Subcontract Duty to Defend Broadly Interpreted: Prospective Extinguishment

Centex Homes v. R-Help Constr. Co., 2019 Cal.App. LEXIS 202 (March 11, 2019)

In this recent case, a California court of appeal held that a trial court improperly delegated the duty to defend issue to the jury. The issue was a court decision.

Centex Homes contracted with R-Help Construction Company, Inc. to trench, install and inspect all utility boxes and conduits for the Novella residential construction project in Thousand Oaks, California. The contract required R-Help to defend and indemnify Centex for all claims “to the extent such claims in whole or in part arise out of or relate to R-Help’s work.”

Matthias Wagener filed a complaint, listing Centex and R-Help as defendants, arising from injuries he sustained as a result of falling into a utility box. Wagener’s complaint alleged that the defendants negligently managed, maintained and inspected the utility box cover so as to create an unstable platform. At trial, the jury found R-Help responsible for the installation of the utility box at issue.

The trial court submitted the issue of whether R-Help had a duty to defend to the jury and the jury found in favor of R-Help. Centex appealed.

The court of appeal, relying on Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.App.4th 541, held that where a plaintiff’s complaint alleges facts embraced by the indemnity agreement, the indemnitor (here R-Help) has a duty to defend throughout the underlying tort action unless it can conclusively show by undisputed facts that plaintiff’s action is not covered by the agreement. The appellate court found that R-Help had a duty to defend because facts existed to suggest Wagener’s action was covered by the agreement between Centex and R-Help.

The appellate court, relying on Scottsdale Insurance Co. v. MV Transportation (2005) 36 Cal.4th 643, further found that when the duty to defend, having arisen, is extinguished by showing that no claim can in fact be covered, it is extinguished only prospectively and not retroactively. As such, the court of appeal reversed the trial court, instructing that Centex is entitled to a new trial on the issue of damages for failure to defend.

Outcome

This case greatly benefits builders with written indemnity and duty to defend provisions in subcontracts. A subcontractors’ contractual duty to defend can only be avoided if the action did not embrace its work scope. The duty is clearly prospective after a valid tender.

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