The opinion of the court was delivered by: EDWARD A. INFANTE
This is an action wherein plaintiff Allstate Insurance Company ("Allstate") seeks subrogation for monies paid on a fire insurance policy. Allstate alleges that the defendants negligently failed to operate and maintain the premises which they leased from Allstate's insured, Mr. George Ku. Presently before the court is defendants' motion for summary judgment.
Defendants' motion is founded on the assertion that Mr. Ku and the defendants were implied-in-law co-insureds, and therefore Allstate has no right of subrogation against them. Jurisdiction is based on diversity of citizenship and the parties agree that California law applies.
On or about November 22, 1982, Ms. Ruth Teasdel entered into a lease agreement with defendants Tung S. Gip, Andy Tan Nang Diep and Julie Nu Van Diep ("defendants"). Pursuant to the lase agreement the defendants leased Unit C of a commercial building owned by Ms. Teasdel. On or about June 6, 1987 the lease was modified to substitute Mr. George Ku as the landlord/lessor. The lease was further modified to extend its term, and increase the amount of rental payments and security deposit. However, in all other respects the lease agreement continued in full force and effect.
The lease agreement provided, in pertinent part:
Paragraph 7B: In addition to the Minimum Rent provided in Article 4 hereinabove, and commencing at the same time as any rental commences under this Lease, Tenant shall pay to Landlord the following items, herein called Adjustments: (a) all real estate taxes and insurance premiums on the premises, including land, building and improvements thereon . . . . Said insurance shall include all insurance premiums for fire, extended coverage, liability, and any other insurance that Landlord deems necessary on the Premises. Said taxes and insurance premiums for purpose of this provision shall be reasonably apportioned in accordance with the total floor area of the Premises as it relates to the total floor area of the Shopping Center . . . (provided however, that if any tenants in said building or buildings . . . carry their own insurance, as may be provided in their leases, their square footage shall not be deemed a part of the floor area).
Paragraph 11A:. . .Tenant shall, upon the expiration or sooner termination of this lease hereof, surrender the premises to the Landlord in good condition, broom clean, ordinary wear and tear damage from causes beyond the reasonable control of Tenant excepted . . . .
Paragraph 14: HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against and from any and all claims arising from Tenant's use of the premises or from the conduct of its business or from any activity, work, or other things done, permitted or suffered by the Tenant in or about the Premises, and shall further indemnify and hold harmless Landlord against all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this lease, or arising from any act or negligence of the Tenant, or any officer, agent, employee, guest, or invitee of tenant, and from all costs, attorney's fees and liabilities incurred in or about the defense of any such claim, . . . Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property or injury to persons in, upon or about the premises, from any cause other than Landlord's negligence; and Tenant hereby waives all claims in respect thereof against Landlord. . . . . .
Paragraph 16: Tenant shall, at Tenant's expense, obtain and keep in force during the term of this lease a policy of comprehensive public liability insurance insuring Landlord and Tenant against any liability arising out of the ownership, use, occupancy or maintenance of the premises and all areas appurtenant therein. Such insurance shall be in the amount of not less than $ 300,000.00 for injury or death of one person in any one accident or occurrence and in the amount of not less than $ 500,000.00 for injury or death of more than one person in any one accident or occurrence and in the amount of not less than $ 500,000.00 for injury or death of more than one person in any one accident or occurrence. Such insurance shall further insure Landlord and Tenant against liability for property damage of at least $ 50,000. . . . If Tenant shall fail to procure and maintain said insurance, Landlord may, but shall not be required to, procure and maintain same, but at the expense of Tenant. . . . All such policies shall be written as primary policies not contributing with and not in excess of coverage which Landlord may carry.
Pursuant to Paragraph 16 of the lease, defendants obtained a comprehensive general liability policy ("CGL") in 1984 from the Farmers Insurance Group. As part of the comprehensive package, the policy also included special additional excess coverage for fire legal liability in the amount of $ 75,000.
After the lease was modified to substitute Mr. Ku as lessor, he obtained a property insurance policy from plaintiff Allstate. On September 1, 1989 Mr. Ku sent the defendants a bill for $ 608.67 as their pro rata share of the premium for this policy pursuant to paragraph 7B of the lease. On or about October 2, 1989, the defendants made the requested payment.
Thereafter, on or about December 26, 1989, there was a fire at the leased premises.
As a result of the fire, Allstate paid $ 249,567.75 to Mr. Ku to repair the damage to the building. This money was paid under the policy to which defendants had contributed premium payments.
Defendants assert that the Allstate policy issued to Mr. Ku was taken out for the mutual benefit of both the lessor and the lessees. This being so, the defendants contend that they are the implied-in-law co-insureds under the Allstate policy, and therefore Allstate has no subrogation rights against them.
Allstate asserts that defendants were required to indemnify the landlord for damages caused by negligence in the use or occupancy of Unit C. Allstate further contends that the parties intended that the defendants' insurance policy would be primary, and any policy procured by Mr. Ku would be excess. Therefore, Allstate contends that it possesses a right of reimbursement, under equitable ...