Filed 7/7/16 Unigard Ins. Co. v. Harco National Ins. Co. CA1/2
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION TWO


UNIGARD INSURANCE COMPANY,
         Plaintiff and Respondent,
                                                                     A141452
v.
HARCO NATIONAL INSURANCE                                             (San Francisco County
COMPANY, et al.,                                                     Super. Ct. No. CGC-13-527766)
         Defendants and Appellants.


         In the course of his employment with Fork & Spoon (F&S), Adam Ike (Ike) rented
a truck from Coast Truck Rental (Coast). He was tragically killed that same day when
the very truck he rented ran over him. Ike’s heirs then sued Coast for wrongful death.
The rental agreement, which had been signed by Ike on behalf of F&S, but not signed by
Coast, included a provision that F&S, as the renter, would indemnify Coast for liability
arising from the operation or use of the vehicle. Coast was a “third party” with respect to
Ike and his employer F&S, and consequently, under the workers’ compensation
provisions of the Labor Code (Lab. Code, § 3200 et seq.), F&S had no obligation to
indemnify Coast for liability resulting from the suit by Ike’s heirs, absent a signed written
agreement. (Lab. Code, § 3864.) The primary issue in this appeal is whether an
agreement to indemnify must be signed by both the employer and the third party in order
to be enforceable under section 3864.
         The trial court answered that question affirmatively, and therefore refused to
enforce the indemnity agreement here, which was signed by Ike’s employer, F&S, but not


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by Coast. Consequently, the trial court granted a summary judgment motion brought by
F&S’s insurer, Unigard Insurance Company (Unigard), which paid for part of Coast’s
defense under a reservation of rights, ruling that Unigard was entitled to reimbursement
from Coast and its insurer, Harco National Insurance Company (Harco).
       Coast and Harco appeal, arguing that even though the trial court’s ruling is
supported by case law, the result is inequitable and should be reversed. We are not
persuaded, and therefore we will affirm the judgment of the trial court.
                 FACTUAL AND PROCEDURAL BACKGROUND
       The following facts are undisputed.
       Adam Ike (Ike) was employed by Fork & Spoon (F&S). Acting in the course and
scope of his employment, he rented a vehicle from Thomas I. Pendergast, Inc. dba Coast
Truck Rental (Coast). Ike signed Coast’s standard rental agreement, which included the
following indemnity provision:
       “4.    IT IS EXPRESSLY AGREED THAT COAST IS NOT LIABLE
FOR ANY LOSS OR DAMAGE TO CARGO, NOR PROPERTY OF
RENTER AND HIS AGENTS, EMPLOYEES AND/OR CUSTOMERS, AND
COAST IS NOT LIABLE FOR INJURIES TO RENTER OR HIS AGENTS
OR HIS GUESTS FROM ANY CAUSE WHATSOEVER AND IT IS
FURTHER AGREED THE RENTER SHALL INDEMNIFY AND SAVE
COAST WITH RESPECT TO ANY AND ALL INJURIES OR DAMAGE TO
PERSONS OR PROPERTY ARISING OUT OF OWNERSHIP,
MAINTENANCE, USE AND/OR OPERATION OF THE VEHICLE . . . .”
       The agreement was not signed by Coast or any Coast representative.
       As Ike was leaving Coast’s premises, he was struck and killed by the truck he
rented. His heirs sued Coast for wrongful death in February 2010.1 In October 2010
Coast tendered the defense of the wrongful death action to F&S, which forwarded the

       1
         Ike’s heirs could not sue F&S because as Ike’s employer it was protected by the
exclusive remedy provision of the workers’ compensation laws. (Lab. Code, § 3602,
subd. (a).)


                                             2
tender to its liability insurer, Unigard. Unigard was not Coast’s insurer, but in view of
the indemnity provision in the rental agreement that Ike signed on behalf of F&S, in
December 2010 Unigard agreed to provide a defense to Coast. Unigard’s position was
that under the policy it had issued to F&S, the rental agreement was an “insured contract”
under which F&S had assumed tort liability and that, accordingly, Unigard would provide
a defense to Coast. Unigard provided the defense subject to a reservation of rights,
including “the right to assert that [F&S] has no obligation to defend or indemnify Coast
because the terms . . . of the rental contract are unconscionable or otherwise
unenforceable and that there is no obligation for Unigard to provide any such defense or
indemnity as a liability assumed under the contract.” Unigard also reserved the right to
seek reimbursement for its defense of Coast.
       In 2011, Unigard notified Coast’s insurer, Harco National Insurance Company
(Harco) that “Unigard may seek contribution and/or subrogation/indemnity” for amounts
Unigard paid to defend or indemnify Coast. Unigard also invited Harco to participate in
Coast’s defense, which Harco declined to do. Eventually, Unigard concluded that the
indemnity provision in the rental agreement was invalid under Labor Code section 3864,2
and in January 2012 it so informed Harco, stating that unless Harco provided authority to
the contrary, Unigard would withdraw from the defense of Coast. Unigard withdrew,
Harco assumed the defense, the matter went to trial, and Coast received a defense verdict.
       In June 2012, Unigard demanded that Harco reimburse it for $323,661.34, the
amount Unigard had paid in defending Coast before Unigard withdrew from the case.
Harco refused, and in January 2013, Unigard sued Harco and Coast seeking declaratory
relief as to its right to reimbursement, and seeking indemnity from Harco and Coast. The
parties filed cross motions for summary judgment based entirely on undisputed facts.
After a hearing, the trial court granted Unigard’s motion and denied the motions of Harco
and Coast. The trial court found, “as a matter of law, that Unigard . . . had no legal duty
to defend Coast in the underlying wrongful death suit . . . , pursuant to Labor Code

       2
           All statutory references are to the Labor Code unless otherwise specified.


                                               3
§ 3864. This legal finding operates retroactively. (See Scottsdale Ins. Co. v. MV Transp.
[(2005)] 36 Cal.4th 643, 655 [(Scottsdale)].) [Coast and Harco] do not dispute that
Unigard reserved its rights to seek reimbursement from Coast, or anyone else, for defense
costs incurred. . . . Consequently, Coast and Harco are responsible for reimbursing
Unigard for the $323,661.34 in defense costs incurred under equitable indemnity and
restitution principles. (See Scottsdale, supra; Clarendon America Ins. Co. v. Mt. Hawley
Ins. Co. [(C.D. Cal. 2008)] 588 F.Supp.2d 1101, 1106 (applying California law).)
Unigard is also entitled to prejudgment interest under Cal. Civ. Code § 3827.”
       Judgment was entered for Unigard, against Harco and Coast for $323,661.34, plus
$55,986.52 in prejudgment interest, plus costs. This appeal timely followed.
                                      DISCUSSION
       Because this is an appeal of an order granting summary judgment on stipulated
facts, we review the trial court’s decision de novo to decide a pure question of law.
(Wilshire Ins. Co., Inc. v. Sentry Select Ins. Co. (2004) 124 Cal.App.4th 27, 33.)
A.     Applicable Law
       The parties agree that Unigard has no duty to defend or indemnify Coast unless
Unigard’s insured, F&S, assumed the obligation to indemnify Coast in the rental
agreement.3 The parties also agree that because the rental agreement was not signed by
Coast, under section 3864 and the cases interpreting it, the indemnity provision in the
agreement does not bind F&S, and therefore does not bind Unigard.




       3
        If the indemnity agreement in the rental agreement had been enforceable against
F&S, Unigard would have had a duty to defend Coast under the policy it issued to F&S.
(Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 300 [an insurer’s duty
to defend arises where there is potential for indemnification].) In the absence of potential
coverage for Coast, Unigard has no duty to defend. (Waller v. Truck Insurance
Exchange, Inc. (1995) 11 Cal.4th 1, 19.) The parties do not dispute that absent a duty to
defend, Unigard, which provided the defense under a reservation of rights, is entitled to
reimbursement from Harco. (Scottsdale, supra, 36 Cal.4th at pp 657-658.)


                                             4
       Section 3864 provides, “If an action as provided in this chapter[4] prosecuted by
the employee, the employer, or both jointly against the third person results in judgment
against such third person, or settlement by such third person, the employer shall have no
liability to reimburse or hold such third person harmless on such judgment or settlement
in absence of a written agreement so to do executed prior to the injury.”5
       The word “executed” in section 3864 means “signed.” (Lockheed Missiles &
Space Co. v. Gilmore Industries, Inc. (1982) 135 Cal.App.3d 556, 558-560; Solano
Concrete Co., Inc. v. Lund Construction Co. (1976) 64 Cal.App.3d 572, 575.) Harco and
Coast (Appellants) concede that under section 3864 and the cases interpreting it, an
indemnity agreement must be signed by both parties—that is, by the employer and the
third party—to be enforceable. (Hansen Mechanical, Inc. v. Superior Court (1995) 40
Cal.App.4th 722, 731 (Hansen) [agreement that was not signed by both parties before the
injury occurred was not executed pursuant to section 3864]; Nielsen Construction Co. v.
International Iron Products (1993) 18 Cal.App.4th 863, 869 (Nielsen) [same].)
       Although the law is clear that the indemnity agreement in this case is not
enforceable, Appellants argue that applying the law in these circumstances means
“[s]hifting the defense obligation away from F&S and its insurer and on to Coast and its
insurer,” a result they characterize as “absurd,” inequitable and unfair. Appellants argue
that the indemnity provision in the rental agreement should be enforced because it was
signed by the indemnitor (that is, by F&S, through Ike) and because F&S and Coast
intended Unigard to cover any loss arising from the use of the vehicle, and that even if
the indemnity provision was not enforceable, Unigard owed Coast a defense obligation




       4
        That is, Chapter 5 (“Subrogation of Employer”) of Part 1 (“Scope and
Operation”) of Division 4 (“Workers’ Compensation and Insurance”) of the Labor Code.
       5
        The “action” at issue here is the lawsuit filed by Ike’s heirs against Coast. For
purposes of section 3864, Ike’s heirs are “employees” because “ ‘[e]mployee’ includes
the person injured and any other person to whom a claim accrues by reason of the injury
or death of the former.” (§ 3850, subd. (a).)


                                             5
under Val’s Painting and Drywall, Inc. v. Allstate Insurance Co. (1975) 53 Cal.App.3d
576 (Val’s Painting).6 We will address these arguments in turn.
B.     Section 3864 Requires Both Parties to Sign an Indemnity Agreement
       Appellants contend that the indemnity agreement should be enforced because it
was signed by F&S, the employer against whom the agreement would be enforced, and
because the rental agreement shows that F&S and Coast “intended for Unigard to cover
the loss.”
       Appellants argue that as long the employer has signed the indemnity agreement,
the parties have complied with the Legislature’s intent for section 3864, which is to limit
an employer’s liability for indemnity when its employee is injured in the course and
scope of employment due to the negligence of a third party, and that once the employer
has “unequivocally acquiesced” to the indemnity agreement, there is “no logical basis”
for requiring the third party to have signed it.7
       Appellants support this argument by claiming, incorrectly and without citing
authority, that “California courts are split as to whether Section 3864 requires the
indemnitee’s [i.e., third party’s] signature on the subject agreement,” and by suggesting,
incorrectly, that in City of Oakland v. Delcon Associates (1985) 168 Cal.App.3d 1126

       6
          In addition to these three arguments, which Appellants present under separate
headings and support with citations to authority, as required by California Rules of Court,
rule 8.204(a)(1)(B), Appellants allude to two additional arguments in their introduction.
First, they contend that the trial court’s result “flies in the face of ordinary business
practices.” Second, they contend that the result “is in no way equitable, and is simply not
fair.” Because these arguments are not presented under separate headings or supported
by legal authority, we can, and do, decline to consider them. (Allen v. City of Sacramento
(2015) 234 Cal.App.4th 41, 52 [argument without citation to authority]; Consolidated
Irrigation District v. City of Selma (2012) 204 Cal.App.4th 187, 201 [argument not
presented under a separate heading].)
       7
         Appellants also contend that requiring Coast as indemnitee to sign the contract
would “invalidate the thousands of car rental agreements that are executed everyday
throughout the country.” We disregard this contention, which is not supported by
citations to the record or legal authority (Cal. Rules of Court, rule 8.204(a)(1)(B) & (C)),
let alone any authority that section 3864 applies in a typical transaction between a
consumer and a car rental company.


                                               6
(Delcon) a panel in this First District “has held that the employer/indemnitor’s signature
is all that is required” under section 3864.
       Appellants never cite a single case holding that the third party’s signature is not
required for an indemnity agreement to be enforced under section 3864. And Appellants’
opening brief fails to discuss cases holding that the third party’s signature is required,
even though two such cases were discussed by Unigard below: Hansen, supra, 40
Cal.App.4th 722 and Nielsen, supra, 18 Cal.App.4th 863. Both cases hold that for an
indemnity agreement to be properly executed under section 3864, the agreement must be
signed by both parties; the employer’s signature alone will not suffice. (Nielsen, supra,
18 Cal.App.4th at p. 869; Hansen, supra, 40 Cal.App.4th at p. 731.) As the court noted
in Nielson, even though there are general contract rules requiring only the party to be
bound to sign a contract, that does not mean that section 3864 requires only the party to
be bound to sign the written indemnity agreement. (Nielsen, supra, 18 Cal.App.4th at p.
868.) The Legislature has included in many statutes language limiting a signature
requirement to the party to be bound; accordingly, if it had chosen to do so, the
Legislature could have included such language in section 3864, but it did not. (Id. at p.
868; see also Hansen, supra, 40 Cal.App.4th at pp. 730-731.)
       The facts in Hansen are similar to the facts here. An employee of Hansen
Mechanical (Hansen), was injured while operating a scissor lift that Hansen had rented
from Northridge Equipment (Northridge). (Hansen, supra, 40 Cal.App.4th at p. 724.)
The employee sued Northridge for personal injuries, and Northridge filed a cross-
complaint against Hansen based on the theory of express indemnity. (Ibid.) The rental
agreement, which included an indemnity provision, was signed by Hansen but not by
Northridge (id. at pp. 724-725) and did not even have a signature line for Northridge. (Id.
at p. 731.) The court ruled that “a contract which does not even have a signature line for
the third party, and is not signed by that party, does not meet the requirement for
execution under Labor Code section 3864. Further, as the party which drafted the rental
receipt agreement, Northridge had the opportunity to draft an agreement which complied
with section 3864, but did not do so. As stated by the court in Delcon: ‘It is not


                                               7
unreasonable for the Legislature to impose the relatively light burden of obtaining an
executed indemnity agreement on the party who will benefit from it.’ ” (Hansen, supra,
40 Cal.App.4th at p. 731.)
       As the quotation above suggests, the one case that Appellants do cite, Delcon, is
inapposite. Delcon holds that the employer’s signature is necessary for enforcement, but
that does not mean that the employer’s signature alone is sufficient. (Delcon, supra, 168
Cal.App.3d at p. 1129.) As the Court of Appeal stated in Hansen, “All Delcon stands for
is the proposition that an indemnity agreement is not enforceable against an employer
who does not sign it prior to the injury. Delcon does not address the issue of whether the
agreement is enforceable where the third party does not sign it, although the employer
has signed it.” (Hansen, supra, 40 Cal.App.4th at p. 731.) That issue did not arise in
Delcon, because the indemnity agreement in that case was signed by the third party.
(Delcon, supra, 168 Cal.App.3d at p. 1131.)
       Unigard discusses both Nielsen and Hansen in its respondent’s brief. In reply,
Appellants ask us to depart from the application of section 3864 in those cases and,
instead, “rule . . . on the equities of the situation before the Court.” But Appellants do not
provide us with any discussion of Nielsen or Hansen, or explanation of why the equities
here justify a different approach. Accordingly, we are not persuaded by Appellants’
argument and we decline their invitation to depart from the reasoned approach that the
Court of Appeal has taken in similar cases.
       Appellants also argue that the indemnity provision should be enforced because the
rental agreement shows that F&S and Coast intended that F&S or its insurer would cover
any losses arising from use of the subject vehicle, and that equity requires the court to
fulfill that intent. Their argument rests on two cases, Hartford Casualty Insurance Co. v.
Mt. Hawley Insurance Co. (2004) 123 Cal.App.4th 278 (Hartford Casualty) and Pacific
Indemnity Co. v. Liberty Mutual Insurance Co. (1969) 269 Cal.App.2d 793 (Pacific
Indemnity), which Appellants cite for the proposition that “[c]ourts will often look at the
underlying contract entered into between the insureds to determine the respective rights
and obligations of the between [sic] the parties’ insurers.”


                                              8
       These cases do not help Appellants. In Hartford Casualty there was no doubt as to
the validity of the indemnity provision in a construction contract. (Hartford Casualty,
supra, 123 Cal.App.4th at p. 281.) The Court of Appeal held that just as the general
contractor was not liable to the subcontractor under the indemnity provision, the general
contractor’s insurer was not liable to the subcontractor’s insurer. (Ibid.) In Pacific
Indemnity, there was no doubt as to the validity of the indemnity provision between
insureds. (Pacific Indemnity, supra, 269 Cal.App.2d at p. 800.) There, the Court of
Appeal had to determine which of two insurance policies covering the lessor would
provide primary coverage and which excess; it looked to the intention of the insureds as
“the critical factor in allocating primacy of coverage between duplicate insurers.” (Id. at
p. 801.) Neither case arises in the context of section 3864; and neither concerns an
indemnity provision of doubtful validity. Consequently, neither Hartford Casualty nor
Pacific Indemnity provides guidance in our case.
       Furthermore, the case law interpreting section 3864 does not support Appellants’
position. Although the facts of Delcon, discussed above, are different from the facts here,
the reasoning of Delcon with respect to this particular issue is entirely applicable: “While
it may seem unfair that respondent can avoid obligations which its representative read
and understood, section 3864’s requirement that an indemnity provision be ‘executed’
before it can be considered binding is clear and unequivocal. (Lockheed Missiles &
Space Co. v. Gilmore Industries, Inc., supra, 135 Cal.App.3d at p. 559.) It is not
unreasonable for the Legislature to impose the relatively light burden of obtaining an
executed indemnity agreement on the party who will benefit from it.” (Delcon, supra,
168 Cal.App.3d at p. 1131.) In Delcon, the party who would benefit from the agreement
failed to obtain the employer’s signature (ibid.); here, the party who would benefit failed
to sign on its own behalf. The situations are different, but the warning stated by the
Delcon court is pertinent here: “By tampering with the statutory language, we would be
opening a Pandora’s box of exceptions which would serve only to create confusion and
needless litigation.” (Ibid.)



                                             9
       We conclude that because Coast did not sign the written rental agreement here,
under section 3864 Coast cannot enforce the agreement’s indemnity provision against
F&S or Unigard.8
C.     Unigard’s Obligations to F&S Are Distinct from Unigard’s Obligations to Coast
       Although Appellants concede in their reply brief that Unigard has no duty to
defend or indemnify Coast unless Unigard’s insured assumed that liability in a contract,
Appellants argue in their opening brief that even if F&S was immune from liability under
section 3864, Unigard was obliged to defend Coast against the claim brought by Ike’s
heirs because Unigard would have been obliged to defend F&S against a claim brought
by Coast against F&S for indemnity. Appellants rely on Val’s Painting for this
argument, but their reliance is misplaced and the argument lacks merit.
       Val’s Painting holds that an insurer has a duty to defend claims against its insured
that are potentially within policy coverage. (Val’s Painting, supra, 53 Cal.App.3d at p.
582.) Val’s Painting says nothing about the situation here, which concerns whether an
insurer has a duty to defend claims against a third party in the absence of an indemnity
agreement between the third party and the insured.9
       Furthermore, Appellants never explain why Unigard’s obligation to defend F&S
against a hypothetical indemnity claim by Coast should entail that Unigard has an
obligation to defend Coast against a claim by Ike’s heirs. Appellants assume that if

       8
         Appellants question whether any rental car company, big or small, requires the
lessor’s signature on the rental agreement, and at the same time they suggest that because
Coast is “obviously an unsophisticated lessor” it should not be required to have signed
the rental agreement. They do not support this suggestion with citations to the record or
legal authority, and accordingly we disregard it.
       9
         Appellants cite A-H Plating, Inc. v. American National Fire Insurance Co.
(1997) 57 Cal.App.4th 427, 443 for the proposition that an insurer’s duty to defend
extends to those insureds whom the insurer believes to be innocent of the conduct alleged
in the third party complaint, and from this Appellants conclude that, “Without question,
Unigard’s defense obligation was triggered” in the action brought against Coast by Ike’s
heirs. But Appellants’ conclusion does not follow, because Coast is not Unigard’s
insured and because nothing in the record suggests that the action by Ike’s heirs alleged
conduct by Unigard’s insured, F&S.


                                            10
“Unigard [had] not accepted Coast’s tender, Unigard would have found itself in exactly
the same position it faces today.” They argue that if Unigard had not accepted the tender,
Coast would have filed an indemnity cross-complaint against F&S, and Unigard would
have been obligated to defend F&S in that action. But Unigard did accept the tender,
subject to a reservation of rights, and Coast did not file such a cross-complaint, and Coast
points to nothing in the record that indicates what might have happened if the facts had
been otherwise. In sum, Appellants have not provided us with evidence or argument to
support their contention that Unigard had a duty to defend Coast.
                                     DISPOSITION
       The judgment is affirmed. Respondent shall recover its costs on appeal.




                                            11
                                             _________________________
                                             Miller, J.


We concur:


_________________________
Kline, P.J.


_________________________
Stewart, J.




A141452, Unigard Insurance Co. v. Harco National Insurance Co.




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