
to defend is shown, nonparticipating coinsurers are
presumptively liable for both the costs of defense and settlement”
unless they prove the absence of actual coverage. (Id. at p. 880.)
“The settling insurer does not have to prove actual coverage.”

20
(Axis Surplus Ins. Co. v. Glencoe Ins. Ltd. (2012) 204 Cal.App.4th
1214, 1223.)
We already have explained that California Capital failed to
show the absence of actual coverage. To establish the right to
indemnity, Respondents need show no more in these
circumstances. However, the trial court found, and we agree,
that California Capital did insure Davlyn for the property
damage alleged in the underlying complaints. In other words,
actual coverage. California Capital insured Davlyn for property
damage arising from Davlyn’s “‘ownership, maintenance, or use’”
of the “premises,” which—as we explain above—included both
individually owned units and common areas. The underlying
complaints allege damage arising from the conduct insured by
California Capital, e.g., “designing, developing, building,
construction, repairing, remodeling, maintaining, installing,
manufacturing, supplying, and/or selling” the insured property
during the policy period. Davlyn marketed, sold, maintained,
and otherwise caused (according to the complaints) damage to
these properties. Accordingly, the trial court properly found
California Capital failed to carry its burden and that
Respondents established a right to indemnity.

D. Respondents Were Entitled to Equitable Contribution
Having established that California Capital had a duty to
defend and to indemnify, Respondents may recover a pro rata
portion of the sums they expended to defend and settle the
underlying actions. Where a settling co-insurer (here,
Respondents) has “undertaken the defense or indemnification of
the common insured,” but “without any participation” from
another insurer that has the obligation “to indemnify or defend

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the same loss or claim,” the first insurer may recover the portion
it paid beyond its own share. (Fireman’s Fund Ins. Co. v.
Maryland Casualty Co., supra, 65 Cal.App.4th at p. 1293.)
“Equitable contribution permits reimbursement to the [settling]
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.” (Ibid.)
In addition, California Capital may not now complain about
the costs of defense or indemnity. When a co-insurer refuses to
participate in the underlying action, it waives the right to
challenge those sums. (Safeco, supra, 140 Cal.App.4th at p. 880;
St. Paul Mercury Ins. Co. v. Mountain West Farm Bureau Mutual
Ins. Co. (2012) 210 Cal.App.4th 645, 662.) This rule applies
particularly where the participating insurer has settled the
underlying action. “By settling, the parties avoid the cost and
uncertainty of litigation. The settlement and the amount of the
settlement are thus presumptive evidence of the insurer’s
liability and the amount of liability.” (Axis Surplus Ins. Co. v.
Glencoe Ins. Ltd., supra, 204 Cal.App.4th at p. 1224.)
Given California Capital’s duties to defend and to
indemnify Davlyn, Respondents were entitled to equitable
contribution for a portion of their defense fees and costs and
settlement payments. Here, the parties insured the “same
risk”—property damage to individual units and common areas—
because the parties’ policies all insured the same insured,
Davlyn, for “ownership, maintenance, or use” of the Palm Lake
and Saddleback properties. California Capital’s assertion that its
policies do not cover the same risk as Respondents’ policies

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(because Davlyn’s “use” of the property as property manager was
different than as rental unit manager) is contradicted by the
express, much broader, policy language.
California Capital’s exclusion for construction defect and
development activity expressly does not apply to “premises
described in this policy,” thus it does not affect our analysis.

E. The Owned Property Exclusion Does Not Apply
Finally, California Capital argues that its policies’ “owned
property” exclusion for damage to property owned or rented by its
insureds bars equitable contribution. This exclusion would apply
if California Capital’s coverage extended only to damage of
property owned by Davlyn. However, as the trial court found, the
underlying complaints did not limit the assertion of damage to
property owned by Davlyn; rather, the complaints alleged
damage to property maintained and used by Davlyn (including
the common areas and residential units). Moreover, as the court
also noted, the polices do not specify the units owned by Davlyn
for purposes of applying an owned property exclusion. That
distinction does not appear in the policies or in any evidence
submitted by California Capital below or here. For this reason
alone, the owned property exclusion argument fails. Respondents
also argue (and the trial court found) that California Capital
waived the owned-property exclusion. Given our conclusion that
the owned-property exclusion does not bar coverage or indemnity,
we decline to decide whether a nonparticipating insurer waives a
coverage exclusion if it fails to raise the exclusion in a denial
letter to, and in subsequent litigation with, a settling insurer.
(See Waller, supra, 11 Cal.4th at p. 31 [outlining test for waiver
as between insurer and insured].)

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 DISPOSITION

The judgment is affirmed. Respondents shall recover their
costs on appeal.

HOWARD, J.*

We concur:

PERLUSS, P. J.

SEGAL, J.

* Judge of the Marin County Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.

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