Allocation, Construction, Insurance: Lower Court’s Denial Of Any Fee Recovery To General Contractor’s Insurer For Defending The GC, Based On Equitable Subrogation, Was Error

GC’s Insurer Was Entitled To Equitable Reimbursement Of Defense Costs Relating To Subcontractor Work As Well As A Reasonable Allegation Relating To Reasonable “Mixed” Defense Efforts.

            In Pulte Home Corp. v. CBR Electric, Inc. (St. Paul Mercury Ins. Co.), Case No. E068353 (4^th Dist., Div. 2 June 10, 2010) (published), a trial judge denied in entirety a general contractor’s insurer’s request for reimbursement of attorney’s fees expended in defending the GC  under an equitable subrogation claim even though GC-subcontractors’ contracts required some subs to defend the GC for their work which was alleged to have been defective in a construction defect suit.  The insurer had requested not only reimbursement of direct fees expended for defending on the work done by the subs, but also mixed, other defense work which it claimed was related to the overall defense of the case benefitting the subs—right around $189,000 out of $209,000 expended by the insurer in GC’s defense.  On appeal, the 4/2 DCA reversed and remanded.  It determined that insurer’s equitable subrogation action allowed an insurer to recoup from subs that portion of defense costs each sub owed as a result of its duty to defend the GC, but not entire defense fees attributable to other work (the overall defense of the case).  Based on Interstate Fire & Cas. Ins. Co. v. Cleveland Wrecking Co., 182 Cal.App.4^th 23 (2010) and Valley Crest Landscape Development Inc. v. Mission Pools of Escondido, Inc., 238 Cal.App.4^th 468 (2015), insurer was entitled to reimbursement of reasonably allocated fees from the subs.  If only the direct fees for sub defense had been involved, the appellate court would not have remanded; however, the claim for “mixed” defense fees of a related nature required an allocation—a division left for the trial judge to make in a remand proceeding.