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Federal Insurance Co. v. Gulf Insurance Co.3/8/2005
n is to give effect to the insureds' indemnity agreement. "To hold otherwise would render the indemnity contract between the insureds completely ineffectual and would obviously not be a correct result, for it is the parties' rights and liabilities to each other which determine the insurance coverage; the insurance coverage does not define the parties' rights and liabilities one to the other." Chubb, 982 F. Supp. at 438. To apply the "other insurance" provisions to reduce the indemnitor's insurer's liability "would serve to abrogate the indemnity agreement between" the indemnitor and indemnitee owner. J. Walters, 620 So.2d at 221. " o apportion the loss in this case pursuant to the other insurance clauses would effectively negate the indemnity agreement and impose liability on [owner's insurer] when [owner] bargained with [contractor] to avoid that very result as part of the consideration for the construction agreement." Rossmoor, 13 Cal.3d at 634.
Further, failure to give effect to the indemnity agreement would result in circuitous litigation which would ultimately end with the excess carrier paying the settlement. Wal-Mart, 292 F.3d at 587; American Indem., 335 F.3d at 437. Courts should consider obligations under an indemnity agreement before allocating responsibility for the settlement liability according to the terms of the relevant policies. St. Paul, 365 F.3d at 277.
The sole case on which Federal relies to refute this body of law is Travelers v. American Equity, 93 Cal.App. 4th 1142, 113 Cal.Rptr.2d 613 (Cal. Ct. App. 2001). In that case, which involved a different type of indemnity agreement, the California Court of Appeals held that the indemnitor's insurer was entitled to equitable contribution from the indemnitee's insurer. Id. at 1157-58. Travelers is not persuasive authority. It has been extensively analyzed by Hartford, a subsequent California Court of Appeals case, which distinguished some of its holdings and rejected others. 123 Cal.App. 4th at 301-05. It also conflicts in various respects with the cases from other jurisdictions holding that indemnitor's insurer is solely liable to cover a loss or liability. We do not need to address how Travelers differs from cases in other jurisdictions because, as distinguished and explained by Hartford, Travelers does not apply to the facts of this case.
Although no Missouri court has addressed this issue, we find the overwhelming authority that recognizes an exception to equitable contribution is persuasive and applicable to the resolution of the issues on this appeal.
C. Application of Exception
Whether an indemnity agreement is relevant and controls the obligations of the insurers depends upon the facts and circumstances of the particular case. Wal-Mart, 292 F.3d at 588; see also St. Paul, 365 F.3d at 271, 273-77; Rossmoor, 13 Cal.3d. at 633. Wal-Mart identifies several considerations in this analysis that subsequent decisions have followed: 1) the validity of the indemnification agreement; 2) an insurance policy that covers the settlement; and 3) the intentions and relationships of the parties and the absence of unfair prejudice to the insurers. 292 F.3d at 587.
1. Validity and Enforceability of Indemnification Agreement
a. Validity
The first consideration is whether the indemnification agreement between the indemnitor and the indemnitee was valid. Wal-Mart, 292 F.3d at 587; St. Paul, 365 F.3d at 271. "Missouri law makes clear that 'in a private contract, where the parties stand on a substantially equal footing, one may legally agree to indemnify the other against the results of the indemnitee's own negligence.'" Nusbaum, 100 S.W.3d at 105 (quoting Kansas
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